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Customer segregated funds

Futures customer money that a US FCM must hold apart from its own, in accounts titled for customers, never used to fund the firm or cover another customer's deficit.

Under the Commodity Exchange Act a futures-commission-merchant must keep customer funds for US futures trading in segregated accounts, funds for foreign futures in a separate secured-amount account, and cleared swaps money in a third bucket. Each bucket is computed daily and must be at least equal to what customers are owed, with firm money added as a cushion.

Segregation is a titling and accounting requirement, not insurance. If a customer blows through their equity and cannot pay, the shortfall is met by the firm's cushion; if the firm cannot meet it, the segregated pool can fall short and customers share the loss pro rata. There is no futures equivalent of sipc.

Daily segregation statements are filed with the cftc and the nfa, and the NFA publishes summary figures. Sudden drops in a firm's excess segregated funds are a warning worth watching if you carry large futures balances.

Related: futures-commission-merchant, cftc, nfa, rule-15c3-3, sipc

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