Washington - An urgent, technological solution is needed that addresses the problems stemming from allowing financial firms to self-report the status, balance and location of customer funds, Scott O'Malia of the Commodity Futures Trading Commission said.

O'Malia, a commissioner at the CFTC, called an emergency meeting to hear from expert witnesses on how to tackle the issue.

Two futures commission merchants (FCMs) have collapsed within the last 10 months and O'Malia said it would be an understatement to say that the meltdowns had shaken public confidence.

"In my opinion, it is imperative for the industry to develop a technology solution that can verify customer balances held by the FCM, custodial banks and the clearing house," O'Malia said in prepared remarks before the meeting.

"This system must be fully automated to draw feeds directly from the relevant entities to compare the balances. If balances do not match, then an automated alert should be sent to both the appropriate self-regulatory organization (SRO) and the Commission. This solution must be 100 percent industry funded and maintained, and must be overseen by the Commission and relevant SROs."

He said an "immediate and comprehensive overhaul of customer protection safeguards" was needed.