The meltdown of securities firm giant MF Global Holdings Ltd. is a “fresh slap-in-the-face reminder” of why the country needs tougher financial regulations, a member of the Commodity Futures Trading Commission (CFTC) said Tuesday.
“MF Global is the new poster child for why thoughtful financial regulations is needed, now more than ever,” said CFTC Commissioner Bart Chilton during the fourth annual Risk Management in Energy Trading Conference in Houston.
New York-based MF Global, which had been headed by former New Jersey Gov. Jon Corzine, filed for bankruptcy on Oct. 31 following an ill-timed bet on the European debt markets (see Daily GPI, Nov. 2). Approximately $600 million in customer securities overseen by MF Global is missing.
“Our staff scoured their [MF Global’s] books, and let’s just say we bring on the Beatles [song] here: It’s been a magical mystery tour trying to find the loot. Half-a-billion dollars seems to have gone missing! I don’t know about you, but losing a half-billion dollars harshes my mellow. If I drop a quarter at some drive-through fast-food joint, I get out and pick it up, but, a half-a-billion dollars?” Chilton said.
“We need to ensure that customers — and markets — are protected to the fullest extent of the law. I can tell you that we are using any and all of our myriad authorities under the Commodity Exchange Act in this endeavor.
“We’ve got expert staff that have been on this around the clock and who will continue to argue aggressively in U.S. Bankruptcy Court to protect investors. We will keep on and we will continue with whatever develops in this matter, making customers our first priority.”
To help locate some of the funds, a number of clearinghouses have coordinated their efforts to provide clients with further information on the status of their account transfers.
CME Group said it “is making substantial progress on verifications and continues to receive information from the 12 receiving clearing firms and other derivative clearing organizations to facilitate their process.
“However, due to the massive undertaking of processing data to verify 15,000 accounts for CME Clearing, ICE Clear US, The Clearing Corp., KCBOT Clearing Corp., MGEX, NYSE Liffe US and The Options Clearing Corp., as well as the unique circumstances of the MF Global bulk transfer process, the validation of each account’s collateral balance is taking longer than originally anticipated,” said CME, which owns the New York Mercantile Exchange, the Chicago Mercantile Exchange and the Chicago Board of Trade.
“CME Group recognizes the urgency of the situation and is working to complete this process as soon as possible. The company expects that those customers’ accounts including only futures positions will be verified, and holds will be removed on a rolling basis beginning Nov. 9…The company will [then] work to complete the process and remove any remaining holds on accounts involving options positions throughout the remainder of the week.”
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