Insight: CME's Duffy vs MF Global's Corzine: A question of trust

Sun Dec 18, 2011 6:33pm EST
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By Philip Shishkin

WASHINGTON (Reuters) - 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.

Corzine and Duffy barely know each other, but their businesses were enmeshed in the clubby futures trading world. The CME made money from MF Global's trading, and was supposed to watch for violations of rules designed to protect investors.

When MF Global collapsed and clients grew angry both at Corzine's firm and at Duffy's exchange, Duffy launched a public attack on Corzine at the congressional hearings.

The plain-spoken CME boss alleged that Corzine may have known of improper use of client money.

"In our opinion, someone has violated the law," Duffy told Congress last week, without specifying who that someone might be. He added that MF Global "falsified" its balance sheets to mislead CME auditors.

Duffy's statements, backed up by a 10-page, hour-by-hour chronology of MF Global's final days, provide the most detailed public accounting of the frantic dissolution of one of the country's largest futures brokerages.   Continued...