C.F.T.C. Approves New Rules for Futures Industry

In October 2011, as the futures broker MF Global teetered on the brink of collapse, employees reached into client accounts in a last-ditch attempt to avert bankruptcy.

But their actions failed to save the broker, and its implosion left thousands of clients short $1.6 billion of their money.

Two years after MF Global’s prominent bankruptcy, regulators have sought to restore confidence in the industry, tightening rules that force brokerage firms to better safeguard client money.

The Commodity Futures Trading Commission voted 3 to 1 on Wednesday to finalize rules proposed a year ago to protect customers, including measures to close loopholes, reinforce internal risk controls and force brokers to provide more information to clients.

“This new information is critical in today’s world of high-frequency trading,” said Gary Gensler, chairman of the C.F.T.C. “Thus, with these reforms, the commission will get additional tools to oversee the markets’ largest day traders and high-frequency traders.”

The new rules are part of a wider shift in policy to better regulate the futures industry after years of lighter-touch policy.

“It’s really pretty clear that we are supposed to protect customer funds all the time,” said Bart Chilton, a member of the commission. “In fairness, we haven’t done as well, if you look at the history, as I think we should have.This rule gets to where we need to be.”

When MF Global declared bankruptcy on Oct. 31, 2011, it sent ripples through the futures industry and prompted several federal investigations and congressional hearings. Less than a year later, another futures brokerage firm, the Peregrine Financial Group, buckled after funneling $215 million out of client accounts.

With the new rules, the C.T.F.C. aims to shine a light on how brokers maintain their clients’ accounts and outlines limitations of when they can move their money around.

Brokers will be subject to tougher auditing standards and will be required to provide daily reports that include details of each separate client account. These reports will be filed electronically. Mr. Gensler said this step was “the right place to be in the 21st century.”

The commission also voted to close a loophole that allowed brokerage firms to use money from client accounts that traded overseas under an exemption called the “alternative calculation.”

The most controversial of the new proposed rules will change how brokers keep collateral and make margin calls to ensure a client default is limited. Brokers, who are required to provide a buffer in client accounts, will be required to make clients pay several days earlier.

Some brokers have said these changes could put them out of business because it would require them to hold more capital in client accounts, while agricultural groups have raised concerns that some farmers would be forced out of the market if they had to make payments on their trades sooner.

Scott O’Malia, another member of the commission, was the dissenting vote.

“Instead of mitigating customer risk, the rules create a false sense of security by imposing broad and ambiguous requirements and introducing another layer of governmental oversight,” he said in a statement after the meeting.

During the meeting, Mr. O’Malia proposed an amendment to the new payment timeline requirements, hoping to leave open a final decision for five years.

Mr. Gensler, the commissioners and members of C.F.T.C. oversight teams spent more than an hour debating the effect of the new requirements. The commission rejected the amendment 3 to 1.

As the second anniversary of MF Global’s bankruptcy approaches, clients whose money went missing are closer to getting it back. James W. Giddens, the trustee who has been assigned the task of finding the money and returning it to customers, has recovered nearly all the funds.