MF Global Situation Prompts Changes for Brokers

CME Group wants daily customer fund level reports.

Published on: Apr 4, 2012

The bankruptcy of MF Global on Oct. 31, 2011 is still causing repercussions throughout the financial sector with $1.6 billion of customers' money still missing and multiple investigations into the collapse of the brokerage firm. Among those investigating the events surrounding the collapse are the U.S. Congress, the Commodity Futures Trading Commission, the Securities and Exchange Commission and the U.S. Department of Justice.

Now the world's largest futures exchange, CME Group Inc., has announced that they will require daily reports from brokers on customer fund levels. Currently CME receives reports from futures brokers on a monthly basis, but starting May 1, the daily reports must be signed by the brokers' chief executive office, chief financial officer, or a designated representative.

Brokers will be required to provide more reports.
Brokers will be required to provide more reports.

"Customer segregation is the cornerstone of the futures industry, and it is critical to ensure the protections afforded under segregation are as strong as they can be for our market participants," CME Group, based in Chicago, said in the notice. It is acting along with the National Futures Association, an industry-funded regulator, and the Futures Industry Association, an industry and lobbying group.

CME Group will also conduct limited reviews on a "surprise basis" of customer segregation reports, it said. CME Group was the designated self-regulator of MF Global, which included audit authority over the brokerage.

In addition to these new requirements of brokers, CME Group is also working with the futures industry to put into place a rule that any disbursement of customer funds that isn't for the customer benefit that exceeds 25% of the total segregated funds must be pre-approved in writing by the futures brokers' chief executive officer, chief financial officer or other designated official.

CME Groups says that bi-monthly statements detailing how customer money is being invested and where the money is being held will also be required of futures brokers.