Anyone pulling money out of MF Global?

"Statement From the Office of the Trustee for the Liquidation of MF Global Inc.
Oct 31, 2011-New York, New York--James W. Giddens, partner at Hughes Hubbard and Reed LLP, was appointed this evening by U.S. District Court Judge Paul Engelmayer of the Southern District of New York to be the Trustee of the liquidation of MF Global Inc., the broker-dealer subsidiary of MF Global Holdings Ltd.

The appointment was made at the request of the Securities Investor Protection Corporation (SIPC). The Trustee will oversee the Securities Investor Protection Act (SIPA) liquidation and his primary goal is to fulfill the SIPA mandate to satisfy public customer claims, including those related to commodities, and securities, in an orderly and fair process. The Trustee has commenced taking steps to protect customers of the brokerage, and he and his team plan to be on the premises of MF Global Inc. to provide proper oversight."

OK thanks I had not seen that. So theoretically he does have the mandate to represent the interests of the public customers.

Well, as you say, he does not seem to be being aggressive enough then....
 
I believe his mandate is to address the interests of all customers. Given that MF Global was a 'broker dealer' in treasuries this probably complicates the issues. The latest info on the trustee website breaks out three groups of customers.

Problem is it does appear that some groups are being better treated. First order - Logically was to transfer accounts with open positions - Prevent market disruptions because of MF Global's order flow.

After that is where things seem to be breaking down. There are a lot of IB accounts with many customers / account. It's hard to imagine why these accounts should have more favorable treatment than regular individual account holders. I guess it depends on the nature of the agreements in place between MF Global and the IB's that cleared through them. This entire process is way too opaque.
 
Agreed that it is way too opaque.

Someone needs to be immediately doing things like

- forcing out into the open what is the nature of the funds in the JP Morgan account and who is making claims against them

- setting out what alternative explanations have been offered to date as to what happened to customer funds

-detailing exactly how customer funds were invested in sovereign debt and whether losses were realized on these transactions

I am quite sure that lots is known already about all of this but it is all being kept secret.

JP Morgan should do the decent thing and guarantee all customer monies and waive its interests in the disputed account. Then the whole thing would be vastly simplified and everyone could get all of their funds back.
 
Quote from comintel:

Agreed that it is way too opaque.

Someone needs to be immediately doing things like

- forcing out into the open what is the nature of the funds in the JP Morgan account and who is making claims against them

- setting out what alternative explanations have been offered to date as to what happened to customer funds

-detailing exactly how customer funds were invested in sovereign debt and whether losses were realized on these transactions

I am quite sure that lots is known already about all of this but it is all being kept secret.

JP Morgan should do the decent thing and guarantee all customer monies and waive its interests in the disputed account. Then the whole thing would be vastly simplified and everyone could get all of their funds back.
More...

The only challenge I have to what you've written is using JP Morgan and the word decent in the same sentence. These folks play dirty pool (I guess there's no other kind really)

http://www.marketwatch.com/story/jp-morgan-hsbc-sued-for-silver-manipulation-2010-10-27

If JP Morgan can stonewall and create a confidence issue with the exchanges their trading book benefits. Since banks are on the hunt for yeild like every one else, this situation is an opportunity too good to pass up for them I think. The selection of this liquidation trustee is also suspect given its track record with Lehman. Taking their time will create a confidence crisis. Probably already started given the postings on these boards about other brokerages.

With the head of the CFTC recusing himself, its pretty clear a 'fix' was in with MF Global last summer to hold back the regulatory changes until they could exit their positions gracefully next year.
 
Quote from FreeMarketRider:

If the banks can stall long enough to crush or weaken participation in an exchange based business model, trading for large customers will move back to the banks books on the banks terms.

... The biz is too small to garner the moral hazard pay that comes via FDIC protection, Fed money creation, and lender of last resort privileges at the discount window.
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Very interesting point, FreeMarketRider. The biggest of the big banks may be privately cheering the fall of MF Global and the (perhaps unnecessary) ensuing mess, and not just for the reduction in competition, but also for the crippling effect it could have on open, centrally cleared markets. To earn $100 million per day in "trading" profits, having a closed market where your're the only counterparty is the way to go, as open exchanges just make things too efficient for the massive profitabilty enjoyed by the bulge bracket in prior years. Unless MF clients are made whole and confidence is restored to independent FCM clients in general, we'll see a victory for high-profit, closed, non-centrally-cleared trading systems (i.e. big banks) at the expense of smaller, more efficient, and less conflicted firms/traders.
 
There is a report
"MF Global clients cry foul over JPMorgan tactics in bankruptcy recovery"

http://www.nypost.com/p/news/business/dimon_dominator_XgEnS4bOQHprlWey7KxqxI

that notes (quoting only in part to respect copyright):

===================

Smaller customers of MF Global believe bank giant JPMorgan Chase, run by CEO Jamie Dimon, is angling to cut ahead of them in MF’s long line of creditors.

Some MF clients are planning to file a motion in Manhattan bankruptcy court today, led by James Koutoulas, chief executive of a Chicago commodities trading firm, in a bid to boost their chances of recovery from the eighth-largest bankruptcy in US history.

At issue is a lien and other protections given to JPMorgan, MF’s largest lender, in exchange for an $8 million loan the bank gave to MF on its first day of bankruptcy.

In short, the lien appears to give JPMorgan the right to some assets that creditors might otherwise try to claw back through lawsuits.

The bankruptcy judge in the case, Martin Glenn, acknowledged he doesn’t normally grant such special rights for a lone lender and said he would re-evaluate the matter at a hearing today.

In an interview, Koutoulas called the loan “a farce” and “a cheap ploy for them to jump the line.”

Stanley Haar, owner of a small commodities trading firm in Boca Raton, Fla., who is part of Koutoulas’ group, said if the bankruptcy judge confirms JPMorgan’s lien, “We would automatically be stepped on by the bank.”

....

Today’s filing by Koutoulas will request that MF’s customers be given priority over any assets recovered if customer accounts were, in fact, wrongfully co-mingled with the company’s assets.

Koutoulas is also agitating to get a seat on the creditors’ committee, which is currently being led by JPMorgan.

Another subject of some customers’ ire is James Giddens, the trustee put in charge of cleaning up the mess and returning money to customers and creditors.
 
Quote from nkhoi:

call for MF Global Trustee James W. Giddens to Resign

http://myinvestorsplace.com/2011/11/09/open-letter-to-mf-global-trustee-james-w-giddens-to-resign/
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Thanks for sharing, and indeed I think this letter is worth repeating here:-

Open Letter to MF Global Trustee James W. Giddens to Resign

I urge everyone who has been violated by MF Global to fax the Honorable Martin Glenn 212 668 2878 if they agree that the Trustee James W. Giddens should resign.

Case # 11-2790
Case # 11-15059
Mr. Giddens you were appointed to represent the interests of the clients of MF Global. I am one of those clients that has been violated. Besides myself Representative Ed Royce and Representative Scott Garrett and countless others have expressed severe concerns regarding your abilities & motivations. For three years you billed over $160 million dollars yet countless Lehman customers have not been returned anything.

Does the longer the MF Global Bankruptcy proceed mean the more you can bill at $890+ a hour from the eventual (if there are any left) proceeds of the bankruptcy? Rules 1.20(a) and 1.264 describe those conditions, including requirements that: (1) the FCM deposit customers’ funds under an account name which clearly shows that they are customers’ funds; and (2) an acknowledgment be obtained from each depository that the depository was informed that the deposits represent customers’ funds. The funds are clearly in our names, titled to the futures clients. What are you doing with them? Are your true motivations in line with the clients of MF Global (mostly agricultural and industrial hedgers, farmers, elevator operators, food producers and others vital to the well being of of the US economy)?

Do the bankruptcy laws allow you to sweep titled segregated client accounts into the assets of MF Global? Is it ethical that you have the authority to hire any services you want, to do your job? Is it ethical to utilize the services of a major Washington lobby group to present your case and bill from the proceeds of the bankruptcy? Is it ethical to use well placed reporters to control the public message that the FCM customers (including farmers & hedgers) have to share in MF Global’s ridiculous gamble when the cardinal rule of segregation of client accounts was violated. People are going out of business because of what has been allowed to transpire. Clients of MF Global never knew of rule 1.25 or 1.29 which enabled MF Global to gamble with their segregated “ Safe” accounts.

I feel violated and uncomfortable with your actions. It seems multiple injustices have occurred, first by MFGlobal & their use of client segregated funds, then by the court system and now a well connected court appointed Trustee who has not performed his past task well yet billed over $160 million for himself and his company. However,I am sure the victims feel relieved that you offered a 10 percent discount from your standard rates, as in other bankruptcy cases, and not charge for overtime meals, internal copies and after-hours travel services.

This request for you to do the right thing and step down. You do not represent me. I am not a creditor of MF Global and neither is any futures client.

I imploring the new true Trustee to

1.To release at least partial amounts of the frozen cash in segregated client accounts in order to restore integrity of the markets
2.Open immediately investigations of JP Morgan and how segregated accounts & money supposedly appear and disappear in lieu of rule 1.25 and rule 1.29
3.Open immediately an investigation of all the regulators who failed their task in regulating the markets including the CME and the CFTC.

Andrew Abraham
Abraham Investment Management

cc. Senator Grassley
Senator Merkley
Representative Royce
Representative Garrett
Honorable Judge Martin Glenn
Numerous reporters
 
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