UPDATE: CME Group Seeking To Relocate MF Global Client Business
November 01 2011 - 5:42PM
Dow Jones News
CME Group Inc. (CME) on Tuesday sought to rally major clearing
firms to take on parts of MF Global's client base, an effort that
could free up some customer money trapped by the brokerage firm's
collapse Monday, according to people familiar with the
situation.
The world's largest futures exchange group, which counted MF
Global as one of its biggest customers, held a conference call
Tuesday morning with major clearing members to outline the plan,
and individual clearing firms were being contacted about
participating, according to people close to the process.
If successful, the effort would free up some of the cash that
has been tied up after the New York firm filed for bankruptcy
Monday, and discrepancies emerged in the level of client assets
held by MF Global. CME's goal was to complete the effort within
about 24 hours, one of the people familiar said.
A spokeswoman for CME declined comment Tuesday.
The swift downfall of MF Global has caught up many smaller
futures and options brokers that relied upon the firm to clear
their trades executed at major derivatives exchanges, including the
Chicago Mercantile Exchange and New York Mercantile Exchange, both
run by CME. As a clearing member, MF Global presided over the
collateral posted by customers to back up outstanding trades.
While MF Global's clients have been able to transfer trading
positions to other trade-clearing companies, the collateral
previously posted through MF Global has been stuck as regulators
and exchanges investigated "possible deficiencies" in the level of
customer assets held.
Chicago-based investment firm Grant Park Funds, managing about
$1 billion, was one example. On Tuesday the firm told its investors
in a notice that 2.3% of its cash remains with MF Global, about $20
million, held in U.S. Treasury bills. Grant Park was in the process
of transferring some positions to Jefferies Bache LLC, another
clearing firm, said Pat Meehan, chief operating officer of the
firm.
The effort pursued by CME Tuesday could allow some of that
collateral to shift to other clearing firms, according to people
familiar with the matter. How much of the collateral moves remains
in question, they said.
CME officials were trying to match up different ranks of MF
Global's customer base--such as individual investors, floor traders
and hedge funds--with other clearing firms that already service
such clients, according to one source.
Separately, CME on Tuesday moved to ease barriers preventing
clients from trading with an emergency rule that will allow some to
find a new clearer and resume trading.
CME and some other exchanges had previously required MF Global
clients to secure a release from the failed broker before they
could transfer business, frustrating customers and sparking
criticism about the lack of information being provided.
The Chicago group invoked an emergency rule allowing members of
its four main exchanges in Chicago and New York to seek a new
clearing member, without recourse to the now-bankrupt MF Global, so
long they were "not in deficit position."
A CME spokesman was not immediately able to identify the size of
the client group that could benefit from the emergency rule.
-By Jacob Bunge and Doug Cameron, Dow Jones Newswires;
312-750-4135; doug.cameron@dowjones.com
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