In the aftermath of MF Global’s crisis last month, CMC Markets has formally announced in a press release that it has decided to completely split client investments and adopt a fully segregated client money model, including client margins to completely eliminate client risk in Australia and New Zealand.
Louis Cooper, head of CMC Mark Australia and New Zealand, pointed out that the company has always strived to retain client money to the highest standards and has always followed client money rules. He said the company has been working toward that model for several months to bring it in line with practices of its parent company in the United Kingdom.
‘While we have always maintained client monies to the highest of standards and in accordance with client money rules, our clients now have that extra peace of mind in knowing CMC has a 100% segregated model,’ said head of CMC Markets in Australia and New Zealand Louis Cooper. ‘Although the demise of MF Global is not necessarily related to its CFD business, it’s important our clients feel safe about the money they invest via CMC Markets’ market leading platform,’ Mr Cooper added.
UK-headquartered CMC Markets, like MF Global, provides contracts for difference derivatives among types of investments to clients. MG Global faced bankruptcy proceedings last month after its $US6.3 billion exposure on European sovereign debt sent investors into a panic.
Segregated accounts serve to protect customers monies in the event a broker files for bankruptcy protection. The detail on how CMC Markets’ fully segregated client money model operates is as follows:
- Client money, including client margins, are not used to meet the trading obligation of other clients.
- Client money, including client margins, are not used to execute any of CMC Markets’ hedging activity. CMC Markets uses only its own funds to finance such hedging activity.
- CFD funds with CMC Markets are held in a separate trust account with a top-tier Australian bank, and are established, maintained and operated in accordance with the Australian Client Money Rules.
Mr Cooper stressed the adaption of the model is not linked to the MF Global bankruptcy problem which showed there was missing client money on top of losses suffered by MF Global due to its large exposure to European sovereign debt.
‘Although the demise of MF Global is not necessarily related to its CFD business, it’s important our customers feel safe and secure about the money they invest via CMC Markets’ market leading platform,” Mr. Cooper said.
Meanwhile, Natalie Beirne, head of compliance with rival IG Markets, said she welcomed any efforts on behalf of the industry to improve transparency. Ms Beirne said IG Markets had adopted a strict approach to the treatment of client funds from the very start.
Treatment of client monies has recently hit the headlines following the collapse of futures broker MF Global. While the company’s demise has mainly linked to its $6 billion exposure to European sovereign debt and a recently reported commercial loss of $187 million, the company’s use of client monies have also been called into question.