CME Group Inc. (NASDAQ:CME), the world's largest futures market operator by contract volume, announced Thursday a $100 million fund to protect agricultural customers, a move to rebuild lost confidence after the collapse of MF Global Holdings LP.
The money will be made available to U.S. family farmers and ranchers who are using CME's futures markets to hedge their crops and livestock. These food producers have been particularly harmed by MF Global's failure, in which a clearing firm violated the U.S. Commodity Futures Trading Commission regulations and misused customer money that should have been kept segregated.
CME said the fund will be in effect starting March 1, but will not make the money available to MF Global victims.
"Though all the facts are not yet in, we do know our industry needs to focus on enhancing protections for customer segregated monies held at the firm level," said CME Group Executive Chairman Terrence Duffy.
Called the Family Farmer and Rancher Protection Fund, it is expected to be backed by insurance and will reimburse farmers and ranchers using CME products up to $25,000 per account in the case of losses resulting from the future insolvency of a clearing member or other market participant. Cooperatives will be eligible for up to $100,000 per account and participants will receive pro-rata share of the payouts if claims top $100 million
Criticism from clients and lawmakers for CME's poor oversight over MF Global, coupled with banks deleveraging and reducing trading, has impacted the company's business.
CME said Thursday its January volume of 11.6 million contracts per day was down five percent from January 2010.
CME Group Inc. (NASDAQ:CME) shares are up $14.06 or 5.73 percent, at $259.54 in Thursday afternoon trading.