January 18, 2012

In the wake of bankrupt futures brokerage MF Global raiding customer segregated accounts leading to a $1.2 billion shortfall, CME Group and other futures exchanges have formed a committee with the National Futures Association (NFA) to review how self-regulatory organizations can strengthen current safeguards for customer segregated funds.

Other members of the joint committee include InterContinental Exchange (ICE), the Kansas City Board of Trade (KCBOT) and the Minneapolis Grain Exchange (MGEX), according to the release.

This coordinated effort by all of the futures industry self-regulatory organizations (SROs) will examine what changes can be made to rules or to the ways firms demonstrate compliance with those rules to prevent customer losses due to the insolvency of a futures commission merchant (FCM).

"Self-regulation has served the futures industry and its customers very well for a very long time," stated Daniel Roth, president of NFA, CME Group and National Futures Association (NFA) today announced, in conjunction with the InterContinental Exchange (ICE), the Kansas City Board of Trade (KCBOT) and the Minneapolis Grain Exchange (MGEX), the formation of a joint committee to review how self-regulatory organizations can strengthen current safeguards for customer segregated funds held at the firm level in light of the MF Global bankruptcy.

This coordinated effort by all of the futures industry self-regulatory organizations (SROs) will examine what changes can be made to rules or to the ways firms demonstrate compliance with those rules to prevent customer losses due to the insolvency of a futures commission merchant (FCM).

"Self-regulation has served the futures industry and its customers very well for a very long time," said Daniel Roth, president of NFA, an independent provider of innovative and efficient regulatory programs that safeguard the integrity of the futures markets. "However, the MF Global bankruptcy has dealt a severe blow to the public's confidence in the financial integrity of our futures markets and it is incumbent upon the industry's SROs - in collaboration with the Commodity Futures Trading Commission - to take the necessary steps to enhance customer protection, particularly in the area of segregated funds."

The committee will hold its first meeting within the next two weeks and plans to issue a series of recommendations by the end of the first quarter of this year.

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Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in ...