Regulators vote on ‘MF Global rule’

Regulators are placing tighter rules on American trading companies, specifically how firms use their customers’ funds, inspired by the recently-bankrupt MF Global.

The Commodity Futures Trading Commission voted unanimously Monday on the latest rules, which would ban “so-called in-house repurchase agreements, or repos,” in which one part of a futures firm swaps customer assets for securities such as municipal bonds or foreign-government bonds held at another part of the firm, according to the Wall Street Journal.

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Since these deals are done within the firm, they expose customers to a firms’ ability to manage risk. The CFTC finalized the rule with a vote of 5-0, Reuters reported.

"Futures customers generally and, indeed, the public are rightly demanding that the commission take immediate steps — even before the MF Global investigation is complete — to reassure them we are doing everything we can to safeguard customer money," said Mark Wetjen, a Democratic commissioner who was sworn in to the CFTC in October, Reuters reported.

Now labeled the ‘MF Global rule,’ it was proposed a year ago by the CFTC but the agency held off adopting it after company CEOs, such as Jon Corzine, who left his position as CEO of MF Global last month, petitioned against it, The New York Times reported.

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Firms will be able to lobby against the restriction. The rule will take effect in 60 days and firms have roughly 60 months to comply, the Associated Press reported.

Trading firm MF Global filed for bankruptcy in October after making bad bets on European sovereign debt. Regulators found that an estimated $1.2 billion in customer accounts is missing. A week after filing for bankruptcy, Corzine resigned from his position. The Securities and Exchange Commission and the CFTC are still looking into whether MF Global used customer accounts for its own needs.

Read more at GlobalPost: Jon Corzine resigns from bankrupt MF Global