Discussion in 'Trading' started by Mvector, Dec 7, 2011.
where is the 100 Billion backstop CME?
CME guarantees performance of contracts... Counter party risk of both sides of the trade. If MF Global blatantly steals your funds CME has no responsibility to make you a whole. If MF is counter party to your trade and defaults CME will back stop the trade.
Upon MF's bankruptcy active positions were transferred to other firms. Many positions were liquidated for lack of margin as client funds were locked up by the MF trustee. CME has an obligation to guarantee MF clients' performance of contracts as counter party to other traders. CME protected the other traders and unfortunately MF clients got margin called and liquidated.
The situation is a mess but the party responsible is MF global and their regulators. CME, to the best of my knowledge, back stopped the performance of all contracts.
No doubt MF clients got screwed but from CMEs' perspective moved the MF client positions to new firms who immediately margin called them in order to guarantee performance of the contracts to their counter party.
Excellent explanation - making more sense now.
I still go back to this point - how could the CME Group keep allowing trade activities with MF Global if there was no funds on the MF Global side of the equation?
No idea but suspect CME stepped in once MF checks bounced. I hear client disbursement checks also bounced.
MF Global only had to keep on deposit with the CME the minimum maintenance margin for actual trades that were open.
The many people who were largely in cash in their MF Global accounts would not give rise to much/any deposit at CME in respect of their excess cash balances.
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