Billy Hunt is a veteran Chicago trader who specializes in the riskiest type of options deals. Yet it's the supposedly safe money in his brokerage account that keeps him up at night.
A year after the collapse of MF Global cost him $1.9 million, Hunt has made a full comeback and today trades on CME Group's open-outcry floor exactly as he has for the last quarter of a century. He still has night-time worries about the $17.5 million in collateral that he keeps at his brokerage, though.
"The risk is still there," said Hunt, 59 and dapper in his bright green trading jacket from his post behind the soybean options pit, where he sells call contracts that expose him to unlimited losses. "Nothing's changed."
It's a common sentiment in the U.S. futures industry, where many say everything is different and yet little has changed since the Oct. 31 failure of the giant brokerage and the $1.6 billion hole it blew in customer accounts.
Trading is down. Market participants worry that hundreds of pages of new and proposed rules do little to safeguard customer money, and will pinch already razor-thin brokerage profits. Some say regulators need to crack down harder on existing rules.
And the stakes are rising. With new regulations pushing over-the-counter swaps onto regulated venues, clearinghouses that already handle contracts valued at more than $2.5 trillion each day are set to take on even more business.
Industry leaders say they've done a lot to exorcise the lingering ghosts of MF Global, including requirements that CEOs sign off on big drawdowns of customer money, and beefed-up auditing.
"Customers are in a better place today," CME Executive Chairman Terrence Duffy told Reuters on Monday. "There are a lot of new processes in place that have really shored up the system."
Or, as Chris Hehmeyer, chairman of the Chicago-based National Futures Association, put it: "It doesn't feel safer. But it is safer."
Futures brokers are required to wall off customer money from their own, and traders have walked away whole from dozens of defaulting futures brokerages in the past, including giants Refco and Lehman.
MF Global and Peregrine shook the industry because their failures made clear that customer money can disappear faster than you can say "Boo".
Trading at CME Group Inc, the biggest operator of U.S. futures exchanges, fell 26 percent last quarter from a year earlier. Duffy told investors last week that macroeconomic factors and the threat of the "fiscal cliff" are keeping investor cash on the sidelines.
But Futures Industry Association President Walter Lukken says the drop also owes something to the impact of MF Global.
"It certainly adds to the uncertainty," Lukken told Reuters. "Trust is lost in a moment; it takes a long time to gain it back."
Scott Gara, who says he lost about $630,000 after MF Global's collapse, is not waiting for trust's return.
He shut down his trading firm, and sold his CME seat and shares this past summer.
"I lost all faith in the CME," said Gara, a soybean meal trader who has bought and sold futures for more than 30 years. The CME was MF Global's front-line regulator.
"It's not worth it to me, the risk," Gara said.
This week, as thousands of futures industry leaders and traders gather in Chicago for an annual conference, the NFA and CME Group plan to announce yet another safeguard: automated checks on brokerage's bank balances.
The checks are a response to the July failure of another futures brokerage, Peregrine Financial Group, whose CEO had used fake bank statements to run a 20-year fraud that cost customers $200 million.
The new system will automatically flag any discrepancies between actual customer account balances and the balances reported by brokerages to regulators, and will be in place by the end of this year, NFA president Dan Roth told Reuters in an interview.
The NFA on Thursday will also start reporting new financial data on brokerages, including how they invest customer money.
The Commodity Futures Trading Commission last week published a 413-page proposal for new customer protections, including some rules that have already been put in place by CME and the NFA.
But those plans have a "gaping hole," according to CFTC Commissioner Bart Chilton: unlike securities traders, futures traders are not backed by an insurance fund. Chilton has been pushing such a fund, which he says has gotten some traction with lawmakers.
With the Presidential election looming, nothing will happen this year, he said, "But I'm hopeful we get to January, February, and something gets introduced."
To James Koutoulas, who heads the Commodity Customer Coalition and worked closely with the MF Global bankruptcy trustee to get money released to customers faster, new rules are not the answer.
"Enforcement is what makes people safe," Koutoulas said. "You can have all the laws and regs and rules that you want and they don't mean anything if people don't go to jail for theft."
Peregrine CEO Russell Wasendorf confessed to cheating customers and is in jail awaiting sentencing that could keep him behind bars for the rest of his life.
MF Global's former chief executive, Jon Corzine, has not been charged with any wrongdoing.
Investigators have said that Corzine's firm appears to have dipped into customer funds as it desperately tried to cope with a liquidity crisis brought on by a credit downgrade following revelations of heavy bets on European sovereign debt.
Futures brokers next week face yet another potential squeeze: new federal regulations that will result in more customer money being held at clearinghouses like CME and not at futures brokerages.
Proponents say the new rules will reduce the possibility of customer losses in a brokerage default, if only because the brokerages will have less customer money to begin with.
Critics say that they will mean less flexibility for futures brokerages already hurt by low interest rates and a 13 percent decline in customer funds in the last 12 months
"Maybe that's the trigger that puts them over the edge," Koutoulas said.
As Hunt buys and sells in the arcane and risky world of grain options, he points to a red button glued to his yellow trading badge, printed with the word "panic."
Still glossy, he says. Never used. When the risk in the options trade gets too much, he caps that risk using futures contracts.
But his nest egg, the $17.5 million lodged with his brokerage to back his trades?
"I don't know any way to manage my clearinghouse risk," he says.