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Forum Post: What are traders supposed to think when CME and other entities allow segregated funds to be stolen?

Posted 12 years ago on Dec. 7, 2011, 11:59 p.m. EST by rockyracoon2 (276)
This content is user submitted and not an official statement

Ann Barnhardt: Well, obviously, it was the MF global collapse and more specifically the fall out after the MF Global collapse and the reaction by the CFTC, the SEC and most especially by the Chicago Mercantile Exchange [the “Merc”]. The actions, specifically by the Merc after the MF Global collapse were unprecedented, unfathomable and completely and totally intolerable. The Merc itself basically did the equivalent of sticking a nine millimeter in their mouth and pulling the trigger by not stepping forward, backstopping the MF Global client accounts and at the very least, the Merc should have allowed the MF Global customers to liquidate their accounts and then transfer to other firms. What the Merc did was the worst possible thing—they froze those people out of their accounts and didn’t allow them to liquidate while the markets continued to trade.

Maybe some of the 1% will start to realize there are issues here that effect all of us not just one side or the other. Please see this interview with Ann Barnhardt for more information. http://www.financialsense.com/contributors/2011/12/02/ann-barnhardt/interview-transcript

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[-] 1 points by rockyracoon2 (276) 12 years ago

Regarding the 9/11 Able Danger program, which highlights prior knowledge of 9/11 hijackers and their plans on 9/11, Lt. Col. Anthony Shaffer gets grilled over the coals to account for $250 http://www.youtube.com/watch?v=uJvABLaMUT8&feature=related

Then so-called "honourable" guy who is CEO of the firm which has stolen a billion + dollars from it's clients, gets off by saying he doesn't know. he doesn't remember. he doesn't know. this is disgusting. It's become so easy for many to take no responsibility for their actions any more. http://www.collapsenet.com/free-resources/collapsenet-public-access/news-alerts/item/5525-watch-corzine-lie

it's no wonder things are haywire with people like this, and the entities with which he's involved, on the loose.

How many 1000's of people get screwed for some misc event, but this guy gets away with stealing a billion because he can say he doesn't know. what a load of crap. AND, where is the CME in all this? What about their responsibility? They are supposed to guarantee all customers segregated funds. Seems anyone going through CME today is subject to this same possibility that their money will be stolen. This is the new reality.

[-] 0 points by economicallydiscardedcitizen (761) 12 years ago

What are traders supposed to think? With the parenthetically implied 'New Rule of Exception' Fiduciary Duty Is Dead!? Rue the day they became traders unless they are of the 'Too Big to Fail' variety and a heretofore 'protected class' who covertly collude in the rampant corruption only to be found out in cases such as MF Global? Heck, the name 'MF Global' is what we should call the current economic crisis because that's what it is!'M'ot$r 'F'u%i*g Global!

Ann Barnhardt states the issues well right here:

"This has never happened before. This was a complete breach of fiduciary duty by the Chicago Mercantile Exchange itself to the point that it literally has destroyed the entire paradigm. I got to the point where I could no longer tell my clients that their free cash customer funds, not even exposed to the market place—just their cash sitting in their account, non-margined—was not safe. I couldn’t tell them that their money was safe. At that point it was morally incumbent upon me to get my client out of this completely dysfunctional, basically destroyed marketplace. Get them off of those railroad tracks and get them away from the risk. Now, I didn’t clear through MF, but with the European collapse and knowing what we know about how these financial entities are leveraged in European paper and the cascading nature of all of this I had to act before the proverbial poop hit the fan because if you sit around and you wait until after the poop hits the fan it is too late. You wouldn’t get anybody out. To me, it wasn’t really a painful decision. It was a complete no brainer.

Jim Puplava: In the past, when firms went under customer funds were intact and the exchanges would step in, as you mentioned earlier, to backstop everything to keep customers 100% liquid. And normally, a quick transfer from the bankrupt firm, the bankrupt firm would be immediately replaced. Why do you think they did not allow that to happen this time?

Ann Barnhardt: You tell me. I will use the word again, it is suicidal. What they did was suicidal. So you are absolutely right. Up until last month on Friday, October 31st, the customer segregation of funds rule was utterly sacrosanct. Even when Refco imploded and imploded quite dramatically in 2005, no customer funds were gone. It was on the prop trading side of the company but the customer funds were there, were accounted for, and it is the onus of the Mercantile Exchange to audit these FCMs [Futures Commission Merchant]. MF Global was under the auspices and under the supervision, of the auditing supervision, of the CME. And I believe that MF was audited not just annually, but quarterly. Also, there is the question of how in the world can the Merc miss the margin being posted. The Merc is supposed to be moving equity and doing margin wire transfers twice a day every day. How could those customer funds be “missing”. They aren’t missing. They were stolen. They were stolen by Jon Corzine and his cadre of associates at MF Global. So yes, again, to your listeners who may not fully appreciate the gravity of this, this has never, ever happened before. Nothing even close to this has ever even happened before and it is the function of the Mercantile Exchange itself—the reason why the exchanges exist is that they stand in the middle of every transaction and they act as the de facto counterparty to every single transaction so that, for example, my clients never had to worry about the credit worthiness of the other individual, whoever it might be, who is on the other side of any trade that they did.

Now, for every buyer there is a seller and it is a one-for-one, zero-sum game; but to ensure the credit worthiness and the integrity of the market, the function of the Mercantile Exchange itself is to stand in the middle of every transaction and be the guarantor. So a year ago when Terry Duffy held a press conference [watch it here] and said never in the history of the Mercantile Exchange has a customer ever, ever lost funds resulting from the collapse of a firm, he was telling the truth a year ago. Everything changed on Halloween of this year though. And that's why I had to shut the doors of my brokerage because I could not in good conscience continue forward knowing that the Mercantile Exchange was no longer going to fulfill their fiduciary duty."

Now, isn't that just 'swell?'

[-] 0 points by owsleader2011 (304) 12 years ago

Lets not forget that the CME "CHICAGO EXCHANGE" put the magic-negro into power. That's why CME can't be discussed on OWS.

Put another way, is without OBAMA in power the crooks at CME stealing client funds ( farmers ) would go to jail, but with OBAMA in power his crony's in Chicago will not go to jail.

We call this an INVESTMENT in ameriKKKa.