Today marks the one year anniversary of the day MF Global filed for bankruptcy. We still remember it like it was yesterday, but much has happened in the months since. And while much of the coverage one year later will focus on what went wrong, there has been progress made on making things right; with new rules, proposals, and reviews all focusing on restoring the unconditional trust in the futures industry’s ability to protect customer funds.
Indeed, one of the highest profile industry members, Terry Duffy, Chairman and President of the CME, spent some time putting pen to paper (or fingers to the keyboard) to point out the steps forward that have been made over the past year. We’ve highlighted some of the passages that caught our eye in the letter put out yesterday below:
Our collective marketplace is too important to the fabric of the world economy to allow these issues to fester. That is why our industry took decisive action. We are demanding even more transparency and more accountability. As a result, a year later we are a better industry and our customers are safer than before.
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CME Group worked with the National Futures Association, the Commodities Futures Trading Commission and others to adopt and employ several new requirements designed to deter misuse of any customer funds – futures or cleared over-the-counter derivatives. […]
The bankruptcy process of returning customer property can never move fast enough for those who, through no fault of their own, are unable to operate their businesses. But, progress has been made. As an industry leader and provider of the broadest range of benchmark futures and options contracts, CME Group guaranteed $550 million to the MF Global trustee. This helped to accelerate the distribution of customer funds in the early days of the bankruptcy. CME Trust has pledged $50 million of its assets to cover our customers’ losses that remain after the Trustee’s distribution process is completed. In addition, we created a $100 million fund to provide further protection for U.S. family farmers, family ranchers and their cooperatives that hedge their business in our futures markets. This is particularly important since our nation’s food producers were so hard hit by the [MF Global and PFG] failures. And, next month, CME Group will begin the process of paying over $2 million in benefits to nearly 200 farmers, ranchers and cooperatives that used CME Group markets and suffered losses in the failure of PFG.
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…We will continue to work together as an industry to learn from the past year. But the more important work is forward-looking. Regulators and the industry must carefully weigh the benefits of even the most far-reaching proposals that could enhance protection for customers’ segregated funds – and we will.
For in the end, that’s the most important element. We must continue to take responsible action to restore confidence in the derivatives markets that so many rely on for their risk-management needs – and that a global economy depends on for growth.
Just what has been done to allow Duffy to say customers are safer than a year before? We summarize the post MF Global reforms which have been put in place or will be shortly below:
We’re not going to downplay the significance of these achievements, but that’s not to say that there isn’t still work to be done. In the PFGBest case, in particular, the CME is touting their role in helping 200 victims recoup some of their losses. That’s good for those 200 individuals, but what about the other 17,800 clients? The fact of the matter is that there is still a lot of room for improvement, as we detailed in our newsletter last week… and the industry needs to keep working hard to make these improvements a reality. The hidden agenda here for the publicly traded CME, of course, is to restore trust as quickly as possible to reverse the trend of lower volumes they are seeing. It will take more than a letter to do that.