JP Morgan denies Holding the MF Global missing client funds. In my opinion, the $658.8 million held at JP Morgan could be the MF Global missing client funds. JP Morgan may not know or want to admit they know anything about the source of those funds from MF Global. However, I am sure the investigators will sort it out if they have not already done so.
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Anyone pulling money out of MF Global?
- Thread starter Daal
- Start date
I'm one of those frozen in all of this, sitting on ice waiting.
I called over to "N"-desk Tuesday morning, got through second try, broker was losing his mind, absolutely losing it. Called customer service, everything was already locked down, wire transfers stacked up to the ceiling, no account transfers were going out. C-service rep was nice enough, patient with questions but sounded resigned to the fact, he was out of a job shortly, bewildered, probably still in shock, at the enormity of the collapse.
I'll freely admit, I'm small potatos as a trader, small account, it means alot to me though, I'm praying for all my fellow traders with larger accounts, cannot imagine what they're going through.
I feel that the basic tennants of segragation just got totally wiped out, a bank stealing contents out of customers safe deposit boxes. Yes, we all want to made whole, and in short order, conflicting reports cannot make any of my fellow traders feel comfortable.
Sadly, I think many of us are going to get a haircut, don't see how any of the commissions, exchanges or regulators will be able to straighten this out to the full satisfaction of the segragated account holders. They'll probable cut the losses best they can, put in some new rule or regulation later on, meanwhile the confidence of traders at other FCM's has most certainly been shaken at best.
I called over to "N"-desk Tuesday morning, got through second try, broker was losing his mind, absolutely losing it. Called customer service, everything was already locked down, wire transfers stacked up to the ceiling, no account transfers were going out. C-service rep was nice enough, patient with questions but sounded resigned to the fact, he was out of a job shortly, bewildered, probably still in shock, at the enormity of the collapse.
I'll freely admit, I'm small potatos as a trader, small account, it means alot to me though, I'm praying for all my fellow traders with larger accounts, cannot imagine what they're going through.
I feel that the basic tennants of segragation just got totally wiped out, a bank stealing contents out of customers safe deposit boxes. Yes, we all want to made whole, and in short order, conflicting reports cannot make any of my fellow traders feel comfortable.
Sadly, I think many of us are going to get a haircut, don't see how any of the commissions, exchanges or regulators will be able to straighten this out to the full satisfaction of the segragated account holders. They'll probable cut the losses best they can, put in some new rule or regulation later on, meanwhile the confidence of traders at other FCM's has most certainly been shaken at best.
Quote from Catoosa:
However, I am sure the investigators will sort it out if they have not already done so.
You have a lot of faith in these investigators. Bearing in mind that pilfering from segregated accounts is a criminal offence, I don't know why the entire financial control department (if MF actually had one) wasn't detained until the money was found.
So far the investigators have been treating customers as if they were on the same level as shareholders..
Quote from Ash1972:
........Bearing in mind that pilfering from segregated accounts is a criminal offence, I don't know why the entire financial control department (if MF actually had one) wasn't detained until the money was found.......
Good point and that money has a trail. Didn't I read that the money dissapeared rather recently too?
Quote from dangerkitty:
I'm one of those frozen in all of this, sitting on ice waiting.
I called over to "N"-desk Tuesday morning, got through second try, broker was losing his mind, absolutely losing it. Called customer service, everything was already locked down, wire transfers stacked up to the ceiling, no account transfers were going out. C-service rep was nice enough, patient with questions but sounded resigned to the fact, he was out of a job shortly, bewildered, probably still in shock, at the enormity of the collapse.
I'll freely admit, I'm small potatos as a trader, small account, it means alot to me though, I'm praying for all my fellow traders with larger accounts, cannot imagine what they're going through.
I feel that the basic tennants of segragation just got totally wiped out, a bank stealing contents out of customers safe deposit boxes. Yes, we all want to made whole, and in short order, conflicting reports cannot make any of my fellow traders feel comfortable.
Sadly, I think many of us are going to get a haircut, don't see how any of the commissions, exchanges or regulators will be able to straighten this out to the full satisfaction of the segragated account holders. They'll probable cut the losses best they can, put in some new rule or regulation later on, meanwhile the confidence of traders at other FCM's has most certainly been shaken at best.
At this stage I'd be quite happy with a haircut. Please give me back 80% of my money NOW rather than 100% at some indefinite point in the future..
Quote from steve0617:
Although my IB said my cash only MF account should have been moved by now (this was told to us about noon Friday), it's still showing in MF.
Has <i>anybody</i> here actually had a successful transfer to another FCM? Who'd you end up with?
I have a cash only account too (about $350K split equally among USD, EUR, CHF and JPY) after successfully flattening all positions by the close of Monday.
Unlike you, I didn't try to move on Friday Oct 28 but on Monday after bankruptcy was declared. Does this make a difference? My guess is yours will be treated as a normal closure request (with 100% of funds returned) but mine will depend on what the trustee thinks is appropriate.
Quote from Ash1972:
I have a cash only account too (about $350K split equally among USD, EUR, CHF and JPY) after successfully flattening all positions by the close of Monday.
Unlike you, I didn't try to move on Friday Oct 28 but on Monday after bankruptcy was declared. Does this make a difference? My guess is yours will be treated as a normal closure request (with 100% of funds returned) but mine will depend on what the trustee thinks is appropriate.
I didn't try on Friday. I tried Monday morning too.
http://www.nytimes.com/2011/11/05/y...ing-access-to-accounts.html?pagewanted=2&_r=1
MF Global Clients Fear for What They Left
By PAUL SULLIVAN
Igor Gavrylov of Kiev, Ukraine, had about $100,000 at MF Global when it collapsed on Monday, although he managed to pull out $150,000 last week.
James Koutoulas, chief executive of Typhon Capital Management in Chicago, said 85 percent of his clientsâ money was tied up in MF Global, about $55 million.
About 150,000 accounts â from investors big and small â were left in limbo in the firmâs rapid demise. Regulators are in the midst of trying to transfer about a third of the accounts to other commodities brokers and securities firms. That usually takes place in a matter of days or weeks.
But, as in any bankruptcy filing, there are complications. Regulators say they are looking for roughly $600 million in client funds that they believe are missing. Before clients can get full access to their funds, the regulators are first going to have to determine where that money is and, then, seek to recover it.
Also unresolved is whether the money in some clientsâ accounts was mixed in with the firmâs money, as regulators have contended. That could lead to further litigation over the ownership of money in the accounts.
And then there is the fact that most of the firmâs investments were not in securities, where the dollar value of an investment is clear, but in commodities, where investors put up what is essentially a down payment on what a commodity will be worth on a future date. Sorting out who is owed what will also take time.
While MF Global may not have been a household name, it was respected in the commodities and futures markets. It provided the essential service of holding money and clearing trades.
The firmâs brand name was why smaller clients said they did not worry whether their money would be safe. Mark Tucker, who lives in the English seaside village of West Runton, population 1,633, manages rental properties by day. But he said he had been trading options for the last 18 years and had $50,000 with MF Global (and another $50,000 with another clearinghouse).
He has not had access to his account since Monday and was worried about some of the options he bought before the firmâs bankruptcy filing. They are bets that the prices of crude oil, coffee and sugar will fall. âItâs not a comfortable position,â he said. âBy definition, the potential for losses on short options is limitless.â
Like many clients, he is trying to separate rumor from reality. He had heard that his account would be moved to another broker. He said his broker had been âtrying to reassure me the only reason it hasnât happened is they have 50,000 of these accounts and it should move over in the next 24 to 48 hours, but thatâs what they told me 24 to 48 hours ago.â
So do clients of other commodities clearinghouses need to worry about the safety of their money?
SITUATION James W. Giddens, a partner at Hughes Hubbard & Reed and the court-appointed trustee in the case, said his group was working closely with the Commodity Futures Trading Commission and the Securities Investor Protection Corporation to transfer accounts to other commodity brokers. He said clients would be notified âif and when their accounts have been transferred.â
The court has approved the transfer of 50,000 commodities accounts to other brokers because those are the easiest to move and the most likely to be picked up. A spokesman for the trustee said that the selection of which accounts would be moved was led by the CME Group, the giant exchange where MF Global did business. On Friday, the CME Group announced that 15,000 accounts had been moved.
But even the clients whose accounts are transferred will not get all their money back immediately. Given that some of the funds involved are contested, clients will have access to only about two-thirds of their accountsâ value. This is a common practice to ensure that there is some money left to pay claims against MF Global.
MF Global was also a registered broker-dealer, like Fidelity and Schwab. The future of the securities accounts it held is less clear. Stephen Harbeck, chief executive of SIPC, said he believed there were only 6,000 securities accounts. So far, he said, the trustee had not found another home for them because they did not have a large amount of assets and a trading history. In other words, these accounts may not pay large fees and could be more of a hassle than they are worth to another firm.
âIf weâre able to find a brokerage firm that is ready and willing and able to take the accounts, the accounts can be transferred quickly,â he said. âThe precedent is Lehman Brothers, where we were able to transfer the accounts within seven to 10 days.â
He added, âFailing that, the process can take a few months.â
SIPC offers protection on securities accounts up to $500,000, though it could take years for claims to be paid. There is no equivalent backstop for commodities accounts.
Mr. Gavrylov, chief financial officer of a firm that trades actual commodities in Ukraine, said he had used MF Global for his personal commodity trading, in part, because he felt his money was safe there. âI thought this might happen to me here in Ukraine or in Russia, where the regulation is quite weak,â he said. âBut I never thought this could happen with a big broker like MF Global.â
Some bigger money managers said they were confident that they would eventually get their money back, but they have the financial wherewithal to wait years and remain in business.
An investment adviser in Chicago who was not authorized to speak to the media said his firm, which manages about $400 million, had had over $5 million at MF Global but had been able to transfer most of it out last week.
âWe got out because of word of mouth only,â he said. âNo one knew anything specific. They just knew the run was on and we got out.â
PRECEDENT Jim Feltman, senior managing director at Mesirow Financial Consulting, said the collapse of MF Global may proceed along the lines of the 2007 bankruptcy of the Sentinel Management Group. Sentinel presented itself as a cash management firm that would keep money safe for commodity traders. But the company was using those funds as collateral to borrow money and invest in riskier securities. When those bets failed, the firm froze $1.6 billion in customer assets.
âIn the Sentinel case, some funds were released quickly, but others were subject to cross claims and litigation,â said Mr. Feltman, who worked on the case for the court-appointed trustee. Four years later, he said, many people still do not have their money back.
He noted that recovering clientsâ money was not as easy as presenting their account statement when client money may have been mixed in with the firmâs capital.
âIf you think you have $1 million of ABC securities in your account, it may turn out that there are $1 million of those securities in your account. But it could also turn out that that $1 million of securities werenât in your account the day before but in someone elseâs account,â Mr. Feltman said. âWhatâs going on right now is the sorting out that gives rise to ownership.â
Sean OâMalley, a partner in the capital markets division at the law firm White & Case, said that protections were not as strong as investors thought when something went wrong. While there has been much talk about segregating assets, he said, assets are really held in one big pool, and it is only through accounting that they are assigned to a particular account.
âYouâre really relying on the operational strength and integrity of the broker dealer,â he said. âSo if the back office at MF Global isnât properly segregating the assets, I donât know if the customers can do anything about it.â
RESOLUTION Mr. Koutoulas, the commodities trading adviser from Chicago, flew to New York early this week to file an emergency motion in federal court asking that all accounts be unfrozen and immediately transferred in full to other clearinghouses. He argued that a failure to do so would cause investors at other firms to worry about the safety of their money. The motion was denied late Thursday, but he said he would continue to push for a quick resolution.
âThe situation is bad,â he said. The regulators, he added, âshould put up a temporary fund and deal with the accounting later. They need to make sure that clients feel safe in segregated accounts.â
Michael Shore, a spokesman for the CME Group, would not comment on the feasibility of doing this.
A spokesman for the Commodity Futures Trading Commission would not comment on the issue of the segregated accounts and referred all inquiries to the MF Global page on its Web site.
One small hedge fund has essentially gone out of business as a result of MF Globalâs collapse. A woman who until this week worked as the office administrator at the hedge fund said all of the fundâs $30 million was at MF Global.
âBy Tuesday, everyone was just staring at screens,â said the woman, who wanted to be identified only as Sandy L. for fear of upsetting her former boss. âHe said, âWe canât access money; I canât even give you a final paycheck.â â
She was let go on Thursday. âSome of the traders are sticking it out,â she said. âEveryone we call at MF Global picks up the phone. They answer, but they have nothing to say.â
MF Global Clients Fear for What They Left
By PAUL SULLIVAN
Igor Gavrylov of Kiev, Ukraine, had about $100,000 at MF Global when it collapsed on Monday, although he managed to pull out $150,000 last week.
James Koutoulas, chief executive of Typhon Capital Management in Chicago, said 85 percent of his clientsâ money was tied up in MF Global, about $55 million.
About 150,000 accounts â from investors big and small â were left in limbo in the firmâs rapid demise. Regulators are in the midst of trying to transfer about a third of the accounts to other commodities brokers and securities firms. That usually takes place in a matter of days or weeks.
But, as in any bankruptcy filing, there are complications. Regulators say they are looking for roughly $600 million in client funds that they believe are missing. Before clients can get full access to their funds, the regulators are first going to have to determine where that money is and, then, seek to recover it.
Also unresolved is whether the money in some clientsâ accounts was mixed in with the firmâs money, as regulators have contended. That could lead to further litigation over the ownership of money in the accounts.
And then there is the fact that most of the firmâs investments were not in securities, where the dollar value of an investment is clear, but in commodities, where investors put up what is essentially a down payment on what a commodity will be worth on a future date. Sorting out who is owed what will also take time.
While MF Global may not have been a household name, it was respected in the commodities and futures markets. It provided the essential service of holding money and clearing trades.
The firmâs brand name was why smaller clients said they did not worry whether their money would be safe. Mark Tucker, who lives in the English seaside village of West Runton, population 1,633, manages rental properties by day. But he said he had been trading options for the last 18 years and had $50,000 with MF Global (and another $50,000 with another clearinghouse).
He has not had access to his account since Monday and was worried about some of the options he bought before the firmâs bankruptcy filing. They are bets that the prices of crude oil, coffee and sugar will fall. âItâs not a comfortable position,â he said. âBy definition, the potential for losses on short options is limitless.â
Like many clients, he is trying to separate rumor from reality. He had heard that his account would be moved to another broker. He said his broker had been âtrying to reassure me the only reason it hasnât happened is they have 50,000 of these accounts and it should move over in the next 24 to 48 hours, but thatâs what they told me 24 to 48 hours ago.â
So do clients of other commodities clearinghouses need to worry about the safety of their money?
SITUATION James W. Giddens, a partner at Hughes Hubbard & Reed and the court-appointed trustee in the case, said his group was working closely with the Commodity Futures Trading Commission and the Securities Investor Protection Corporation to transfer accounts to other commodity brokers. He said clients would be notified âif and when their accounts have been transferred.â
The court has approved the transfer of 50,000 commodities accounts to other brokers because those are the easiest to move and the most likely to be picked up. A spokesman for the trustee said that the selection of which accounts would be moved was led by the CME Group, the giant exchange where MF Global did business. On Friday, the CME Group announced that 15,000 accounts had been moved.
But even the clients whose accounts are transferred will not get all their money back immediately. Given that some of the funds involved are contested, clients will have access to only about two-thirds of their accountsâ value. This is a common practice to ensure that there is some money left to pay claims against MF Global.
MF Global was also a registered broker-dealer, like Fidelity and Schwab. The future of the securities accounts it held is less clear. Stephen Harbeck, chief executive of SIPC, said he believed there were only 6,000 securities accounts. So far, he said, the trustee had not found another home for them because they did not have a large amount of assets and a trading history. In other words, these accounts may not pay large fees and could be more of a hassle than they are worth to another firm.
âIf weâre able to find a brokerage firm that is ready and willing and able to take the accounts, the accounts can be transferred quickly,â he said. âThe precedent is Lehman Brothers, where we were able to transfer the accounts within seven to 10 days.â
He added, âFailing that, the process can take a few months.â
SIPC offers protection on securities accounts up to $500,000, though it could take years for claims to be paid. There is no equivalent backstop for commodities accounts.
Mr. Gavrylov, chief financial officer of a firm that trades actual commodities in Ukraine, said he had used MF Global for his personal commodity trading, in part, because he felt his money was safe there. âI thought this might happen to me here in Ukraine or in Russia, where the regulation is quite weak,â he said. âBut I never thought this could happen with a big broker like MF Global.â
Some bigger money managers said they were confident that they would eventually get their money back, but they have the financial wherewithal to wait years and remain in business.
An investment adviser in Chicago who was not authorized to speak to the media said his firm, which manages about $400 million, had had over $5 million at MF Global but had been able to transfer most of it out last week.
âWe got out because of word of mouth only,â he said. âNo one knew anything specific. They just knew the run was on and we got out.â
PRECEDENT Jim Feltman, senior managing director at Mesirow Financial Consulting, said the collapse of MF Global may proceed along the lines of the 2007 bankruptcy of the Sentinel Management Group. Sentinel presented itself as a cash management firm that would keep money safe for commodity traders. But the company was using those funds as collateral to borrow money and invest in riskier securities. When those bets failed, the firm froze $1.6 billion in customer assets.
âIn the Sentinel case, some funds were released quickly, but others were subject to cross claims and litigation,â said Mr. Feltman, who worked on the case for the court-appointed trustee. Four years later, he said, many people still do not have their money back.
He noted that recovering clientsâ money was not as easy as presenting their account statement when client money may have been mixed in with the firmâs capital.
âIf you think you have $1 million of ABC securities in your account, it may turn out that there are $1 million of those securities in your account. But it could also turn out that that $1 million of securities werenât in your account the day before but in someone elseâs account,â Mr. Feltman said. âWhatâs going on right now is the sorting out that gives rise to ownership.â
Sean OâMalley, a partner in the capital markets division at the law firm White & Case, said that protections were not as strong as investors thought when something went wrong. While there has been much talk about segregating assets, he said, assets are really held in one big pool, and it is only through accounting that they are assigned to a particular account.
âYouâre really relying on the operational strength and integrity of the broker dealer,â he said. âSo if the back office at MF Global isnât properly segregating the assets, I donât know if the customers can do anything about it.â
RESOLUTION Mr. Koutoulas, the commodities trading adviser from Chicago, flew to New York early this week to file an emergency motion in federal court asking that all accounts be unfrozen and immediately transferred in full to other clearinghouses. He argued that a failure to do so would cause investors at other firms to worry about the safety of their money. The motion was denied late Thursday, but he said he would continue to push for a quick resolution.
âThe situation is bad,â he said. The regulators, he added, âshould put up a temporary fund and deal with the accounting later. They need to make sure that clients feel safe in segregated accounts.â
Michael Shore, a spokesman for the CME Group, would not comment on the feasibility of doing this.
A spokesman for the Commodity Futures Trading Commission would not comment on the issue of the segregated accounts and referred all inquiries to the MF Global page on its Web site.
One small hedge fund has essentially gone out of business as a result of MF Globalâs collapse. A woman who until this week worked as the office administrator at the hedge fund said all of the fundâs $30 million was at MF Global.
âBy Tuesday, everyone was just staring at screens,â said the woman, who wanted to be identified only as Sandy L. for fear of upsetting her former boss. âHe said, âWe canât access money; I canât even give you a final paycheck.â â
She was let go on Thursday. âSome of the traders are sticking it out,â she said. âEveryone we call at MF Global picks up the phone. They answer, but they have nothing to say.â
The exchange / clearing house model is the central basis for the participation of small spec's in futures markets. Segregation / Protection of customer funds from corporate malfeasance is the principal reason we trust our brokers. Maybe the large FCM's and exchanges have just decided we represent too much friction against the ROR for servicing our accounts? That is certainly how it feels at this point.
Yeah - I have a small acct (but it means a lot to me) which was flat on 10/31 so I'm frozen. The challenge of folks trying to manage open positions seems to cloud the issue for what should be cut and dried liquidation or transfer of accounts. Calls to my broker at MF yield the same story every day, that "accounts will be moved but it will take time" - Not very inspiring.
JP Morgan has a sum approximating the short fall, but claims these are not customer segregated funds. Morgan is also the custodian (if I understand correctly) of some portion of customer funds not on deposit with the exchanges. They are also part owner of the 1.2 BLN credit facility that may have been drawn down. I'm really smelling a rat here. With CME releasing only minimum margin on transfers of accounts with positions and MF Global having rights to the balance of funds, this looks like it will take some time to sort out. The protections we all assume to be in place appears to be a house of cards at this point.
"Customers treated like share holders" posted earlier here says it all. It's not supposed to happen this way. The implications for this industry will become significant if account holders are not made whole.
Think this can't happen to you? Think again.
Yeah - I have a small acct (but it means a lot to me) which was flat on 10/31 so I'm frozen. The challenge of folks trying to manage open positions seems to cloud the issue for what should be cut and dried liquidation or transfer of accounts. Calls to my broker at MF yield the same story every day, that "accounts will be moved but it will take time" - Not very inspiring.
JP Morgan has a sum approximating the short fall, but claims these are not customer segregated funds. Morgan is also the custodian (if I understand correctly) of some portion of customer funds not on deposit with the exchanges. They are also part owner of the 1.2 BLN credit facility that may have been drawn down. I'm really smelling a rat here. With CME releasing only minimum margin on transfers of accounts with positions and MF Global having rights to the balance of funds, this looks like it will take some time to sort out. The protections we all assume to be in place appears to be a house of cards at this point.
"Customers treated like share holders" posted earlier here says it all. It's not supposed to happen this way. The implications for this industry will become significant if account holders are not made whole.
Think this can't happen to you? Think again.