All eyes are on client fund segregation following the fraud at PFGBest. But many barriers remain to what has long been the Holy Grail of transparency.
For over a hundred years the drum of the futures industry
banged to the mantra that client funds had never been
embezzled. In less than nine months that mantra has been blown
apart with frauds of varying sizes in two large and well known
FCMs. The fallout from the frauds will be long and expensive
and client segregation will take centre stage. However, as
Galen Stops found, there are numerous levels of segregation and
many challenges to achieving it.
For the FCM business model to work, clients must have faith in
their brokers, and the PFGBest scandal, occurring just nine
months after MF Global, has rocked the base of that faith.
End-users, FCMs and regulators alike all seem to agree that
something must be done to mend a system that failed so
dramatically twice in less than a year and help restore
confidence in the industry. However, how to do this is the
source of much debate.
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