After MF Global Holdings Ltd. imploded and more than $1 billion of client money went missing in 2011, Washington, D.C., ratcheted up restrictions on what futures brokers could do with customer funds. Now, regulators in the Trump era are examining whether the shackles should be loosened, Bloomberg News reported. The rules in question stiffened limits on brokers’ ability to invest collateral that clients post for trades. The Commodity Futures Trading Commission approved the overhaul after former MF Global Chief Executive Officer Jon S. Corzine made wrong-way bets on European sovereign debt that helped trigger the firm’s collapse and set off a political firestorm. But Wall Street has long complained that the regulations were an excessive overreaction that wouldn’t have even prevented MF Global’s failure. Worse, the industry says that the restrictions are unnecessarily eating away at its profit margins, fueling a decline in the number of futures brokers. One worry: a smaller pool of brokers concentrates risk, potentially exacerbating the harm to the financial system if a firm fails. Those arguments are resonating at the CFTC under Chairman Heath Tarbert, who took over in July as President Donald Trump’s second head of the derivatives regulator. One of Tarbert’s top deputies, Joshua Sterling, said in a speech last month that the agency was evaluating an industry request to ease the requirements, adding that softening them “makes great sense.” The changes Sterling referenced were limited in scope, according to a CFTC spokeswoman.
