The failure of MF Global leaves CME Group holding the bag for investors


CHICAGO — CME Group has taken measures to accelerate the return of substantial customer cash and other assets securely held at CME Clearing, other clearing houses and MF Global custodians following the failure of MF Global Nov. 11.

No guarantee

Though CME Clearing does not guarantee FCM-held assets, CME Group is willing to provide a $250 million financial guarantee to the trustee to give the trustee greater latitude to make an interim distribution of cash to customers now.

Additionally, CME Trust will provide $50 million to CME Group market participants in the event there is a shortfall at the conclusion of the trustee’s distribution process.

Until this point, the trustee has authorized the distribution of $1.45 billion in customer collateral, which permitted the transfer of open positions and avoided greater losses to customers that would have been incurred through liquidation.

Frozen assets

Cash balances remain frozen.

The proposal is designed to ensure that customers would have access to a greater percentage of the total customer-segregated funds MF Global accounted for at CME Clearing, other clearing houses and MF Global custodians.

This guarantee offered by CME Group would be used by the trustee in the event that a final accounting determines that the trustee distributed more property than was permitted by the bankruptcy code and CFTC regulations.

In addition, if there is a shortfall at the conclusion of the distribution and the $50 million trust has not been exhausted, the remainder of those funds will be used to restore the other CME Group customer accounts that suffered a shortfall in customer-segregated funds held at MF Global.

The trust was designed to be used in cases such as this if customers lose money due to the failure of a clearing member.

Uncharted waters

“The failure of MF Global and the firm’s mishandling of customer segregated funds is absolutely uncharted territory for this industry, and this extreme measure will help to provide all former MF Global customers access to their account balances that had previously been frozen in the liquidation,” said CME Group Executive Chairman Terry Duffy.

“We have and will continue to advocate on behalf of customers, wherever they cleared or traded.”

“Our primary concerns are the protection of our customers at CME Clearing and the integrity of all futures markets,” said CME Group CEO Craig Donohue.

“We believe this extraordinary measure is necessary to ensure that all customers are treated fairly during the unique and challenging circumstances surrounding the failure of MF Global.”


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