FIA proposes simplified regulatory approach for retail derivatives clearing to CFTC
The Futures Industry Association (FIA) has submitted a letter to the US Commodity Futures Trading Commission (CFTC) in response to its Request for Comment on the Direct Clearing of Derivatives by Retail Participants, proposing a simplified regulatory framework for retail direct clearing while preserving the existing structure for leveraged trading. FIA explains that the Commodity Exchange Act 1936 establishes an interdependent system in which designated contract markets provide price discovery, derivatives clearing organisations (DCOs) ensure settlement, and futures commission merchants (FCMs) manage credit, margin and customer risk. It argues that this intermediated model should be retained where retail trading involves leverage, as the allocation of responsibilities and risk controls is essential to market stability. However, where positions are fully collateralised and pre-funded, and no leverage or extension of credit is involved, FIA considers that a streamlined regime may be appropriate because the DCO functions primarily as a settlement agent and the risk profile is reduced.