Futures brokers will be required to report customer fund levels daily under new CME Group rules designed to improve safeguards after the failure of MF Global.
Starting on May 1, brokers must electronically submit statements approved by their firms' chief executive officers, chief financial officers or designated representatives showing how much money is held in customer accounts, CME told brokers this week. They currently submit reports monthly.
The measure is aimed at improving confidence in the futures industry after an estimated $1.6 billion in client funds went missing when brokerage MF Global went bankrupt last fall. Customer funds in segregated accounts are supposed to be protected, even if a broker fails.
CME has come under fire because it was MF Global's first-line regulator.
"We continue to work with the industry in determining best practices regarding internal controls and procedures over customer assets," CME said.
CME will perform "limited reviews" of the daily statements on a surprise basis outside of its regular audits, according to a notice sent to brokers.
In another change, transfers exceeding 25 percent of customer segregated funds will need to be pre-approved by a brokerage's chief executive officer, chief financial officer or a designed representative. An effective date for that rule has not yet been determined, CME said.
In a rule expected to take effect on July 1, brokers also will be required to file reports twice a month reflecting how customer funds are invested and where those funds are held.
MF Global collapsed on Oct. 31 after making risky bets on European sovereign debt.
The new rules should help rebuild trust in the futures industry, said Paul Georgy, president of commodity brokerage Allendale and a board member of the National Futures Association. Still, it is unclear whether they would have prevented customer money from disappearing from MF Global, he said.
"It certainly is a step to make customer money more secure. Is it the right step? Well, nobody really knows," he said.
CME made the changes in coordination with recommendations from the National Futures Association and Futures Industry Association, which are trade groups.