UPDATE: CME Group Seeking To Relocate MF Global Client Business

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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