CME Group Discusses MF Global Bankruptcy

CHICAGO – Dec. 12, 2011 – CME Group’s COO Bryan Durkin addressed the crowd at the National Grain & Feed Association’s (NGFA) 40^th Annual Country Elevator Conference with his highly anticipated conference session, “Meeting the Challenge of the MF Global Bankruptcy.” In the wake of the chaotic weeks agribusiness has endured after the announcement of the 8^th largest bankruptcy in U.S. history, attendees packed the conference hall to hear what new information and insight Durkin could offer. Here is the full transcript of Durkin’s presentation:

"Thank you for inviting me to speak today. Personally, I have had a very long and strong relationship with the NGFA. For over 20 years we have addressed a lot of initiatives together. We have always had a very strong and forthright and, I think, collegial relationship dealing with a lot of difficult changes — whether it come from product development, contract specifications, changes in the markets — and I view my discussion today with you to be a further extension of that relationship. Hopefully as I walk you through the experiences of the last several weeks and I give a strong understanding of where the CME Group has been throughout this whole process; what we plan on doing going forward; and how we definitely plan on keeping a very open and truthful dialogue with the NGFA as we work through this very difficult situation.

I know there are always a lot of concerns in the minds of grain producers in the winter months as it relates to hedging and the futures markets, but certainly this year represents a different level of difficulty given the failure of MF Global. I’m here to share with you all today what the CME Group’s perspectives are on the things that led up to this situation; hope to provide you with concrete updates as to the status; and hopefully my comments will help to address some of your concerns.

As hedgers, clearly you experienced an unprecedented shock to the market several weeks ago with the bankruptcy of MF Global and the discovery of the shortfall in customer segregated funds. In the wake of that event, we have held a number of calls with members of the NGFA. I have reached out personally to many in the agribusiness community and continue to do so. I have spoken to many elevators throughout the country to gain as much perspective as much as possible to have a deep understanding and communicate my appreciation on behalf of the CME Group on what you’re enduring.

In the wake of this event, there are two things I want to address: the integrity of our markets and the protection of our customers. This has been our primary concern and focus throughout this entire event. For a very, very long time — about 150 years — farmers and agribusinesses never worried about the safety of their money when hedging on futures exchanges. The fact is the system continued to work at the clearinghouse level — and I want to make that very clear — the system continued to work at the clearinghouse level where $2.5 billion of your money was held and safeguarded. But given what did not work at the firm level at MF Global, many of you are now awaiting the return of funds; and, if you are affected by this situation, we fully understand that farmers and lenders that you do business with are affected too. In order for you to do your job, they must have confidence in the futures market’s ability to manage price risk. This has been an industry-wide blow to the heart of commodities markets — to its producers, to its processors and to its distributors — and that blow was dealt by the violations that were committed by MF Global.

As MF Global’s primary exchange operator and one of its regulators, CME Group has faced a lot of questions following MF Global’s failure about how a shortfall in customer funds occurred; about the security of our clearing operation; and our ability to return customer funds to their rightful owners and restore confidence. I would like to take these next few minutes to review a timeline of the events and our response to those events that I hope will answer some of these questions.