CME Curtails Charitable Giving After MF Global Collapse

Investigators are still searching for hundreds of millions of dollars of customer money that CME says was improperly siphoned off in the brokerage firm’s final days to meet its escalating liquidity needs.

Last month, the CME Group said it would give former MF Global customers the entire $50 million held by the CME Trust, which was originally intended to help traders caught out by a broker default but which in recent years has been a mainstay of the CME’s charitable giving.

“CME Group will continue to honor some previous trust commitments going forward, even after the $50 million is paid out,” said a CME spokeswoman, Laurie Bischel. “Though the CME Trust will be used to help customers of MF Global, CME Group remains committed to our communities and will continue to provide support to charitable organizations as possible through our other programs and corporate foundations.”

She declined to specify the level of future grants, and it was unclear if other programs could partly or fully make up the loss of the trust’s contributions. The firm’s charitable giving has gone up and down through the years.

The CME Trust was established in 1969 to provide financial assistance to customers if a brokerage became insolvent.

Federal rules requiring brokers to keep client money separate from their own made the prospect of customers actually losing money in a broker default seem so remote that in 2005 the CME’s board voted to turn the trust into a charitable foundation.

In 2008, after giving millions of dollars to local institutions, the trust began the CME Group Foundation with a $16 million grant, and pledged to make annual donations to support grant-making. The foundation has become the CME’s biggest charitable giver, contributing more than $6 million last year alone.

But on Oct. 31, the day MF Global filed for bankruptcy, the firm’s executives made what regulators have since said was a shocking disclosure: that money had been moved from customer accounts to MF Global’s accounts, and was now missing. In mid-November, the CME board voted to turn the CME Trust back to its original purpose.

The CME Group operates the Chicago Board of Trade, the Chicago Mercantile Exchange and the New York Mercantile Exchange, and only its own customers will be eligible for reimbursements.

Money is to be paid out only after the bankruptcy trustee determines that client money is really gone. The CME’s executive chairman, Terrence A. Duffy, this month estimated the shortfall at $700 million to $900 million.

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