September 7, 2015
Dear sirs
CME Clearing is a branch of CME Inc – it is not a separate subsidiary and therefore its liabilities fall to the exchange and ultimately to the CME Group Inc.
The CME Group Inc is (in the words of S&P) technically insolvent – reference page 64 of CME Group Inc’s accounts (attached for ease of reference). It’s intangible assets and goodwill are greater than its equity. Its compliance with IAS 36 is little short of a joke – (for instance, we all know WTI is no longer the benchmark). In a crisis, I wonder how much liquidity they might receive for all those intangibles?
How on earth you can expect the European regulators to sanction a CCP that is insolvent is beyond credulity. (One days gross margin versus two days net is an irrelevant distraction).
By all means reduce their guarantee fund – the difference will get lost in the rounding. Anybody who can read a set of accounts will make their own decision.
Yours
Tim Reucroft
Thomas Murray Ltd
Copyrighted material redacted. Author cites:
CME Group 2014 Annual Report; available at http://files.shareholder.com/downloads/CME/691626295x0x821372/8EC261CD-961E-4267-B0EA-6AEA8B43DBE8/CME2014_AR_Full_FINAL.PDF