Protection Fund: Building a Better Piggy Bank

Is there any protection for my futures account? That is the key question for futures customers today and quite likely, the answer is “no” or “not much.” While dialog and debate ranges on the type of customer protection fund or insurance that might or might not work, John Roe, co-founder of the Commodity Customer Coalition and principal at BTR Trading, says it is essential to restore customer confidence.

In this video, Roe explains how protection for futures customers can be established with a small fund that ultimately will grow over time using a small trading fee. And, in the case of a default, it would replace customer funds before they were tied up in bankruptcy court.

Futures insurance has received support from some industry regulators such as Bart Chilton. And the National Futures Association announced last summer it would fund a cost of insurance study, which is due out in spring 2013. Others have been cautious in endorsing such a move.

CCC also recently outlined its so-called “Commodity Insurance Corporation,” a captive customer insurance plan. Under the plan, an association of firms would sell their customers insurance to protect assets. Revenue from the insurance company would be pooled into a protection fund to buy reinsurance. In the case of an FCM default, the insurer would advance customers their insured amount and pursue their claims in bankruptcy.

CCC prefers the customer protection fund, but is examining different variations such as the commodity insurance company plan.

Also see — Protection Fund: Slip it to SIPC

Customer Protection Fund Resources

  • John L. Rowe on MarketsWiki (link)
  • Commodity Customer Coalition on MarketsWiki (link)
  • CCC Plan for Private Commodity Customer Account Insurance (link)
  • “Futures Industry Looks to Insurance After MF Global Collapse” on InsuranceJournal.com (link)
  • “The Plan, Stan—Moving Forward on a Futures Insurance Fund” on CFTC.gov (link)
  • “Time for a Futures Insurance Fund: CFTC’s Bart Chilton” on CNBC.com (link)