While Administrators don't mind being involved in legal action involving the Administration, one thing they will try to avoid at all costs is leaving themselves open to litigation. That's why there won't be any return of funds until it's been clarified by the Courts. Whatever is the best case made at that court hearing is how the funds will end up being distributed IMO. Those who can afford to have their view represented will have the best chance of getting what they want.
skc - mmis4168
skc - you are 100% right. The only issue, once all liquidation prices are known, is to agree on the reconciliation method.
Which means we all have 2 options:
1) we all agree to disagree; most will do this convinced that they have valid arguments.
2) we can all somehow (... a miracle must happen here ... ) agree on a common method - a consensus amongst all traders - those who had open positions and those who had not - those who suffered slippage as a result of the liquidation and those who did not.
What is the best outcome? There is no doubt in my mind that the second option offers a better outcome for everybody
a) because it will allow to distribute the money faster
b) because it will allow to distribute more money
Now if I stopped here, I should hear 100% of people say - yeah, agree 100%, more money and faster, I'm in.
OK, so lets go one step backwards and look at
1) why would option 2 get us all our money faster and get us all more money?
2) how can we get to a common consensus?
Why would option 2 get us all our money faster and get us all more money?
The answer is simple. Regardless of whether the cause is "right" or not, the minute the matter hits the court, we can all kiss our money good bye. Not because I have no trust in the courts, simply because disputes are costly (legal fees), and lengthy (this also means costly, because the Administrators will need to stay on longer). In addition, the matter is complex, with probably not many precedents - this will only add in cost and duration.
To make the matter worse, the more fees Deloitte will need to stay on the job, the less cash there will be left in MFGA for employees and creditors, and they will start suing too. And once there is no more cash left in MFGA, Deloitte will seek to get their fees paid from the segregated accounts - and rightly so.
Another point to consider is that whether it's fair or not, the regulation around the segregated account clearly states that customers funds are co-mingled, exposing all clients to the failure of one. This is clearly not fair, but this is the way it is.
Conclusion: it will take only one client who for whatever reasons decides go to Court (be it as a matter of principle and justice or his perceived own self interest) rather than accepting a pragmatic common resolution to put all the clients of the pool he belongs to in the mess. The irony is that the outcome of this process will be even more unfair, will result in huge delays in getting any of us our money back, and will result in much money available for distribution than if that individual had accepted the common solution proposed.
I've learned over the years that trading is not about being "right". Trading is about understanding risk and reward.
Going to court and fighting among each other might be about being "right", but it will bring no rewards and big losses (not even risk, because it's guaranteed losses).
2) How can we get a common consensus
Well, this certainly is not easy, although the prospects of failing to reach such a consensus should be a formidable motivation to at least try; if we succeed, this would be an achievement that we could all feel extremely proud of. We spend our time trying to outsmart each other, for once we have an opportunity to all work together for the good of all of us.
What is needed:
- we need to rely on fair, reasonable and recognised experts on each pool to work out a solution
- we then all need to give them the chance to explain to us why they think it is fair and reasonable
- we all have to be ready to accept compromises
- we all need to focus on the big picture (as someone once taught me, successful business people think simply: how much money comes in and when, how much money do I need to spend and when - this is the big picture). We should let go of our beliefs of absolute justice and see what is best from a pragmatic point of view.
If we can agree and can prevent a request to go to Court to get directions on how to reconcile accounts, the deadline to start the distribution of money will be shorter than the March/April best case scenario.
Now for this, a miracle needs to happen. We need to agree to not disagree. We need to agree that it's not about being "right", it's about when we can have our money and how much.
For most of us, every month our funds are frozen represents a 5% opportunity loss, money we would have otherwise made from our trading - some more, some less. And it's compounding.
So I stand here on record saying, I'm happy to give away 20% of my money - compared to what I think I should receive (which is not relevant) - if I can get my money back in 2 months. This is probably double what I normally make, but it is a hell lot less than what it would cost all of us if only one foolish client decide not to agree.
Anyone with me on this?
skc - you are 100% right. The only issue, once all liquidation prices are known, is to agree on the reconciliation method.
Which means we all have 2 options:
1) we all agree to disagree; most will do this convinced that they have valid arguments.
2) we can all somehow (... a miracle must happen here ... ) agree on a common method - a consensus amongst all traders - those who had open positions and those who had not - those who suffered slippage as a result of the liquidation and those who did not.
What is the best outcome? There is no doubt in my mind that the second option offers a better outcome for everybody
a) because it will allow to distribute the money faster
b) because it will allow to distribute more money
Now if I stopped here, I should hear 100% of people say - yeah, agree 100%, more money and faster, I'm in.
OK, so lets go one step backwards and look at
1) why would option 2 get us all our money faster and get us all more money?
2) how can we get to a common consensus?
Why would option 2 get us all our money faster and get us all more money?
The answer is simple. Regardless of whether the cause is "right" or not, the minute the matter hits the court, we can all kiss our money good bye. Not because I have no trust in the courts, simply because disputes are costly (legal fees), and lengthy (this also means costly, because the Administrators will need to stay on longer). In addition, the matter is complex, with probably not many precedents - this will only add in cost and duration.
To make the matter worse, the more fees Deloitte will need to stay on the job, the less cash there will be left in MFGA for employees and creditors, and they will start suing too. And once there is no more cash left in MFGA, Deloitte will seek to get their fees paid from the segregated accounts - and rightly so.
Another point to consider is that whether it's fair or not, the regulation around the segregated account clearly states that customers funds are co-mingled, exposing all clients to the failure of one. This is clearly not fair, but this is the way it is.
Conclusion: it will take only one client who for whatever reasons decides go to Court (be it as a matter of principle and justice or his perceived own self interest) rather than accepting a pragmatic common resolution to put all the clients of the pool he belongs to in the mess. The irony is that the outcome of this process will be even more unfair, will result in huge delays in getting any of us our money back, and will result in much money available for distribution than if that individual had accepted the common solution proposed.
I've learned over the years that trading is not about being "right". Trading is about understanding risk and reward.
Going to court and fighting among each other might be about being "right", but it will bring no rewards and big losses (not even risk, because it's guaranteed losses).
2) How can we get a common consensus
Well, this certainly is not easy, although the prospects of failing to reach such a consensus should be a formidable motivation to at least try; if we succeed, this would be an achievement that we could all feel extremely proud of. We spend our time trying to outsmart each other, for once we have an opportunity to all work together for the good of all of us.
What is needed:
- we need to rely on fair, reasonable and recognised experts on each pool to work out a solution
- we then all need to give them the chance to explain to us why they think it is fair and reasonable
- we all have to be ready to accept compromises
- we all need to focus on the big picture (as someone once taught me, successful business people think simply: how much money comes in and when, how much money do I need to spend and when - this is the big picture). We should let go of our beliefs of absolute justice and see what is best from a pragmatic point of view.
If we can agree and can prevent a request to go to Court to get directions on how to reconcile accounts, the deadline to start the distribution of money will be shorter than the March/April best case scenario.
Now for this, a miracle needs to happen. We need to agree to not disagree. We need to agree that it's not about being "right", it's about when we can have our money and how much.
For most of us, every month our funds are frozen represents a 5% opportunity loss, money we would have otherwise made from our trading - some more, some less. And it's compounding.
So I stand here on record saying, I'm happy to give away 20% of my money - compared to what I think I should receive (which is not relevant) - if I can get my money back in 2 months. This is probably double what I normally make, but it is a hell lot less than what it would cost all of us if only one foolish client decide not to agree.
Anyone with me on this?
skc
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Agree and will take the same stance.
Well put. My thoughts exactly.
I am not familiar with all the product pools, but with ASX equity CFDs, my thought on using the average liquidation price and apply that one price to all positions held for that security seems to be a simple and fair to me. I have not come across other proposed method of reconciliation. Do you know what they are?
I also haven't heard anyone's reasoning with regards to not accepting slippage... I think the CFD PDS would dictate that there is little ground to stand there.
Does it need to be a client to stop distribution? We are creditors according to the administrator. We have the same status as former employees or system providers.
skc,
I believe the issue is this: once you apply a weighted average price, you will have to make adjustments to all accounts - for some, it will result in a profitable adjustment, for some it will be a negative adjustment; the problem arise from those who would not accept to give money back.
The allocation of fills to accounts is typically a manual process that MF Global performed every day. I've asked several time what method was used, and never got a definitive answer; I've been told it's "first in - first served", at other times I've been told that larger orders were filled first. Not sure it never was a matter of "who yells the loudest gets the best fills" or a "mates" thing.
My suggestion would be this: in the unpredictable events that unfolded after 1-Nov, I would suggest that no one can demonstrate they had a reasonable merit to justify receiving a better fill than others. It was a mess, every body wanted to get out, and the normal order execution process was broken. Therefore, applying a weighted average price for each instrument is the only fair method.
The next question is : how do you convince those who benefited from a "lucky" fill to give some money back?
i) we could rely on their common sense - it would be better for them and for everybody else to agree among us rather than letting the Court decide for us. And objectively, they should know that going to Court will delay things - and any one who thinks it can be done in a couple of months without significant cost would be well advised to check by themselves (Sonray's clients have not yet seen their money - Lehman's clients have not yet seen their money - do we want to add MF Global to this list?)
ii) we could push the weighted average method and put the burden on them to go to Court; they would have to prepare their case, fund it, get legal advice and hopefully along the way they will realise that they'd be better off accepting rather than argue - as you said skc the Client agreement the PDS states without ambiguity that there is no guarantee in terms of fills
iii) we could process the account reconciliation using the weighted average method, acknowledge that some will disagree with the method and isolate those who disagree by paying anyone who agrees with the method and leaving those who disagree to fight with what's left - I'm not sure our legal system would allow such a practice (unfortunately), and most likely those who disagree would go to Court to oppose the distribution
iv) we could come to some kind of commercial decision - use the good old 80-20 rule and find a compromise. Lucky people get to keep 20% of the positive slippage they experienced (compared to a weighted average); unlucky people get to keep 20% of the negative slippage they experienced. No one is perfectly happy, but we get an agreement in the end. If we are all adults, we should be able to find an acceptable middle ground that would be much better than bringing the matter to Court for god knows how long and at what price.
An alternative to using the weighted average method is to proceed with the distribution with the fills the way they happened, not wasting any time to figure out whether it's fair nor to calculate weighted average and apply the adjustments. Of course I can hear the "lucky" say: "Yes, this is very pragmatic, let's do this" and the "unlucky" say: "This is absolutely unfair, I will never agree to this".
Those who suffered negative slippage could to tap into MF Global Professional Indemnity Insurance, if they believe and can prove that MF Global (and/or The Administrators) failed to meet their obligation. Whether it's fair to leave the burden on them is a debatable. It would be better of course for everyone if those claims were submitted after the distribution of funds.
I think it finally comes down to finding a compromise between what's fair and what's practically best for everyone. But everyone should understand that the quest for fairness is unfortunately a long and costly road.
For the record, I suffered some negative slippage and am OK with it. I have already accepted that this is part of trading. I would rather see a quick resolution than trying to get some money back. I'm a profitable trader, not because I argue about the fills, but because I focus my energy on the next trade.
Intellectually and morally, I support the weighted average method because it is fair (and the fact I did experience negative slippage has nothing to do with it).
Practically my preference would be to just distribute the money with whatever balance is on everyone's statement. If we can avoid a court case by adopting a weighted average method, so be it, let's do the extra work.
If we can't avoid a Court case, then let's be very clear - we are all doomed. Like Sonray's clients, and like Lehman's brother - except for one thing: it will be our own doing, because we (clients) could have avoided it.
If the simplest solution meant getting the money in 2 months instead of 12 months and prevent an additional 40% haircut due to legal fees and additional Administrators' fees, would you still prefer the most fair solution?
2 comments: First, you are right, we need a methodology to reconcile the accounts. What I meant is that if there is a disagreement between various methodologies, we could pay everyone what the worse case scenario would give them. What's left in the pool is then subject to debate. Or we just distribute 50% of what's been recovered so far (i.e. 50% of 80% for CFDs and 50% of 67% for Futures).
Second, yes mmis4168, it seems pretty unfair that people like you who were sitting in cash would be affected by the shortfall in recovery from the margin money sitting overseas. And the setup of the segregated account is unfair, in that it exposes all clients to the wrong-doing or maverick behaviour of just one.
If only you were right ... just ask Sonray's customers, and Lehman's brother ...
PS: I did read the PDS, that was 8 years ago. I felt it was pretty unfair. I trusted that the application of margin would limit what an irresponsible trader could do. Trading is about understanding risks and accepting them. In fact embracing them.
No, this is not what I'm suggesting.so are you suggesting of fast agreement on your conditions (a weighted average) or we have to struggle?
I believe a weighted average is the fairest method.
But I would personally prefer to simply distribute the money based on current account balances, because it would be quicker and simpler (and cheaper). It's all about getting the money as quickly as possible - because the quicker we get it, the more money we'll receive.
For the record, I did suffer negative slippage - it wasn't the first time, won't be the last time. Slippage is part of trading. I accept that.
Some may not - if the only way to avoid court action and internal fighting is to adopt a weighted average method, then I'll support it. Not because I think it's the fairest method. Because I would get my money sooner. And definitely not because I might get some of my slippage back.
Even without a guarantee or compensation Fund, we could still distribute 50% of the money - this would leave enough in the segregated account to not have to take anything back.
And one thing is sure. Any money from partial distribution would end up in traders' pockets and no one else pockets. For money still in the segregated accounts, this is less certain.
You're an idealist mmis4168 - and good on you. Unfortunately life has taught me many times that the quest for fairness can be a long, frustrating and very costly road.
It won't be 1 or 2 extra months. It will be years and millions in fees. And not even a guarantee that in the end the result will be fair; which by the way no one will really care about, because by then there won't be any money left.
The only way to reach an acceptable outcome it to decide this among us. And to all be reasonable and ready to compromise. Let's forget about 100% fairness, not even all fairy tales are fair. Let's be pragmatic. If we want to continue to be traders, we need our money back, as quickly as possible.
Hi Hatton01 and all,
My understanding is that Deloitte will be in a position to finalise the accounts reconciliation as soon as they get all the liquidation prices (we should be pretty close from that now) and there is a consensus on the method to use for allocating the fills.
Once accounts are reconciled, Deloitte won't make a distribution as long as:
- clients have submitted claims that exceed their account balance
- clients are disputing the method used to reconcile accounts; the major issue comes from instruments for which exit prices (liquidation, orders fill and transfers) were in a large range between the 1-Nov and the 10-Nov.
- clients have suffered slippage compared to an exit price as of 1-Nov
and any of those above is planning to sue Deloitte, seek compensation and oppose the distribution of funds.
As long as this risk exists, Deloitte will need to go to Court to seek direction.
The only way to get a quick distribution of funds would be:
- to agree on the method (I think this was one of the task Deloitte was planning to undertake with the Committee of Creditors)
- to get all clients to agree on their statement balances
- and to get clients to commit not to oppose the distribution on the basis of the updated statement balance.
All the above might allow to avoid going to Court (hopefully).
Reasons for Deloitte not to proceed with a partial distribution:
- a partial distribution does not reduce the risk of people opposing that distribution for the same reasons mentioned above,
- while Deloitte could seek approval from the Court for a (conservative) partial distribution of funds before an agreement on the method is reached, they might be of the view that a better outcome is still to find an agreement on the method and then distribute what is available, and use the same distribution mechanism for any additional money collected in the future - which would make sense.
- or other reason
disclaimer: I am a simple futures trader and all the views that I have expressed are my own and imperfect thoughts due to my limited understanding of the situation. People sitting at the Committee of Creditors would certainly know more, but are not allowed to share information (other than information approved by Deloitte). I do not sit at the CoC. The only agenda I have is to help everyone (including myself) receiving their money back as soon as possible.
I think that compromise and common sense will be more useful to achieve this outcome than emotions and desire to achieve 100% fairness.
Going to Court will most definitely not help either. It will only significantly increase the time it will take to get our money back, and significantly decrease the amount of money we will receive. We should only consider going to Court as the last resort, and probably to achieve objectives different than receiving our money quickly.
1) you are correct, anyone can stop the distribution, including creditors (for example, JP Morgan in the US is attempting to block the distribution of funds to US clients)
2) clients is a different status than creditor - as clients, our rights are different than creditors' rights; and the money in the segregated accounts cannot simply be pooled with the money in the company, because it sits in a trust.
3) while we are clients, we are also all "contingent" creditors, i.e. potential creditors; our creditor status will be confirmed once it is confirmed that some money sitting with counter-parties will not be returned, which is very likely.
So we will end up being both clients and creditors: clients for the amount of money available in the segregated accounts, and creditors for the shortfall.
All creditors will be paid out money available with the company, once all assets have been sold, and priority creditors have taken their due (this includes for example paying employees entitlements).
I imagine that our rights as creditors (low priority) combined with the money available with the company (little) would result in a very low "cent to the dollars" payment (and most likely none).
The haircut we will suffer as clients on the money available in the segregated account should be small in comparison (20%-40%), assuming no one goes to Court to oppose the distribution of our funds, which could trigger a very long and protracted legal process that unfortunately would result in depleting these funds in addition to postponing their distribution.
Interesting interview with an (ex)commodities broker in the cattle sector.
http://www.financialsense.com/contributors/2011/12/02/ann-barnhardt/interview-transcript
http://www.financialsense.com/contributors/2011/12/02/ann-barnhardt/interview-transcript
Garpal Gumnut
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I would rather say it was the administrator who decided not to distribute early.
The problem is we need the agreement. I would prefer the most fair solution - not the simplest one.
hard to imagine honestly. The methodology is the key. how to treat the account worth 20000 AUD with one open DAX contract with margin of 13000 AUD and gain, lets say 1000 AUD, when margin is somewhere in UK or US? are you going to share the margin cost amongst the traders (PDS)? or debit the holder (the risk she/he took opening the position)? and 1000 gain? return 50% of the funds? and later when we agree to charge the holder a margin cost, we would ask him/her for return of few thousand? come on...
As we have, would have or at least we can "create" closing prices, debiting the acc holders for gains/losses on positions and their margins suppose to be on the cards.
The nature of segregated account, the law and regulator said that my money was safe. And yours too. I have spoken with MF Global about it, ASIC was on guard, politicians. The system was safe. And even if something unimaginable happens, I would get it back. I have not read PDS. but I am pretty sure you have not too 6 weeks ago. and 6 weeks ago you would not agree to take losses of your fellow traders, just because "'s written in the PDS".
so are you suggesting of fast agreement on your conditions (a weighted average) or we have to struggle?
it is clear for everyone here
You are kidding. I do not know the numbers, but if you pay some acc holders too much now, later it will be impossible to take it back and pay the others. look at example with dax contract.
for many 100% fair mechanism is a priority. I am not sure if it exists, but I would prefer to spend 1 or 2 extra months to find it.
I am overseas, with no job and couple of 000's AUD in my bank account. Have no means to return Australia. Had to take a loan from my family overseas to survive. I was full time trader - pretty bad one as I have lost almost everything in a such stupid way.
unfortunately I can not help you guys in Australia, but thanks for your effort and hard work.
Mate,
As one who many years ago was taken in similar fashion may I suggest the following.
1. You will be lucky to see 50% of your money ( I got 60% and recovered )
2. It doesn't matter how sophisticated an investor/ trader you were, someone else has your money.
3. It is a lawyers picnic.
4. It is an accountants picnic.
5. Read forums such as this as people were suss about MF and their model, so you don't make the same mistake again.
As Oscar Wilde I think said, "Losing one wife is tragic, losing two is pure carelessness.
Best of luck with your endeavours, settle soon and early and for 50% plus.
Otherwise spend years bitter and not in control of your destiny.
gg
Hi GG,
I think before you make statements like "you will be lucky to get back 50% of your money" you should check the facts ? Surely you dont want to make it any worse than what it is for mmis4168 or for that matter any other MF client.
Here is a link to Brent's URL. He is keeping a tally of the funds returned:
http://www.indextrader.com.au/images/OTC_Pool_Estimate_24_Nov_2011.GIF
For example in the CFD pool we are now short by $17 Mil out of a total of $84 Mil.
Thats 81% returned not 50%.
http://www.indextrader.com.au/images/Exchange_Pool_Estimate_24_Nov_2011.GIF
In the futures pool 67% of the money has been returned.
36M belonging to the futures pool is still held by the ASX who want an agreement with MF (UK) to release the funds to the local MF.
We also know where the missing funds are ie: with the counterparties.
There was no fraud or theft at MF (Aust) like with Sonray where clients will end up with 67 cents in the dollar!
I think before you make statements like "you will be lucky to get back 50% of your money" you should check the facts ? Surely you dont want to make it any worse than what it is for mmis4168 or for that matter any other MF client.
Here is a link to Brent's URL. He is keeping a tally of the funds returned:
http://www.indextrader.com.au/images/OTC_Pool_Estimate_24_Nov_2011.GIF
For example in the CFD pool we are now short by $17 Mil out of a total of $84 Mil.
Thats 81% returned not 50%.
http://www.indextrader.com.au/images/Exchange_Pool_Estimate_24_Nov_2011.GIF
In the futures pool 67% of the money has been returned.
36M belonging to the futures pool is still held by the ASX who want an agreement with MF (UK) to release the funds to the local MF.
We also know where the missing funds are ie: with the counterparties.
There was no fraud or theft at MF (Aust) like with Sonray where clients will end up with 67 cents in the dollar!
Garpal Gumnut
Ross Island Hotel
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Have written to many politicians & I was getting frustrated from not hearing back from any of them. Finally an email back from Andrew Robb.
Dear xxxxxx
Thank you for your email regarding the administration of MF Global Australia.
I understand your frustration with the administration process. The process of disbursing funds during administration can be slow and when there is a shortfall of funds, as may be the case in this instance, the process can be further delayed as the priority of creditors is determined.
The office of the Shadow Assistant Treasurer Mathias Cormann has contacted the administrators, Deloitte, and urged them to conduct the administration in a prompt and efficient manner to ensure that client funds are returned as soon as possible.
We will continue to monitor the situation to make sure that undue delays are avoided.
Thank you for bringing this important matter to my attention. Please feel free to stay in touch with my office.
Kind regards,
Andrew Robb
Dear xxxxxx
Thank you for your email regarding the administration of MF Global Australia.
I understand your frustration with the administration process. The process of disbursing funds during administration can be slow and when there is a shortfall of funds, as may be the case in this instance, the process can be further delayed as the priority of creditors is determined.
The office of the Shadow Assistant Treasurer Mathias Cormann has contacted the administrators, Deloitte, and urged them to conduct the administration in a prompt and efficient manner to ensure that client funds are returned as soon as possible.
We will continue to monitor the situation to make sure that undue delays are avoided.
Thank you for bringing this important matter to my attention. Please feel free to stay in touch with my office.
Kind regards,
Andrew Robb
Garpal Gumnut
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Thank you hatton01
1) for your relevant reply to gg re current status of funds collected
2) for sharing Andrew Robb's reply - I got the same one.
My understanding is that both the government and the opposition have contacted Deloitte expressing their concerns and their desire to see a seedy resolution.
Deloitte must however remain in the boundaries of what the law allows.
Our main challenge at this stage is to agree among ourselves on how to address 3 issues:
- should the cash-only accounts suffer a haircut, considering that the haircut results from account that had open positions?
- how to deal with the slippage experienced between 1-Nov and the date when positions got closed (close, transfer or compulsory close)?
- for instruments who got closed after 1-Nov with a wide range of price, how to deal with the slippage resulting from the allocation of fills to accounts (fill allocated versus weighted average price)?
In terms of process, it is important that:
- everyone expresses how they think
- everyone listens to other parties' arguments
- everyone balances the benefits of starting a legal challenge vs. the consequences of the legal action (delaying funds distribution, legal costs, ...)
Regardless of the resolution chosen for each of these 3 issues, the best solution is to come up with a common approach that everybody agree with; if not, Deloitte will have to go to Court to seek direction, and if people disagree and start to oppose the proposed plan, this will result in further delays and potential reduction of our funds in the segregated account (to pay for legal and administrators fees "working" to help find a solution we could not find ourselves; we'll have only ourselves to blame).
pf
Interesting article:
http://www.businessweek.com/news/20...to-weigh-illegal-use-of-funds-for-margin.html
http://www.businessweek.com/news/20...to-weigh-illegal-use-of-funds-for-margin.html
Hatton01, pifousyd and all others,
The comments that advise that we as clients of MFGA need consensus are absolutely spot on. What confuses me, however is that Deloitte are saying they need consensus amongst clients of MFGA for allocating haircuts and close out slippage, a methodology for fills etc and to go to court to get this approved before making a partial payment.
However there are enough cash balances in the accounts now to make a decent partial payment before going to court for approval of haircuts, close out prices etc. If we have 67% futures, 81% CFD, 80% FX Margin cash balances in these product pools, we could say with a very high degree of certainty, given that close out prices are now known, that even with close out slippage, haircuts to be allocated by whatever methodology, these cash balances are highly unlikely to drop below 50% in each product pool (the slippages reported so far are nowhere near this high - the main issue now is collection - so theoretically balances should not fall below the above %ages in each product pool now). So the way I see it 50% of all product pools should be easily able to be paid out in cash without the need to find consensus on the above points - this is what seems to have been applied elsewhere in US, Canada etc. If this is the case could Deloitte not have gone to court to get approval on 50% pay out of all cash balances in the last 3 weeks rather than saying that we have to wait till February? Or am I missing something here?
Can someone please explain why Deloitte need to hang on to this 50% in cash now as a pre-text for future haircuts, close out pricing methodology and slippage to be calculated when the combined effect of all of these have almost zero chance to reduce the product pool balances to less than 50% of what they should be?
If Deloitte are arguing that this 50% (which I think should be paid out) should be maintained in case we all go to court to sue each other as clients of MFGA and the resulting legal fees will reduce the balance below 50% in each product pool - then this needs to be seriously challenged.
With regards to close out prices - if I understand correctly no client account holder with MFGA is guaranteed the price of a fill done after 1 November even if this is on the statement.So if all clients who had open position do not actually know their fill price with certainty, doesn't a VWAP closing price methodology resolve this issue fairly? That way those who might have had an actual profit on close out are not unfairly advantaged over those who would suffered losses on actual lose out (in the event that they were told about the actual close out prices). VWAP close out methodology for clients with open positions I think seems fair given these are circumstances with which we all had very limited control. And if those with open positions as at November 1 still do not know with certainty what the close out prices are for positions in their account - I would hope this should help with consensus in agreeing VWAP
If we can agree on close out pricing methodology ASAP then we will be in a position to see what haircuts need to be applied either in the case of
1) Applying shortfall proportionally to all account holders (with open positions and cash only positions) on 1 November
2) Applying haircuts to open positions only on 1 November
I think we, as a collective group of client holders of MFGA, at that time will be in a better position to make a judgement about which of the 2 haircut methodologies above will offer the quickest and most efficient means of getting a consensus to keep this situation away from the courts and also give Deloitte fewer excuses to drag this on longer.
By the way does it make sense for us to vote to have Deloitte removed as administrators? Or will this involve too much backtracking and wasted time for the new administrator taking over?
If it doesn't make sense then ok, but we need to get narrow date ranges when close out methodology has been finalised - a date on what the effect on haircuts on the accounts will be (based on the 2 options above, given close out methodology agreed), and a date on when we get paid. If Deloitte can't agree to, or meet these deadlines, then we should ask for them to be removed and I think we should tell them this in advance.
If Deloitte are saying that each product group can be split into sub categories causing more complexity - that is rubbish - this is can be shown by a simple matrix based on the different sub categories on what the haircuts would be as long as an agreed close out methodology is adopted. Therefore In my view agreeing close out methodology ASAP between client account holders of MFGA should be the immediate priority. And I think VWAP is the fairest mechanism of doing this.
The comments that advise that we as clients of MFGA need consensus are absolutely spot on. What confuses me, however is that Deloitte are saying they need consensus amongst clients of MFGA for allocating haircuts and close out slippage, a methodology for fills etc and to go to court to get this approved before making a partial payment.
However there are enough cash balances in the accounts now to make a decent partial payment before going to court for approval of haircuts, close out prices etc. If we have 67% futures, 81% CFD, 80% FX Margin cash balances in these product pools, we could say with a very high degree of certainty, given that close out prices are now known, that even with close out slippage, haircuts to be allocated by whatever methodology, these cash balances are highly unlikely to drop below 50% in each product pool (the slippages reported so far are nowhere near this high - the main issue now is collection - so theoretically balances should not fall below the above %ages in each product pool now). So the way I see it 50% of all product pools should be easily able to be paid out in cash without the need to find consensus on the above points - this is what seems to have been applied elsewhere in US, Canada etc. If this is the case could Deloitte not have gone to court to get approval on 50% pay out of all cash balances in the last 3 weeks rather than saying that we have to wait till February? Or am I missing something here?
Can someone please explain why Deloitte need to hang on to this 50% in cash now as a pre-text for future haircuts, close out pricing methodology and slippage to be calculated when the combined effect of all of these have almost zero chance to reduce the product pool balances to less than 50% of what they should be?
If Deloitte are arguing that this 50% (which I think should be paid out) should be maintained in case we all go to court to sue each other as clients of MFGA and the resulting legal fees will reduce the balance below 50% in each product pool - then this needs to be seriously challenged.
With regards to close out prices - if I understand correctly no client account holder with MFGA is guaranteed the price of a fill done after 1 November even if this is on the statement.So if all clients who had open position do not actually know their fill price with certainty, doesn't a VWAP closing price methodology resolve this issue fairly? That way those who might have had an actual profit on close out are not unfairly advantaged over those who would suffered losses on actual lose out (in the event that they were told about the actual close out prices). VWAP close out methodology for clients with open positions I think seems fair given these are circumstances with which we all had very limited control. And if those with open positions as at November 1 still do not know with certainty what the close out prices are for positions in their account - I would hope this should help with consensus in agreeing VWAP
If we can agree on close out pricing methodology ASAP then we will be in a position to see what haircuts need to be applied either in the case of
1) Applying shortfall proportionally to all account holders (with open positions and cash only positions) on 1 November
2) Applying haircuts to open positions only on 1 November
I think we, as a collective group of client holders of MFGA, at that time will be in a better position to make a judgement about which of the 2 haircut methodologies above will offer the quickest and most efficient means of getting a consensus to keep this situation away from the courts and also give Deloitte fewer excuses to drag this on longer.
By the way does it make sense for us to vote to have Deloitte removed as administrators? Or will this involve too much backtracking and wasted time for the new administrator taking over?
If it doesn't make sense then ok, but we need to get narrow date ranges when close out methodology has been finalised - a date on what the effect on haircuts on the accounts will be (based on the 2 options above, given close out methodology agreed), and a date on when we get paid. If Deloitte can't agree to, or meet these deadlines, then we should ask for them to be removed and I think we should tell them this in advance.
If Deloitte are saying that each product group can be split into sub categories causing more complexity - that is rubbish - this is can be shown by a simple matrix based on the different sub categories on what the haircuts would be as long as an agreed close out methodology is adopted. Therefore In my view agreeing close out methodology ASAP between client account holders of MFGA should be the immediate priority. And I think VWAP is the fairest mechanism of doing this.
Before any funds can be returned, the Administrator has to get a court ruling as there are some clients who are now claiming more than what was supposed to be in there trading accounts because of opportunity loss costs etc. Others who think everyone should have to bear the cost of slippage. Others like myself who think we should not be liable for any slippage (as our funds were in cash) & should be paid interest on the balance as that was the agreement I had in place with MF as a Platinum CFD client.
Once we have had our day in court & there is a legal basis on how the distribution can be best made in a fair manner, there should not be any reason why there cant be a full distribution of existing funds.
If you look at the CFD pool, 85% of the funds our now in cash & earning interest. There has been a lot of misinformation spread about what happens when funds our under Administration. Like the Administrator gettting access to interest payments which is "simply not true". If you think about the Sonray case where there was "Theft & Fraud" & missing funds, clients will still end up getting 69 cents in the dollar thanks to the "Administrator" in this case.
So if you are a CFD client there is an extremely high probability you should get at least 85 cents in the dollar. A far cry from the another "Myth" that was spread that "we will be lucky to get 50 cents" in the dollar & the "money is all gone"!
Canada is not a good example for the early return of funds. The reason it happened in Canada is because there was already something in place for insolvancy, ie: the Canadian Investor Protection Fund. I hope Sonray & MF is the catalyst for the reform agenda that is needed urgently in Australia to protect folks like us from the risks of a broker going insolvant.
Once we have had our day in court & there is a legal basis on how the distribution can be best made in a fair manner, there should not be any reason why there cant be a full distribution of existing funds.
If you look at the CFD pool, 85% of the funds our now in cash & earning interest. There has been a lot of misinformation spread about what happens when funds our under Administration. Like the Administrator gettting access to interest payments which is "simply not true". If you think about the Sonray case where there was "Theft & Fraud" & missing funds, clients will still end up getting 69 cents in the dollar thanks to the "Administrator" in this case.
So if you are a CFD client there is an extremely high probability you should get at least 85 cents in the dollar. A far cry from the another "Myth" that was spread that "we will be lucky to get 50 cents" in the dollar & the "money is all gone"!
Canada is not a good example for the early return of funds. The reason it happened in Canada is because there was already something in place for insolvancy, ie: the Canadian Investor Protection Fund. I hope Sonray & MF is the catalyst for the reform agenda that is needed urgently in Australia to protect folks like us from the risks of a broker going insolvant.
