The Commodity Futures Trading Commission (CFTC) of the United States has focused its attention on how businesses manage the assets of their customers.
The proposed rule changes by the CFTC aim to improve regulations for derivative clearing organizations (DCOs) and futures commission merchants (FCMs).It is currently mandatory for these businesses to use client cash to purchase highly liquid assets.The unique operating model of LedgerX is not taken into consideration by the amended regulations.In contrast to FCMs’ traditional position as middlemen, LedgerX functions as a DCO, forming direct relationships with clients.
Commissioner Kristin Johnson of the CFTC has expressed concerns, pointing out that the laws are not keeping up with the industry’s rapid changes.Previously associated with FTX, LedgerX—now a subsidiary of Miami International Holdings—operates in a distinct business by offering direct client access, departing from traditional industry norms.LedgerX has gained recognition for its endeavors to settle cryptocurrency transactions directly for customers, departing from the traditional approach of enlisting middlemen.The business has strengthened its operations with improved consumer safeguards, like asset segregation, by successfully obtaining several CFTC registrations.
Johnson is in favor of a redesigned regulatory structure that would offer retail clients consistent protection whether they transact with non-intermediated DCOs like LedgerX directly or through middlemen.
The public will have a seventy-five-day period to provide input on the proposal concurrent with this call for action.This conversational phase could potentially direct the CFTC in resolving the regulatory shortcomings that Johnson has identified.Ensuring that regulatory measures stay in line with the dynamic derivatives market is the CFTC’s role.This is necessary to keep an even playing field and safeguard the interests of retail customers.