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“As MF Global was falling apart, the customer accounts and what remained of the customer money was divided up among FCMs (Futures Commission Merchants) in good-standing with clearinghouses (mainly CME) and regulators.”

http://maxkeiser.com/2012/01/16/as-mf-global-was-falling-apart-the-customer-accounts-and-what-remained-of-the-customer-money-was-divided-up-among-fcms-in-good-standing-with-clearinghouses-mainly-cme-and-regulators/

-January 16, 2012 -

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C a t c h i n g U p :

CFTC, FCM -Data- in a Post-MF Global World

http://needhamconsulting.net/2012/01/16/catching-up-cftc-fcm-data-in-a-post-mf-global-world/

-January 16, 2012-

(John P Needham) It has been a few months since I took a look at the CFTC FCM Data reports, which list FCM Customer Segregated Funds, Customer Secured Funds (also called 30.7 funds), and other data.

As most readers will already know, MF Global flamed out spectacularly at the end of October, and with that collapse it was revealed that somewhere between $600 million and $1.2 billion of Customer Seg money is “missing” from the FCM.

The hunt for that money, and the hunt for the perpetrators of this fraud and theft, continues to this day.

(If you don’t know about MF Global’s bankruptcy and scandal, this probably isn’t the blog, much less the blog post, for you.)

As MF Global was falling apart, the customer accounts and what remained of the customer money was divided up among FCMs in good-standing with clearinghouses (mainly CME) and regulators. I was told anecdotally that CME ordered the division of client business among multiple FCMs in a somewhat arbitrary way.

For example, some of MF Global’s energy clients were assigned to FCMs that were not terribly active in the energy markets; additionally, MF Global “local” business (individual trader accounts) had to be divided up among the diminishing number of FCMs that continue to clear that business.

In the weeks and months that followed MF Global’s demise, some of the business that was (as I was told) somewhat arbitrarily assigned to FCMs had the opportunity to move to other FCMs in a more orderly manner than in those hectic weeks following the bankruptcy filing. Now that the dust is starting to settle a little bit, it seems like a good time to take a look at the CFTC FCM data in a post-MF Global world.

(((The source for the CFTC data is here))) http://www.cftc.gov/MarketReports/FinancialDataforFCMs/index.htm

The Starting Point

The last known “good” date for FCM data that included MF Global was August, 2011. The September report, which presumably would have included the failed FCM, has MF Global conspicuously missing. So, let’s take a look at August’s report.

(((FCM Data August 2011 Sorted By Seg))) http://johnpneedham.files.wordpress.com/2012/01/fcmdataaugust2011-sorted-by-seg.pdf

In August, 2011 the top FCM measured by Customer Seg was Goldman Sachs, at $23.166 billion; second was Newedge at $22.348 billion. JP Morgan, Deutsche and Citi rounded out the top 5.

The next five FCMs were Merrill Lynch, UBS, MF Global, Barclays, and CSFB (USA).

MF Global, at 8th largest FCM in terms of Customer Seg, reported $7.270 billion. As such, MF Global reported 4.27% of all the Customer Seg funds in August, 2011. In contrast, the top 2 FCMs each had more than 13% of all Seg funds, and had nearly 27% among them. The top 5 FCMs comprised 53% of all the Customer Seg Funds reported to CFTC in August, 2011. The total Customer Seg funds reported for August, including MF Global, was $170,185,554,883.

The Most Recent Month

(((FCM Data Sorted By Seg Nov2011))) http://johnpneedham.files.wordpress.com/2012/01/fcmdatanov2011-sorted-by-seg1.pdf

The most recent month for which CFTC FCM data is available is November, 2011. As stated above, MF Global’s figures were mysteriously omitted from the September, 2011 report, and of course, by the October reporting date, the FCM has collapsed into bankruptcy. In November, Goldman Sachs again topped the list, with $22.299 billion in Customer Seg. JP Morgan was second with $17.597 billion and Newedge had slipped to third, with $17.447 billion. Deutsche and Citi rounded out the top five again.

With MF Global now gone, the next five FCMs are UBS, Merrill Lynch, Barclays, CSFB (USA) and Morgan Stanley.

Total FCM-reported Customer Seg Funds stood at $149,071,676,345, down more than $20 billion from the days before as much as $1.2 billion of customer money vanished from MF Global. I don’t know if that figure is somehow seasonal, but a drop of $20 billion in Customer Seg funds over three months is astonishing to me.

With the top five-or-so FCMs remaining relatively constant in terms of Customer Seg, and a drop of $20 billion overall, the percentages also provide some insight.

Goldman now holds almost 15% of Customer Seg Funds (14.95889%). JP Morgan and Newedge are both at almost 12%. The top 5 FCMs hold more than 55% of all Customer Seg funds as of the November reporting period.

I’d be interested to hear what you all think of the numbers-crunching provided here. Do any of these stats/statements stand out to you, as surprising or as expected? Please let me know your thoughts.

(((View this artcile Here))) http://needhamconsulting.net/2012/01/16/catching-up-cftc-fcm-data-in-a-post-mf-global-world/

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SEC FOCUS Report Link

http://ftp.sec.gov/rules/other/nasdaqllcf1a4_5/g_secform.pdf

http://needhamconsulting.net/2011/11/30/sec-focus-report-link/

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Clearing Houses: The Next Casualty of the Crisis?

http://www.reuters.com/article/2012/01/16/clearing-default-idUSL6E8CD4AL20120116

-Jan 16, 2012-

Jan 16 (Reuters) - Clearing houses -- the plumbers of high finance -- could become the next casualties of the crisis as regulators insist that banks run their riskiest and private trades through them.

At the moment banks conduct over-the-counter trades between themselves: one to one dealings often involving multimillion-euro bets on differences in interest or other rates, the scale and complexity of which can be difficult to track.

But with the financial crisis still raging and banks, hedge funds and governments alike faced with unforeseen levels of debt, regulators are now forcing this shadowy, $600-trillion industry into the light.

The question being asked by industry insiders is whether the clearing houses, also known as central counterparties (CCPs), are any more secure.

"What happens if they go bust? I can tell you the simple answer: mayhem. As bad as, conceivably worse than, the failure of large and complex banks," Paul Tucker, deputy governor of the Bank of England, said in October.....

(((Continue Reading this article Here))) http://www.reuters.com/article/2012/01/16/clearing-default-idUSL6E8CD4AL20120116

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