Good News for MF Global Customers

When a disaster strikes, there’s a certain amount of breath holding that takes place until the damage is assessed. Will it be worse than we imagined, or will we find that things aren’t quite as bad as we had feared in our worst-case scenarios? Only once the panic has subsided and pieces picked up can we make that determination. And such has been the case of the financial collapse of the futures broker MF Global, except in this instance the “picking up” phase has dragged out for well over a year. But as the picture of what comes next has become clearer, it has also become rosier. The Wall Street Journal reports:

Trustee James Giddens, who represents customers of the failed firm’s brokerage unit, said MF Global customers in the U.S. who invested on domestic exchanges could receive up to 93 cents on the dollar of their cash back, according to the filing in the U.S. Bankruptcy Court in the Southern District of New York.

Getting 93% back is better than 81% (the previous estimate), but still worse than 100%. Nevertheless, 7% is a loss that, while painful, isn’t likely to be life-ending for many people. But the news could get even better, with a plan in the works that might mean full restitution for customers:

…A group of MF Global creditors filed a plan of liquidation for the failed brokerage firm. The proposal outlined a plan to pay back creditors of MF Global’s general estate within a year and could restore the accounts of brokerage customers to 100% within months, according to a person familiar with the group.

The filing was made by a group of creditors led by Silver Point Capital LP, Cyrus Capital Partners LP and Knighthead Capital Management LLC. Those creditors own about 65% of MF Global’s $2.2 billion in unsecured debt, according to the filing.

This could potentially be good news for PFG customers, too, by setting the legal precedent that futures customers get paid back first, before any proceeds from the bankruptcy go to general creditors. That’s the letter of the law written in the CFTC regulations, but with high priced lawyers fighting to get around the letter of the law – we’ll take whatever we can get that supports following it.

Of course, along with the sigh of relief that restitution would bring, there will still be reason for frustration. Even with 100% of the money returned, customers have still lost access to much of their money for over a year. If “protection” means getting you some of your capital back sometime in the next few years… well, that’s a pretty loose definition of the word, in our opinion.

So this news may be a spot of bright news in what has been a long gloomy story, but it should serve as a reminder of what’s at stake in the futures industry. It’s why we suggested that the CME purchase all PFG customer’s claims at face value after its collapse, it’s why we’ve been strong advocates of an insurance fund for futures customers, and it’s why Attain CEO Jeff Malec is running for the NFA board. Because even as we pick up the pieces from the disasters we’ve faced, we can’t lose sight of the work that remains to be done.

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.