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The CME acts on MF customer accounts
Interesting development in the MF Global story after the close:
The $300mm is in the form of a guarantee. The objective is to get the Bankruptcy Trustee to release money owed to former MF customers. From the CME release:
"Though CME Clearing does not guarantee FCM-held assets, CME Group is willing to provide a $250 million financial guarantee to the trustee to give the trustee greater latitude to make an interim distribution of cash to customers now, given the monumental task he faces to sort through considerable data and claims in order to complete the MF Global liquidation and make distributions to creditors.”
Some thoughts:
-The amount of “missing” customer money is $600. So the CME is picking up the tab for half of the nut.
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-This is a glass half full for MF customers. Yes, they are getting half their money back. But my read from this is that this other half is very much at risk.
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-The CME steps up for $300 large and they don’t have to? Nobody does that. There is more to this offer than meets the eye.
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-I can’t see how the CME can be held liable for MF customer losses. Therefore the money is an attempt to preserve the integrity of the exchange and to protect its members.
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-It’s possible that the CME action was done with a gun to their head. Absent a fix (partial or otherwise) a systemic risk was (is) a consequence. The only one who could hold a gun in this discussion is Treasury.
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-Has anyone noticed that Treasury has been silent on the MF story? I’ve been very surprised at this. It’s long since time that Geithner should have spoken publicly on this important development. The WH wants to steer clear of anything that smells like a bailout. The WH is ignoring its responsibilities.
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-It’s (again) clear that there is a ton of cash sitting with the Trustee. The reason this money has not been forwarded to customers is that there is a claim against it. I can’t imagine how that can be.
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-The most likely entity that is claiming the money is JPM. It’s possible that JP is acting on behalf of yet another party, but I doubt that.
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-That this matter has now gone on for two weekends confirms to me that there are losses outside of MF. What shouldn’t have happened has happened.
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-Early next week the Trustee will accept or reject the CME deal (I’m sure there are strings). If the Trustee does reject this (its very unusual) then there will be some fallout. If this happens, all of the customer money is at risk.
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-I’ve thought from the beginning that this had the makings of a Black Swan. I’m not sure that the actions by the CME defuse the risk.
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-If there is going to be a reaction (capital withdrawals from other brokers, liquidity issues in futures markets), it will be evident on Monday.
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-If I had an account with a second tier broker I would take the money out. It’s easy to put it back in. It’s a disaster if you can’t take it out.
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This story royally stinks!!! The only way the MF customers would be [even partially] covered in this manner is to make one of the owners of the federal reserve whole when they didn't deserve to be. That would be JPM again, the same pack of criminals who rig the silver market and who knows how many others. The comments from the CFTC criminals also makes clear a massive coverup is underway.
Never attribute to malice what you can attribute to incompetence. I suspect all the parties have no clue where the money went. That in itself is criminal negligence. Someone "should" go to jail. I suspect they are looking for a sacrifical goat. I wonder who it'll be.
Incompetence? Government is force. They're knowingly forcing serfs to fund whatever they decide serfs shall fund. To pretend they know nothing of freely functioning markets, the entire history of all mankind and the despots that run thru it, any philosophies that argue for individual rights and the sovereignty required to achieve prosperity and happiness is delusional and pat. They want what they want and they'll take it until we stop them.
I see your point, and there is no end of incompetence on display here. So...
Since we agree, can I now go to the casino and gamble with your money?
So, as the clearing house - CME has no liability when one of their members goes rogue? Seems unlikely...but...regulators don't regulate...exchanges don't pay attention - it's a Brave New World.
I sure hope that J. Corzine (and any of the other conspirators/yes-men) get some time in Federal "Pound your ass" Prison.
What did Martha Stewart make again?
I remember Martha going to jail for an "insider trade" on somewhere between 40 and 50 K.
Actually, Martha went to Stony Lonesome not for making insider trades, but for lying under oath about the trades later.
But getting back to Justacitizen's point: when you go to the CME website and look at the Financial Safeguards page ( http://www.cmegroup.com/clearing/cme-clearing-overview/safeguards.html ) CME claims that in the extremely unlikely event of a member default, they can draw on more than $100 billion to make clients whole.
Beyond that, they claim "the highest level of safety and the early detection of unsound financial practices on the part of any clearing member." LOL They can't even find the money now!
imho, the real issue here is trust, and if CME can't handle a piddly $600 million spill, why would anybody trust CME to safely manage their account in a $100 billion tsunami?
Bloomberg
http://www.bloomberg.com/news/2011-11-10/mf-global-missing-funds-may-be-...
The $593 million shortfall in client money at MF Global Holdings Ltd., the broker that filed for bankruptcy on Oct. 31, appears to result from a "massive hide- and-seek ploy," Bart Chilton, a commissioner at the U.S. Commodity Futures Trading Commission, said today.
You've heard of the "velocity" of money?
Bart Chilton? Please. Is he not of the same GS fraternity as Corzine? Once a squid, always a squid.
No he's not.
http://en.wikipedia.org/wiki/Bart_Chilton
thanks tempo..looks like the guy is a straight bat...but probly surrounded by sewer rats
Something doesn't smell right about Chilton, to me. Nothing specific (though moving from the Department of Monsanto to the Department of JPMorgan doesn't look good on the surface) ... just my acute canine sense of smell around some of his prior actions....
i think the missing money was covering up unrecognized prop trading losses on those european bonds
Me thinks the money just flew to Indonesia!!!!????
One of the reasons the Treasury does not inventory gold is it can potentially upset people. It is called inventory slippage and that is all that is going on with MF Global, except with money. If people would stop keeping books, I am pretty sure this issue would resolve itself.
I think the issue here is that CME can trace half of the missing monies to simple inventory slippage and that is how much they are returning. The other half is probably suspended in someones Apple cloud account and will be found soon. hehe
anyhoo,
the love of money is the root of all evil
Here's what Jesse had to say about this:
http://jessescrossroadscafe.blogspot.com/2011/11/cme-group-to-provide-fu...
Whar SIPC?
Whar?
Slush Funds can only mean one thing, the sewer is overflowing.
WB,
You're the best. Where do you come up with this stuff? You must be a wiz at photoshop.
bk
Photoshop is the easy part ;-)
And if that graphic were animated, no matter which silver cup was clicked, it would always lift up with nothing under it. All plays are losers...
I am still surprised that the fraud reserve of Bernanke didn't save MF global. Bernanke has a list of preferred clients which doesn't not include: LEH, MFG, and so on.
Rememeber, the CME is in Chicago - Barry Soetero turf. 300 large doesn't mean shit if you are protecting your turf from outside sunlight. The absolute last thing the CME wants is for anybody to actually know how they operate and what happens to all that moola that flows through the place. What better protection than appearing to be a white knight providing half the money when you don't legally have to.
That they have a "slush fund" shouldn't surprise anybody. And how did they accumulate this? Simple: shake down every member and clearing firm for cash. "It's for the good of the business model."
And while they aren't preparing for bailouts of FCM's, the money gets invested to political campaigns, hookers, parties, and travel. The rest gets wasted.
Some day the truth will come out about this whorehouse, but not while "The Annointed One" is in the WH. Don't act surprised when that day comes.
http://vegasxau.blogspot.com
If traders were going to pull their money from accounts it would have happened this week. The injustice of Fascism keeps on giving .
Fascism = Bankster Bustout
Why would anyone leave unencumbered funds in a brokerage account after this?
good question.
Corzine is currently in Kenya living in a hut with Obamas 14 brothers and sisters, word on the street is he will be made ambassador for the town of BungaObama!
The shell game continues. Which cup is the ball under? Surprise, there is no ball at all.
http://www.youtube.com/watch?v=Bnmt6dLasxw
friends of ours..........
Good read as usual Bruce - lots of stinky rats here.
o/t but interesting homework assignment for ZHers:
http://money.cnn.com/2011/11/11/news/international/euro_breakup_prize/in...
$400,000 is motivating. . . surely the Tylers may be able to come up with a winning plan. Ask for the prize to be delivered in PMs.
Please, keep your stupid to yourself.
Please keep your "Please, keep your stupid to yourself." comments to yourself. I'm sick of seeing them everywhere. Carry on.
Jeez man! I didn't write the fucking thing and I'm not linking to my blog so what's your problem? Thought some folks here might find opportunity for fun with it. . . lighten up!
Your posts are always must-read, Bruce. Thanks.
Soooooo. Hopefully you can be back Monday to let us know the happening. What a story.
He's here 9/24/7, what's a monday?
OK you brought up the topic of Slush Fund, there's a theory out there that $ Trillions of Bailout Money are missing, supposedly disappearing into a CIA "Black Budget" slush fund. Please watch to the end, and listen to the Angelo Mozilo "he did what he was asked to do" explanation.
http://www.youtube.com/watch?v=6EE3K7SiO1U
Note: There's no proof that the CME is connected. No proof that Citadel is connected. No proof that Chicago or the PPT has anything to do with any government slush fund. None at all. "$ Trillions are being siphoned off, where is it?".
Short clip: http://www.youtube.com/watch?v=sitkms0VFYs
Outstanding interview with Catherine Austin-Fitts. Thanks for posting.
It shows just how far back the start of the fraud bubble really was. Reagan-Bush-Clinton-Bush-Obama, and all the associated Congresses and Administration bureaucracies that actually drafted and passed the policies ... one long fraudulent continuum!
"high frequency corn syrup" - max kaiser
time for you to keep your stupid to yourself now.
The trust for traders just left the building. Big time mistake if customers lose anything. This is a RICO action!
RICO action
lol
RICO action case filed by what federal prosecutor? So far only a Jew and an Asian have gone to jail for all this platinum-collar crime. When do the WASP boys get put in the dock? Ever??
Scapegoating and bogotry/racism are in lockstep in the halls of justice.
Why didn't they (or someone) step in and pay the losers of the Reserve Fund when it went belly up?
Who benefits from this generous move?
I’m not sure that the actions by the CME defuse the risk.
Bruce, I agree 100%.
While 50% of something is better than 0%, it WOULD BE A COLD DAY in hades,before I left ONE dime of my currency in any other brokers accounts.I see the beginning of a HF run.
Invitation to contagion suicide.This smells like a Creditor take it or leave it, at the Bankruptcy.
I see the beginning of a bank run. Run to gold. Fly to silver.
Right on, bro. Unitl my PMs fell out of my boat, they never declared bankruptcy. Still don't understand why people play paper. Fuck the NYSE, CME, and all the other "markets". They have not been markets for many moons.