by pna
Financial professionals from around the world attending a
symposium here have called for more protection against the risk in the derivatives market.
At the symposium on Central Clearing of Over-the-Counter (OTC) Derivatives on Friday, experts shared ideas and each other's concerns about recent topics in the futures market, particularly regarding clearing and regulation,
according to the Federal Reserve Bank of Chicago.
After the outbreak of the global financial crisis, OTC derivatives, and particularly credit default swaps, faced large amounts of scrutiny, with liquidity crises in the futures market being one of the main factors
contributing to the crisis.
More recently, the collapse of financial derivatives broker MF Global in October 2011 and news that the firm had lost over 800 million U.S. dollars in customer funds caused public outrage, as MF Global was revealed to have mixed clients'
money with the firm's own.
MF Global's primary regulator was the Chicago Mercantile Exchange (CME), the largest operator of U.S. futures exchanges.
After MF Global's colossal failure, some skeptics questioned the quality of oversight CME gave to MF Global, and asked if CME could have done more to supervise and protect customer accounts.
In February, the U.S. Commodities Futures Trading Commission (CFTC) issued two subpoenas to CME to
investigate the exchange operator's possible conduct and regulatory role regarding MF Global, though no charges have been made yet.
At the Fed Symposium, a representative from CME was one of the panelists chosen to speak on the topics of central counterparty (CCP) default management, and of how
bankruptcy could play out in the futures market.
Dale Michaels, managing director of Credit and Market Risks at CME, said the group was developing new ways to protect client funds in
case of a default.
Through "robust" stress testing measures such as ones currently being developed, CME will be prepared in the event of another mass default situation, Michaels said
Making preparations for the situation and setting up new ways to protect client
funds were now among CME's primary concerns, he added.
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