How Futures Customer Funds Are Protected (and Why SIPC Doesn't Cover Them)

In the United States, money in a futures account is protected mainly by segregation: CFTC rules require your broker to keep customer funds separate from its own money and never use one customer’s funds for another. There is no government insurance for futures accounts, and SIPC, which covers stock brokerage accounts, specifically excludes futures.

In short: US futures customers rely on segregation rules, regulatory audits, and priority in bankruptcy, not insurance. If a futures broker fails with a shortfall, customers share the remaining customer property pro rata. In Canada, futures accounts at CIRO member dealers are eligible for coverage from the Canadian Investor Protection Fund (CIPF) up to set limits if the dealer becomes insolvent. MF Global’s 2011 collapse showed both how segregation can fail and how customers were eventually made whole.

This article describes the rules as of November 2026. Protection limits and regulations change; check the regulators’ and CIPF’s websites.

Who is holding your money

When you open a futures account, your margin goes to a futures commission merchant (FCM), the type of firm registered with the CFTC to accept customer money for futures. The FCM posts margin on your behalf to the exchange’s clearing house, which guarantees the trade. See how clearing houses work for that layer.

So your money sits in two places:

At the clearing house: the margin the exchange requires for your positions.
At the FCM: everything else in your account, including any excess above required margin.

The clearing house is rarely the weak link. The FCM, a private company that can make mistakes or commit fraud, is where most customer losses have come from.

US rule 1: segregation (CFTC Regulation 1.20)

Section 4d of the Commodity Exchange Act and CFTC Regulation 1.20 require an FCM to:

Separately account for all money, securities, and property received from futures customers,
Hold customer funds in accounts clearly labelled as customer segregated funds, at banks, clearing houses, or other permitted depositories,
Not commingle customer funds with the FCM’s own money, except for the FCM’s own cushion deposited into the customer account,
Obtain written acknowledgment letters from each depository confirming the money belongs to customers and cannot be used to pay the FCM’s own debts.

CFTC Regulation 1.22 adds that an FCM may not use one customer’s money to margin or settle another customer’s trades. Funds can only be invested in a limited list of instruments such as US Treasury securities.

Daily computations and reporting

FCMs must compute every business day how much they owe all futures customers and how much they actually hold in segregation. After 2012, the CFTC strengthened this: daily segregation reports go to the FCM’s self-regulatory organization, and depositories must give regulators direct, read-only access to view customer accounts. The CFTC also publishes monthly financial data for every FCM, including segregation totals and excess funds.

Foreign futures: the secured amount

Money for trades on non-US exchanges is covered by CFTC Part 30, which requires FCMs to hold a “secured amount” for those customers. Protection for these funds can depend on foreign insolvency law, which mattered in the MF Global case.

US rule 2: the residual interest rule

A customer whose account goes into deficit (an “undermargined” account) creates a hole in the segregated pool. Before 2013, an FCM could in effect let other customers’ money cover that hole temporarily.

The CFTC’s November 2013 customer protection rules, amending Regulation 1.22, require each FCM to keep enough of its own money (its “residual interest”) in the customer segregated accounts to cover all customers’ undermargined amounts. The deadline is 6:00 p.m. Eastern Time on the next business day, covering undermargined amounts computed as of the close of the previous day. The original rule planned to move the deadline earlier by the end of 2018. In March 2015 the CFTC removed that automatic phase-in, so the 6:00 p.m. deadline stayed, pending any future rulemaking.

In plain terms: other customers’ money is never supposed to be used, even overnight, to cover your shortfall.

Why SIPC does not cover futures

The Securities Investor Protection Corporation (SIPC) protects customers of failed securities broker-dealers up to $500,000, including up to $250,000 in cash. SIPC’s own guidance on what it protects states that it does not protect commodity futures contracts, unless they are held in a special portfolio margining account, and that cash held in connection with a commodities trade is not protected.

The reason is legal: futures are not “securities” under the Securities Investor Protection Act. Their protection runs through the Commodity Exchange Act and the commodity broker liquidation rules in the Bankruptcy Code and CFTC Part 190.

This matters for people who hold stocks and futures at the same firm. A brokerage account can be SIPC-protected while the futures account next to it is not.

What happens if a US futures broker fails

If an FCM goes bankrupt:

A trustee takes over and tries to transfer customer positions and money to a healthy FCM, so positions are not forcibly liquidated.
If transfers are not possible, positions are closed and customers file claims.
Customer property (segregated funds plus anything recovered) is reserved for customers ahead of the FCM’s general creditors.
If customer property falls short, customers share it pro rata. There is no fund to fill the gap.

This is the key difference from stocks: there is no SIPC-style backstop. Segregation working properly is the protection.

Canada: CIPF

In Canada, the Canadian Investor Protection Fund protects clients of CIRO member firms if the firm becomes insolvent. According to CIPF:

Coverage is automatic and free for eligible accounts used for securities or commodity and futures contracts business at a member firm.
Eligible property includes cash, securities, commodity and futures contracts, and segregated funds held by the firm. Crypto assets are excluded.
The limits, as of November 2026, are $1 million for all general accounts combined, plus $1 million for registered retirement accounts combined, plus $1 million for RESPs where you are the subscriber, and certain other categories.

A non-registered futures account falls into the general accounts category, so it shares the $1 million limit with your cash, margin, and TFSA accounts at the same firm.

CIPF covers losses caused by the dealer’s insolvency only. It does not cover trading losses, losses from bad advice, or a fall in market value. CIRO rules also require dealers to segregate client property, and trades on the Montreal Exchange are cleared by the Canadian Derivatives Clearing Corporation (CDCC). See how futures markets are regulated for how those pieces fit.

MF Global: the case that changed the rules

MF Global Inc., a large US FCM, collapsed on October 31, 2011. The firm had made large bets on European sovereign debt, and as its liquidity ran out, customer money was used to cover the firm’s own needs.

The shortfall: the trustee for the liquidation, James W. Giddens, reported in June 2012 that MF Global had improperly used customer money, leaving a gap of about $1.6 billion: roughly $900 million in domestic accounts and roughly $700 million tied to customers’ trades on foreign exchanges.
The freeze: customers’ accounts were frozen. Transfers to other firms happened in stages, and many customers waited months for most of their money.
The recovery: on April 3, 2014, SIPC announced that the trustee would begin a final distribution that would fully satisfy all claims of both securities and commodity futures customers, with $6.7 billion returned in total to more than 26,000 customers. (SIPC was involved because MF Global was also a securities broker-dealer and was liquidated under SIPA; the futures customers were repaid from recovered customer property, not from SIPC insurance.)
The penalty: in December 2014 a federal court ordered MF Global Holdings to pay $1.212 billion in restitution, or as much as needed to pay customers in full, and a $100 million civil penalty, in a case brought by the CFTC.

Full recovery came from settlements, recoveries from the UK affiliate, and creative steps by the trustee. It was not guaranteed, and it took about two and a half years. The broader story is in famous futures blowups.

Peregrine Financial Group

Less than a year later, in July 2012, the CFTC sued Peregrine Financial Group (PFG) and its owner, Russell Wasendorf Sr. The CFTC’s complaint alleged that during an NFA audit PFG claimed to hold more than $220 million of customer funds when it actually held about $5.1 million, and that at least $200 million had been misappropriated. Wasendorf had forged bank statements for years. That case is why depositories now give regulators direct electronic access to segregated account balances.

Worked example: excess funds at the FCM

All figures are illustrative. A trader holds 2 crude oil futures (1,000 barrels each). Suppose the exchange’s margin requirement is $6,000 per contract, so $12,000 total, and she has $50,000 in the account.

$12,000 is posted as margin and held at the clearing house through the FCM.
$38,000 is excess, still segregated but held by the FCM at its depositories.

If her FCM failed with a 5% shortfall in customer property and no recovery, she would bear about 5% of her $50,000 claim, roughly $2,500, on top of any trading result. Holding large idle balances at an FCM increases exposure to that firm. Some traders keep only what they need for margin plus a buffer, and hold the rest elsewhere.

What can go wrong

Assuming SIPC applies. It does not cover futures outside a portfolio margining account.
Large excess balances. Money sitting at an FCM above margin needs is exposed to that firm’s failure.
Foreign exchange trades. Funds for non-US exchanges are protected under Part 30 and may depend on foreign insolvency law.
Unregistered platforms. None of these protections apply to a firm that is not a registered FCM or a CIRO member.
Delays. Even when customers are eventually made whole, access to money can be frozen for weeks or months.

The short version

US futures customer money is protected by segregation under CFTC Regulation 1.20, the ban on using one customer’s funds for another, and the residual interest rule requiring the FCM to cover undermargined accounts with its own money by 6:00 p.m. Eastern the next business day. SIPC does not cover futures, so a shortfall at a failed FCM is shared pro rata among customers. In Canada, CIPF covers eligible futures accounts at CIRO member firms up to $1 million for general accounts combined, as of November 2026. MF Global’s roughly $1.6 billion shortfall in 2011 was fully repaid by 2014, but only after long delays.

This is general education, not legal or financial advice. Protection rules and limits change. Check the CFTC, NFA, CIRO, and CIPF websites, or consult a qualified professional for your situation.