Dear CME,

We understand that you’re probably dealing with a lot right now. Coincidentally, so are we. Actually, so is the rest of the industry. Despite calls for the institution of a SIPC-like program for futures investors from advocates across the industry after MFGlobal, no such fund was established. Now, as we all reel from the revelations out of Cedar Falls, we find ourselves, once more, wondering how things could go so wrong – and without a safety net for clients.

In the bankruptcy filings presented by PFGBest, they listed a rather broad range of assets and liabilities, and as we well know, these proceedings can drag on. And on. And on. The one point of solace in this situation – at least, relative to MFGlobal – is that the amount of funds missing is much smaller at $220mm, and the company’s overall size is dwarfed by the spectre of MFGlobal’s sprawl. The hope is that these circumstances result in a speedier return of available funds to make clients whole, especially since the proceedings appear to be moving forward under commodity law instead of the SIPC, meaning there is no confusion over who gets the money in cusrtomer segregated accounts and who is first in line for disbursement of company assets.

That’s the hope, at least. To be fair, we’re beginning to lean towards optimism on the matter. The CCC, fresh off of their organizing efforts during MFGlobal, is already mobilizing to defend your clients in court, and the judges seem just as angry as the rest of us about how this situation unfolded. But even so, your clients are still floundering, waiting for their money. In the wake of MFGlobal, confidence in the system that, for years, protected futures investors’ assets, has been decimated. With every passing day without client reimbursement, that confidence wanes even further.

News came out yesterday that you will be making the Farmers Insurance Fund available to qualifying victims of the PFGBest scandal. This is definitely a step in the right direction, but its impact may be limited. After all, the reimbursement is for only $25k per account, and is only available to a small group of market participants. Those who are likely more active in the markets – and thus the bulk of your profit base – won’t be able to benefit from the move, and even if they did, the reimbursement would be a drop in the bucket compared to their account balances.

Here’s the thing- $220 million is missing. With MFGlobal, the loss was at $1.6 billion. There was no way you could be expected to cover that, of course, but it didn’t stop the media and industry from demanding it, and criticizing you for not doing so. You have an opportunity here to make clients whole, without anywhere near the cost of the MFGlobal scandal. In doing so, you become champions of the industry, and send a message to futures investors that, even with reforms necessary at the regulatory bodies, the industry as a whole has their back. It’s not a giveaway, either. You don’t need to take a hyper optimistic view of the liabilities and assets of PFGBest to see that you’d most likely be able to recoup the money in the bankruptcy proceedings. In the meantime, you take the industry off pause, and show investors – your clients – that you’re in their corner.

This isn’t just about a potential slow down in volume and market participation in the short term – it’s about long-term confidence in the markets and the safety of the funds we put in it. We’ve got a long road ahead of us, but you can help the journey along. We hope you’ll do the right thing.

Sincerely,

Beleaguered Investors Everywhere