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

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MF Global Updates
2 min read

IBS Granted Access to October Commission Runs

NIBA is pleased to announce that its efforts to gain the release to IBs of their October Commission Runs have been a success. In our ongoing efforts to represent our Members interests in the MF Global bankruptcy, Melinda Schramm worked with NIBA legal counsel Schuyler, Roche & Crisham (“SRC”) to send correspondence dated January 3, 2012, to the Trustee and the Bankruptcy Judge with copies to CFTC, NFA, CME and ICE (view full copy of the letter sent by SRC to the Trustee). The correspondence outlined the importance to the IB community of obtaining the October Commission Runs, for among other reasons, to facilitate the filing of accurate Proof of Claim forms with the bankruptcy court, an act necessary to recover any earned commission revenue. SRC reports that the Trustee’s attorneys understood the importance to our Members of the Commission Runs and were responsive and accommodating to NIBA’s request. Any...

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MF Global Updates
5 min read

MFG Bankruptcy Highlights Regulatory Issues for Managed Futures Industry

The MF Global (MFG) bankruptcy has been a nightmare for managed futures customers, brokers and introducing brokers, SROs and the CFTC. The bad news keeps coming – in addition to the headaches the bankruptcy has caused the industry from an operational standpoint, we have now heard from MFG trustee James Giddens that there is the distinct possibility MFG customers will ultimately not be made whole. Regardless of whether customers are made whole, the MFG bankruptcy has highlighted important issues with respect to oversight of the industry. The three most important of these issues include (1) the design of the current SRO structure, (2) the fact that there is no SIPC-like insurance for margin in segregated accounts, and (3) the lack of resources for the CFTC. These three issues will be in sharp focus in 2012 and beyond, and it is unclear how and when Congress will act to address these...

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MF Global Updates
2 min read

CME Group MF Global Update: Advocating on Behalf of Customers

For many in the agricultural community, the failure of MF Global shook the very foundation on which the hedging industry is built. Since the beginning of this unprecedented ordeal, the CME Group has advocated on behalf of our members and customers, and we will continue doing everything in our power to ensure that another failure at the firm level does not happen again. Most important to us is that all customers affected see their property returned -- as much as possible, as soon as possible. Our work with the Bankruptcy Trustee has already helped to accelerate that process. We successfully transferred 15,000 customer accounts and $1.45 billion in the week following the MF Global bankruptcy. We also provided a guarantee of $550 million to the trustee to speed the return of funds, and pledged an additional $50 million from CME Trust. After more than two months into the bankruptcy proceedings,...

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MF Global Updates
2 min read

CFTC and MF Global Trustee: Firm Assets to Reduce Customer Seg Shortfall

The MF Global trustee, James Giddens, estimates a $1.2B shortfall in domestic customer segregated funds, and a further shortfall of $800M of foreign secured funds exists unless and until foreign jurisdictions allow that money to be returned by foreign MF Global affiliates to the US broker. However, the CFTC and Giddens take the position that the US broker’s proprietary firm assets will first go toward reducing any such shortfalls before any amount would be paid to creditors. Assuming the bankruptcy judge accepts this position, a key question would then be just how much firm assets there are. The US broker reportedly maintained about $1B of regulatory capital not long before the bankruptcy proceeding, but Giddens’ attorneys have stated that they currently control just $200M of firm assets. News reports indicate that MF Global worked to sell a large amount of securities in the week before the bankruptcy filing, and it...

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MF Global Updates
5 min read

MF Global Bankruptcy – Request for Release of IB Commission Runs

On behalf of NIBA Members, this letter was delivered to MF Global courtroom and trustees by NIBA attorneys on Jan. 4, 2012. A transcript of the letter is below. View the Original Document as Submitted to the MF Global Trustee (PDF) Dear Mr. Giddens: I write on behalf of my client, the National Introducing Brokers Association (NIBA). The NIBA is a membership organization which has represented the interests of Introducing Brokers (IBs), Commodity Trading Advisors (CTAs) and other registered futures industry professionals for over 20 years. Many NIBA members cleared customer’s transactions through MF Global (MFG), and earned commissions as a result. The commission amounts earned were tracked on a daily basis by MFG on documents known as ‘commission runs.’ These commission runs have always been routinely provided to IBs on a monthly basis as standard business records. We know that the commission runs already exist, so their production would...

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MF Global Updates
1 min read

IIBs: MF Global Reporting for Net Capital

Discussions with the NFA regarding accounting requirements and concessions in light of the MF Global debacle.  Even though these may change, this is what is recommended up to this point. Receivables from MFG are to remain non-current for net capital Broker commissions remain a liability, a reduction of net capital As long as both parties are in agreement, the MFG broker commissions due can be added back in for the net capital computation. Information provided courtesy of Michael Coglianese CPA, P.C. www.cogcapa.com

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MF Global Updates
2 min read

MF Global Trustee Discusses Recovery Process for Offshore Funds

The MF Global trustee held a meeting today (12/20/11) to provide information about the recovery of MF Global customer funds that were held for trading futures on foreign exchanges. Such funds are treated as being in a separate class than the funds held for trading futures on domestic exchanges under US bankruptcy law, and may or may not have their own shortfall apart from the apparent shortfall in domestic funds. The customers of the US MF Global broker had more than $800M of these offshore funds, and more than $600M of that amount was with the UK MF Global affiliate. Other significant amounts were with Canadian, Singapore and Hong Kong affiliates, all of which are in insolvency proceedings under local jurisdictions. The US MF Global trustee will file a single omnibus claim on behalf of all the customers of the US broker with such offshore funds, so its customers need...

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MF Global Updates
1 min read

CFTC Actions - MFG

To Members of the NIBA: On Thursday, Dec. 15 I wrote to the office of Commissioner Jill Sommers to ask questions concerning the permitted investments of customer seg funds by FCMs. Yesterday I received a call from her office. The Commission will be reviewing current regulation in the context of lessons learned from MF Global. Ms. Sommers indicated that input from the NIBA will be a valuable part of that process. I will keep you posted on the dates, agenda points, etc., and I invite comments and suggestions. Melinda Schramm, Chairman NIBA

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MF Global Updates
1 min read

Final Information Regarding the Third Interim Distribution of Customer Funds to Clients of MF Global Inc

On Friday, December 9, 2011 the U.S. Bankruptcy Court approved a petition by the SIPC Trustee for a bulk transfer and distribution of up to $2.1 billion to former MF Global Inc. commodities customers. The intent of this third distribution is to restore 72% of US segregated customer property to all commodities customers on a pro rata basis. As such, many US segregated customers who have already taken part in one of the first two interim distributions or have yet to receive a distribution may be entitled to receive further funds. The distribution for each account will be calculated based on the Net Liquidating Value on the day prior to transfer. Click here for the full text

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