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Insights, analysis, and updates from the National Introducing Brokers Association

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MF Global Updates
3 min read

Reponse to Feedback | NIBA's Letter to the Membership Regarding PFG’s Bankruptcy,

Subsequent to NIBA’s letter to the membership regarding PFG’s bankruptcy, we’ve had additional in-depth conversations with senior officials at the regulatory agencies and at the PFG trustee’s office. Here is what we’ve learned. 1. There are statutory limitations which restrict the scope of the NFA’s spending, and would seem to prevent the NFA from providing the assurance or adequate security to the PFG trustee which would be similar to what the CME Group provided to the MFGI trustee. Specifically, Section 17 of the Commodity Exchange Act (CEA) sets the standards for registered futures associations. This section was added to the Act in 1974, when Congress created the CFTC. The language of Sec. 17 was, for the most part, lifted from the statute that allowed for the creation of NASD, and there is little legislative history on Sec. 17 in general, and a futures associations’ authority to impose fees in particular....

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MF Global Updates
2 min read

PFGBest Trustee Message

The Trustee is working to be able to distribute funds to customers, with the authorization of the Bankruptcy Court, as soon as possible. However, the Trustee must ensure that any such distribution goes to the correct customers in the correct amounts. Such a distribution would, of necessity, rely on the books and records of Peregrine. This requires that the Trustee be satisfied that he can rely on the accuracy and integrity of those books and records to the extent they identify customers and set forth the balance due to such customers. This is especially important in a case that started because of a fabrication of certain of the company's books and records. Based on information received from law enforcement and regulatory authorities, the Trustee is investigating the validity of the customer account statements and must complete that investigation prior to any provisional distribution to customers. The Trustee and his professionals...

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MF Global Updates
1 min read

MF Global Agreement With CME Group Wins Court Approval

The trustee liquidating MF Global Inc. (MFGLQ) won court approval to receive $130 million from CME Group Inc. to pay back the bankrupt brokerage’s customers and other creditors. U.S. Bankruptcy Judge Martin Glenn said in court papers filed in Manhattan bankruptcy court today that the agreement can go forward, overruling an objection from one customer. Glenn had heard arguments in court on Aug. 8., including those from the Commodities Future Trading Commission and Securities Investor Protection Corp. in support of the pact. » Read Full Article at Bloomberg   The Opinions expressed are the opinions of the author. The opinions, the trading styles, trading information and trading programs are not endorsed by the NIBA, but are the individual opinions, styles, information and programs of the author.

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MF Global Updates
1 min read

CFTC Commissioner Details Plan for Futures Insurance

A shortfall in customer funds revealed at Peregrine Financial Group last month renewed calls for an insurance program for futures customers, but the plan still faces many hurdles, including getting legislation approved by Congress. "I've put this proposal out there because we need to move this discussion forward and get a new law on the books to better protect customers," Mr. Chilton said in an email. The fund, as Mr. Chilton outlines it, would be modeled on a similar insurance plan for securities customers and would be created by collecting fees from futures brokers "which would under no circumstance exceed 0.5% of the merchants' previous year gross revenue specific to futures." The insurance would pay out up to $250,000 in the event that customer money was taken. » Read Full Article at FOX Business   The Opinions expressed are the opinions of the author. The opinions, the trading styles, trading...

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MF Global Updates
1 min read

Peregrine Judge Grants Trustee Request To Subpoena Banks

A federal judge has granted the bankruptcy trustee for Peregrine Financial Group the right to subpoena information from financial firms, including Goldman Sachs and JPMorgan Chase, with which Peregrine and its subsidiaries dealt. Peregrine's founder, Russell Wasendorf Sr., is accused of misappropriating more than $200 million in client money. » Read Full Article on Bloomberg   The Opinions expressed are the opinions of the author. The opinions, the trading styles, trading information and trading programs are not endorsed by the NIBA, but are the individual opinions, styles, information and programs of the author.

By NIBARead article
MF Global Updates
2 min read

Judges in MF Global and PFG Bankruptcies to Decide Whether Proprietary FCM Assets are Allocated to Make Up Customer Seg Shortfalls

The recent failures of MF Global and PFG represent two devastating FCM bankruptcies with substantial shortfalls in customer segregated assets. Each company also has significant firm assets – the MF Global trustee has apparently recovered more than $1.2B of firm assets and while it is too early to know what the PFG trustee will be able to marshal, PFG reported $31M of regulatory capital in its most recent Form 1-FR-FCM filing and there are news reports of an $18M office building, a $7M+ private jet and an array of other businesses and smaller properties. CFTC regulations provide that if there is a shortfall in customer segregated assets then FCM firm assets should be reallocated to make up the shortfall, giving priority to commodity customers over creditor claims. However, a bankruptcy court has found this rule to be invalid as exceeding the CFTC rule-making authority. The MF Global trustee and the...

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MF Global Updates
4 min read

PFGBest Brokers: Make Sure You Have Ownership of Your Domain Name

As we go through the failure of PFGBest less than a year after MF Global, I wanted to alert brokers and GIBs in particular, to make sure you have ownership and access to your domain name. Being able to transfer your domain name in an emergency can help keep your email and website hosting up and running in the event of a crisis such as MF Global and PFGBest. Why does an FCM have control of my domain name? In the past, many FCMs tried to provide website and email hosting and support as a benefit to doing business with that FCM. In doing so, the FCM registered the domain name on behalf of the brokers. Unless ownership of the domain was transferred directly to the broker, it typically stayed registered to the person registering the domain name, typically the FCM. What is the impact of losing control of my...

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MF Global Updates
1 min read

MF Global payouts could take six years

Source: cattlenetwork.com The complex pursuit of the missing $1.6 billion in segregated customer funds lost by bankrupt broker MF Global could take up to six years to sort out, with full payback to customers unlikely, a top futures industry official said.   The Opinions expressed are the opinions of the author. The opinions, the trading styles, trading information and trading programs are not endorsed by the NIBA, but are the individual opinions, styles, information and programs of the author.

By NIBARead article
MF Global Updates
3 min read

Trustee Report Apparently Indicates Trustee Close to Recovering Sufficient Assets to Make Non-Insider Customers Whole if CFTC Rules Upheld

On June 4, 2012, the MF Global Inc. ("MFGI") trustee released his first six month report on the SIPA liquidation of MFGI. In the report, the trustee detailed recoveries the trustee has already achieved and also prospective recoveries on behalf of both MFGI's proprietary accounts and the segregated asset pools for MFGI's former customers. A CFTC rule provides that in the event of shortfall an FCM's firm assets go to make up the shortfall, this would mean that MFGI's proprietary assets would be allocated to make up any extant shortfalls in the segregated asset pools of MFGI's former customers. Creditors will argue that this rule is invalid and a court decision will be necessary to determine if it is upheld. An analysis of the trustee's report seems to indicate that he is close to recovering sufficient assets to make up the current shortfall and thus make all public customers whole...

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