Jeff  Carter

Fraudster John Corzine testified today before the House Ag Committee. The agricultural committees in Congress rule over the CFTC, and commodity exchanges. That’s why he is going there instead of the House Financial Services Committee.

Corzine offered no an apology. In testimony he said he has no idea where the money is and other pablum.

It’s not enough. There is a gaping money hole that won’t be filled, but can have some closure.

$CME’s Executive Chair Terry Duffy is also testifying. Duffy has every right to be outraged at Corzine and MF Global. MF’s customers are also CME’s customers. CME relies on a chain of distribution to interact with those customers, and MF put CME in a horrible spot. MF also took about 40 points off the CME stock price which cost it’s shareholders around $2.6 billion in market cap. So yeah, Duffy has a right to be more than a little peeved.

Corzine and MF Global didn’t just lose a little money. They lost their own customer money and violated a sacred trust. It wasn’t just a breach of ethics between them and their customers, it was a fraud that stained an entire industry. MF also violated an ethical relationship that a clearing firm has with an exchange. Their action calls into question every single business relationship in the food chain.

Trader to firm, sub clearing firm to megaclearing firm, megaclearing firm to exchange, and exchange back to the trader. Virtually every aspect of the business has to be re-examined. It’s tough to trade when you have to look over your shoulder and be suspect of your entire support staff that you pay handsomely for with your commission dollars. Traders have a very unique relationship with their clearing firm, and the exchange they do business at. Exchange employees don’t just shuffle paper and worry about bureaucratic clearing firms. They are on the ground every day touching and talking to people that actually trade the markets. They help traders manage that relationship. Up until now, there was never, ever a question about the security or safety of my money posted on margin or excess money sitting in my trading account with my firm. MF changed that.

If Vito Corleone was handling this problem, the head people at MF would be swimming with the fishes already and their assets, both personal and business, would be the property of the family now.


Jeff Carter

Jeffrey Carter is an independent speculator. He has been trading since 1988. His blog site, Points and Figures was named by Minyanville as one of The 20 Most Influential Blogs in Financial Media.