Rival commodity brokers raced to bring on board thousands of MF Global customers Friday, facing a tight deadline to see that trading positions and collateral frozen since Monday are fully margined or liquidated.
Following a court order on Wednesday, the MF Global trustee has worked with the CME Group and a handful of other mostly independent futures commission merchants (FCMs) to move the bankrupt broker's 50,000 or so commodity accounts in bulk to new clearing firms, along with 60 percent of collateral.
Facing a Friday evening deadline to transfer their accounts or have them closed out, customers have scrambled to ensure they have a new clearing broker. FCMs have jostled to get a piece of the business without being saddled by unknown new customers that may be more trouble than they are worth.
So far there was little sign of the mass liquidation that analysts fear may ensue as traders rush to raise some $1 billion in additional margin with new brokers, the approximate sum that is being left on account at MF Global as authorities search for missing customer funds.
But with margins due only on Friday evening, forcible liquidation occurring on Monday morning, and thousands of accounts still unsettled, dealers were jittery.
"Some of them have moved," an MF Global broker told Reuters. "I am still waiting for word (on 300 accounts)."
Initially, the CME anticipated that many of MF Global's segregated client accounts totaling some $5.5 billion would be transferred to one of six FCMs, according to a letter to the Commodity Futures Trading Commission: ABN Amro Chicago Clearing, ADM Investor Services, Dorman Trading, FCStone, RJ. O'Brien, and/or Rosenthal Collins Group.
But several other brokers have worked to get in on the action. While the specifics remain in flux, the bankruptcy judge on Thursday rejected one request by a fund to move its accounts to a specific broker who was not on the original list, although the first order appears to allow clients to transfer positions, but not collateral, to a broker of their choosing.
Penson Futures was garnering some clients, a source familiar with the transfer process said. It was not immediately clear how accounts would be divided.
While regulators continue to search for the $633 million that authorities say may have been misappropriated from MF Global's segregated client accounts, which are supposed to be untouchable, the chief executive of the biggest independent FCM in the United States resigned.
Jon Corzine, 64, former New Jersey governor and chief of Goldman Sachs & Co, stepped down as MF Global CEO four days since the firm filed for bankruptcy after its leveraged $6.3 billion bet on euro zone debt scared away clients and counterparties.
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