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MF Global: Customers Asked to Post More Collateral

November 7, 2011
Good news for MF Global customers: most of their accounts were transferred to new locations. One caveat: these clients will have to post additional money to maintain their trading positions, according to notices sent out over the weekend. In one such notice, R.J. O’Brien, one of the firms that had taken in MF Global customers, informed new clients that their accounts had been transferred with about 75% of the required margin needed to remain in good standing. These customers must wire additional money to R.J. O’Brien by the end of business today to support their trades. Otherwise, they face having their trading positions liquidated. The notices were sent out as the CME Group, the exchange where MF Global did much business, and the trustee overseeing the liquidation of the failed firm’s brokerage managed to transfer many client funds to new homes this past weekend. Those clients whose accounts were not transferred over the weekend have had their positions liquidated. The process is meant to finally allow MF Global customers to again regain access to their accounts. Such margin calls were expected. In his emergency request to move client funds last week, the MF Global brokerage’s trustee, James W. Giddens, sought initially to transfer only 60 cents of every dollar in a customer account. That is because some $600mn in customer money still cannot be accounted for. As more customer money is found, clients will eventually receive additional money. To provide some help, CME announced on Saturday that it had temporarily eased margin requirements for these now-former MF Global customers. [Dealbook, 11/6/11]