UK customers of failed futures broker MF Global could see some of their money returned as early as next week, while in the US, Chicago-based CME Group has revealed it took a US$30 million hit last quarter due to MF Global’s bankruptcy and is launching a US$100 million protection fund for customers.
KPMG, the special administrator for MF Global’s UK holdings, told a London court today they may be able to begin returning client money as early as next week.
First payments of 26 cent in the dollar will be made to clients with “agreed claims” who had positions frozen or money lost that was supposed to be in segregated accounts.
No more funds can currently be provided to UK clients because the Supreme Court of Britain needs to ascertain which customers can claim protection, and MF Global’s US bankruptcy trustee, James Giddens, is also fighting KPMG asserting around US$740 million of the UK funds should be repatriated for American customers.
The unwinding of client positions at MF Global has been complicated by the different liquidation policies of futures clearing houses. In the US, the CME Group – the largest futures exchange operator in the US and a ‘self-regulatory’ organisation for the sector – came under fire for not releasing funds quick enough. The group maintained it acted decisively to transfer MF Global positions and supporting collateral to other clearing members instead of liquidating those positions.
But in Q4 results released today, CME revealed a US$30 million hit from activities related to MF Global. Profits of US$390 million included a US$3 million negative impact related to the broker’s bankruptcy, and operating expenses of US$346 million included a US$27 million expense from the affair.
In a bid to quell angry MF Global customers who are still awaiting returns, CME said it would establish a US$100 million fund to provide protection of customer segregated funds for US family farmers and ranchers who hedge their business in CME futures markets.
“In light of the recent MF Global failure, in which a clearing firm violated Commodity Futures Trading Commission regulations and misused customer monies that should have been kept segregated, CME Group is adding this extra security measure to protect the country’s food producers who are using CME Group futures markets to hedge their crops and livestock that feed the world,” the company said in a statement.
MF Global filed for bankruptcy in New York on 31 October after counterparties reacted adversely to the disclosure of a US$6.3 billion bet on European debt. It has also been reported widely that regulators have determined that days before the 31 October bankruptcy filing, MF Global may have moved more than US$100 million in client money to its own brokerage accounts.