As testimony on Capitol Hill has continued, MF Global’s collapse has become (if possible) even more dramatic. Corzine’s strategy of pushing plausible deniability in his testimony fell apart with the testimony of the CME’s Terry Duffy, who argues that the law was broken and Corzine knew about it.

At this point, the question has become one of motive- not what Corzine’s motivations might have been as he dipped into those accounts, but whether the resounding indictment is a red herring ploy by the exchange to deflect criticism. One of the articles being passed around today questions Duffy’s testimony with a timid skepticism, though the headline- CME’s Duffy vs MF Global’s Corzine: A question of trust– pushes the idea with all the gusto of a Shakespearean rivalry:

The drama over the meltdown of the brokerage firm MF Global pivots around a clash between two veteran traders who rose from relatively humble roots to the very top of the futures-trading business.

One is Jon Corzine, the firm’s former CEO who just testified in Congress about the mystery surrounding some $1 billion in customer money that vanished from MF Global before it failed. The other is Terrence Duffy, the chairman of CME Group Inc, the huge Chicago exchange where MF Global did most of its trading.

At stake is not only Corzine’s reputation – and whether his career on Wall Street and in politics comes to an ignominious ending – but investors’ trust in Duffy, the CME and the U.S. futures industry, which is largely self-regulated…

A desire to shore up the CME’s image helps explain the forceful and at times personal tone of Duffy’s testimony against Corzine, said federal officials familiar with the matter.

“It doesn’t surprise me they are being so aggressive, they don’t have a choice,” one official said of CME’s handling of the matter. “They have a lot of people who lost money.”

Dennis Hastert, the former Republican speaker of the House who has known Duffy for years and who now sits on CME’s board, says of Duffy: “His reputation, his business, everything he’s ever worked for is on the line.”

Noting that MF Global was one of the largest traders on the exchange, Hastert says “the whole business works on trust, and when somebody breaks that trust, it jeopardizes the system.” Duffy “was not amused by the situation at all,” Hastert added.

In some ways, the logic here makes sense. Duffy and the CME find themselves in a perilous position. If Corzine was doing something fishy, to what extent are they liable for not catching it? It had crossed our minds that the CME would be feeling the heat in all of this, especially with the industry anger over their initial reaction to the MF Global collapse. But would that heat be enough to compel them to such tactics?

We’re betting no.

For starters, testifying in front of Congress is not for the faint of heart. Not only is your testimony broadcast to the world, but a misstep carries major legal repercussions, providing a disincentive to try to lie. This doesn’t mean that people don’t perjure themselves. If Duffy is right, that means Corzine already has. The difference here is what’s at stake. At this point, Corzine’s entire life has imploded; he has nothing left to lose. Duffy, on the other hand, would have a long way to fall if disgraced, and would leave himself and the CME open to potential civil legal action if the testimony had been fabricated.

Second, the CME has historically been very careful about what they’ll say and when they’ll say it. They carefully curate and guard their reputation, as one would expect when dealing with such a massive financial entity. This sort of disciplined message development is what drew the ire of so many in the days following MF Global’s filing for bankruptcy. Those calling the CME for comment or explanation found themselves quickly turned away; no one was about to say anything until they could do so with certainty. Ignore Duffy’s risk in this mix- the CME’s board and communications department would not have stood behind Duffy’s testifying if they didn’t have that certainty.

In our minds, this perspective makes more sense than the vindictive testimony angle- particularly when you consider the numbers. One might expect that November would have seen a drop in trading volume as MF Global, one of  the largest FCMs in the business, froze up billions in client trading funds, or as a result of concerned investors who hadn’t been directly impacted by MF Global pulling out of the markets. We certainly expected  the CME’s volumes to be down, and have been monitoring volume on a weekly basis looking for a trend to this effect. Turns out, that has not been the case.

You’ll notice that November saw some drops in equity index trading, energies and forex. You’ll also notice that, despite these drops, volume year to date is up across the board. In other words, the CME isn’t seeing a massive drop in business that’s compelling them to throw Corzine under the bus. This doesn’t mean that the CME doesn’t have more long-term concerns, nor does it mean that confidence in the system hasn’t been shaken. We’re just not seeing an immediate compulsion for recklessness, which, given the risk-oriented nature of our industry, definitely has us leaning towards believing Duffy over Corzine.