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To: greatplains_guy who wrote (58143)

11/1/2012 9:40:06 AM

From: Hope Praytochange

1 Recommendation Respond to of 71588

A Year After MF Global’s Collapse, Brokerage Firms Feel Less Pressure for Change

Published: Thursday, 1 Nov 2012 | 8:35 AM ET

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By: Ben Protess
The New York Times

When MF Global toppled a year ago, chaos engulfed a Chicago trading floor. Customers were locked out of their accounts, later discovering that about $1 billion of their money had disappeared.

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The debacle, which played out on the evening of Halloween, prompted federal authorities to immediately bear down on the brokerage firm and the broader futures trading industry.

But a year after a federal grand jury issued subpoenas and regulators vowed reforms, the largest bankruptcy since the financial crisis has begun to fade from Wall Street’s memory.

Federal authorities have all but cleared MF Global’s top executives of criminal wrongdoing, people briefed on the matter say. The government has yet to usher in a wider overhaul of futures trading rules, save for certain piecemeal policy changes. And the profit-making exchanges that rely on brokerage firms for business still police the futures industry, presenting potential conflicts of interest.

The slowing momentum for change has provided relief for the brokerage firms that dominate the futures trading industry. The Chicago companies, which largely dodged the humbling losses that scarred Wall Street in 2008, continue to cast MF Global as a fleeting distraction rather than a permanent black eye for their business.

“We haven’t seen a dramatic change,” said Terrence A. Duffy, executive chairman of the CME Group, the giant exchange that oversaw MF Global.

But the aftermath, Mr. Duffy noted, has left some customers wary.

Farmers and ranchers traded futures contracts through MF Global to protect themselves from the price swings of their crops. While the clients have received 82 percent of their missing money, they are still owed millions of dollars.

With the prospect of a full recovery unlikely, some traders are sitting on the sidelines. Others who continue to trade are seeking added assurances that the brokerages will follow the law.

“Every conversation with clients is about safety and sanctity of customer funds,” said Mike O’Callaghan, a managing director of business development at Knight Capital’s [KCG 2.61

-0.02 (-0.76%)

] futures business.

Futures customers — and the integrity of the industry — were dealt a further blow this summer when another firm collapsed after misusing customer money. The chief executive of the firm, the Peregrine Financial Group, attempted suicide before eventually pleading guilty to carrying out a nearly 20-year scheme to raid customers’ accounts.