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CME statement on Refco and CME Financial Safeguards System

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The Chicago Mercantile Exchange Inc. has put out a statement clarifying its position with regard to its clearing member, Refco, LLC.

The CME stated: “CME provides a marketplace where futures and options on futures contracts are traded.  The CME Clearing House clears, settles and guarantees all matched transactions in CME contracts and contracts traded through the Chicago Board of Trade (CBOT).  The financial integrity of the CME Clearing House is the foremost consideration of the CME’s Management, Board of Directors and Clearing House Risk Committee.  CME is vitally aware of its role in international financial markets and believes that its financial safeguard system, designed for the benefit and protection of both clearing members and their customers, is second to none.  CME’s financial safeguard systems and auditing systems have proved absolutely effective for over 125 years to protect customers and other members of its clearing house against any loss.”

“CME’s clearing member, Refco, LLC, is a subsidiary of Refco, Inc., but is a separate company with its own accounts, assets and customers.  These accounts, assets and customers are protected through a comprehensive federal statutory and regulatory regime and other financial safeguards and risk management protections provided by the CME Clearing House.  All customer funds are required to be segregated from firm assets, held in specially identified accounts and are not subject to any creditors’ claims against the firm. “

“Refco, LLC, the CME clearing member has met and continues to meet all of its obligations to CME and remains in good standing. Additionally, CME’s Risk Committee has restricted Refco, LLC from withdrawing capital (including current excess capital) from Refco, LLC without CME’s permission and has required Refco, LLC to submit weekly capital computations and segregated funds computations to CME.  CME audit and financial surveillance staff are also monitoring current activities within the firm, including customer-segregated balances, on a real-time basis.”

“CME’s risk management and financial surveillance techniques are comprehensive and specifically designed to:

• Prevent the accumulation of losses through CME’s twice daily mark-to-market and settlement variation payment process.  All payments to and collections from clearing members are made in “same-day” funds.

• Ensure that sufficient resources are available to cover future obligations through the payment of both minimum initial and maintenance performance bonds and with high quality collateral specified by CME.

• Result in the prompt detection of financial and operational weaknesses affecting any CME clearing member firm.

• Allow swift and appropriate action to be taken to rectify and financial problems and protect the clearing system.”

Further information regarding the CME Financial Safeguard System can be found at


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