CMC Discusses Senate Agriculture Committee Roundtable on MF Global

On this week’s policy call, CMC staff reported to our members on the Senate Ag Committee’s MF Global roundtable held on Tuesday, April 3.  CMC was one of only four groups invited to participate at this select event to discuss our thoughts and recommendations regarding potential legislative/ governmental regulatory / self-regulatory fixes to minimize the chances of another MF Global – like situation from occurring again.

Based on numerous prior discussions within our membership and with outside groups, CMC offered ten recommendations that followed from three core principles.  Click here to read CMC’s recommendations.

The event was moderated by former CFTC Commissioner Mike Dunn, and the other groups invited to share their thoughts were the National Futures Association, the Futures Industry Association and the Commodity Customers Coalition.


CMC’s Top Five Articles to Read This Week

Here are 5 articles I don’t think you can miss this week:


MF Global

In Politics

  • Charlie Cook starts to concur with Chuck Gabriel’s presentation at CMC’s SOTI 2012 event.
  • Up In The Air

In Agriculture

CMC Continues Works Inside The Beltway On MF Global Bankruptcy

Over three months after the MF Global bankruptcy, CMC continues to work to set the table for a robust and thoughtful discussion on policy recommendations.

  • We mobilized our members and formed a Task Force which will hold its first meeting in the coming days.  If you are interested in participating, please contact Meghan Tran (Meghan.Tran@CommodityMkts.Org or 202.842.0400 ext. 104)
  • When the House Ag Committee convened the first hearing on the bankruptcy, CMC had a seat at the table.  In a day-long hearing, R.J. O’Brien CEO Gerry Corcoran delivered the Council’s testimony and answered questions.  To read our testimony, click here.
  • Recognizing the need for greater education and a forum for discussion within the agricultural community, CMC is hosting a series of briefings on the bankruptcy.
  1. Our first briefing was held January 18 and drew a standing room only crowd.  Representatives from over 40 ag trade associations and numerous Hill staff gathered to listen to Ann Shuman, Managing Director & Deputy General Counsel with CME Group, explained CME’s role in the bankruptcy process and answers questions.
  2. Our next briefing is slated for February 13 and will feature representatives from the CFTC discussing a number of topics but including the regulatory framework governing FCMs and the penalties associated with breaching customer segregated funds
  • CMC continues to reach out to our press contacts, keeping them informed about these efforts and offering background and interviews as requested.  Just before State of the Industry, CMC was quoted in this article by Greg Meyer of The Financial Times.
  • Using our extensive inside the Beltway network, we are working with other agricultural, energy and financial groups not only to educate and to offer a forum for discussion, but to be prepared to work with us when the time is right to put forth policy and regulatory recommendations.  Combining the expertise of our membership with a variety of like-minded-groups in DC will multiply the message to help law makers and regulators make better and more informed decisions.

CMC Hosts John Lothian on Policy Call

Famed futures trader, industry consultant and newsletter publisher John Lothian spoke with CMC members on the policy call yesterday. Always forthright, knowledgeable and opinionated, John sparked a constructive and wide-ranging discussion on potential regulatory reforms stemming from the MF Global fiasco.

CMC Recap of House Ag Hearing on MF Global

Last week, CMC participated in the House Agriculture Committee hearing on the bankruptcy of MF Global.  It was an important opportunity that positioned the Council as a thought leader on the issue.  We were one of only two witnesses that spoke about the bankruptcy from a market participant perspective.  The hearing garnered significant media attention as it was the first public appearance of former MF Global CEO Jon Corzine since the bankruptcy of the firm.


  • CMC testified at the first Congressional hearing on the MF Global bankruptcy
  • The Trustee currently estimates the customer shortfall to be $1.2 billion
  • Investigations into missing customer segregated funds continue and include CFTC (civil penalties) and the US Attorney’s office (criminal penalties)
  • If in a legal proceeding the CFTC successfully collects restitution from MF Global, it would be distributed to customers.
  • Corzine testified for the first time and will subsequently testify in two more hearings this month (12/13 and 12/15)
  • Congress understands the magnitude of this situation and will explore policy options.  While nothing appears to be imminent, bills have already been introduced and Ranking Member Peterson may introduce a bill requiring third party segregation of customer funds.

The hearing stretched well over 8 hours and started with three hours of tough questioning for CFTC Commissioner Jill Sommers and Mr. James Kobak (lead counsel for the Trustee).

Mr. Kobak estimates the potential shortfall of customer funds at $1.2 billion.  He also indicated that customers would have priority in any asset distribution and the Trustee will pursue any legal theory to “claw back” customer money.  He also explained that today the trustee is asking the bankruptcy court to allow distribution of an additional $2 billion.  If the distribution is granted, it would bring everyone up to 69-70% and customers should have their money in 2-4 weeks.

When Mr. Corzine came forward in the afternoon he proved to be contrarian.  He apologized and took questions.  However, the critical questions – what did he know and when – remain unanswered.

CMC joined several other witnesses on the third panel.  Gerry Corcoran, our witness, gave an abbreviated statement and fielded questions.  Rep. Conaway spoke directly to Mr. Corcoran and asked if it was possible for the market to fix itself after all the dust settled.  Mr. Corcoran suggested that customers are already looking more closely at their FCMs and greater transparency may help customers choose the right FCM.

House Ag Committee Chairman Lucas (R-OK) refrained from advocating for any particular policy change and focused on fact-finding.  Ranking Member Collin Peterson (D-MN), however, took a different approach.  He appears to be giving deep consideration to two options:

  1. The capital requirements of a combined FCM/BD; and
  2. Third party holder of segregated funds or full physical segregation.

Peterson made clear he opposed any proposal for a SIPC-like insurance fund.


Panel I

Panel II

Panel III

R.J. O’Brien CEO Corcoran Testifies on Behalf of RJO and CMC

R.J. O’Brien CEO Corcoran Testifies on Behalf of RJO and Commodity
Markets Council at House Agriculture Committee Hearing on MF Global

Gerald Corcoran Testimony Release

Follow these links for more information:

CMC Continues Engagement on the MF Global Situation

The MF Global meltdown has caused a lot of anxiety, understandably so, among the futures industry and more generally among users of financial derivatives. CMC members are no exception. To address our members’ concerns, CMC staff has engaged actively with member companies, outside experts, law firms, journalists and Capitol Hill staff.

CMC members (individually and collectively as a group) and staff have had numerous discussions on this subject to determine what our strategy should be in handling the issue, and what position we should adopt. The CME Group provided a detailed briefing to other CMC members on the situation.

More recently, the House Agriculture Committee offered CMC the opportunity to testify at an upcoming hearing on Thursday, December 8, on the MF Global situation. CMC staff is in discussions with members in this context, and once the details are finalized, an official announcement will be circulated to the entire membership within the next day or so. To CMC’s credit, we are viewed by the legislative community on Capitol Hill as a voice that offers substantive and well-reasoned thinking on a complicated issue such as this.

We will continue our engagement on this subject, and we thank our members who have played key roles in the intra-CMC dialog.