MEMORANDUMFor: National Futures Association Board of DirectorsFrom: Douglas Bry & Ernest JaffarianCTA/CPO RepresentativesDate: 13 February 2012Re: MF Global Issues and ProposalsThe MF Global bankruptcy and its aftermath have created the potential for irreparableharm to the futures industry, a key component of the global financial system.National Futures Association (NFA) is in a unique position to take a leadership rolehelping to recover customer funds, restoring the
trust and confidence, andimplementing changes to further codify the already existing public policy that customerfunds are sacrosanct.
What happened and just how bad is it?
We’ve set out below some background and
a summary of what led to, and has transpired inthe wake of, the MF Global (MFG) bankruptcy, followed by four proposals that we think will help to resolve the major problems.Testimony of Daniel J. Roth, President of NFA, before the Committee on Agriculture, USHouse of Representatives, December 8, 2011:
The recent demise of MF Global has dealt a severe blow to the public'sconfidence in the financial integrity of our futures markets. This is much
more than an academic argument. Thousands of customers have sufferedand continue to suffer from a breakdown in the regulatory protectionsthey have come to expect. Their frustration with the situation is
completely understandable. Reestablishing the public's confidence isessential to our futures markets, which, in turn, are an essential part of ournation's economy.
Testimony of Terrence A. Duffy, Executive Chairman, CME Group Inc. (CME), beforethe House Committee on Financial Services Subcommittee on Oversight &Investigations, December 15, 2011:
[T]he MF Global bankruptcy is unprecedented in that it is the first time(i) there has been a shortfall in customer segregated funds held by one of our clearing members as a
result of the clearing member’s improper
handling of customer funds and (ii) our clearing house was unable totransfer all customer positions and property in an FCM bankruptcy due to