Chicago, 4 November 2011

Today, CME Group continued to successfully transfer additional MF Global U.S. customer positions and CME Clearing-held collateral to other qualified clearing firms.  The remaining customer segregated positions are expected to be transferred by the end of the day, completing the total transfer of customer positions at CME Group exchanges in approximately 15,000 MF Global accounts and approximately $1.45 billion in associated clearing collateral, as approved by the Trustee and bankruptcy court.

Receiving commodity brokers for these transfers are responsible for notifying customers as to the new commodity broker for their accounts.

These transfers do not include any warehouse receipts, certificates or warrants, which remain part of the assets under administration by the Trustee.  Receipts/certificates and warrants not available for delivery as of November 4, 2011 due to the MF Global bankruptcy are summarized by issuing facility in the Deliverable Commodities Under Registration Report and the Warehouse and Depository Stocks reports.

For more information, please visit www.cmegroup.com/mfglobal.

CME Goes To Collateral DefCon 1: Makes Maintenance Margin Equal To Initial For… Everything!?

By Tyler Durden

Created 11/04/2011 - 21:20

[1]

Submitted by Tyler Durden [1] on 11/04/2011 21:20 -0400

• Greece [2]
• Lehman [3]
• MF Global [4]

The most important news announcement of the day was not anything to came out of Cannes  (as nothing did), nor from Greece (the merry go round farce there continues unabated). No, it was a brief paragraph distributed by the CME long after everyone had gone home, and was already on their 3rd drink. It is critical, because not only is this announcement a direct consequence of what happened with MF Global several days ago, but because also it confirms one of our biggest concerns: systemic liquidity is non-existanet. We confirmed interbank liquidity in Europe was at an all time low earlier [5]today, and can only assume the same is true for US banks. But what is very disturbing is that this is just as true at the exchange level, where it appears the aftermath of the MF collapse is just now being felt. What exactly was the announcement. Unless we are completely reading it incorrectly, it is nothing short of a margin call for tens if not hundreds of billions worth of product. Because as of close of business on November 4, today, the CME just made the maintenance margin, traditionally about 26% lower than the initial margin for specs, equal. For everything. Which means that by close of business Monday, millions of options and futures holders will be forced to deposit billions in additional capital to the CME just so they are not found to be margin deficient, and thus receive a margin call. Naturally, since it is very unlikely that this incremental amount of liquidity can be easily procured in one business day, we anticipate the issuance of hundreds of thousands of margin calls Monday, followed by forced liquidations of margin accounts across America… and the world. Just like when Lehman blew up, it took 5 days for Money Markets to break. Is this unprecedented elimination in the distinction between initial and maintenance margin the post-MF equivalent of the first domino to fall this time around?

From the CME (source [6]):

[7]

And for those asking, here is a complete breakdown of all CME products and associated margins:

London, 5 November 2011

A risk rally across all sectors has lifted commodities in the past month. However, Barlcays Capital think it unlikely that the trend will be sustained. Although growth prospects look a little stronger in the US, they are much weaker in Europe and the picture for China is “still worrying” according to Kevin Norrish, Head of commodities research. “Moreover, the European debt situation shows no sign of resolution so we are continuing to favour defensive positioning, reducing weightings in those commodities likely to suffer most from further waves of pessimism.”

The main change in this month’s sector weightings is a shift to a small underweight in base metals, which were amongst some of the biggest price gainers in recent weeks as short positions predicated on a slowing global economy were closed out.

“Our other rankings are unchanged meaning that in addition to our underweight in base metals, we are running a sizeable overweight in precious metals (where financial market conditions favour continued outperformance) a small overweight in energy (where low crude oil inventories and the approach of northern hemisphere winter should limit the oil price downside) and an underweight in agriculture (where weather threats appear to be easing and recent harvest news has been relatively good, especially in grains).”

SinceBarCap’s last reweighting on 7 October, the BCRI is up by 6.7%, outperforming the neutral portfolio in which weights are held constant, which is up by 6.5%. Applying the BCRI rankings to the DJUBSCI weights in order to rebalance that index results in a 1.3% outperformance in October. In the year-to-date that outperformance now stands at 2%.

Ends —