CFTC Commissioner: Former FTX subsidiary LedgerX in gray area outside CFTC client funds proposal

The U.S. Commodity Futures Trading Commission (CFTC) on Friday proposed a rule change on how agency-regulated futures broker-dealers (FCMs) and derivatives clearing organizations (DCOs) should invest customer funds. However, while crypto derivatives platform LedgerX is a DCO regulated by the agency, it is in the unusual position of being a clearinghouse without an FCM member to connect it with its clients, a traditional practice that has previously existed in this industry. CFTC Commissioner Kristin Johnson said Friday's proposal details that regulated firms can only put client assets into an expanded list of the most liquid investments, but does not take into account "the direct nature of DCOs in the context of a disintermediated clearing model." Provide clearing services to clients without the need for FCM to act as an intermediary.” "The structure of the derivatives market is evolving significantly, so regulatory commission regulations must evolve in step with it," Johnson said. LedgerX has been bucking tradition, perhaps most notably when it recently reversed its efforts to resolve margin crypto trading directly for customers, without the need for a middleman. The company registered with the CFTC after agreeing to various special consumer protection measures, such as asset segregation. Johnson said: “Our current regulations do not address the issues involved in LedgerX orders, and the Commission should consider closing this gap and ensuring parallel protection for retail customers who trade through intermediary and non-intermediary DCOs.” Friday's proposal, which does not allow the public to express their opinions during a 75-day comment period, was originally scheduled to be introduced at a Nov. 1 meeting, but the agency canceled the meeting and moved forward with an internal vote. (CoinDesk)