The "MF Global problem" remains unsolved and the appetite for change is waning, says Philip McBride Johnson.
It was recently reported that the major futures institutions
may be promoting the idea that, when significant funds are
withdrawn from the customer segregated account at a futures
broker, a senior official at the broker must approve the
transfer. The evident purpose is to deny top officials any
opportunity to disavow knowledge of the transfer, or at least
of its legitimacy (as the CEO of MF Global did before
This is a good idea. Unfortunately, it does not solve the
"MF Global problem" where $1.6 billion of customer funds were
transferred out of the customer segregated account in the
broker's final, chaotic days.
First, let's understand how the existing system works. All
customer funds must be banked separately from the broker's own
resources. The Commodity Exchange Act and rules of the
Commodity Futures Trading Commission (CFTC) make it both a
civil and a criminal offense to do otherwise.
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