By working with the industry the CFTC appears to have found a solution to implementing Rule 1.73. However, the initial confusion highlights flaws in the regulators approach, says Galen Stops.
At the beginning of October 2012 Regulation 1.73, introduced
in the US by Commodity and Futures Trading Commission, came
into effect causing widespread consternation amongst market
participants. As a result the CFTC granted an extension of the
compliance deadline to June 1 for the sections of Rule 1.73
concerning give-ups and bunched orders for futures and
In respect to give-ups, clearing FCMs will be required to
establish risk-based limits for their customers and executing
brokers will be required to screen orders for compliance.
For bunched orders, clearing FCMs must establish limits for
the block account and screen the order and FCM that clears the
allocated trades must establish and maintain systems of
controls that ensure compliance.
It was clear from the outset that the CFTC had not fully
appreciated how much upheaval these requirements could
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