Dave Siciliano
Final Approach
- Joined
- Feb 27, 2005
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- 6,434
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- Dallas, Texas
- Display Name
- Dave Siciliano
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- Addison, ADS
For those with funds in a brokerage account or money market fund, this is worth a read.
The liquidation of MF Global has become an absolute mess and will have many questioning how safe a segregated funds account with one's name on it is.
Money market funds fall into this category. Remember when folks used to bury cash or put it under the mattress? This is how that comes about.
An excerpt from the article follows but reading the entire article at the link below is better.
Best,
Dave
========================================================================
To customers like Andrew Abraham, 49, of commodity trading adviser Abraham Investment Management in Israel, the trustee’s role is troubling; “Do the bankruptcy laws allow you to sweep titled segregated accounts into the assets of MF Global?” Abraham asked in an open letter to Giddens.
Abraham said in a phone interview that without the immediate return of customer cash, the costs of the trustee -- who has hired lobbying firm APCO Worldwide to represent him to the media -- will eat into assets that should belong to customers. Republican lawmakers have criticized Giddens’ work in liquidating Lehman Brothers, where he billed $891 an hour, saying his work would cost more than $640 million.
Legal obstacles to quick recovery of the frozen cash could also include concern about whether some customers aren’t entitled to be repaid as much as others, and customers who transferred money out of their accounts prior to the bankruptcy could be subject to clawback rules, Butler noted.
Those like Monjure who liquidated their positions on the day of the bankruptcy to avoid a drawn-out recovery process, said they feel aggrieved because they had to sell at a loss and can’t get any of their cash. Customers who still had open positions have been transferred to new brokerages with about 60 percent of their cash collateral, and now face margin calls for the rest, which is locked up at the MF Global accounts.
Jarrell said customers with open accounts were transferred while those with all cash accounts were not because, “moving the open positions could avoid market disruptions and allow customers to have some sort of choice of what to do with the positions.”
“We can’t distribute cash because we have to know what the amount of segregated cash held for customers is and verify the claims against that pool of segregated cash,” he said.
Legal options are less clear for those who have not just frozen cash, but margin calls, Butler said.
“People can’t understand how the new margin is being calculated. Some people say they’re getting less than 60 percent transferred, others say they’re getting 80 percent,” he said.
The people who were most prudent are being hurt the worst, said Don Miller, 50, a member of the CME since 2004 who works remotely from his home in the Boston area and has more than $2 million at risk, including his business and retirement accounts.
“Some people put a little in for margin, those of us who don’t believe in excessive leverage put more in for our activity in the course of providing market liquidity than we need,” Miller said. “Because of the segregated aspect, that money is supposed to be safer than with a bank.”
“My trading business and my life have come to a complete stop,” said Miller, who has a $30,000 college bill for his daughter coming due.
The CME reviewed MF Global’s accounts the week of Oct. 24, and found them to be in compliance. MF Global didn’t report any transfers until early morning Oct. 31, suggesting the firm “made subsequent transfers of customer segregated funds in a manner that may have been designed to avoid detection,” according to a CME statement on Nov. 2.
http://tinyurl.com/cjfxb7x
The liquidation of MF Global has become an absolute mess and will have many questioning how safe a segregated funds account with one's name on it is.
Money market funds fall into this category. Remember when folks used to bury cash or put it under the mattress? This is how that comes about.
An excerpt from the article follows but reading the entire article at the link below is better.
Best,
Dave
========================================================================
To customers like Andrew Abraham, 49, of commodity trading adviser Abraham Investment Management in Israel, the trustee’s role is troubling; “Do the bankruptcy laws allow you to sweep titled segregated accounts into the assets of MF Global?” Abraham asked in an open letter to Giddens.
Abraham said in a phone interview that without the immediate return of customer cash, the costs of the trustee -- who has hired lobbying firm APCO Worldwide to represent him to the media -- will eat into assets that should belong to customers. Republican lawmakers have criticized Giddens’ work in liquidating Lehman Brothers, where he billed $891 an hour, saying his work would cost more than $640 million.
Legal obstacles to quick recovery of the frozen cash could also include concern about whether some customers aren’t entitled to be repaid as much as others, and customers who transferred money out of their accounts prior to the bankruptcy could be subject to clawback rules, Butler noted.
Those like Monjure who liquidated their positions on the day of the bankruptcy to avoid a drawn-out recovery process, said they feel aggrieved because they had to sell at a loss and can’t get any of their cash. Customers who still had open positions have been transferred to new brokerages with about 60 percent of their cash collateral, and now face margin calls for the rest, which is locked up at the MF Global accounts.
Jarrell said customers with open accounts were transferred while those with all cash accounts were not because, “moving the open positions could avoid market disruptions and allow customers to have some sort of choice of what to do with the positions.”
“We can’t distribute cash because we have to know what the amount of segregated cash held for customers is and verify the claims against that pool of segregated cash,” he said.
Legal options are less clear for those who have not just frozen cash, but margin calls, Butler said.
“People can’t understand how the new margin is being calculated. Some people say they’re getting less than 60 percent transferred, others say they’re getting 80 percent,” he said.
The people who were most prudent are being hurt the worst, said Don Miller, 50, a member of the CME since 2004 who works remotely from his home in the Boston area and has more than $2 million at risk, including his business and retirement accounts.
“Some people put a little in for margin, those of us who don’t believe in excessive leverage put more in for our activity in the course of providing market liquidity than we need,” Miller said. “Because of the segregated aspect, that money is supposed to be safer than with a bank.”
“My trading business and my life have come to a complete stop,” said Miller, who has a $30,000 college bill for his daughter coming due.
The CME reviewed MF Global’s accounts the week of Oct. 24, and found them to be in compliance. MF Global didn’t report any transfers until early morning Oct. 31, suggesting the firm “made subsequent transfers of customer segregated funds in a manner that may have been designed to avoid detection,” according to a CME statement on Nov. 2.
http://tinyurl.com/cjfxb7x
