I'm a little troubled with the MF Global Bankruptcy and the freezing of assets of individual traders (that had nothing to do with the bad bets of an FCM) that I see flashing on the news wires these days. It brings back memories of 2004 - 2005 when I was introduced to Spot Forex and Refco. Maybe many of you can remember back when Refco filed for bankruptcy. At the time Refco was the Big Dog firm of the day. During the bankruptcy fall-out we found that our Spot Forex accounts didn’t fall under CBOT, CME, NFA, CFTC and SEC segregated account protection policies so those accounts were raided and never returned to their rightful owners. We all felt that those accounts were protected should the firm get into trouble just as our futures accounts were. Were we wrong!! We lost all our funds in those accounts without ever making a trade that day. Through the court process years later maybe 25% at most was returned when all was said and done. Thankfully at the time my futures account was safe and secure as promised by the CBOT, CME, NFA, CFTC and SEC protection policies. At the time I kept the bulk of my money in my futures account and was quite pleased and relieved that things were handled as promised back then.

The scare however on the Spot Forex side in 2005 taught me to only carry what I needed to have to trade each day and I soon did that for both accounts (Spot and Futures). Sweeping regulations over the years and assurance from our regulators is the reason why I am still in this business today but I wasn’t going to hold my life savings in my accounts anymore. I learned my lesson and I relay this information to the very clients I help on a daily basis as well. The ironic thing for me is that the next day after the 2005 Refco bankruptcy (practically overnight) the header on my futures account statement read MF Global instead of Refco. Many of the Big Dogs over at Refco just kept their jobs and continued BUSINESS AS USUAL I GUESS up to 2011 but now under the MF Global umbrella. I guess in hindsight the good news for me was that not much longer after the 2005 Refco bankruptcy I walked away from MF Global as well and moved to other firms.

The news today about MF Global doesn’t leave me wiping my brow and saying thanks that I moved away from them as the real ALARMING ISSUE in my opinion is that the exchange and regulators watching over the ENTIRE INDUSTRY are not doing what they promised to do 100% of the time for the traders caught in the middle of the MF Global crisis. This promise is to guarantee that all trades made are backed and that the traders accounts are segregated and protected in case a FCM collapses to ensure safety for all. This crisis doesn’t effect me in the short term today but it leaves me thinking about the integrity of the entire industry in the long run. The thousands of other traders attached to MF Global are now looking for their mysteriously missing funds in what they thought were protected accounts (the $600M neighborhood and maybe in the Billions). As traders the CME and industry regulators make us as traders hold exorbitant amounts for margin (good faith money) in our accounts, rightfully so in a highly leveraged business. They charge fees every time we trade on top of the held margin as does the NFA to keep themselves profitable and funded in case of need.

Now it is time for the CME, NFA and other industry regulators to do their part, which is to protect the very business they say has a sound foundation; enough with the hypocrisy already! In my opinion the money in the futures accounts of traders needs to be returned if the integrity of the business is going to hold any merit. There is enough pressure to worry about with trading but to not have a foundation under our feet destroys the business.

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