The Wall Street Journal reports that a series of recommendations were released Wednesday by a Wall Street trade group specializing in futures trading. The hope is that these recommendations will help restore confidence among traders, farmers and others. The downfall of MF Global has seriously shaken the perception that futures trading is generally safe. Some of Wednesday's proposals by the Futures Industry Association already are followed by many banks and Wall Street firms' futures divisions. They call for more reporting of information about customer money, including daily reporting to regulators such as CME Group Inc. and twice a month reporting on how customer money is being invested.
The trade group, whose committee on MF Global's downfall includes banks, brokerage firms and clearinghouses, also made recommendations about requiring that the chief financial officers of futures brokerage firms to be tested about their knowledge of customer protection rules. Many CFOs of futures firms take a more general exam that doesn't drill down into the protection of futures customers, according to the trade group's report.
Clash over Collateral
During a two-day roundtable convened by the Commodity Futures Trading Commission this week derivative buyers urged the commission to extend collateral-protection rules and add collateral-segregation standards to the futures market.
"We know it's going to cost more. We know it might increase margining. There are a bunch of buy-side participants who are willing to pay more," said John Torell, Tudor Investment Corp.'s chief financial officer.
Tim Doar, managing director at CME, the world largest futures exchange, said the agency shouldn't "rush to judgment" with regulatory changes.
CFTC Chairman Gary Gensler has asked the agency's staff to develop recommendations for oversight of the futures markets' system of self-regulation. The roundtable is an early step toward possible regulatory changes. "There will be significant public input" on any changes to be proposed by the CFTC, Gensler told lawmakers Wednesday at a House Agriculture Committee hearing.
Senate Ag Leaders Seek IRS Guidance
The leadership of the Senate Ag committee, Chairwoman Debbie Stabenow, D-Mich., and Ranking Member Pat Roberts, R-Kan., are urging the Internal Revenue Service to provide former MF Global customers with guidance as income tax filing deadlines are approaching. These former MF Global customers are waiting for 1099 forms detailing gains and losses to their accounts in 2011. The company filed for bankruptcy on October 31, 2011 after revealing that hundreds of millions of dollars in customer money had gone missing.
In a letter to IRS Commissioner Douglas Shulman, the pair wrote, "The court-appointed trustee applied for and received two extensions from your agency, but the former customers of MF Global must still pay their taxes on time. Many of these customers are farmers and ranchers who have significant planting responsibilities in the spring and we urge your agency to respect the difficult time constraints they are under."
The letter continued, "We ask that you issue guidance on the specific rules that apply in the reporting of losses from MF Global's bankruptcy so the firm's former customers may be able to claim a loss on their missing funds even though the full investigation of the bankruptcy is incomplete."