The Trustee’s statement on today’s ruling can be viewed here:
http://dm.epiq11.com/MFG/document/GetDocument.aspx?DocumentId=1458565

This bulk transfer will bring ALL accounts to the same level will beging next week. The Trustee did leave the door open for additional interim distributions, but I feel that is highly unlikely. The remaining 28% will be paid back on a pro-rata basis through the client claims process.
Every client must complete and submit a client claims form. If you DID NOT receive a claims packet please download the required documents from the MF Global Trustee’s website:
http://dm.epiq11.com/MFG/document/GetDocument.aspx?DocumentId=1456163

You will also need a copy of your October 31st MF Global statement. Many of you do not have a statement, as you transacted no business in your account during the month of October. Please email statements@gptc.com to request both a September 2011 monthly statement and a October 31st equity run.

We still have many unanswered questions regarding the claims process and will do our best to assist you in completing the forms. The Commodity Customers Coalition has stated they will produce a Q&A on the claims process.

We continue to fight for the immediate return of 100% customer funds and that in the event of a shortfall, you the customer, be granted have first access to MF Global Inc’s $41B in assets.

The coalition has wasted no time elbowing its way into the situation, showing up in court despite no formal standing, and publishing a widely circulated white paper to get at the heart of how and why MF Global collapsed. The alliance was formed to give a voice to the thousands of customers who stand to lose the most if missing customer funds are never recovered.

Among the 7,000-strong coalition, members include Rosenthal Collins, MB Financial Bank, and Clara Vista Capital Management. Typhon Capital’s James Koutoulas is a vocal member of the group, providing pro bono legal work alongside law firm Barnes & Thornburg.

The CCC has won some key early victories, helping to streamline the claims process and increase an early distribution amount to customer accounts. But beyond quick fixes, the overarching goals would allow customers to leapfrog other creditors to get money back via the bankruptcy process, while at the same time seeking assurances from regulators and exchanges that a quagmire like MF Global never happens again.

Judge Martin Glenn of the New York Bankruptcy Court of the Southern District of Manhattan “sympathizes with the customers, but only has so much leeway under the bankruptcy code,” the first lawyer commented.

Detective work

The central aim of the CCC is to recover customer funds that may be stuck somewhere within the many accounts in which the debtor dealt. Based on a USD 633m estimate of missing customer funds, the unified customer alliance has argued in court that the US Trustee should immediately release the remaining 88.4% of the USD 5.4bn MF Global segregated customer funds to prevent further damages.

So far, the group has been successful in increasing the amount released to them, though they continue to push for the full release since the US Trustee initially said it located USD 4.8bn to date, which corresponded to a USD 600m shortfall.

When the US Trustee announced plans to return just 60% of the value of cash in customer accounts in a first transfer in early November, the group quickly expressed its displeasure. Their argument was bolstered by the complaints of many non-CCC customers and nudging by Judge Glenn. Eventually, the US Trustee compromised, increasing the transfer amount to 75%, based on an estimate of missing customer funds that has been increased to USD 1.2bn.

The CCC’s logic is that, unless the US Trustee disagrees with the Chicago Mercantile Exchange (CME) estimate of USD 5.4bn, the full USD 4.8bn should be distributed. The US Trustee counters that he prefers to transfer funds with caution to ensure that recoveries are equal for all customers, and to prevent any chance of having to claw back funds.

In addition to speaking up in court, the CCC has also done its own investigation into where the missing funds might be, zeroing in on four likely scenarios, according to the white paper. The first scenario is that the funds were eaten up by collateral calls on repo-to-maturity European sovereign debt trades. While the reported amount was USD 6.3bn, the trade may have been as large as USD 16.3bn, the CCC claims. Customer funds may have been legally and legitimately used for this transaction, as Commodities Futures Trade Commission (CFTC) Rule 1.25 allows customer funds to be invested in foreign sovereign debt.

However, the CCC argues that customer funds could have also been used illegally to cover collateral calls on other proprietary trades that did not adhere to CFTC rules. Finally, they say customer assets could have been sent out in the final days of the company and not properly accounted for, or could be trapped in overseas subsidiaries.

Judge Glenn has asked MF Global trustee Louis Freeh for a status report on the search for the missing customer funds at a hearing scheduled for 9 December.

Calls to MF Global’s representatives, and the trustee were not returned.

Beyond the hunt

Despite gaining traction on some key issues, some of the CCC’s more far reaching demands will be a tougher sell, the sources said.

One of the disgruntled coalition’s most vehement objections has been its opposition to interim liens the court granted JPMorgan, holder of MF Global Finance’s fully drawn USD 1.2bn revolver. The CCC believes that allowing such a super-priority right would “abrogate sacrosanct protections for commodities account holders, depriving those who trade in commodities, futures, and derivatives, of their only protection and potentially chill economic activity.”

A hearing on this issue has been continued several times, indicating an uphill battle to get the liens stripped, the sources said.

Another one of the CCC’s bullet point requests – that the CME set up a temporary fund so customers’ money can be paid back immediately – is unlikely to come to fruition, the sources said. The idea is that the CME would step in as a bankruptcy claimant and/or assess a special fee to all trades that are executed on the CME to repay the fund.

The CCC is also against many of the reforms that have been proposed by Congress and regulators in the wake of the MF Global collapse. It is against the SIPC-like commodities insurance that some have suggested, on the grounds that it does nothing to prevent further bankruptcies by brokers or build a wall around customer segregated accounts.

“A SIPC-like system is very appealing to Congress, the first attorney familiar said.

For its part, the CCC believes that insuring customer funds could introduce a moral hazard that could encourage brokers to take additional risks.

Instead, the group advocates a general fund, administered by the National Futures Association that would be used to temporarily fill shortfalls in customer accounts. The fund would be paid for by a one penny per trade transaction fee.

by Tibita Kaneene

http://us.debtwire.com/common/ho.aspx?e=104&a=549501&i=2448795&d=20111205&s=1277883

Today I sat in on the Commodity Customer Coalition’s conference call. We continue to thank the volunteers of the CCC for their tireless efforts on behalf of our MF Global customers. Callers were briefed on current developments relating to the ongoing legal battle, and future legislative action.

Events to take note of:

December 9^th

• Bankruptcy hearing seeking approval for a third bulk transfer
• CCC objection to JP Morgan’s motion to seek “super priority” status for Debtor in Possession financing
• Segregated fund update from Trustee Giddens

Agriculture Senate hearing today. CFTC chairman Gensler was asked to answer question relating to his actions, and oversight of MF Global in light of potential conflicts with key personnel. This political theater is good for our cause, but most likely won’t result in much action. (Par for the course for Congress)

The conference call was dominated by questions on the claims process. It is the recommendation of the CCC to not complete any claims form, until after the third bulk transfer has been completed. While Great Pacific cannot dispense legal advice, we do see the logic of waiting until all transfers are paid. There is NO RUSH to complete claims as long as they are filed before the January 31^st deadline.

Let me repeat, there is no immediate reason to hastily complete the claims form, especially in light of the very fluid and dynamic process.

We have received a large volume of phone calls and emails. We are doing our best to reach you all in a timely matter, but I am sure you can understand the difficult circumstances we are operating in. We did receive an opinion by the CCC on the issue of October 31^st statements.

For clients who did not trade in October, no monthly statement was generated by MF Global. This is the normal practice. It is of the opinion of the CCC that an October 31^st equity run snapshot would be a feasible substitute. I have sent this question along with several others to the Trustee and I will update you when I hear back.

Great Pacific will be setting up a email address specifically for customers seeking a copy of their statements. I will keep you posted when it is ready, and instructions on what we need, to provide you with timely and accurate information.

As always feel free to contact us.

Starting Friday, November 26^th, the Trustee in charge of the MF Global liquidation started mailing out claim packets to all MF Global account holders. These claim forms must be completed by ALL MF Global clients wishing to receive the money owed to them.

Download claim forms here:
Commodity Customer Claim and Instruction Packet

The claims process opens on December 2, 2011 and ends January 31, 2012. (These dates maybe subject to change) Claim forms can be mailed directly to the Trustee’s claim processing center or emailed to MFGlobalClaims@epiqsystems.com.

Please read the instructions carefully and if you have questions please contact our office immediately. This should be a fairly straight forward process, but will take time to be completed. Make sure you have access to an MF Global statement dated October 31, 2011. This is the date the Trustee has selected to perform all accounting calculations.

If you do not have access to an October 31 statement, please call our office immediately so we can provide you with one. Again, any questions you may have please do not hesitate to call.

Six hours after I wrote an op-ed piece that was sent out to all our media contacts, the CME substantially upped their offer to help MF Global customers. Let me say this, I am under no illusion my piece influenced their decision making, but the collective pressure helped the CME to step up and do the right thing.

Yesterday started off with a devastating blow. The Trustee gave a “summary” report of assets under his control, how much he had previously distributed, and what is still owed to clients. The bottom line was not good. The supposed $600m shortfall had doubled to $1.2b. An accounting error in excess of 100% has me second guessing every move by the SPIC appointed Trustee.

There was also a hearing yesterday to approve the Trustee’s revised claims process. This motion was approved and we are reviewing the forms to ensure we have a complete understanding of the claims process in order to help expedite your claim.

Those customers, whom did not bulk transfer to RJ O’Brien, will be transferred with 60% of their total equity today. You will then have trading access on Friday. The third bulk transfer is expected to take place early December and will bring everyone to the 60% level.

Late Tuesday afternoon the CME announced they would offer up $550m to the Trustee to guarantee additional distribution of client funds. This is extremely good news as the CME expects that now 75% of total equity can be transferred by early December.

The other significant development was the CME’s statement that they believe the Trustee is significantly overestimating a potential shortfall. To read the official CME release, use the link below:
http://cmegroup.mediaroom.com/index.php?s=43&item=3215&pagetemplate=article

So, it appears that we have a little good news for Thanksgiving. Our office will be open limited hours on Thursday and will resume normal operation on Friday. We continue to advocate for you our valued customer. Finally, we are very thankful and appreciate all the support we have received.

Better late than never? In a stunning reversal of sentiment, it appears now that every investment bank analyst just realized that the European Union is one gigantic mess.

I wonder what rapidly deteriorating metric they have chosen to justify their new view.Was it short term Greek paper yielding over 5000bps for the past 12 months?  Consistent credit downgrades by major rating agencies of Italy, Spain, Portugal, Ireland and Greece debt over the last 2 years? Or is it just that their sovereign debt holdings are finally reaching maturity?

Whatever the reason, the hottest investment fashion for 2012 is to be short the Euro. Monday, Credit Suisse joined the party with a research note ominously titled: The “Last Days” of the Euro. With numerous buy side analyst, finally saying the same thing we have been yelling from the roof top for two years how does the average investor take advantage?

Obviously, you are not going to build an elaborate portfolio of short and long maturity European credit default swaps, but you could invest in a trend following CTA program. That is correct; the complex world of sovereign debt can be traded in your plain old Managed Futures account.

Excluding the outright short in the Euro Currency futures, technical trend following CTA programs have numerous opportunities in other highly event correlated markets to trade. See if/when the European Union unravels, traders will increase their short exposure to the Euro Currency. This will lead to other markets that tend to correlate well to the Euro Currency to move.

A trade that I would expect to work well would be long Yen and short Euro. This spread will most likely be taken advantage by both trend followers and spread trading strategies. Due to the Euro’s high correlation to “risk” I would also fully expect long bonds and short equities to work well during the initial breakdown of the currency.

The risk to next year’s most fashionable trade: the EU does everything it can to keep up the status quo. As I stated above we have been hammering on the fundamentals of a weak Euro for two years with little success in our trading accounts. The metric to watch, in my opinion, a jump in French 10yr paper.

Stress in the “strong” Euro members will only mean that the “weaker” countries are truly the disaster we have always thought and German and France are not far behind.

Today’s news from the Trustee was not exactly what Great Pacific or our clients stuck at MF Global wanted to hear. The shortfall in the client funds held by MF Global was larger than originally reported. Trustee Giddens says $1.2b may be missing. Read the full press release here:
http://dm.epiq11.com/MFG/document/GetDocument.aspx?DocumentId=1452116

I had been putting pressure on the Trustee in the press to disclose the exact amount of funds he held. Well, he gave me what I wanted, but I didn’t like the number. The sizeable jump in missing funds (roughly 100%) leads me to believe an interim solution to our collective woes is still a ways off.

Some bright spots are the fact that the news media seems to be reenergized by the fact that “more” money is now missing. Reporters love a story that bleeds, and Great Pacific has been leveraging every media contact we have to show them how our clients are hemorrhaging. Also, it is becoming painfully obvious that there was criminal fraud committed by MF Global in their final hours of operations.

This sounds like a bad thing, but I believe it will open the claimants (you) to restitution under “Fraudulent Conveyance”. This could put former MF Global customers first in line as creditors to the more than $40b in assets of the holding company.

The Commodity Customers Coalition is heading to court tomorrow to continue to advocate for you the customer. I will post the live blog link as soon as it is available so you can follow the hearing.

Lastly, all accounts that haven’t transferred to a new FCM; this process should be underway this week. We will be notifying you when it is complete. 60% of your net equity will be transferred. For those accounts that only received a small portion of your net equity a third transfer is planned to “true-up” your account to the 60% figure.