Fri, Jan 20, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Horizon survey reveals 73% of CTAs has been impacted by the failure of one or more FCMs

Wednesday, March 20, 2013
Opalesque Industry Update - Horizon Cash Management said that 73% of the commodity trading advisors (CTAs) and commodity pool operators (CPOs) that responded to its survey were impacted by one or more of the futures commission merchant (FCM) failures mentioned in the study. The results are documented in an executive summary, The Aftermath of MF Global and Peregrine Financial Group Meltdowns: A Crisis of Trust.

Horizon distributed its survey questions in early November 2012, one-year after the MF Global meltdown and nine months after the demise of Peregrine Financial Group (PFG). The goal of the survey was to document the impact of the MF Global and PFG liquidations, among others, on the managed futures industry and its investors.

Diane Mix Birnberg, Horizon Founder and Chairman, said, “The results of this survey clearly indicate that fund managers need better solutions to safeguard customer funds, and the futures industry needs improved mechanisms that will help to restore trust among investors.”

Horizon said some of the key findings include:

  • 91% of the respondents strongly believe that there was a breakdown in audit procedures. The comment section that followed this question revealed widespread frustration and anger. Three themes emerged in the comments:

    The NFA needs to hire top-notch, qualified auditors and take full responsibility for its audits.

    The laws and rules that govern the industry need to have “teeth” – all those involved in fraud and theft need to be punished.

    Customer segregated funds must either be kept completely out of the FCM and/or be verified in real-time by regulators.

  • 81% of respondents said they do not think there has been an industry wide effort to educate the press and public on what is being done to restore trust and integrity to the futures markets.

Recommendations for restoring trust and safeguarding customer funds that were listed most often by respondents include:

  • Create an insurance fund.
  • Create a separate custodial entity to hold customer funds and ensure real-time verification of balances for customers by regulators.
  • Make accountability for violation of laws a reality by imposing severe punishment for those who commit fraud and theft.
  • Change the CEA bankruptcy laws to dovetail with other current bankruptcy laws so that laws do not conflict and that there are no loopholes.
  • Strengthen current regulation to prohibit FCMs from using customer segregated funds for any self-serving purposes with severe consequences for violations.
  • Create regulation and procedures to guarantee that all positions and margin are immediately transferred when a bankruptcy is declared.

The survey was designed to capture both quantitative and qualitative information from a wide ranging universe of CTAs and CPOs. While the survey was distributed worldwide, 84% of the respondents are based in the U.S. and represent approximately 15% of the total active CTAs and CTA/CPOs in the U.S. For statistical reasons, the results of the survey are limited to only U.S. respondents. The Executive Summary will be distributed to regulators, government oversight authorities, futures exchanges and FCMs.

Press release

bc

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - This hedge fund made 37% betting on banks in 2016 and remains bullish after the Trump rally, Hedge fund legend David Einhorn is making a big bet on GM, After impressive 85% return in 2016, hedge fund looks to Canadian gold producer, small banks[more]

    This hedge fund made 37% betting on banks in 2016 and remains bullish after the Trump rally From Forbes.com: Can bank stocks continue to rise after a 28% surge in the KBW Bank Index in 2016, fueled by a post-election rally as stock pickers returned to the beaten down sector? Forget the s

  2. SWFs - China sovereign wealth fund CIC plans more U.S. investments[more]

    From Reuters.com: China Investment Corporation (CIC), the country's sovereign wealth fund, is looking to raise alternative investments in the United States due to low returns in public markets, its chairman said on Monday. CIC will boost its investments in private equity and hedge funds as wel

  3. Some hedge funds strong start in 2017 nice contrast to 2016[more]

    With the 2016 HSBC Hedge Weekly performance rankings in the books - a year in which the same leader-board entries pretty much dominated unchallenged throughout the year - comes a new leader board that is a hard-scrabble mix of hedge fund styles and categories. What is clear after but a few short wee

  4. Macro hedge funds and CTAs outperform in December on strong dollar[more]

    Komfie Manalo, Opalesque Asia: The last month of 2016 saw risk assets climbing higher, as part of expectations that the new U.S. administration will remove barriers to growth and investment, Lyxor Asset Management said. December also saw the Fed hik

  5. Opalesque Exclusive: Roxbury credit events UCITS gathers more assets[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: The Roxbury Credit Events Fund, launched in September 2015, was up 4.24% in 2016, having returned seven positive months during the year. The managers raised