CHICAGO CME Group Inc, the biggest operator of U.S. futures exchanges, wants all customer money to be held at clearinghouses or other depositories in order to keep it out of the hands of brokers where it might be misused.
The collapse of MF Global Inc last year and this month's implosion of smaller futures brokerage Peregrine Financial Group has left customers with an estimated shortfall of $1.8 billion, undermining confidence in the industry.
A signed confession found at the site of Peregrine Financial CEO Russell Wasendorf Sr.'s botched suicide on July 9 took credit for misappropriating funds and deceiving regulators for 20 years. Wasendorf was arrested July 13 and is in jail awaiting a bond hearing this week.
CME officials have also pointed the finger at MF Global CEO Jon Corzine for not keeping track of the customer funds kept at his firms, although Corzine has not been charged with any wrongdoing.
The MF Global and Peregrine debacles have prompted a series of changes to futures regulation to deter future misuse of customer funds, including new requirements that brokers make more frequent reports on, and be subjected to spot checks of, the customer money under their control.
Blaming "management transgressions" for the misuse of customer funds at both firms, CME Group said that holding customer money at a clearinghouse could provide greater protection.
"Not protecting customer funds is such a fundamental breach of trust that, without question, the current system in which customer funds are held at the firm level must be re-evaluated," it said.
U.S. futures brokerages currently hold most of the money that customers put up to back their futures trades, earning interest on those funds while putting just a portion of the funds at clearinghouses.
Any interest earned on customer funds would be returned to the brokerages, CME said in the statement.
(Reporting by Ann Saphir and Tom Polansek; Editing by Maureen Bavdek)