Anyone pulling money out of MF Global?

Giddens will get his pound of flesh. The longer this takes, the more he makes, see Lehman Brothers:

Giddens, in a court filing last month, said he has gathered some $20 billion in the Lehman case and his goal is to “make a substantial distribution on customer claims, and to make interim distributions when it is possible to do so, possibly as early as the spring of next year.”

The bulk of the $642 million in expenses in the case have gone to consulting and financial advisory fees, according to the Oct. 21 court filing. Giddens and Hughes Hubbard have been paid about $169 million. They’ve been working on the liquidation of Lehman Brothers Inc. since September 2008, shortly after the brokerage’s parent company filed the largest bankruptcy in U.S. history.

In their letter, Royce and Garrett said the “lack of progress” in that resolution “raises questions regarding what is expected of the trustee and the process by which these fees are approved.”

http://www.bloomberg.com/news/2011-...lobal-trustee-s-work-on-lehman-brokerage.html

 

If you do that they'll probably forward it to their attorneys. Maybe you would be better served getting someone with power of attorney and going into their offices, picking up the check, and walking to their bank to cash it.

 

This just got posted. At least it's *some* information directly from the CME.

 

From the above attachement (CME memo): "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."

Well, that's at least encouraging - it sounds as if each customer's share of the 11% or so that is missing may be tied up for a while - but it's MUCH better than having the 100% tied up until the entire debacle is over . .

 

I read that differently. It sounds like *only* the customers whose account have been moved because they already had open positions will get access to that cash/positions. Remember, it's all frozen until the end of today-Tuesday.

The cash only flat people like me get this:

<i>CME Group will continue to work diligently with the Trustee and authorities to assist in the recovery of any misused customer funds and secure a distribution or partial distribution at the earliest time.</i>

Which doesn't tell us anything other than 'we're looking for the lost money. Sit tight.'

 

You can bet his checks to the guy on the left cleared just fine http://i44.tinypic.com/xda0hw.png .... .

 

I received communication from my MF Global broker. It referenced the following web links:

Mfglobaltrustee.com
SIPC.com

There have been significant additions to the trustee website since yesterday. The SIPC website provides access to forms that can be completed on-line, but must be downloaded and mailed to the court appointed liquidation trustee. It's aggravating that two calls to trustee's call center could yeild these simple instructions. There have been several comments in this thread regarding what protections are offered by SIPC. The following is taken from their website:

http://sipc.com/claim/claimsprocess.cfm

The above seems to parallel CFTC's position regarding equitable distribution of any shortfall in segregated funds across all account holders. Per the above it looks like SIPC coverage is limited for cash shortfalls to a maximum of $100k per account holder. We're all living in a pretty gray world at this point. If you want to get a headache, start reading the documents posted under the "Docket" section on the trustee website.

Basically the MF Global brokerage ceased to exist as of the bankrupcy filing. So we all have to be a bit careful with statements made by remaining MF Global staff as regards our funds or next steps. The trustee controls everything at this point. The more separate legal filings accumulate in the matter, the longer it's going to take to resolve. All customers should have the same legal standing here, but of course that is exactly what the lawyers will wind up arguing about.

 

You could be right, but I take it this way:

Company assets are subject to bankruptcy proceedings. Because of the co-mingling of some customer funds with company assets, a certain percentage of customer money is subject to legal wrangling as to whose money it is.

However, there is still money in segregated accounts - not all of it has gone missing. The ownership of these accounts is not in dispute, and not a company asset - therefore not subject to bankruptcy proceedings prior to release. The Trustee, I believe, is legally obligated to disburse & clear-out the non-disputed funds as quickly as is reasonably possible, before moving on to settling ownership claims on company assets.

I.e., If you lent $350 million to MF Global last week, that does not give you the right to make a claim on customer segregated accounts, just because you see cash lying around in there - you have to make your claim against company assets.

Again, I'm no lawyer, but that's my understanding of the following sentence:

"The Trustee is
required to ensure a fair and equitable distribution of that property. In the ordinary course, he
will reduce all assets, including securities, letters of credit, warehouse receipts and other
delivery certificates to cash, and make a pro-rata distribution among the commodity customers based on their relative account balance."

Notice it speaks of distribution of cash amongst customers - not lenders, bondholders, creditors' claims, etc.

I'm not saying you're wrong - I just interpret it a little differently.

What's the alternative? Keeping customer-segregated accounts tied up for years? I just don't see the industry being able to survive that. CME would probably file suit right away - that's a MASSIVE threat to their long-term survival. No one will trade futures (institutions or individuals) if customer seg accts become subject to claims on company assets.

Maybe I'm a little more optimistic than you, because I don't have any money tied up in this . .

 

Like you, I'm not a lawyer. But keep in mind that there are two separate bankruptcies in progress here. A bankruptcy of the parent company and a bankruptcy of the brokerage unit. The brokerage was placed into bankruptcy to in part protect existing customer funds. This is why all accounts were (and are still) frozen. Accounts with active positions were transferred and / or liquidated. The rest of customer funds appear to be part of the bankruptcy process at minimum to insure equitable distribution based on an accurate accounting of the actual short fall in customer funds. There seems to be a lot of bounced checks out there if you believe whats being reported in the press. Unfortunately this may alter the size of the shortfall in customer funds. I would not want to share in either the loss or gain of open positions of other account holders.

I want to believe that the back office records that the trustee has access to are in pretty good shape. If I were guessing, those records will probably need to be vetted against account holder claims to insure accuracy before a final "hair cut" % can be determined. Any losses related an inability to access open positions is a whole other matter. SIPC clearly has no obligations to address this. It also seems fair that the losses of account holders with open positions should not have any bearing on the final 'haircut' we are all going to get (excluding any SIPC coverage for cash balances on deposit at the brokerage).

I really feel for the folks who couldn't liquidate positions. It an issue all traders are going to have to plan for going forward. I think it's fair to assume at this point that fund segregation does not mean that each account holders funds were in separate deposit accounts at the broker custodial bank(s). If this were the case resolution would be very simple and straight forward. We must rely on the integrity of the back off system, and any documentation we can provide to validate our individual claims.

 

Yes, definitely - and yet another argument for having a back-up broker, where you could take opposite positions, & theoretically be 'flat' while riding-out the transfer process.

(though I realize it doesn't work exactly like this in real life - at least you would have SOME kind of exposure-protection).