Confidence in futures markets shattered forever?

SAN FRANCISCO (MarketWatch) — Commodity traders have seen their fair share of action this year from Iranian oil threats and a global economic slowdown, but now must also face growing concern over the integrity of futures trading in the wake of the latest regulatory investigation.

Questions over the safety and integrity of trading in commodity futures are “driving vast amounts of traders away from commodities forever,” said Kevin Kerr, president of Kerr Trading International.

“The latest incident with the CEO of PFGBest boggles the mind, quite frankly,” he said. “Investors should be confused and worried.”

“There are enough reasons for investors to choose not to participate in [the commodities futures trading] environment with the awful fundamental news that we hear about every single day,” said Steve Ayer, managing director and partner at HighTower in Harrison, N.Y. “So these potential frauds have the capability to push that already established cautious sentiment over the hump.”

“Our entire system is built upon confidence, so when people lose that confidence in the regulators, brokerage firms and/or governments, then people can say enough is enough and pull their investments,” he said

“As I follow the scandal, I hear alarming phrases such as ‘reeling industry,’ ‘shattered confidence,’ and that PFGBest, in tune with MF Global, had ‘violated sacrosanct client funds,’” he said. “What’s even more shocking is that the corruption in this case had allegedly been going on for several years.”

Jeffrey Kennedy, chief commodities analyst at Elliott Wave International, said he sees “decreased participation in commodity futures trading because of a lack of trust and confidence in the system.

A CFTC report of open interest for the period of November 2011, during the MF global scandal, shows that there was a “striking drop in the amount of open interest — and that this drop is concentrated in the physical commodities, particularly the agricultural and soft commodities,” said Robert Ready, finance professor at the University of Rochester’s Simon School of Business, whose research covers energy markets.

http://articles.marketwatch.com/201...ldings-commodity-futures-trading-commission/2

 

Forever is a long time.

 

Put the cunt Jon Corzine in jail for life -problem solved.

 

Lets' be real here.....while what happened at PFG is insanely criminal, they were a small firm. A few hundred million in assets. Along with Corzine I think the head of PFG should rot in a prison cell for life......but to say this is going to hurt confidence in futures markets forever? That's laughable. Open interest/volume is down...sure.....as it is in every other type of trading instrument. The person claiming this should look at volumes in equity markets. Much worse than in the past.


MFG was a much bigger deal...not even comparable to PFG, and futures trading still moved on. Just because a few bad apples are out there it doesn't mean the whole industry is going to go under.

The regulators just need to do their job a lot better and bring down the hammer on guys like Corzine and the head of PFG.

 

what's required is INSURANCE
then incompetent management and/or theft and incompetent regulators can do their
thing but client funds are 100% insured which means clients suffer NO financial loss

 

Not even close. The system is designed to fail, and fail again. There is no current structure in place to stop the current corrupt operations.

 

Sad but true, with rare exception, most of the trading industry whether dealing with equities, futures, options, bonds, currencies, swaps, or what have you, is corrupt and rife with conflicts of interest. Good traders know this and choose to trade anyway. But that does not excuse either criminal or unethical behavior. It would be nice if our regulating and monitoring bodies would stop advocating and serving as lap dogs for the industry they are supposed to be overseeing, but that seems a political impossibility.

The lure of the casino is so engrained in the human psyche that it easily triumphs over risk avoidance and makes for easy pickings by the corrupt mavens of Wall Street. The industry knows this and takes full advantage. I suppose just as the magician who creates the illusion of pulling rabbits from hats deserves credit for their skills, so too one might marvel at the illusions created by and the panache of a Ponzi, a Corzine, a Wasendorf, a Madoff, a Blankfein, a Dimon, a Fuld, or a Diamond. It's by no means a given that they will slip up and reveal the rabbits hidden in their sleeves, though just as with the stage magician, the same trick done one to many times exposes them to risk of discovery.

 

As long as the heads of these companies are not held accountable, there will continued deterioration of liquidity in the futures market.

The US govt is directly responsible for caving in to Wall St lobbyist pressures to look the other way. Its a disgrace.....



*** And just think....this could be just a whif of more to come. There could be easily more futures brokers that have illegally misplaced client funds. Scary,,,very scary.