Archive for February, 2012
Chalk it up to a quarter century of Type A non-stop work, and four recent months of non-stop advocacy for MF Global traders.
Seasoned travelers will likely know the destination based on the pic.
Hints for others? Passport required & 4 1/2 flight time.
More clues to come over time.
Keep current via Twitter (millerdon).
Please note Jellie trader webinar orders will continue to be processed during this time at the curent discounted $1,250 rate. Simply email email@example.com for a special discounted PayPal invoice.
In light of the MF Global Bankruptcy Trustee’s update released last week, which astonishingly announced that MF Global had been LONG dipping into customer monies to fund daily operations … funds which per congressional hearings were supposed to be segregated “every second of every day … i.e. segregated means segregated”, I sent the following letter to the CME, CFTC, all major news services, and via the growing Twitter trader network on Wednesday.
February 8, 2012
To: All Major News Services
CME Completely Misses MF Global’s Ongoing Game of Chicken
There’s a game children play where one child puts his/her hand down on the table, and then attempts to pull it out just as the other child tries to “trap” it via a slap. On a far larger and more dangerous scale, there’s a similar “game” called Russian Roulette which, well, it unfortunately speaks for itself.
Essentially, per the Trustee’s press release and update to the Court on Monday (excerpt below), these are precisely the games MF Global had been playing – in the Trustee’s words – “regularly”.
The investigation to date has found that transactions regularly moved between accounts and that funds believed to be in excess of segregation requirements in the commodities segregated accounts were used to fund other daily activities of MF Global. In the past, such transfers were in amounts of less than $50 million, but as liquidity demands increased and could not be met from internal sources, much larger amounts were used, apparently with the assumption that funds would be restored by the end of the day. By Wednesday, October 26, as the result of increasing demands for funds or collateral throughout MF Global, funds did not return as anticipated. As these withdrawals occurred, a lack of intraday accounting visibility existed, caused in part by the volume of transactions being executed, and the 4(d) U.S. 2 segregated commodity customer account appears to have reached a deficit condition on Wednesday, October 26 that continued through to MF Global’s bankruptcy.
As any auditor will tell you, there are very simple audit techniques that catch such activity. Yet for some inexplicable and inexcusable reason, the CME as regulating entity, as well as the CFTC, completely missed this ongoing game. As a result, just like that child whose hand finally gets “trapped”, MF Global & CME customers got caught in the squeeze … and are still waiting to be freed.
We continue our ongoing and rightful industry call for the CME to make customers whole and end this circus.
And on a related point, you’ll recall that in last week’s post I refered to the CME repeated use of a “band-aid” to try to stop a $1.2 Billion (now $1.6 Billion as of Friday) bleeding aorta.
Wouldn’t you know it that Bloomberg reported on Friday that members of the National Cattlemen’s Beef Association shoved the CME’s “3rd grade math” and “chickenfeed” public relations ploy attempt right back at them.
Band-aids and chickenfeed won’t solve the problem.
And until the regulating entity responsible for safeguarding our funds truly steps to the plate and rights this wrong via full restoration of funds, the bleeding will continue.
A highly-seasoned trader, one who rose to the top of the industry in 2008 after a decade of personal discovery, one who was managing capital preservation effectively – even during periods of burnout, flash crashes, etc., one who fully understood the sanctity and multiple regulatory & industry firewall concepts related to “segregated funds”, one who devoted the last decade to educating traders & improving industry transparency, and one who – if he had a trading fault, it was excessively tight trade management at times where experience, intuition, or conditions instructed him otherwise, suddenly saw 100% of his capital vanish.
To him, a 0.5% loss was unimaginable. That’s 0.005. Not 100% … and subsequently 28% as the climb back to 100% continues.
Yet as history shows, three months ago, that is precisely what happened to this trader as a result of the MF Global fiasco.
Many who have followed me over the years, will recall that in 2008, I coined the term “EESM”, which stood for “emergency & extended scalp mode”. Of course, the reference at that time, was to describe the mode I’d enter after getting knocked back in an unexpected trade sequence.
Well, that could also describe the last three months, as we began the arduous climb back toward 100% restoration of our capital and the highly public “Horton Hears a Who” public relations, regulatory, and legislative fight in which I’ve been immensely immersed over the past 90 days.
And while I was involved in my own “trade-gone-bad” fight, it quickly became a “fight for everyone” battle as I chose to put aside trading, teaching, and everything else to focus on making a very LOUD voice at Bloomberg, Forbes, the NY Post, Chicago Tribune, the Motley Fool, CME, CFTC, the Commodity Customer Coalition, Bankrutpcy Trustee, Judge, Legislators … well, the list goes on.
As does the list of everything else which went wrong, including:
The CFTC for not supporting customers via a backroom deal that allowed the MF Global Bankruptcy to incorrectly go the SIPC route to protect the creditors and 1% of MF Global’s customer base based on a few hundred security accounts vs. 99% futures accounts. Thank you Congressman Michael Grimm for hammering that point home in Thursday’s hearing.
CFTC Commissioner Sommers for going on vacation in the middle of the battle.
The CME essentially admitting they had accountability by agreeing to provide a $50 Million tiny band-aid (you know, one of those small round ones) for a bursting $1.2 Billion aorta, then recently setting up a fund GOING FORWARD to protect customers should this ever happen again, but basically flipping their finger at its customers and members who lost funds under its watch.
And I could continue the list of wrongs on and on and, well, I guess I have over the last 3 months.
Which brings me to a question so many of you have asked me recently … what happens now in terms of this blog, my teachings, my trading, my continued fight, etc.
To better explain my perspective and roadmap for going forward, let me first say that I intentionally backed off trading education & “Jellie” related posts for one primary reason … for as my public profile exploded beyond an already-high baseline, I didn’t want a single thread of hint that I would use such opportunity to profit from discussion of my educational tools.
So I went on a three-month mission of silence on the teaching front, all the while I was on a three-month “screaming at the top of my voice” mission to right the clear wrongs.
Plus, as always, I felt sharing reality was equally important to formal instruction.
So, as I move forward, here are some answers to many of your questions in terms of my roadmap for the future.
First, let it be known that I will continue the highly public battle to fully restore 100% of our funds through holding the CFTC & CME fully accountable for their actions via every legal, legislative, regulatory, and public relations means at my disposal, in part by using my high profile pulpit to speak loudly on the behalf of traders everywhere.
Second, after a three-month period of essential silence on trader education, I will begin to refocus posts and this site toward our core concept of education, beginning today with a one-time 33% price discount of the industry-acclaimed Jellie trader Webinars to $1k until 2/11, with this week’s charitable cause reflecting the Commodity Customer Coalition who continues to fight on behalf of traders everywhere. Simply email me at firstname.lastname@example.org and I’ll email a discounted invoice.
Third, and to those of you who have asked whether I plan to continue trading, the answer is a qualified, but resounding “yes”.
The qualification? I’ll continue to make my point with the CME via careful & purposeful management of my trading volumes under – what race cars would call – a “governor”. And yes, I’ll do so even at the “expense” of personal opportunity cost to make our continued points loud and clear.
Yes, it’s been quite the 3-month journey and we still have work to do.
But I won’t let it stop our continuing core mission of full transparency & education … for if the last three months have told us anything, it’s that the void of education and understanding the consumer side of this business has only grown greater in recent years.
So the fight goes on.
In the end, we know that good overcomes evil, and right overcomes wrong.
It always has and always will.
Sometimes, “good” simply needs to speak up … loudly.
And rest assured that is exactly what will continue to happen from this end.