CME CME Group Inc

Derivatives brokers should be probed more often and offer better details as to how they handle their clients' funds after the collapse of MF Global Holdings Ltd. (MFGLQ) revealed a shortfall in customer assets, a senior U.S. futures market regulator said Friday.

Such firms could also face stricter limits on the way they invest customer funds to ensure the money is not being placed into higher-risk bets, according to Bart Chilton, a commissioner with the Commodity Futures Trading Commission.

MF Global, among the biggest futures brokers in the U.S., filed for bankruptcy Monday. Regulators and exchanges since then have worked to move its customers to other clearing firms, a process complicated by an estimated $600 million shortfall in customer assets held by the failed firm in so-called "segregated accounts."

CME Group Inc. (CME), the world's largest futures exchange operator and MF Global's main exchange-level regulator in the U.S., conducted an audit of the firm's customer accounts last week, but said in a statement this week that it appeared client assets had been moved after the examination.

Chilton said Friday that regulators and exchanges need to do deeper and more frequent probes of such customer accounts. Clearing firms like MF Global should offer more detailed looks into their handling of the business "so that even intra-day transfers that could negatively affect customer funds are detected and prohibited," he said.

The commissioner also urged CFTC staff to move forward with a proposed rule that would have barred some methods of investing customer funds held on deposit with futures brokers, such as certain repurchase agreement trades that Chilton said MF Global had favored.

Clearing firms typically invest client funds held on deposit to earn a return on the money. The firm and its former chief executive, Jon Corzine, had pushed back against the CFTC proposal, Chilton said.

 -By Jacob Bunge, Dow Jones Newswires; 312 750 4117; jacob.bunge@dowjones.com 
 

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