Desperate CME Tries To Regain Client Confidence In MFG, PFG Aftermath; Sends Letters To Customers

Tyler Durden's picture


The CME, which is seeing an unprecedented exodus in trading and customers due to the recent fiascoes at MF Global and Peregrine Financial, and which is completely helpless to do anything about what is fundamentally a core feature of modern US 'capital markets', has resorted to the last ditch effort of every failing enterprise: writing and mailing letters to clients full of hollow promises. "We want you to know that CME Group is committed to making whatever changes are necessary to strengthen customer protections, restore confidence in the futures industry and ensure the effectiveness of these critical markets." Or until the next MFG or PFG at least. Sorry: too little, too late.

From the CME

July 23, 2012

To our customers:

CME Group is appalled by the recent misuse of segregated funds by two firms, MF Global Inc. and PFG, particularly since there has never been anything like it in the history of the futures industry.

Clearly there were serious management transgressions at each firm. But while these firms may have been at fault, it's nevertheless our problem as an industry, and this problem needs a solution. Not protecting customer funds is such a fundamental breach of trust that, without question, the current system in which customer funds are held at the firm level must be re-evaluated. We are exploring the concept of having clearing houses or other depositories hold all customer segregated funds while returning any interest earned on that money back to the FCMs, increasing protections while preserving the operating model for the vast majority of firms who respect and comply by the rules.

The futures community has a strong history of working together to improve our industry. Congress, federal regulators, industry regulators, industry groups and CME are all working towards the same goal: to ensure that market users have confidence in all aspects of the industry, and that the appropriate protections are in place at every point in the system. Every link in the chain has to be as strong as the next. The businesses and individuals who rely on the futures markets to manage their risk rely on all of us to collectively manage their trust.

For CME Group, nothing is more important than the confidence customers have in our marketplace and the protection of our customers when using our markets. In conjunction with the NFA, CFTC and others, we have put in place and are in the process of implementing a number of new requirements designed to deter another firm from misusing customer funds. New requirements include:

  •     Increased surprise reviews of customer segregated funds
  •     Daily segregation reporting by all FCMs
  •     Bi-monthly reporting on investment of segregated funds
  •     Periodic electronic confirmation of customer segregation balances from the firms via e-confirm system
  •     New rules providing direct online access to firm bank accounts to confirm segregation balances
  •     CEO/CFO signoffs of customer segregated fund distributions (Corzine rule)

While these significant steps will provide further safeguards to the users of our markets, and continue to make the system even stronger. We want you to know that CME Group is committed to making whatever changes are necessary to strengthen customer protections, restore confidence in the futures industry and ensure the effectiveness of these critical markets.


Terrence A. Duffy
Executive Chairman & President

Phupinder Gill
Chief Executive Officer

Your rating: None

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Mon, 07/23/2012 - 14:10 | 2643264 Meesohaawnee
Meesohaawnee's picture

another hour and the end of the day ramp job.. get ready. algos getting warmed ..vroom vroom

Mon, 07/23/2012 - 14:23 | 2643324 dow2000
dow2000's picture

Actually, given the long slow ramp all day...I'd bet  we sell off aggressively into the close.  TPTB need to sell off from abetter position, gaps down on the open catch alot of the Hampton's crowd by surprise on a Monday morning!

Mon, 07/23/2012 - 14:35 | 2643352 idea_hamster
idea_hamster's picture

  "the recent misuse of segregated funds"

Total fail within the first 10 words -- PFG admitted it was skrewing clients for 20+ years.

Clearly CME is actually appalled that people got caught:  

"To be with another man's wife? That's French. To get caught? That's American."

Mon, 07/23/2012 - 14:47 | 2643395 Jonas Parker
Jonas Parker's picture

Looks like Ann Barnhardt's call was right on the money (no pun intended).

Mon, 07/23/2012 - 14:51 | 2643406 NotApplicable
NotApplicable's picture

Must be a special week, with Friday afternoon humor showing up on Monday.

I'd like to say I'm surprised that these geniuses didn't see their susceptibility to being Corzined, but no, they went full-retard.

Or maybe they did realize it at the time, but kept quiet, not wanting to get on Dimon's death threat list?

So... which mafia runs the CME, anyway?

Mon, 07/23/2012 - 15:05 | 2643439 Gief Gold Plox
Gief Gold Plox's picture

Jesus. Are they trying to go out of business? Anyone reading this letter having two brain cells to rub together will read it as a giant "Get the fuck out of Dodge" poster which it is.

Anyways, Dear CME, it's been nice knowing you. NOT!

Mon, 07/23/2012 - 15:49 | 2643563 CH1
CH1's picture

The place was dirty as hell in the 70s. God only knows what it's like now.

"Cleaned up" my ass.

Mon, 07/23/2012 - 16:05 | 2643603 Doña K
Doña K's picture

Dear Mr. Duffy,

I am sure by now you are aware of this article and may be reading comments here. These comments below and more to come, are representative of the people who invest. They also read zerohedge.

While reading, besides finding the truth and the feelings of the investing world you now know what needs to be done.

I am sure that you have a high IQ and you know what the right thing to do is.

If you have any concience, resign and write a similar letter that the IMF fellow did. The other option is to raise hell and demand justice and the third option is to stay a coward and rot in hell.

Mon, 07/23/2012 - 16:36 | 2643668 TrainWreck1
TrainWreck1's picture

The only thing Duffy and Phoophighter are doing is pulling everything personal out before the whole mess collapses.

These guys will walk away with a ton, scot-free, and the investors will be *surprise... wait for it* holding the bag.


Mon, 07/23/2012 - 19:08 | 2644016 Bananamerican
Bananamerican's picture

" Congress, federal regulators, industry regulators, industry groups and CME are all working towards the same goal:"


"Personal enrichment and the ensuing, semi-inadvertant destruction of Amerikan capital markets"

Mon, 07/23/2012 - 20:00 | 2644135 FEDbuster
FEDbuster's picture

Restored CONfidence?  When Jon Corzine and Bernie Maddoff are bunking in the same prison cell.

Mon, 07/23/2012 - 21:51 | 2644365 TheFourthStooge-ing
TheFourthStooge-ing's picture

TrainWreck1 said:

The only thing Duffy and Phoophighter are doing is pulling everything personal out before the whole mess collapses.

To our customers:

Please don't pull your money out yet. If you wait until after Halloween, we'll send you a free Spiderman beach towel. Thanks.

Duffy and Phoo Phighter

Tue, 07/24/2012 - 12:44 | 2645912 J U D G E M E N T
J U D G E M E N T's picture

The proper way forward is to admit responsibility for the transgressions of your

regulated firms, make the customers whole, and move forward with REAL oversight

and regulation that is ALREADY supposed to be done.


As long as you are THINKING about making changes, which we don,t need, Ill be

thinking the CME is a criminal organization colluding with its associated firms to

steal peoples money for your own gain.


The CME is over if it does not. Period.



Mon, 07/23/2012 - 15:52 | 2643572 smlbizman
smlbizman's picture

its obvious gief you didnt read the letter......did you not see were they are "appalled", and the cme, congress, the fed regulators, industry regulators and i even bet jamie and lloyd are "appalled" just cant please you people.....and for that..i am "appallled"

Mon, 07/23/2012 - 16:38 | 2643673 tenpanhandle
tenpanhandle's picture

instead of being appalled, they should be impaled.

Mon, 07/23/2012 - 16:26 | 2643650 Whiner
Whiner's picture

Shoulda added a "P.S. For customers who stay in the CME Family, each has our unequivocal assurance that you accounts shall remain unfettered by rehypothication clauses. And, we're not done: you will be assured of a seat on the creditors committee in any Chapter 11 case filed by your dealer! Yours very truly, I remain TA "Dud" Dudley."

Mon, 07/23/2012 - 15:34 | 2643536 El Oregonian
El Oregonian's picture

"temporal illusions": Everything in the future has been manipulated in the past, which explains why everything is coming conveinently, to this point in time i.e. meltdown... It's weird but logical.

Wed, 07/25/2012 - 12:17 | 2649693 matrix2012
matrix2012's picture


El Oregonian,

interesting link but this particular page "DARPA Neuroscience Research And The Batman Massacre" is NO longer available!! any copy of its content?

Tue, 07/24/2012 - 00:33 | 2644618 torak
torak's picture

No one has ever lost a dime in the derivatives market under the watchful eye of CME...NOT!

I thought I read some CME propaganda before the debacle that CME would make the customers of any failing member whole again should the member fail.  Now, that would go a long way to restoring confidence.  But mere words on a press release?  Forget it.  Everyone knows the CME is run by lying SOS.

Mon, 07/23/2012 - 15:05 | 2643435 DoChenRollingBearing
DoChenRollingBearing's picture

@ Jonas + 1

Yes, Ann Barnhardt warned everyone to GET OUT some 11 days ago.  I would go with Ann's advice rather than this shabby letter from the CME.

Mon, 07/23/2012 - 15:33 | 2643525 The Big Ching-aso
The Big Ching-aso's picture




A fly on CME's executive restroom wall...............

"Hey Gary, what did you think of our letter?"

"Ughhhh, I think, (grunt), it's good, (grunt).  I'm glad you didn't mention me."

"Yeah Gare, well about that no mention.  Word's that you're up for promotion."

"No shit! (grunt).  I won't settle for anything less than Treas-Sec.  I earned it."



Mon, 07/23/2012 - 23:10 | 2644503 TheFourthStooge-ing
TheFourthStooge-ing's picture

The Big Ching-aso said:

A fly on CME's executive restroom wall...............

Another possibility:

Mon, 07/23/2012 - 15:52 | 2643571 zanez
zanez's picture

Barnhardt warned everyone to get out last year.


Mon, 07/23/2012 - 16:21 | 2643640 William Wics
William Wics's picture

I was thinking exactly the same thing.

Mon, 07/23/2012 - 18:42 | 2643980 killallthefiat
killallthefiat's picture

Excellent point. I had forgotten about her. 

Mon, 07/23/2012 - 15:10 | 2643459 Arnold Ziffel
Arnold Ziffel's picture

Do you know where your money is?

Mon, 07/23/2012 - 15:21 | 2643493 Widowmaker
Widowmaker's picture

I do, crisp bound $50 bundles of $2k each.

The problem is so many of them I cant sleep.


Mon, 07/23/2012 - 15:25 | 2643503 GMadScientist
GMadScientist's picture

I'd valuate that as "one swift headsmack away from poverty".


Mon, 07/23/2012 - 15:34 | 2643537 Widowmaker
Widowmaker's picture

But my accountant said it would be soft...

Mon, 07/23/2012 - 15:33 | 2643526 iDealMeat
iDealMeat's picture

Convert it into nickels..  99.99% of people would leave it alone and not realize its worth more then the sitting FRN's



Tue, 07/24/2012 - 00:39 | 2644635 Bringin It
Bringin It's picture

idea_hamster - if you begin your post with italics, no one can vote it up or down.  The italics kill off the voting [javascript?] script for some buggy reason.

Tue, 07/24/2012 - 11:59 | 2645672 Kobe Beef
Kobe Beef's picture

"CME Group is committed to making whatever changes are necessary..."

Like, customer dude, we'll promise whatever changes, cuz we haven't, you know, thought of any specific changes to make. And we don't plan on making any actual changes anyway. Like anyways, brah. Send us more money. Dimon needs a new yacht and the hoes are getting bitchy, for real.

Sincerely Up Yours,



Mon, 07/23/2012 - 14:32 | 2643354 strannick
strannick's picture

Die CME die. Your 'whoops I did it again', lucy-and-charlie-brown football antics are tiresome. We're all standing poolside watching you drown.

Mon, 07/23/2012 - 14:53 | 2643413 NotApplicable
NotApplicable's picture

Now not all of us would sit idly by.

I, for instance, would chuck in a brick or two.

Mon, 07/23/2012 - 15:08 | 2643449 unrulian
unrulian's picture

"trying to call 911....this stupid BlackBerry keyboard...or is it the network?....any one have an Iphone?"

Mon, 07/23/2012 - 14:25 | 2643331 Central Bankster
Central Bankster's picture

Im guessing RobotTrader is getting levered long CME as we speak?

Mon, 07/23/2012 - 14:28 | 2643343 The Big Ching-aso
The Big Ching-aso's picture



Fill in the blank...............

"I promise again not to come in your_______."


Mon, 07/23/2012 - 15:13 | 2643466 piceridu
piceridu's picture

your segregated mouth

Mon, 07/23/2012 - 15:25 | 2643507 GMadScientist
GMadScientist's picture

Can I buy two commas and some conjunctions please?

Mon, 07/23/2012 - 21:56 | 2644373 TheFourthStooge-ing
TheFourthStooge-ing's picture

Central Bankster said:

Im guessing RobotTrader is getting levered long CME as we speak?

That's his plan for recovering from the spanking he received on the Facebook IPO.

Mon, 07/23/2012 - 14:50 | 2643389 Carl Spackler
Carl Spackler's picture

Too little, too late...for customers of firm's with seats on the CME group of companies.

This is unprecented.  By the way, whatever happened to REFCO?

Mon, 07/23/2012 - 15:10 | 2643457 pavman
pavman's picture

whatever happened to REFCO?

They were allowed chapter 11 (instead of chapter 7) and thus allowed to reform.


Hmmm.... since 2006 (or whenever that happened) I've had 0 faith in CFTC, NFA, and retail FX market makers.  And apparently the SEC is a joke too, considering they let REFCO go public 3 months before they declared bankruptcy.   Makes you really wonder about that whole false sense of security the gubermint provides with organizations like this.  I do wonder who lobbied for CFTC and NFA in the first place.  One thing's for certain: the gubermint hasn't learned from REFCO.

Mon, 07/23/2012 - 15:53 | 2643577 CH1
CH1's picture

the SEC is a joke too, considering they let REFCO go public 3 months before they declared bankruptcy..

And they both examined and cleared Madoff TWICE, and... and... and...

Mon, 07/23/2012 - 14:53 | 2643414 cossack55
cossack55's picture

Whats a "Phupinder"?

Mon, 07/23/2012 - 15:29 | 2643520 Motorhead
Motorhead's picture

Exactly.  Does anyone expect us to believe ANYBODY with a name such as "Phupinder"?  Phooie-pinder is more like it.  What a fucking joke.

Mon, 07/23/2012 - 16:08 | 2643616 slewie the pi-rat
slewie the pi-rat's picture

meet the author, BiCheZ!

from slewie intel files


Mon, 07/23/2012 - 16:55 | 2643711 tenpanhandle
tenpanhandle's picture

isn't that an agent that binds runny shit?

Mon, 07/23/2012 - 21:58 | 2644378 TheFourthStooge-ing
TheFourthStooge-ing's picture


isn't that an agent that binds runny shit?

You're thinking of Kaophucktate.

Mon, 07/23/2012 - 15:42 | 2643552 Offthebeach
Offthebeach's picture

" E-Mail verification ".

Yeah. That'll work. That's the ticket.

( How come the CME IP address runs through Lagos, Nigeria? )

Mon, 07/23/2012 - 22:03 | 2644381 TheFourthStooge-ing
TheFourthStooge-ing's picture


" E-Mail verification ".

Yeah. That'll work. That's the ticket.

( How come the CME IP address runs through Lagos, Nigeria? )

Because CME has outsourced their email verification to these guys:

Do NOT follow this link or you will be banned from the site!