The full facts remain elusive but, according to the MF Global bankruptcy trustee, some USD1.2 billion may be missing from MF Global’s segregated customer account. For generations, the U.S. Commodity Exchange Act has required a strict separation of a broker’s customer funds from its own operating resources. Under no circumstances may customer funds be used to pay the broker’s own bills. Violations are crimes. For generations, that creed was honored. If it is concluded that this is the exception and especially considering the size of the shortfall, there will be calls for corrective measures.
The challenge, in that case, will be to find a remedy that does more good than harm.
The ‘good’ is to reassure market users that this event is a one-of-a-kind and has been addressed effectively. The harm would be devising a response that chases traders out of the market due to ....