Ah, the ‘Self-Regulated’ U.S. Futures Markets – How’s That Going For You, CME Group?

CME Group (CME) lost ground Tuesday after brokerage firm Peregrine Financial Group announced terrible news: Peregrine's owner Russell Wasendorf Sr. attempted suicide and left a note saying he’d done something wrong, reports the Financial Times It has since filed for liquidation.

CME Chart

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Futures scandals are as old as futures trading, so you might think the country’s dominant futures exchange and its investors would be used to this kind of thing. But this one is notable because it’s the second in less than a year to violate what was long considered sacrosanct in the industry – the understanding that customers’ funds, when kept in brokerage accounts, were safe. After MF Global blew out in October under the watch of onetime New Jersey governor Jon Corzine, it turned out $1.6 billion in supposedly safe funds had disappeared. Now another $200 million is missing.

With two violations like this, it makes sense to expect that the futures industry will be more heavily regulated. That could raise costs and crimp volumes, which would lower revenues at CME.

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