Archive for Breaking News
Here’s the formal obituary.
Burnham “Burnie” Miller was a wonderful and kind man, as well as a tremendous role model who was married to his wife Betty for 59 years. While we’ll miss him dearly, we take tremendous comfort that he is now with our Lord and free of all pain and limitation, and we’re grateful that we had some extra time with him in his last days to say goodbye.
Dad, if I could be just half the man you were, I’d consider myself extremely fortunate. Thank you again for your love, support, and example over the years.
Until we meet again.
In our continuing win-win spirit of providing trader education at minimal cost while benefiting worthwhile causes, I’m pleased to announce that a portion of all Jellie educational proceeds over the next few months will be directed to The One Fund, a charitable fund established to support victims of the tragic events Boston Marathon on April 15.
Charities benefiting from past proceeds of the Jellie Video Series include the American Diabetes Association, GrowUganda.org, and Commodity Customer Coalition to support efforts arising from the MF Global and PFG Best fiascos. To date, we’ve contributed over $23,000!
In addition, readers of “Chronicles …” are eligible for a $250 discount off the course set. Please refer to the educational site for more details.
“No” to the numerous requests to author a book on trading.
Why? Well, the reasons are multiple.
First, I’ve felt this blog has been an optimal way to get my thoughts across to the trading community on a current basis … initially in a painstaking daily and detailed manner, then in a manner which shifted focus away from me and more on trader education & motivation, and more recently via recent activism on the MF Global front.
In addition, from a pure business perspective, a decent trader can make far, far (did I say “far”?) more profit from directing his/her energies toward trading than by writing. Ask any author, and they’ll tell you the royalties are minimal at best, which I’ve confirmed through my own recent due diligence.
And lastly, in terms of educational goals, it’s simply impossible to teach anyone to trade via a $50 book, when it takes years of vast experience and a solid trading educational program to do so, which is why the extensive & highly-regarded Jellie program was crafted.
Oh, if it were up to my ego, I would have said yes long ago. But as successful traders know, ego is the death knell in trading … and in life.
So for years, I’ve said no … based on what I believed was sound reason.
And then the call came from Wiley Press, the leading publisher in the financial world with a reputation for quality and reputable work with a capital “Q” and “R”. Look for the small handful of what I would consider to be quality books among the chaff of the trading world (I can count five out of hundreds), and it’s likely Wiley was behind the work.
As publishing ideas and discussions began, I made it clear from the outset that if we did something, it would have to be done in such a way that held true to the values since I began public advocacy efforts in the late 1990′s. Specifically, it would have to focus as much – if not more – on my failures than my successes. For any success that God has granted me over the years has been largely rooted in the foundation of failure.
Read that last line again, and you may have unlocked several secrets to life itself!
And then the parallels began. An opportunity to author a modern-day version of the classic “Reminiscences of a Stock Operator” … a book long regarded as the top trading book ever published, yet one that has become dated as intraday wholesale opportunities increased, technologies and market access advanced, and regulation evolved. Plus, there’s the modern day version of Gordon Gecko, which has created a whole new verb in the trading industry – “getting Corzined” – which has added a new wrinkle to the long-running objective of ensuring the market doesn’t take your money as now we have the game of ensuring your broker doesn’t abscond with your hard-earned money.
Yet there would be one difference. For unlike “Reminiscences”, there would be no question as to the true source of authorship and name of the trader chronicled.
On July 4, 2008, after a prolonged break from the public eye, I began this blog with the following “Out of Hiding” post:
Where does one begin after a 2 1/2 year break from the public eye?
As some of you may know, February 2006 was my last public post after years of teaching traders and writing for various trading publications & websites. Two and 1/2 years. Gas prices were a heckuva lot lower and the Celtics were pre-Garnett.
And while I had planned on remaining “off the radar” until the beginning of 2009, I want to begin sharing the revelations I’ve discovered that have taken my trading to a completely new paradigm [Here's a tease as noted in Dr. Brett Steenbarger's 6/7/08 post], as well as start a formal logging of daily thoughts, trades, and results. And yes, as I’ve always done in the past, I’ll post actual results … good, bad, ugly, and fully supported by trading records.
As has been the case in my past “public” life, this will be a completely no-hype site. I hate it, period. I’m a trader … pure and simple … and consider the ethical portion of this business to be more important than any other aspect of trading. The sole purpose of my posts will be to share observations from one person’s perspective for those who choose to follow my journey to consider.
So let the journey begin anew.
And so another journey of sorts begins. One where hopefully the lessons, failures, and humbling moments of this man’s life and trading career which ultimately catapulted him to the top of the industry’s Mount Everest, can be shared in the spirit of continuing to pay it forward.
It was good.
It was bad.
And, at times, it was oh-so-ugly.
But in the end, as with the gift of life itself, it was all good.
So a new and exciting journey begins.
One that – if done right – will benefit traders and our charities alike, and like its predecessor, will forever stand the test of time.
And as always, guided and strengthened by the grace of God.
The enemies: MF Global, PFG Best, Ponzi Schemes, & Regulators who don’t have a clue.
Yet the industry WILL rise, survive, and thrive.
The rest is over and a new fight begins.
It is time for us to take control of utter chaos.
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 firstname.lastname@example.org for a special discounted PayPal invoice.
As noted in this morning’s New York Post article, I’ve joined James Koutoulas and the Commodity Customer Coalition in boycotting JP Morgan.
On related notes, the WSJ reports this morning more possible odd transfers to JPM, and five Congressmen from Illinois sent a letter to SEC Chairman Mary Shapiro and CFTC Chairman Gary Gensler in support of the immediate release of 100% of customer funds frozen in the MF Global bankruptcy.
And while I’ve been highly reluctant to mention any of our educational services during the MF Global debacle so as to keep focused on the task at hand and not benefit from the increase in traffic, several people have asked whether the Jellie course remains available, and the answer is yes.
Here are key critical links to Breaking MF Global news impacting traders, with my thoughts to help us team together and keep our eye on the ball. New items appear at the top, and I’ll continue to communicate via Twitter (@millerdon) as new links are added.
Also be sure to check the Commodity Customer Coalition site daily for critical updates.
Lastly, please keep our recent prayer for industry healing and recovery circulating!!
12-16-11 5:50pm ET Busy day on the advocacy front as I sent a fairly stern note to CFTC Commissioner Sommers this morning on the heels of her pathetic performance in this week’s Congressional hearings, which hopefully – along with the Coalition’s efforts – helped prod her within hours to subsequently release this press release.
Then, the Motley Fool published this column today quoting myself and CCC leader James Koutoulas as we continue to keep the pressure on.
12-16-11 1:15am ET Despite zero help from CFTC Commissioner Sommers who has repeatedly refused to respond to questions or support customers in clawing back our funds, as well as the pathetic MF Global executives in this week’s Congressional hearings, we seem to be getting closer to seeing the smoking gun thanks to the CME’s release of a detailed timeline of how/when our funds were stolen (timeline at the bottom of the link).
The coalition has also stepped up efforts to challenge JP Morgan, who will undoubtedly be found as one of the key recipients of the stolen funds.
12-10-11 7:15am ET While many are patting each other on the back - given Friday’s court decision to allow us to tap another whopping 10% of OUR funds - the fact remains that 28% of our accounts remains stolen, the judge didn’t rule on customers being AHEAD of creditors in the bankruptcy process, and we must keep the pressure on the CME, CFTC, and Feds for immediate 100% reimbursement.
Here’s a great “common-sense” piece in Forbes today by noted trader accountant Bob Green as to how to make that happen NOW.
12-8-11 9:15am ET Trustee AGREES customers get paid BEFORE all other creditors … link via today’s CCC Press Release. We’ve only been shouting that for five weeks … welcome to the real world Mr. Trustee … did that opinion really require $900/hour for 5 weeks???
Also, Corzine’s prepared testimony for today’s hearing stating he has no clue where the money went.
12-7-11 9:30pm ET Huge two days coming up as our Coalition participates in and awaits the results of Thursday’s Congressional hearing and Friday’s “day in court”. The CME has also somewhat helped our cause by reminding the court that all customers should receive every penny of their stolen segregated monies BEFORE any penny is provided to creditors via the bankruptcy process. Here’s their court filing in support of our efforts.
Specifically, note the following comments:
34. With respect to the merits of the committee’s arguments, first and foremost funds held and maintained in customer segregated accounts are property of no one else. No statute or regulation requires customers to trace or prove that funds held in segregation for their benefit are in fact theirs. Moreover, 100% of the funds being distributed to customers were on the commencement date (and continue to be) held in segregated accounts for customers. Thus, the committee’s argument that the SIPC Trustee should be required to show that funds in segregation are customer property turns the burden of proof related to customer property on its head, and is specious.
35. Moreover, even if any of the funds to be distributed to customers were for some reason determined to be general property of the estate, any customers whose claims are not satisfied from customer property would still be entitled to assert claims against MF Global’s estate, and would be entitled to be paid in full before any equity distribution. There is also no evidence of any valid, unsubordinated intercompany claim by MFG Holdings against MF Global, and in light of the circumstances surrounding MF Global’s collapse the reverse is far more likely. Simply put, the creditors in MFG Holding’s bankruptcy case (whose interests are represented by the committee) should not see a penny of value from MF Global’s estate until all customer and other claims at the MF Global level have been paid 100%.
Please keep the pressure on the CME (by their own admission the primary regulator of our stolen monies) and not rest until we receive a guarantee of 100% recovery. My trading boycott remains in effect.
12-4-11 5:00pm ET Continuing to put pressure on those entrusted with overseeing our stolen monies. Stepping up advocacy & accountability efforts every further, including pursuing joining/filing class action lawsuits. Boycotting all trading until the CME promises 100% restoration. Let’s get perspectives straight everyone … CUSTOMERS are the victims … and we WILL continue to be heard in a loud way until every last penny is returned.
12-1-11 12:40pm ET I just had a very professional and earnest discussion with Mr. Bryan Durkin, COO of CME Group, who responded to my email plea for help as he was traveling overseas.
First, my thanks to Mr. Durkin for speaking with me. As one of MF Global’s largest non-institutional clients in recent years, as well as a member of the CME since 2004, I – like thousands of others – still have a great deal at risk as we await return of 40% (or more for many) of our funds.
During our conversation, I respectfully reiterated the thoughts in my weekend email which was sent to the CME Board of Directors, CME Management, Court, Trustee, and other influential leaders in the MF Global fiasco.
Specifically, I asked for the CME to continue its industry leadership role by – using the analogy of a “Tylenol-like moment” if you think back to how years ago Tylenol turned a major catastrophe into a huge positive and win for the firm, industry, and customers – step up and redeploy the $550M they’ve already put at risk with the Trustee to restoring the shortfall of our stolen funds.
I also reiterated that while the Trustee & CME are publicly touting their “tremendous success” in releasing 60% of funds, the fact remains that everyone’s focus SHOULD be on the 40% still owed us … vs. reveling in how “wonderful” things are that we’ve been 60% restored. (Sort of like saying to the one-armed man, “Hey, you STILL have the other arm!”)
He indicated he understood and was sympathetic to my/our concerns and agreed to further discuss the issue with Mr. Duffy and the Board, as well as stay in touch with me.
As one whose life has been completely disrupted, and given the theft which has occurred, I’ve personally curtailed my trading business until such time we receive a promise of 100% restoration. The heart, faith, and energy simply aren’t there.
The CME has a HUGE opportunity to complete the action which they began by turning their initial small steps into a giant leap for the sake of their customers and the future of the industry.
Doing so would swiftly end this circus, and based on the response of clients in the Maddoff fiasco, likely even save lives which have been ruined.
I again thank Mr. Durkin for his time and our conversation, and pray that they do the right thing … in Tylenol fashion.
Don Miller (Still missing one “arm”)
11-30 6:50am ET Despite CME $550M “guarantee”, Trustee only inches up distribution to 66% and admittedly retains large 20% reserve of OUR funds. Duh, what was the CME guarantee good for then?? WSJ also summarizies tangled money web and tug-of-war disagreement over OUR funds.
Further, the article suggests that per the Trustee, funds moved INTO our account on 10/31 may not be ours, and of course funds transferred OUT may not be recoverable. Does this make sense to anyone???
100% remains the only resolution, and the CME CEO has responded to my weekend letter indicating he’d like to discuss it with me in detail.
11-29 1:02am ET The J.P. Morgan “got it, don’t got it, got it” (think Mel Brooks’ High Anxiety) saga takes another turn tonight toward “got it”. And please keep the weekend letter below circulating as it seems to be gaining traction!
11-26 2:10pm ET I’ll be sending the following letter to Exchange and Industry leaders, as well as to U.S. Congressmen this weekend. PLEASE CIRCULATE THROUGHOUT THE INDUSTRY AND INTERNET SO OUR COLLECTIVE VOICES CAN BE HEARD.
To: Leaders of the U.S. Futures Industry, Members of U.S. Congress, MF Global Trustee, and Court
The time has come to fully restore our stolen capital and, in turn, our faith in America.
We have been patient, but our patience has run out.
We have listened to totals of our stolen money that change more frequently than the New England weather.
We are told the world’s best forensic accountants are at work, yet four weeks later it seems as if they’re still choosing pawns in a game of Clue.
We have listened to what a wonderful job the Trustee has done in acting quickly to “free up” a small amount of capital, even though many of us have still not seen a penny.
We have listened to a CME “Guarantee” of $550 Million, even though only $50 Million is designed to replace our stolen funds.
We are told we live in the greatest country in the world that protects its citizens, yet are seeing customers in foreign countries being made whole as we speak while we await our rations.
We are supposed to live in a land of fairness and integrity, yet have seen behemoth J.P. Morgan cut in line in front of us to claim corporate self-interest ahead of our stolen monies.
We have been told for decades by the exchanges and industry that the segregation of customer futures accounts was sacred and that multiple fail-safe firewalls were at work, yet the vault was opened, ransacked, and burned beyond recognition without anyone knowing.
We are supposed to live in a land where our leaders take responsibility, yet have seen more fingers pointed at others than a Family Circus “Not Me” cartoon.
We are supposed to live in a country of opportunity, yet have seen the retirements and lives of families, farmers, and small businesses ruined.
Our country is supposed to exude trust and confidence, yet we’ve begun to see a crisis of industry confidence as people withdraw funds in mass.
And yet … this excruciating four-week treadmill of events can be switched off by one simple and swift move by the leaders of our industry and the Court.
A promise by Christmas Eve to cut through all of the red tape and corporate interests to restore 100% of our stolen funds.
Not $50 Million. Not 60% or 75%.
Any penny less will forever compromise our faith in this industry and country.
The time has come for someone to step up and act swiftly and decisively.
The time has come to fully restore our capital … and our faith.
11-22 8:55pm ET A great article in the Chicago Tribune tonight about needing to make all customers 100% whole. A must read!
11-22 7:43pm ET CME boosts guarantee to $550M to target 75% to customers by early December. Says shortfall not going to be as much as reported. BUT will (1) the Trustee listen, and more importantly, (2) the CME stop these baby steps (remember the $550M means nothing unless the Trustee uses it to act) and just fill the ENTIRE gap as they should. Their future, that of the industry, and most of all – their CUSTOMERS’ money – are hanging in the balance.
11-21 2:04pm ET Here’s an outstanding and current overview article … especially the J.P.Morgan part … from Fortune. Keep the heat on!
11-21 10:42am ET THUD … Trustee reports missing funds may now exceed $1.2 Billion – more than double previous figures released by the CME & CFTC (talk about sleeping on the job … the CME’s “asleep at the switch” liability and moral obligation just grew exponentially), and that funds under Trustee’s control have just about run out. Not good and the future of this industry is at a major crossroads unless the CME steps in and stops the bleeding.
11-18 11:40pm ET Here’s an excellent interview that Forbes conducted today with the Commodity Customer Coalition’s counsel. A must read for sure.
11-18 5:10pm ET Participated in a highly productive 90-minute conference call with the Coalition, and then an extensive interview with The Motley Fool as we continue to make our voices heard. Keep the pressure on gang as we fight against this blatant theft of customer monies.
11-17 10:50pm ET All likely know by now, Judge Glenn approved the 60% payout for MF Global customers who had remained in cash as of 10/31. Here’s the official order. Also, continued congrats to our Commodity Customer Coalitionwhich continues to win the respect and standing of the Judge, Trustee, and industry. Special kudos to James Koutoulas, John Roe, and Tim Butler … as well as the entire team who are working on a volunteer or pro-bono basis.
Read the CCC’s latest update including a plea from Congressman Huelskamp to not rest until 100% of the funds are returned to customers. Meanwhile, the WSJ reports MF Global wired hundreds of millions of customer fund dollars into its own accounts as it was crumbling.
11-16 10:45pm ET A veryactive day in court for our oustanding coalition as we have emails (and twitter messages during the day’s court procedings) exchanged every few minutes … including as I write this at 10:45pm ET. Official and realtime updates – as well as key news links - appear on the coalition’s website under the “Home” and “Press” sections at www.commoditycustomercoalition.org.
In addition, here’s a good NY Times piece on the continuing hunt for the money, and a good press overview of the CCC’s position beforetoday’s procedings (check the CCC site for updates resulting from today’s court meeting).
11-16 10:00am ET The CFTC issues a statement on the MF Global fiasco. Not a bad perspective actually, especially the part about determining how we can return “all customer funds as soon as possible and punish any wrongdoing”. For certain trustees, courts, and J.P.Morganites trying to cut in line, that’s “all” as in “everything”, “100%”, and “the whole enchilada”. Let’s keep our eye on the ball.
11-16 1:00am ET Lots of news on all fronts over the last 24 hours including the Trustee’s filing of an expedited claims process and motion for “emergency” release of 60% of MF Global balances that had been in cash on the date of bankruptcy – Reuters release here. Nothing like a fire engine responding with marshmallows & s’more sticks after the fire has been raging for weeks.
Nevertheless, we need to continue to push for a 100% release or other make-whole provisions, as well as a formal voice in the procedings. Here’s the Trustee’s site and our initial coalition’s summary page hosted by BTR Trading with all relevant links. The Commodity Customer Coaltion’s formal site is also now up and running.
Further, and unfortunately as I first suspected despite press interpretations to the contrary, here’s the CME press release confirming that they were “really” only providing $50M in relief in the event the missing funds can’t be returned … NOT $300M. Pass the marshmallows and s’more sticks.
11-14 10:15pm ET: Here’s an IMPORTANT Wall St. Journal brief on the Commodity Customers Coalition’s motion to block J.P. Morgan from illegally stepping in front of CUSTOMERS in the bankruptcy process.
11-14 10:00pm ET: If you agree, sign the National Introducing Brokers Association (NIBA) Petition for the Honorable Martin Glenn to permit the release of the remaining cash balances of MF Global customers.
Here’s the full text:
Why This Is Important: The National Introducing Brokers Association (NIBA) submits this Petition urging you to exercise your authority and immediately, to the extent it does not hinder the bankruptcy process, permit the release of the remaining cash balances of liquidating and transferred customers of MF Global, and of customers who were included in the bulk transfer process.
To the extent there are sufficient “segregated” funds available, they are the assets of the customers. Further, those funds are absolutely vital for the marketplace to function fully. The result of withholding these funds is affecting the ability of customers to maintain and trade their positions, and will impact liquidity and trading volume – absolutely necessary for an efficient market.
Customers and futures professional alike are suffering under the current scheme. We urge you to heed this Petition and release these funds. We want to get back to work.
Respectfully, The National Introducing Brokers Association
11-13 9:50am ET: Open Letter to MF Global Trustee to Resign -I urge everyone who has been violated by MF Global to fax the Honorable Martin Glenn at 212-668-2878 if they agree Trustee James W. Giddens (billing at $890+ an hour and who has billed $160 Million in the Lehman case over 3 years with little results) should resign. This excellent letter from Andrew Abraham of Abraham Investment Management says it all. Let’s keep making OUR voices heard.
11-12 10:20pm ET: Work continues around the weekend as a customer coalition comprised of industry professionals and MF Global customers has been formalized to liberate customer segregated funds, engage in a proactive public relations campaign, and be legally & actively represented throughout the bankruptcy process. The effort, of which I’m a part, will be referred to as the Commodity Customers Coalition, and a plentiful resource page containing sample letters to Congress, the Court, and Trustee, along with a general description of our effort and much more is now accessible.
11-12 11:10am ET:In light of yetserday’s CME news, we’ve revised our support of the motion to push for an immediate withdrawal of funds to reflect 94.2% of seg fund balances, believing the intent of the CME was to back half of the $600M shortfall. If that wasn’t their intent, then they’ve just bamboozled the entire industry.
11-11 3:31pm ET: CME to provide $300M Guarantee to Trustee. Here’s the full Press Release. Well, it’s a step. Could this trigger the Trustee to move?? The way it’s worded, it’s a bit confusing as to whether it plugs half of the $600M hole or not, and we need to keep pushing for 100% reimbursement.
11-11 7:15am ET: TELLING OUR STORY: Bloomberg piece released this morning as we make our voices heard loud and clear. Includes quotes from James Koutoulas who is leading a grass-roots legal effort for the trading community (I participated on a 90 minute trader conference call with them yesterday), along with a few quotes from Tim Butler (the attorney who filed the 85% withdrawal request), myself (in the “Prudence Doesn’t Pay” Section) and others as we make our voices heard.
11-10 7:24pm ET: Bloomberg: CFTC Commissioner goes public, referencing high probability of illegal “hide and seek” ploy.
11-10 7:21pm ET: MF Global Trustee hints at claims process getting closer (link at top of page).
11-10 4:29pm ET: NY Times: Feds order an audit of all U.S. future trading firms. Looks like key players are essentially admitting the existing controls and “audits” weren’t good enough … opening the door wide open for litigation that they were negligent unless they make everyone whole.
11-10 1:08pm ET: ICE Futures supports 85% withdrawal request. Here’s their letter to the court, as well as the WSJ article referencing the filing. I’ve also already sent mine & remain in contact with Bloomberg news re: today’s developments to help get our voices heard.
11-10 12:00pm ET: Trustee Update: Shortfall in customer segmented accounts to be treated as UNSECURED CREDITOR CLAIM. Aren’t customers – per all the legal docs I’ve read – supposed to be FIRST IN LINE?? Isn’t cash the “security”?? Have we been “demoted”??
11-10 11:02am ET: NY Times: MF Global customers question CME oversightand seeking their assistance in making them whole. Completely agree, especially with:
It is time for the executive team at CME to save its business and do the right thing,” wrote Glenn Jackel, a managing member at Traxian Partners with about $1 million trapped at MF Global, in a letter to CME board members. “As it stands now, the MF Global debacle represents every single deep-seated underlying fear that commodity investors have, that their money will be lost or frozen in a commodity firm meltdown.”
11-10 7:10am ET: Futures Industry Association (FIA) issues statement requesting interim accounting and return of customer funds.
11-9 4:25pm ET: MF Global Bankruptcy Trustee just posted a FAQ on the Trustee website. But there’s zero new news on it.
11-9 2:10pm ET:Just spoke with the attorneys who filed the request for 85% distribution (see link below). We can all be heard by mailing our support and situations to the judge and trustee at the addresses below. Hearing is scheduled for 11/22, but the main intent of the filing was to put the pressure on to get something done before that. I also spoke with Bloomberg News to continue to put the heat on to get the funds released.
Hon. Martin Glenn
U.S. Bankruptcy Judge
One Bowling Green
New York, NY 10004-1408
James W. Giddens,
Trustee for the SIPA Liquidation of MF Global Inc.,
c/o Hughes Hubbard & Reed, LLP
One Battery Park Plaza
New York, New York 10004
Timothy F. Butler, Esq
Tibbetts Keating & Butler, LLC
36 West 44th Street
New York, New York 10036
11-9 7:05am ET: Forbes reporting non-cash assets (more difficult to track than cash) may have been pledged overseas in last minute attempt to back desperate loans … and have since been liquidated by the lender. Of all the theories, this one seems one of the more logical ones – especially as time has passed.
***** IMPORTANT 11-8 10:35pm ET: Traders seeking court permission to transfer 85% of cash. All traders should continue to put this EXACT heat on the courts as all parties agree 88.4% of the money is there. *****
11-8 3:54pm ET: Per Forbes, looks like the missing funds may have been used on Corzine’s risky Europe bet via a little known loophole????? Say it isn’t so. Although that doesn’t gel with MF’s management stating that they believed everything was accounted for, and the CME’s assertion that the funds WERE THERE during their recent audit!
11-8 4:05pm ET: Trustee seeking options to move on partial disbursements for those in cash.
11-8 3:54pm ET: Per Forbes, looks like the missing funds may have been used on Corzine’s risky Europe bet via a little known loophole????? Say it isn’t so. Although that doesn’t gel with MF’s management stating that they believed everything was accounted for, and the CME’s assertion that the funds WERE THERE during their recent audit!
11-8 12:28pm ET: At the CME end, here’s a memo to the CME trading community that was sent today from the CME Executive Chairman and Chief Executive Officer.
11-8 12:05PM ET: Here’s a great link to an article by Avery Goodman from Seeking Alpha explaining the CME’s liability in the MF Global mess. And here’s the direct link to the “CME Clearing Financial Safeguards” document referenced in the article, created by … none other than the CME itself. Pass the word in getting the CME to step up to the plate and fulfill their obligations.
4:00 PM 11-4 Update: J.P. Morgan & MF Global Fight over funds.
I’ve thought long and hard about whether, when, and how to write a post on the MF Global situation.
One reason was because I wanted to avoid participating in the initial industry rumor mill which has been rampant beyond belief over the last four days – and which often contains more inaccurate vs. accurate info.
Another reason is that I have a lot of “skin” in this particular dilemma – actually more of full torso as I mention below – and didn’t want my personal emotion to dictate my words.
Yet this journal – even as it’s evolved into more of a formal educational venue in recent times - has always been about the “good, bad, and ugly” of the truth behind the futures trading industry. And oh, have all three been seen in spades this week.
As a quick aside, I’m told I remain one of few – if any – to have publicly spoken about my personal drawdowns and rocky periods along the road to present day, including that large one-day draw on that Monday in October 2008 when the VIX was spiking toward 80 and last year’s Flash Crash - both of which occurred among backdrops that had never been seen in the industry. Of course, both were simply momentary stumbles from which I recovered as any decent trader would and should, including using that Monday lesson to turn a profit by week’s end.
And so I feel the time has come to speak in the continuing spirit.
So here we go again with a deeply personal post with full transparency.
I’ll begin by saying that I am one of the larger non-institutional clients for whom MF Global cleared futures trades, with approximately $3 Million in personal trading balances amidst three accounts. One is my main retirement account, one is a small personal account, and the other is the modest prop firm account I’d recently established.
I’d been a customer of theirs since 2003, and I’d rank their trade clearing, technical support, reporting, and yes – even the ethics of those with whom I directly worked (note the bold) - second to none.
I’ll also quickly follow up these points with saying that I made two personal mistakes that led to more personal angst this week than should have ever occurred.
The first was leaving too large an accumulated balance directly with the clearing firm. Ironically, I truly thought about significantly reducing the balance in recent days, but hadn’t moved on it given what I viewed as “higher priorities” … not to mention the fundamental essence of “segregated accounts” with daily controls. Even Refco clients ultimately retained 100% of their capital amidst an environment of complete fraud.
I’d also not given MF’s Europe debt problems enough personal attention and thought during the preceding week as my focus was on my other businesses much of the time, including my obligation and fiduciary role to PivotPoint Advisors, for whom we had just closed out of Friday’s profitable long trade sequence at the market highs before this week’s early-week cliff drop. And again, there was that “segregated account” protection where business segment A was supposed to have no relation to business segment B.
The second error at my end was not having a back-up clearing firm with whom I could immediately clear new trades, which cost me dearly in opportunity loss this week … which in the “when it rains it pours” category turned out to be the most fertile trading environment in terms of concrete opening MATD or gap sequences we’ve had all year.
So before I jump on the MF dogpile, that’s my own glass house for all to see.
Now, let’s turn to the chronicle of my journey of this past week.
My plan – as it typically is on both the last day of the month and a Monday – was to trade lightly. And at 9:47:27 AM ET, I’d just closed out a small long trade for a modest profit. I then tried to place another order which the platform didn’t accept. “Great …” I’d thought with some sarcasm,“… an order entry platform issue on a Monday morning.”
So I then checked to see if I could place a Eurex trade, which I could. “OK, must be an issue with the CME feed.”
I then called the MF support desk and was told the Merc had suspended MF’s electronic access to the CME markets. “WTF? OK, let me trade Eurex as a derivative of the ES action. Hmmmm … on second thought, maybe not … something has to be up.
The rest of the day is frankly a bit of a blur, but included morning calls to my FCM FuturePath Trading (the “Good” as I’ll explain below), a decision to request an immediate wire of my full main account balance, and calls to my long-time contacts at MF (more “Good”).
Then, an odd thing happened. For the electronic access to the CME – which I tested by pacing orders outside the market – had been turned back ON.
A quick call to the MF support desk ensured: “What’s going on?” I asked? “Liquidation orders only” they responded. “Are you aware I can place opening orders??” I shot back. Deathly silence at their end, followed by “We’re only doing what we’re told.”
I then turned my attention over the next several hours to babysitting the liquidating wire request as best I could from a distance. Of course, it turned out that the request – which was quickly joined by requests to liquidate my other two accounts – came after all outgoing activity had been frozen.
It was during that time where the news began surfacing: Failed sale to Interactive Brokers, Bankruptcy, Frozen assets, Missing client money which by law was segregated with controls that had tested the time of many failures over the last decade.
Tuesday – Friday
The rest of the week turned into a mix of constant phone calls to FuturePath (God Bless them for putting up with me), calls to MF Global, constant internet Googling, and a lot of personal and spiritual angst over what was or wasn’t happening.
And the news — along with my human emotion — shifted by hour as both fact and rumor battled for position in my mind:
$900 Million missing. $600 Million missing. $300 Million missing. Nothing missing … it’s all there and just an accounting issue.
I’ve retained everything. I’ve lost everything. Sure, it’s “only” 10% of client money as I grasped for silver linings – but what if my accounts were among the 10% … that’s essentially 100%.
And then the personal regret kicked in. Why hadn’t I pulled the balance down? Why did I allow myself to be distracted and “complacent” as to not see the writing on the wall during the preceding week and get the funds the heck out of there? But they’re segregated balances reported and monitored daily.
OK, now the specific Good, Bad, & Ugly categories:
The Good (Much of it “Very”):
God, my wife Debra, my PivotPoint partner John, Pat, Maria at MF Global, the regulatory agencies swarming to protect our interest – else this entire industry falls like a house of cards, and the entire team at FuturePath Trading – especially Damon, all of whom came to my support this week during those times when I was at best a pain in the neck, and at worst, unnerved.
You see, the vast majority of the futures industry – while competitive on the one hand – is actually a very tight-knit family of sorts. And it was during the events of this week where we learned who were the true blue family members, and who were the black sheep.
At one point, I even found myself comforting one of my MF Global friends – who was in tears over the prospect of damage to my account – despite her difficult personal situation.
Another “good” element was my decision to initially trade lightly – as matter of generealy rule – and then to stop all trading completely on Monday as soon as I figured something was up, which left me with zero open positions as everything was unraveling. Obvioulsly, those with open position had to wrestle with both (1) somehow closing the positions, and (2) exposing themselves to additional market time – perhaps days – and risk.
My personal loss of spiritual perspective at times. From dust to dust Don. You’re simply a temporary steward anyway. Why it took me almost three days to finally put the situation in God’s hands, I’ll never know. For it wasn’t until Thursday morning that Deb and I prayed together for God to directly intervene and unleash his full power and might to guide the regulators to ensure His assets remained in His kingdom. Before that, Deb had been praying for me to regain my spiritual footing!
The loss of income as trader accounts have been temporarily frozen and unaccessible during a very fertile time.
The lack of constant communication from the regulatory bodies to clients with accounts (although I do understand their challenge and the Trustee website is beginning to serve as a decent clearinghouse of sorts).
The quick - under a week – allowance for the transfer of accounts with positions and a portion of the underlying collateral to other brokers, but not for those accounts simply sitting in cash, which would be the case for most intraday and/or liquidity-providing traders. At worst, initially moving 50%-75% of the cash this week would have been far more prudent, followed up with the rest in the near-term as assets are redeployed which by law should first go to making the cucstomers 100% whole. I even phoned my senator’s office – both the Washington and Boston offices – for the first time ever to discuss.
The resurrection of another reason for some politicians to rally the “transaction tax” charge during – of all things – the European summit which is addressing the same thing. Talk about poor timing.
To this point, I’ve not piled on the MF Global bandwagon. For as in any “trade”, I believe the finger first points inward, and there are of course things I could and should have done at my end.
Having said that – and taking a deep breath – there is clearly a LOT of ugly that has surfaced in recent days.
Alleged violations in the sacred fiduciary and segregation principles, along with alleged deceit with a trail requiring a team of forensic accountants and multiple regulatory agencies to unravel and which has drawn attention from the CFTC, SEC, SIPC, and FBI.
This hits particularly close to home as we’ve tried our best in this small corner of the world to help this business become more transparent over time through “truth in blogging”, bona fide education, and – now that I’m on the fund management side of the business with PivotPoint – constant communication with clients via email and weekly website Briefings that involve trade sequence explanations. And then the industry shroud reappears … talking about swimming upstream.
A man who was all smiles in giving a speech as his company was going south.
I could go on with respect to the Ugly, but will leave it at that … adding one more category called “The Irony”.
The Irony? -
That a firm catering toward traders – who should be taught tight risk management principles in the event of a failed trade – would fail based on the excessive risk taken on by the firm itself.
A few days ago, I posted “This too shall pass.” For in the end, there is absoultely no reason to believe that clients won’t be either made 100% whole, or pretty darn close to it. So this is truly a bump in the road – albeit a large one.
Yet this week has reminded me why I don’t like flying in planes. For unless I can see out the front window, can see what’s ahead, and am flying the plane (even though I’m not a pilot), I’m very, very uncomfortable.
And this week I’ve had zero control … over everything.
For some reason, I forgot who the real Pilot is.
And to Him I have to give my utmost trust.
Have a blessed weekend.