Thursday, November 3, 2011

Major PM Smash Imminent? CME Preparing to LIQUIDATE 50,000 MF Global Clients' Commodities Positions by 11/4

According to the trustee handling the liquidation of MF Global Inc., no other broker dealers have agreed to accept the transfer of the 150,000 MF Global accounts that were frozen on Oct 31, of which 50,000 accounts were regulated commodities accounts.  The trustee states that if no one agrees to transfer the accounts to their brokerage, all commodities accounts WILL BE LIQUIDATED BY END OF TRADING ON FRIDAY 11/4!
Let that sink in for a moment.
Folks, if this happens, look for The Morgue to use this as the opportunity to extricate itself from it's 15,000 remaining naked short silver positions- making THE MOTHER OF ALL SILVER SMASHES possible.
Be prepared and have plenty of dry powder available in the event that the MF trustee is forced to liquidate all of MF's clients' commodities positions by end of day Friday (don't be surprised if they all clear after end of trading Friday-meaning Sunday night during illiquid globex trading).
Are you getting the picture?  May 2nd all over again, with the added assistance of 50,000 Average Joe's positions.

1. On or about October 30, 2011, MFGI, a registered futures commission
merchant, reported to regulators that a material shortfall appeared to exist in the amount of
customer funds required to be segregated under the Commodity Exchange Act (“CEA”) and the
U.S. Commodity Futures Trading Commission (“CFTC”) regulations promulgated thereunder.
Thereafter, MFGI’s clearing privileges at major commodities clearing organizations, including
the Chicago Mercantile Exchange (“CME”), were suspended, and MFGI was put on “liquidation
only” trading status.
2. As a result of the apparent segregation violations and the suspension of
clearing privileges, more than 150,000 customer accounts essentially were frozen on October 31,
2011, of which more than 50,000 accounts were regulated commodities customer accounts.
CME estimates that MFGI’s current segregated funds requirement is approximately $5.45
billion.  Moreover, the total amount of MFGI customer segregated funds on deposit at the CME
is approximately $2.5 billion, and the clearing-level segregated collateral is approximately $1.5
billion or approximately 60 percent of the MFGI customer segregated funds on deposit at the

7. Promptly after appointment by the District Court, the Trustee became
involved in the process to find potential transferees for MFGI’s commodity clients. A
substantial portion of MFGI’s commodity clients cleared their transactions through the CME.

8. CME’s familiarity with MFGI’s business lines and earlier, unsuccessful
efforts by the company to find buyers to avert this liquidation suggested that the transfer of
accounts would have to be to more than one firm as none of the 125 existing FCMs would be
willing and able to handle the variety of accounts carried by MFGI.

10. As of the end of the day on November 1, 2011, no
potential transferees had agreed to participate in this relatively small population of customer
commodity positions.
The Trustee has endeavored and will continue to endeavor to work with
the interested parties to find transferees for all commodity customer positions, but some such
positions may remain untransferred, and may have to be liquidated.

The Trustee has determined that the Account Transfers will contribute to
the prompt satisfaction of customer claims and the orderly liquidation of MFGI. Without
effecting these transfers, the positions are required to be liquidated promptly and in an orderly
As set forth more fully below, the customers’ positions are required by Part 190
Regulations to be liquidated if they are not transferred to a transferee FCM before the close of
business on Friday, November 4, 2011
(the fourth business day after the entry of the MFGI
Liquidation Order). The liquidation of these customer commodity positions in all likelihood will
negatively effect the net value to the customers and the markets in general.