CME Group Inc. (CME:US), the world’s largest futures exchange, will require brokers to report daily customer fund levels as $1.6 billion in client money is still missing related to the bankruptcy of MF Global (MFGLQ:US) Holdings Ltd.
The daily reports, to begin May 1, must be signed by the brokers’ chief executive officer, chief financial officer or their designated representative, CME Group said in a notice to its members yesterday. The exchange now gets customer segregation reports on a monthly basis from futures brokers. The loss of customer money when MF Global filed for bankruptcy protection on Oct. 31 was a first in the futures industry.
“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.
Congress, the Commodity Futures Trading Commission, the Securities and Exchange Commission and the Justice Department are investigating events surrounding the collapse of MF Global, including the disappearance of the customer funds. The company was run by Jon Corzine at the time of its bankruptcy, the eighth-largest in U.S. history.
Corzine, 65, helped run Goldman Sachs Group Inc. (GS:US) from 1994 to 1999. A Democrat who served in the Senate and as New Jersey’s governor, he testified three times in December before congressional panels probing the brokerage’s failure.
CME Group is also working with the futures industry to institute a rule requiring that any disbursement of customer funds that isn’t for the customer benefit that exceeds 25 percent of total segregated funds is pre-approved in writing by the futures brokers’ chief executive officer, chief financial officer or other designated official, the company notice said.
Futures brokers will also be required to file bi-monthly statements detailing how customer funds are invested and where the money is held, CME Group said.
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