The CME Group will establish a $100 million fund designed to provide further protection of customer segregated funds for U.S. family farmers and ranchers who hedge their business in CME Group futures markets. In light of the recent MF Global failure, in which a clearing firm violated CFTC regulations and misused customer monies that should have been kept segregated, CME Group is adding this extra security measure to protect the country's food producers who are using CME Group futures markets to hedge their crops and livestock that feed the world.
Under the Family Farmer and Rancher Protection Fund, expected to be in effect by March 1, 2012, farmers and ranchers using CME Group products will be eligible for up to $25,000 per account in the case of losses resulting from the future insolvency of a clearing member or other market participant. Farming and ranching cooperatives also will be eligible for up to $100,000 per cooperative. If losses in a future failure total more than $100 million, participants will be eligible for a pro-rata share of the fund, up to $100 million. This new fund is expected to be backed by an insurance policy and will not be available retroactively.
Cattlemen attending the 2012 Cattle Industry Convention heard from Bryan Durkin, CME chief operating officer, who said on behalf of CME that they felt an "inherent" responsibility to help their customers. He said there is more to be done.
"We are in unchartered territory," Durkin said. "There are a lot of facts that still need to be sorted out. We took an important first step for farmers and ranchers." He said MF Global found a way to manipulate a system that has been working flawlessly for 75 years.
The fund will not help former MF Global customers who haven't received all their money as a result of the bankruptcy. There is an estimated $1.2 billion shortfall in customer segregated accounts. Durkin said customers with accounts in the U.S. have received about 72¢ on the dollar.
You can read more here.