CFTC Wants Futures Insurance Fund after MF Global Payback


U.S. Commodity Futures Trading Commission (CFTC) member Bart Chilton issued a statement today supporting a futures insurance fund. The statement comes after MF Global announced it had reached a settlement that would return $500 to $600 million of customer funds.

MF Global has admitted to using at least $700 million in customer funds to cover liquidity shortfalls in highly public scandal dating back to October 2011.

CFTC’s Chilton on Futures Insurance Fund

Chilton’s statement comes just one day after the announcement of MF Global’s liquidation:

I’m pleased with today’s announcement that commodities customers are getting back a little more of what they lost in the MF Global debacle. I appreciate the Trustees’ work to that end.  The fact remains, however, that futures customers have not been made whole (and securities customers will have a surplus).  This just further underscores the need for a futures insurance fund.

The Futures Insurance and Customer Protection Act that I have proposed Congress consider would offer assurances for futures customers who get fleeced when an MF Global-like failure or a Peregrine Financial Group-like fraud takes place.  There are solid models for such a fund in the securities and banking worlds.  Why not futures?

Chilton continues by anticipating arguments that U.S. regulation is too under-resourced to establish a futures insurance fund:

Such a fund would not create a big new bureaucracy in Washington.  On the contrary, it can be done with a minimal staff and a minimal budget.  It’s a small price to pay to protect honest investors who stand the chance of getting ripped off by the unseemly dealings of a few bad actors.

The persistent infighting between MF Global trustees charged with returning customer funds, as well as the projected seven months they will require to return such funds, perhaps bolsters Chilton’s case. It will be difficult, though, to push the case for a futures insurance fund until after fiscal cliff talks are resolved.

See the statement here.


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About the Author

Felix Shipkevich
Mr. Shipkevich’s practice focuses on regulatory, transactional, and enforcement matters in the fields of futures, commodities, and derivatives. He works with Futures Commission Merchants (FCMs), Retail Forex Exchange Dealers (RFEDs), Introducing Brokers (IBs), Commodity Pool Operators (CPOs), Commodity Trading Advisors (CTAs), Swap Dealers (SDs), Swap Execution Facilities (SEFs), and domestic and offshore hedge funds. Mr. Shipkevich guides clients on procedures related to registration with the U.S. Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), as well as domestic and international regulators in local jurisdictions. Mr. Shipkevich prepares and helps implement compliance, anti-money laundering (AML), and Electronic Trading Systems (ETS) procedures for clients in the commodities and derivatives fields.