You may remember that I previously wrote about the NFA’s proposals earlier this year to better monitor customer segregated funds after some high profile monitoring failures. The NFA recently began implementing its proposal to develop a daily segregation confirmation system that would require all depositories holding customer segregated funds, including banks, clearing FCMs, broker-dealers and money market accounts, to file daily reports reflecting the funds held in segregated accounts. Initially, the NFA intended to manually monitor compliance through direct, view only online access. However, after discussions with vendors, the NFA determined that it could quickly implement an automated system via a third party vendor.
The NFA will require FCMs to instruct their depositories holding segregated, secured amount and cleared swaps customer collateral to report the balances in the FCM’s accounts to a third party designated by the NFA. The rule also provides that in order for a depository to be deemed acceptable, it must make the daily reports to the third party designated by the NFA.
The daily confirmation system is still under implementation, but the first phase, beginning with banks, was implemented on January 1, 2012. Other categories of depositories will be added in 2013.