Calling all MFGlobal Customers

U

usman88

I know there are a couple of threads on the MFGlobal on these boards but I felt there was a need to create a separate thread for MFGlobal customers so that we can keep track of the situation and engage in coordinated efforts to recover our money.

I begin first. Till date, I have contacted SIPC, MFGlobal USA and MFGlobal Trustee without any satisfactory response. I am told to wait for claim forms and then file my claim.

I was lucky enough to liquidate my positions before the drama began so I had cash only in the account.

Did any of the customers manage to get a satisfactory reply from any authority of MFGlobal themselves?
 
Quote from usman88:

I know there are a couple of threads on the MFGlobal on these boards but I felt there was a need to create a separate thread for MFGlobal customers so that we can keep track of the situation and engage in coordinated efforts to recover our money.

I begin first. Till date, I have contacted SIPC, MFGlobal USA and MFGlobal Trustee without any satisfactory response. I am told to wait for claim forms and then file my claim.

I was lucky enough to liquidate my positions before the drama began so I had cash only in the account.

Did any of the customers manage to get a satisfactory reply from any authority of MFGlobal themselves?
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If you had a Futures account, no one really knows what's going on yet. If you have a margin account (For equities and options), SIPC should offer protection up to the SIPC limits.
 
No good repsonse from anyone so far. They are all incompetent in my opinion. One would think since so many customers accounts are involved, the trustee would issue a statement (in english not lawyer jargon) stating to some effect a timeframe or some clarification of what is happening with the frozen funds. There are so many rumors between you will get you $$ from SIPC through filing a claim form to the cash will be divided up because of the missing 600M it is really crazy. At the end of the day the client funds are supposed to be segregated so clients should be made whole before anyone gets paid a dime but that makes too much sense.

What I have heard is deliotte or pwc is doing a full audit so that will take time. If SIPC does not cover futures accounts (which are the majority of accounts and funds) then they need to get out of the way. Considering there are no claim forms to fill out so far then hopefully once the audit is complete some of the cash will be released. It makes no sense at all that the trustee should freeze all cash when there is at least 85% accounted.
 
The best thing at this point is to keep a close eye on the trustee's site and the SIPC site.

http://www.sipc.org/

http://mfglobaltrustee.com

Outbound communication from these two entities is poor to say the least. For now I think the best guidance seems to be the following from the trustee's update section:

As required by law, account transfers must be complete by 5:00 pm EST on Friday, November 11, 2011, at which time the process of an orderly liquidation of non-transferred accounts will begin.
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The Forbes article by Francine McKenna unfortunately sounds like its as good a forensic as I've read in the news. If that is accurate, cash will likely be the least impacted asset at the brokerage. The principal of pro rata distribution of shortfalls makes sense but also implies a slow resolution.

I spoke with someone at the SIPC call center. He indicated that the trustee was trying to get processes in place that would make it un-necessary to have to utilize the 'claim form' process. If that is accurate, it implies that there is a lot of cash on hand to distribute. Of course, if that were the case, why would accounts with positions only get transferred with only 75% of maintenance margin. The only explanation I can think of is that this reflected available cash on deposit across all exchanges. Some may have had more margin deposit that others. CME was over funded but perhaps other exchanges were under-funded. I read somewhere that ICE had already negotiated a $200 million credit line to have available for the wash out of MF Global that they anticipated was coming.

One thing is certain, the press coverage on this isn't all that reliable.
 
From the WSJ:

MF Trustee Exploring Options to Free Customer Cash

By JACOB BUNGE

MF Global Holdings Ltd. customers who still have cash locked up with the failed broker-dealer "most likely" will need to go through the claims process, though a court-appointed trustee is examining other options for dispersing some of the funds, according to a spokesman for the trustee.

About 30,000 MF Global futures-trading accounts include cash that remains frozen after the New York company filed for bankruptcy last week, even as exchanges and regulators have coordinated to free up $1.55 billion in collateral tied to standing trades.

MF Global's demise wasn't large enough to threaten the financial system, but its fall hurt thousands of investors and employees and brought unusual problems and uncertainties to customers, Jacob Bunge reports on Markets Hub.

That effort, aimed at reducing the risk presented by open trades on U.S. derivatives exchanges, has prompted outcry from MF Global customers who took trades off the table ahead of its downfall, or didn't happen to be trading at the time.

"We understand the frustration of some customers," said a spokesman for James Giddens, the trustee overseeing MF Global's liquidation. "We are working around the clock and exploring options for getting additional assets back to customers without jeopardizing the ability to fairly and equitably distribute the assets of the estate to all customers."

The spokesman declined to elaborate on what those options may be, but stressed Tuesday that the most likely outcome will be the claims process.

No dollar figure has been put on the cash that sits at MF Global, either in dormant trading accounts or in the form of excess trading collateral. Some brokers and asset managers trading contracts through MF Global tended to keep extra margin on deposit.

On Friday, futures-exchange operator CME Group Inc. completed the transfer of about 15,000 futures accounts of MF Global to a group of 10 other clearinghouse member firms, moving about $1.45 billion in trading collateral—about 60% of the overall total held at CME by MF Global—in the process. Other market operators like IntercontinentalExchange Inc. moved an additional 2,000 accounts with about $100 million in margin.

Those funds are expected to be freed up at the close of business Tuesday, but those clients of MF Global who had no trades standing on U.S. exchanges await signs that they will get access to their own money.

At least 60% of the customer cash on deposit at MF Global is expected to be dispersed at some point, in line with the amount of trading collateral the trustee approved to move in last week's transfer of open trading positions and margin.

The delay in shifting that cash has the company's former clients crying foul and complaining of a lack of communication from the exchanges and trustee.

"If I would have gone the other way and put on positions instead of liquidating, I would be treated preferentially for acting in a way that was adding risk," one customer said. "I got out because I thought it was the prudent thing to do given the circumstances."

In a letter to traders Tuesday, CME said that the trustee intended to reduce all assets held by MF Global to cash, which then would be distributed to customers on a pro-rata basis, depending on their relative account balances.

"While we understand and appreciate that there are many frustrations and unanswered questions, it is worth pointing out that significant progress has been made over the last several days," CME executives wrote in the letter.

The process for filing claims is being worked out this week, according to the spokesman for the trustee.
 
Quote from usman88:

I was lucky enough to liquidate my positions before the drama began so I had cash only in the account.
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It seems that futures customers with all cash in their accounts and those with part cash and part assets (like T Bills) will be treated differently, but the trustee has yet to provide any details.
 
I think its an open question that all cash accounts will be treated differently in the long run. The bulk transfer of positions was about getting traders access to their positions. Below the surface, I think regulators were concerned about the relative size of MF Global's order flow and it's impacts to liquidity.

The vulnerabilities brought to light by this incident (safety of segregated funds / investment of segregated funds) will cause many to rethink their relationships with FCM's. The best thing regulators and exchanges can do is make all account holders as whole as possible as quickly as possible. I think that will become the new push for the trustee. I believe this is what is referred to with the trustee's remarks about orderly liquidation of accounts not transferred beginning around November 11th.

My sense is that more funds will be flowing to accounts transferred with under-margined positions. It's hard to fathom why there was a hold back to begin with, unless there is significantly more funds missing that we're being informed about. It is probably more likely that the trustee did not want to indiscriminately shift funds between accounts just to accomplish full margining. There was probably not enough money on deposit with all the exchanges to accomplish this.

I also think the CME was very concerned about the integrity of their operation should this incident trigger a "run" by all traders to close their positions irregardless of who their FCM's were. This may be something that happens in the future if traders don't have a warm fuzzy feeling about the safety of their funds in the post MF Global world. On the link below, FCM's can park segregated customer funds in any investment vehicle listed under the "current" column.

http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/reg125_307_factsheet.pdf
 
From the trustee website:

UPDATE: Commodity customer accounts that have not been transferred as part of the bulk transfer of accounts can be transferred if the account holder finds a Futures Commission Merchant willing to accept a transfer of the positions in the account without collateral. As required by law, account transfers must be complete by 5:00 pm EST on Friday, November 11, 2011, at which time the process of an orderly liquidation of non-transferred accounts will begin.

Former MFGI customers who would like to transfer positions without collateral may log their requests with MFGI, and may contact Dan Schulman to do so at (312) 548-2020.
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Looks like the Nov 11th date is still about transferring accounts with positions. Why is it so hard for these folks to just make direct statements about what they are going to be doing? What kind of FCM would be willing to accept a position without supporting collateral? Then again if you had an account whose 'position' was 'no position" (ie all cash), I think any FCM would be willing to accept such an account.

I saw this on my log in page a few days ago:

<a href="http://s1104.photobucket.com/albums/h331/specsalot/?action=view&amp;current=Loginsnip.jpg" target="_blank"><img src="http://i1104.photobucket.com/albums/h331/specsalot/Loginsnip.jpg" border="0" alt="Photobucket"></a>

As of yet I have not been able to see my account at RJO. Anyone else with a flat account have any luck getting on line access to their new account at RJO?
 
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