In February 1995 Barings PLC, an international financial institution with a 200-year history, collapsed as a result of substantial trading losses incurred by a Barings employee. These losses were caused in large part by a lack of adequate internal controls over the employee's proprietary trading activities, including those conducted in exchange-traded futures and options.

The Barings failure did not result in losses to other market participants and, in many respects, the situation underscored the fundamental strength and soundness of the global futures and options regulatory, trading and clearing systems. Nevertheless, the events surrounding the Barings failure prompted market participants to consider certain national and cross-border issues related to the structure and operation of the international markets for exchange-traded and/or cleared futures and options. The most significant of these issues included the mechanisms that exist for the protection of participants' assets, the internal controls and risk management procedures employed by exchanges/clearinghouses, brokers/intermediaries and customers, and the communication of information regarding the activities of market participants by exchanges/clearinghouses and regulatory authorities.

The Futures Industry Association Global Task Force on Financial Integrity was organized in March 1995 to address these issues. The Task Force includes representatives of major international exchanges/clearinghouses, brokers/intermediaries (including futures commission merchants and other brokers), and customers from 17 jurisdictions. In June 1995, the Task Force released a comprehensive set of recommendations to improve the financial integrity of the international futures industry.

Financial Integrity Recommendations: For Futures and Options Markets and Market Participants (PDF)

Financial Integrity Recommendations: Appendix (PDF)

For printer-friendly versions of individual sections of the publication, link to the following:

• Letter from the Chairman
• Task Force Objectives, Structure and Intent
• Recommendations for Brokers and Intermediaries
• Recommendations for Regulators, Exchanges and Clearinghouses
• Recommendations for Customers

In a parallel action, regulatory agencies from 14 jurisdictions signed a declaration of cooperation and supervision covering international futures markets on March 15, 1996. The authorities also welcomed a complementary memorandum of understanding and agreement by 49 futures exchanges and clearing organizations. Both documents constitute multilateral mechanisms for the sharing of information on a bilateral basis among market authorities consistent with their legal and contractual obligations.

http://www.cftc.gov/opa/press96/opa3995-96.htm

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Special thanks to participating firms:

Amsterdam Futures M.P.A. De Vries

BELFOX W. Van Stappen

Board of Trade Clearing Corporation Dennis A. Dutterer, John C. Hiatt

Cargill Investor Services, Inc. Hal T. Hansen

Chase Manhattan Futures Corp. Janice C. Abrahamson

Chicago Board of Trade Carol A. Burke, Ralph I. Goldenberg, Kathryn M. Trkla

Chicago Mercantile Exchange Eileen T. Flaherty, Kathryn J. Meyer

Coffee, Sugar & Cocoa Exchange, Inc. Audrey Hirschfeld

Dean Witter Reynolds Laurence E. Mollner

Deutsche Borse AG Michael Hofmann, Anselm Jumpertz

Fimat USA, LLC Gary Alan DeWaal

FIA Board of Directors Robert E. Zellner

Futures Industry Association Mary Ann Burns, John M. Damgard, Barbara Wierzynski

Futures Industry Institute Paula A. Tosini

Futures and Options Association Anthony Belchambers

General Motors Investment Management Corporation William P. Miller II

Harris Futures Corporation Jennifer S. Johnson

Harvard Management Company, Inc. Michael Pradko, Verne O. Sedlacek

Hong Kong Futures Exchange Ivers W. Riley

Italian Stock Exchange Council Luigi Ruggerone

John W. Henry & Co., Inc. Peter F. Karpen

Lehman Brothers Inc. Ronald H. Filler, Charles P. Nastro

London Clearing House David M. Hardy, Andrew Lamb

London Commodity Exchange Michael N. Jenkins

LIFFE Daniel Hodson, Nick Carew Hunt, Richard Pratt

London Metal Exchange Neil D. Banks

Managed Futures Association L. Carlton Anderson, Clyde F. Ensslin

MATIF, Louis-Armand de Rouge Michel Favreau, Patrick Stephan

Merrill Lynch Futures Inc. William T. Maitland

Merrill Lynch Japan Inc. David J. Semaya

Montreal Exchange John S. Ballard

Morgan Stanley & Co. John P. Davidson III

National Futures Association Daniel A. Driscoll

New York Mercantile Exchange Bernard J. Purta, Neal L. Wolkoff

Northern Futures Corporation David R. Ganis

OMLX, The London Securities and Derivatives Exchange Derek Oliver

OM Group Hans Berggren

Refco Commodities Services GMBH Elizabeth Ocker

Refco Overseas Ltd. Richard A. Reinert

Sakura Dellsher, Inc. Karen M. Dorff, Leo Melamed

Salomon Brothers Inc. Marcy Engel

Smith Barney Inc. Steven Keltz

Sydney Futures Exchange Terrence F. Martell

Counsel to the Task Force, Sullivan & Cromwell Kenneth M. Raisler, David J. Gilberg, William Y. Chua