Comment Text:
The proposed rules requiring FCM's to post residual interest and collect customer margin payments intra-day will create new costs for customers while preserving the traditional omnibus segregation model to the exclusion of any other alternative. Have the costs and benefits of alternative segregation models been considered? For example, what costs might be involved iif FCMs were to establish a central service bureau so that a customer willing to pay a fee for enhanced collateral protection could have the option of having their collateral held in an individual fully-segregated bank account? Creating such a service bureau as an industry utility would impose new costs but would also bring clear, easily-understood benefits for customers who have lost confidence in the traditional way of doing business. Whether the costs of an alternative segregation model would be higher or lower than the costs attendant to these proposed new rules is unknown at present -- and that is the point. We are doing the customer no service by presuming that the traditional omnibus segregation model must be preserved at all costs. An evaluation of the costs and benefits of alternative segregation models should be conducted before the proposed rules are implemented, and that cost-benefit analysis should include pilot programs to test alternative models under market conditions. There are market participants willing to put alternative segregation models to the test in the belief that these alternative models might offer enhanced protection at a tolerable cost. Moreover, customers will have greater confidence that their interests are being protected if the costs and benefits of the proposed improvements are known up-front.
Steve Hurst
Merchants Data Repository LLC
175 W. Jackson
Suite 2214
Chicago IL 60604
312-521-5662
shurst@merchantsdata,com
