CME defends handling of MF Global collapse

Wed Nov 30, 2011 7:40pm EST

(Reuters) - The CME Group (CME.O) on Wednesday fought back against criticism it has not done enough to protect customers whose money has gone missing in the collapse of brokerage MF Global Holdings Ltd MFGLQ.PK.

CME was "over collateralized when it came to MF Global's customer positions in CME's clearinghouse," Jamie Parisi, CME's chief financial officer, told investors during a webcast presentation at New York brokerage conference.

A shortfall in money in customer segregated accounts at MF Global "was an issue between MF and their customers," Parisi said at the Keefe, Bruyette & Woods conference.

"Our clearinghouse did a fantastic job around this," he said.

Parisi's comments came as customers who had open positions and cash in MF Global accounts continued to wait to get their money back. As much as $1.2 billion is still missing since its collapse October 31.

Customers have said CME should have exercised greater oversight of MF Global before its bankruptcy, with some calling for the exchange to compensate clients for their losses while a MF Global trustee searches for the missing funds.

CME was MF Global's main regulator at the exchange level. It performed an audit on the brokerage days before its bankruptcy, which was caused by bad bets on European sovereign debt.

Last week, the CME expanded the size of a fund to help expedite the return of client cash to $550 million from $250 million.

Parisi downplayed complaints about delays in returning money to customers.

"There's been some delay in returning the funds, but when you compare it to other just general bankruptcy situations, it's been a very quick return of a substantial amount of funds," he said.

CME STILL HOPES FOR STATE TAX BREAKS

Parisi also said the CME would not give up on negotiations with Illinois lawmakers on a package of tax breaks from the state after a proposed deal was voted down by the Illinois House of Representatives on Tuesday.

The exchange has threatened to leave Illinois because of a heavy tax burden.

"Unfortunately we were not able to get something passed in this recent session that would have been a benefit for CME going forward," he said. "We'll continue to work there and we will continue to look at our other options."

CME executives have said the exchange's physical trading floors would remain in Chicago. Other operations could move out of state.

(Reporting by Tom Polansek; editing by Bob Burgdorfer)

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