Release: 4808-03
For Release: July 3, 2003


Washington, D.C. -- The U.S. Commodity Futures Trading Commission (CFTC) is proposing a new margin-based or risk-based approach for determining the minimum capital requirements for futures commission merchants (FCMs). The CFTC is also proposing to harmonize reporting requirements for FCMs that are registered with the U.S. Securities and Exchange Commission as broker-dealers. The proposed changes recognize advances in technology, streamline Commission procedures, and generally promote the goals of the Commodity Futures Modernization Act of 2000 (CFMA).

The proposed amendments to minimum capital regulations would incorporate calculations based on the margin levels of futures and option positions carried by an FCM. Currently, the Commission’s capital requirement is based on a percentage of customer funds held at FCMs. Margin-based capital rules were adopted by the Board of Trade Clearing Corporation, Chicago Board of Trade, Chicago Mercantile Exchange, Inc., and National Futures Association (NFA), and FCMs must comply with the greater of the two computations. The proposal would ensure that a firm’s capital requirement reflects the risks of the futures and option positions the firm carries.

“The proposed risk-based or margin-based capital rules for FCMs are part of the Commission’s efforts to modernize rules for market intermediaries, which is a key objective of the CFMA,” said Chairman James E. Newsome. “In addition, the proposal would establish minimum capital requirements that are based upon the risk of the futures and options positions carried by a firm, which will allow more efficient utilization of capital.”

The proposals would reduce the time periods allowed before an FCM must take a capital charge for outstanding margin calls and would permit IBs to file financial statements solely with the NFA instead of with both the NFA and the Commission.

The proposed rule amendments will be published on July 9, 2003, in the Federal Register with a 60-day comment period. Copies may be obtained by contacting the Commission’s Office of the Secretariat, Three Lafayette Centre, 1155 21st Street, N.W., Washington, D.C. 20581, (202) 418-5100 or by accessing the Commission’s website,