Bloomberg News

MF Clients to Get Cash at CME Once Exchange Verifies Transfers

November 17, 2011

Nov. 8 (Bloomberg) -- Clients of MF Global Holdings Ltd., the futures broker that filed for bankruptcy protection last week, can access their frozen cash collateral at CME Group Inc. after the exchange verifies all traders’ accounts have been transferred to new brokers.

CME Group has moved about 15,000 accounts and approximately $1.45 billion in collateral from MF Global customer positions to other brokers, the Chicago-based exchange and clearinghouse owner said today in a letter to its members. The world’s largest futures exchange was also responsible for auditing MF Global as a clearing member.

“When the verification process is completed and we confirm that all monies and positions have been transferred correctly, customers will be given access to cash in their accounts,” Terrence Duffy, executive chairman, and Craig Donohue, chief executive officer, said in the letter, which was posted on the CME Group’s website.

Customers of MF Global whose money is trapped at the broker say the safeguards meant to protect them failed. The New York- based firm filed for bankruptcy on Oct. 31 listing debt of $39.7 billion and assets of $41 billion after failing to find a buyer in the days leading to its collapse.

CME Group and James Giddens, the trustee overseeing the liquidation of MF Global, are working to locate money that is missing from client accounts. The U.S. Commodity Futures Trading Commission is investigating a $593 million-shortfall in those accounts, a person with knowledge of the regulatory probes said on Nov. 4.

“We are 100 percent currently shut out of business,” said Marc Borden, a managing director and co-founder of Omni Point Capital LLC in Chicago, which was an MF Global customer. “We had to let a revenue-producing trader go on Friday because we don’t have the ability to make payroll. It’s unbelievable,” said Borden, whose fixed-income fund traded interest-rate derivatives and securities through MF Global.

The trustee can’t release more collateral as long as money seems to be missing from some commodity accounts, because the trustee’s job is to distribute assets equitably, Giddens said.

--With assistance from Linda Sandler in New York. Editors: Pierre Paulden, Alan Goldstein

To contact the reporters on this story: Matthew Leising in New York at mleising@bloomberg.net; Silla Brush in Washington at sbrush@bloomberg.net.

To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net or Lawrence Roberts at lroberts13@bloomberg.net


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