System for Tracking Customer Funds In Development
November 21, 2012
The AlphaMetrix Group said one of its units has been chosen to help build out a system for the CME Group and National Futures Association that will safely sequester funds for customers of futures brokers.
Its AlphaMetrix360 business will aggregate data for an initiative by the CME and NFA to build a system that will collect balances for banks that are supposed to separate and sequester customer funds on a daily basis for futures commission merchants.
The NFA and CME will perform an automated daily comparison of the balances reported by the bank depositories to the balances reported by the FCMs to identify any discrepancies.
"Obviously, no system or set of rules can completely eliminate fraud,'' said Karen Wuertz, senior vice president for strategic planning and communications for the NFA. "However, this system will greatly enhance the ability to monitor the safety of customer segregated funds on a daily basis and detect potential misuses of customer funds.
The initiative comes after several well-publicized incidents involving misuse of customer funds by futures merchants. On Wednesday, the U.S. Commodity Futures Trading Commission settled a case involving Cantor Fitzgerald & Co., where a customer segregation account was underfunded by $3 million for three days. Cantor paid $700,00 as a civil penalty.
But MF Global, led by former Goldman Sachs banker and New Jersey governor Jon Corzine, last year faced a $1.6 billion shortfall in customer funds. This year, more than $100 million in customer funds went missing at Peregrine Financial Group, whose chief executive attempted suicide.
This is a “necessary project which will improve the ability to monitor the safety of customer funds,’’ said Aleks Kins, President and Chief Executive Officer of AlphaMetrix360.
The firm said it started working on the initiative in early November and will start reporting daily data in early December.
The CME Group operates the world's largest marketplace for trading of commodity futures and other derivatives. The National Futures Association is the self-regulatory organization for the U.S. futures industry.