CME's Donohue: Futures Customer Safeguard System 'Does Work'

The top executive of CME Group Inc. (CME) stood behind the U.S. futures market's methods of protecting customers from brokerage failures, despite shortcomings revealed in the collapse of MF Global Holdings (MFGLQ).

"We need to stick with the segregation-type system and look for ways to make it more effective," said CME Chief Executive Craig Donohue, who said the concept of an insurance-like protection fund for futures traders was "probably inadequate."

Donohue said CME had done the best it could to supervise MF Global and protect its customers. He said that the exchange operator, which was MF Global's front-line regulator, had no regrets in its oversight of the firm, which CME maintains broke rules governing futures markets.

The trustee unwinding MF Global has estimated that $1.6 billion worth of MF Global customers' money remains out of reach nearly five months past the New York firm's Oct. 31 bankruptcy.

A Securities Investor Protection Corp.-like solution for the futures markets is likely unworkable, Donohue said, because the long-term nature of some hedges maintained by futures market participants would be too much for an insurance fund to properly cover.

Designing fixes for the problems exposed by MF Global's collapse is hard to do until regulators and investigators provide a full explanation as to how the money went missing, said Jeff Sprecher, chief executive of IntercontinentalExchange Inc. (ICE), the second-largest U.S. futures market operator by volume.

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

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