Philip McBride Johnson congratulates Bart Chilton on his post-MF Global and PFG Best insurance proposals.
On August 9, CFTC Commissioner Bart Chilton formally
proposed a plan to insure futures customers' accounts up to
$250,000. The industry trade association has estimated that,
for MF Global customers, about 78% of them would have been made
whole if the Chilton insurance fund had been in place last
October. And I suspect a similar (or greater) coverage for
PFGBest futures clients as well since its customer base appears
to have included fewer large institutions than MF Global. This
idea is undeniably a good one.
Presumably, the futures commission merchant (or FCM)
community would fund the program. In today's competitive
climate with low commissions and paltry yields on permissible
investment of customer funds, the FCMs may or may not be able
to pass on these costs to customers. Only the "sharp pencils"
within each FCM can make the calculation whether the plan might
further erode its profit margins.
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