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MF Global situation
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MF Global situation

  #11 (permalink)
10 out of 10
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eudamonia's Avatar
 
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Breaking news CME to provide $300M guarantee to MF Global trustee to facilitate quick release of frozen funds:

http://www.btrtrading.com/11-198%20Guarantee%20Release.pdf

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  #12 (permalink)
Market Wizard
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gotta post this, from online petition

Quoting 

Noble DraKoln

I am the Chief Trader of Liverpool Capital Management and a couple of our client's gave us limited power of attorney in their IRA funds being held at MF Global. By holding up their segregated funds and accumulated profits from their option positions it has made it impossible to trade them in the necessary way to make them whole.
This fiasco has created a significant black eye not only on MF Global, but also the CME Group, the NFA, and the CFTC. Each of whom will be liable for significanlty more than the actual seg funds as CTA's and clients seek punitive damages. If the funds had been released immediately and the respective watch dog agencies had simply covered the seg funds, as should have been the case, and left the rest to the government, this would have been resolved quickly and with little recourse.
As it stands by interrupting trading in seg fund accounts, holding positions and then releasing them late, the entire system will be held liable for missed potential gains, screwing up CTA performance numbers, and overall guilt by improper action, and will end up paying significantly more to client's to make them whole than if they had just simply covered the seg funds and moved on. The class action law suit that will be forthcoming against the CME will be devastating and set the futures industry back by 20+ years.


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  #13 (permalink)
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MF Global Scandal: Is CME's Financial Guarantee Of Millions Just A PR Gimmick? | Business News | Minyanville.com

and do not miss the second page.

And her an other nice one:

Futures Exchange CME Knew of MF Global Fund Shortfall Before CFTC Was Told - Bloomberg

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  #14 (permalink)
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cory View Post
gotta post this, from online petition

Just opinion on my part, but I know a little about sueing for 'lost revenue'. It is VERY DIFFICULT to prove losses that were never possible to transpire and especially over a very short term like this. The argument would simply be that it could have also saved the CTA's from losses and there is no way to prove either for certain.

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  #15 (permalink)
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Those fuckers did not care one minute about any of our money

Probe finds MF Global used funds of customers

Dow Jones Newswires/Wall Street Journal 5:08 p.m. CST, November 17, 2011

Regulators have unearthed more details about MF Global Holdings Inc.'s activities in the days before its bankruptcy filing that suggest the securities firm shifted hundreds of millions of dollars in customer funds to its own brokerage accounts, according to people familiar with the matter.

MF Global's internal records indicate that the company moved segregated customer funds in transactions as large as hundreds of millions of dollars at a time, these people said. The money was transferred out of the unit that houses the assets of futures-trading customers and went into the accounts of MF Global's brokerage, people familiar with the situation said.

Such moves could violate regulations stipulating that commodities brokers can't mix customer funds with brokerage funds. Brokerage funds often are used to back proprietary-trading positions.

MF Global officials are still working to piece together what happened in the last days before the Oct. 31 bankruptcy filing. It is common practice among futures brokers to maintain a buffer of firm capital in customer segregated accounts to protect against possible customer losses.

However, MF Global officials believe it was acceptable to use that buffer when needed for the company's own purposes, people familiar with the matter said.

Still, it appears increasingly likely to regulators from their investigation so far that MF Global burned through all of its capital buffer during the week before the bankruptcy filing, and then started tapping customer funds, according to people familiar with the matter.

Whether that occurred intentionally or by mistake in the confusion of the securities firm's moves to stave off bankruptcy isn't clear. But the money, estimated at about $600 million, still is missing and might never be recovered.

Commodity Futures Trading Commissioner Scott O'Malia said in a statement this week that it “appears that MF Global failed this fundamental responsibility” to not commingle customer and proprietary funds.

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  #16 (permalink)
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Just to give an example what happen with any transferred account to any broker:

Corp

R.J. O’Brien Margin Policy Update for Former MF Global Customers

Former MF Global customers transferred to R.J. O’Brien were delivered with up to 80% of the maintenance margin requirement related to their accounts.

As a result, every former MF Global account faces a margin call. No excess equity was transferred.


All former MF Global customers must wire R.J. O’Brien additional monies to bring their account above its initial margin requirement or liquidate their current trading positions.


If the account did not contain a trading position, former MF Global customers must wire or mail R.J. O’Brien funds to initiate trading as no excess equity was transferred.

All Margin Calls Must Be Met By Wire


Former MF Global customers will need to begin initiating payment to meet margin calls immediately. Customers will need to wire monies to the following account:


Harris Bank, Chicago IL
ABA #071-000-288
R.J. O’Brien Cust Seg Funds
#386-015-2
FFC: Customer Account Name
FFC: Customer Account Number

All undermargined accounts will be subject to liquidation.
After your account has been properly margined, the regular R.J. O’Brien margin policy will be in effect.



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  #17 (permalink)
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Is any of those MF'er going to jail for this?

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  #18 (permalink)
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What is a Seg Account

It appears the definition of a seg account needs to understood. Don Miller is right - A seg account is just about the safest account there is. Because the CFTC and NFA definition is that it cannot have a counter party risk (as it should be).

Only physical Gold is a better asset class. No bank account has this status, other than those protected by FDIC insurance. That is also debatable, since in a liquidity or confidence crisis (such as that in 2008) can result in blocked funds in banks as well. Those that believe a bank account has no counter party risk in fractional banking system need to be careful about their perceptions.

There are complete grounds for the the class action lawsuit against the regulators in this case since the very definition of a seg account was violated by either deceit or neglect. And when this sordid saga is eventually over, if the Judicial system is fair it will bring ground breaking changes to the futures industry.

Of course, nothing in the US surprises me any more. So will the guys at MF global, the regulators at CME/CFTC and NFA go to jail over this, as they should. And every single seg account be made 100% whole again, is another story.

For once I hope those bottom feeder class action lawyers make them all pay punitively.

This is in its very essence, a breakdown of the law of the first degree. And the law is ineffective in protecting the public because the government is too corrupt to enforce existing rules or extract severe penalties when rules get broken (and because the government is ultimately a reflection of us, the blame comes back at us, the person in the mirror).

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  #19 (permalink)
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“appears that MF Global failed this fundamental responsibility”; too nice words. Sounded like they deliberately were trying to cover their behinds in the last days before bankruptcy. Thinking they could get away with it long enough without it being reported and trying to get bought out, but the news hit the fan the same day and the potential buyers pulled out, and I do hope enough of them go to jail and the SEC gets real reform and expansion of investigative powers and resources.


Last edited by Cloudy; November 18th, 2011 at 10:04 AM.
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  #20 (permalink)
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eudamonia View Post
I can see this leading to a major crisis of faith with futures brokerages. For myself at least I don't see any reason to keep more than the absolute minimum I need to cover margins in the account if I know that this money is 100% at risk. Anyone else feeling the same way? This could happen to any of us it seems and having your money locked up or become an unsecured collateral against the company is going to have serious repercussions for the industry.

I agree with this. I prefer to keep the minimum in my trading accounts to cover margin and the appropriate risk in which I'm taking on relative to the size I'm trading. I take out my monthly profits as well which are re-invested in various passive investments. I don't trust keeping a large chunk of my net worth in a brokerage account of any kind. On another thread, I discussed the risks associated with brokerage firms, accounts and asset/securities titling. The last thing I need is to have my money locked up with a firm. I utilize a traditional trust company to handle my long term investments (mainly fixed income). My assets are held on a true fiduciary platform and all the securities are titled in my name (investment entity) rather than in street name or book entry. In the case of a firm failure/BK, there would be no confusion over who's money is who's.

I had money with MF Global a few years ago and felt their overall approach to managing their business and balance sheet was very concerning. I also had money with Penson and am a bit wary of them as well as they appear to be very similar to MF and moved my money out of there as well a while back. I highly recommend using an FCM that does not engage in anything other pure trading and clearing for it's clients.

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