CME to Put 300mil with MF-G Trustee.

Discussion in 'Wall St. News' started by rcj, Nov 12, 2011.

  1. rcj


    Smart move by CME.

    The CME Group, the major exchange where MF Global did business, took the unusual step on Friday of pledging $300 million to help ailing customers of the bankrupt brokerage firm.

    The money will be an insurance policy of sorts, handed over to the trustee overseeing MF Global, and is intended to backstop the roughly $600 million in customer funds missing from the firm. While CME is not sending the money directly to customers, the announcement will provide an extra cushion that could enable the trustee to dole out additional funds.

    The move comes after days of fierce complaints from MF Global’s futures industry clients, including farmers and hedge funds, who have called on CME to step in to plug the $600 million shortfall. The exchange has no legal obligation to do so, but customers have hammered CME, saying the safety of the futures industry is at stake.
    “CME Group believes it is critical to pursue this option with the trustee to distribute additional securely-held customer assets,” CME Group’s chief executive, Craig Donohue, said in a statement. “Our primary concerns are the protection of our customers at CME Clearing and the integrity of all futures markets.”

    MF Global’s customers, including farmers and traders, were frozen out of trading by the CME Group on the day MF Global filed for Chapter 11. While CME has transferred some of their positions to other brokerage firms, customers received only about 60 percent of the cash they posted to directly back their trades. There’s also customer cash reserves that remain frozen.

    CME will provide a $250 million guarantee to the trustee’s office so it has “greater latitude to make an interim distribution of cash to customers now,” CME said in the statement. CME Trust, a related entity that was set up like an insurance fund for trying times like these when customers lose money after a brokerage firm fails, also pledged $50 million.

    Customers will only draw from the overall $300 million pot if federal regulators are unable to locate the missing money at MF Global.

    “We look forward to seeing the details of the CME proposal and hope it might help us as we develop an expedited claims process,” said Kent Jarrell, a spokesman for the trustee.

    The Commodity Futures Trading Commission and other federal regulators are continuing to search for the missing funds. The Federal Bureau of Investigation is also examining the case.

    “The failure of MF Global and the firm’s mishandling of customer segregated funds is absolutely uncharted territory for this industry, and this extreme measure will help to provide all former MF Global customers access to their account balances that had previously been frozen in the liquidation,” Terry Duffy, CME Group’s executive chairman, said in the statement.
  2. ddouglas


    Bravo . . it doesn't fix everything, but is a major step toward restoring confidence.
  3. rcj


    Just noticed ZH put up a story on this a few min ago.
  4. Illum


    Good for the CME; they didn't have to do it, it definitely helps, and let's be honest that's a big number when they have no obligation. Now what they need to do is break the CFTC balls. They allowed this loophole to be used to make huge bets on euro crap. I don't know why that rule is in place. Maybe to sweep customer funds overnight? Either way, it should not allow segregated finds to be speculated with. CME needs to get in the CFTCs face. Do we really need to put up with this anyway? I hear swiss are taking large chunks of commodity markets. This is a global world now, and if money isnt safe here we should clear through those who are forced under a better set of laws to conduct themselves properly. The law is the only thing keeping us from these idiots. They don't fix this loophole... nothing is fixed. Even if you get close to whole, you just can't trust it.
  5. Wow that reminds me of the early days before SIPC when firms failed NYSE members would have to pledge or buy a firm and make sure people were made whole.

    This was back when the paper crisis was a huge mess, securities were lost or outright stolen from the cage.
  6. bone

    bone ET Sponsor

    I wonder if Corzine will like jail as much as Madoff seems to.

    Pucker up, buttercup.