A note from Goldman Sachs yesterday said the CME Group, which owns an operates the world’s largest futures exchange, may face “liability” related to MF Global for misleading regulators, Bloomberg reported.From Bloomberg:
“CME has been under pressure,” Daniel Harris, an analyst at New York-based Goldman Sachs, wrote in a note to clients yesterday. The concerns are “owing to worries it may face liability over the timing of communications with the CFTC following a discovery of a shortfall in MF Global’s segregated client accounts,” he said, referring to the Commodity Futures Trading Commission, the CME Group’s regulator.
A source told Bloomberg that the CME Group found unexplained wire transfers at the broker-dealer unit of MF Global and a $900 million shortfall in client funds prior to the bankruptcy. According to the report, CME noticed the shortfall in client funds on October 30, which was a day before the CFTC said they were informed about the missing money.
The company released a statement today about the reported MF Global segregation violation.
“In response to inaccuracies reported yesterday, CME Group confirmed today that if followed CFTC requirements and CME Rules and procedure in reviewing MF Global’s segregated funds statements and coordinating the review with the CFTC.”
In the statement, the exchange owner said it noticed the shortfall in the early hours of Monday, October 31 — not October 30.
What’s more is the CME Group said it “is confident that it complied with all its obligations as a DSRO pursuant to the Commodity Exchange Act.”
So what the company is essentially saying is “yes, we did our job,” but someone else is clearly saying “no, you didn’t.”
If the CME Group failed to follow CFTC guidelines, it would not be good.
The CME Group serves as a self-regulatory authority that oversees member organisations such as MF Global. Therefore, it has to immediately inform the CFTC when a member group has committed a segregation violation or misappropriated customer funds, the Bloomberg report said.
The exchange company’s stock was last last down more than 1% on the Nasdaq.