Significant Developments in the Liquidation Proceeding of MF Global Inc.

November 18, 2011

Since our last client update, there have been a number of significant developments in the liquidation proceeding of MF Global Inc. (“MFGI”), under the Securities Investor Protection Act of 1970 (“SIPA”), in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). We are pleased to provide you with a brief summary of some of the more notable developments in the SIPA proceeding of MFGI (“SIPA Case”). If you would like additional information concerning the SIPA Case or the chapter 11 cases of MF Global Holdings Ltd and MF Global Finance USA Inc., we would be happy to discuss these matters with you in greater detail.

Transfers and Distributions to MFGI’s Cash-Only Customers

On November 17, 2011, the bankruptcy court entered an order (“Order”) approving the Trustee’s expedited request to return a significant portion of the $869 million in cash to as many as 23,300 former commodities customers (“Cash-Only Customers”) whose customer accounts held only unencumbered cash or cash equivalents as of the October 31, 2011 (the “Filing Date”). The Order was entered over the objections of certain commodities customers whose customer accounts held non-cash assets. The Trustee indicated that the bulk transfer was facilitated by a $250 million guarantee provided by the Chicago Mercantile Exchange (“CME”) which has been made applicable to this bulk transfer and could potentially cover any overpayments that provide Cash-Only Customers with more than their pro rata share. According to the Trustee, the Order (in conjunction with Court’s November 2, 2011 order authorizing the bulk transfer of approximately 17,000 commodities accounts with open commodities positions) will provide nearly all of MFGI’s former commodities customers with access to some portion of their assets prior to the claims process.

The Order authorizes the Trustee to provide the Cash-Only Customers with a 60% distribution of the total account cash balances in accordance with MFGI’s books and records as of the Filing Date or approximately $520 million. The transfer and distribution is primarily to be effectuated through the CME and other registered derivatives clearing organizations to one or more qualified transferee futures commissions merchants. Given MFGI’s shortfall in customer segregated funds, which has not yet been accounted for and is still being investigated by the Trustee in coordination with others, the Trustee will be retaining approximately 40% of the cash associated with the Cash-Only Customers’ accounts. The Cash-Only Customers will be able to assert customer claims for the remaining cash trapped in their accounts through the claims process that is established by the Court. The Trustee has indicated that there may be additional interim distributions.

MFGI Application for Claims Procedures

On November 15, 2011, the Trustee filed an application (“Application”) on shortened notice seeking court approval of parallel claims processes for both commodity futures customer claims and securities customer claims and an additional claims process for general creditor claims. A hearing on the Application was held on November 16, 2011; however, in light of the less-than-twenty-four hours notice of the hearing and the objections that were filed to the Application, the bankruptcy court adjourned the hearing on the Application to November 22, 2011 at 3:00 p.m. (EST). The objectors, among other things, contended that the Application seeks a set of unnecessarily lengthy procedures for the return of customer property. It is anticipated that the claims procedures and deadlines specified in the Application may be modified by the Trustee to accommodate some of the objectors in advance of the hearing that is scheduled for November 22, 2011.

MFGI Protocol for Terminating Safe Harbor Transactions

The Trustee has indicated that prior to the Filing Date, a number of market participants had entered into derivatives contracts, repurchase agreements and other transactions that are subject to the safe harbor provisions of the Bankruptcy Code (“Safe Harbor Transactions”) with MFGI, that are scheduled to close after the Filing Date. Accordingly, the Trustee, in cooperation with the Securities Investor Protection Corporation (“SIPC”), developed a protocol (“Termination Protocol”) for terminating and closing out these Safe Harbor Transactions. It should be noted that these termination and closeout procedures only apply to Safe Harbor Transactions that are exempt from the automatic stay (See 11 U.S.C. §§ 362(b)(6), (7), (17), (27), 546, 555, 556, 559-562).

In accordance with the Termination Protocol, market participants may terminate and close out Safe Harbor Transactions by completing a form of Termination Notice of Safe Harbor Transaction (“Termination Notice”) which is available online at and submitting it, along with a copy of any relevant agreement(s), to the following address:

Hughes Hubbard & Reed LLP
Counsel for James W. Giddens, trustee for the SIPA Liquidation of MFGI
One Battery Park Plaza
New York, New York 10004
Attn: Robert T. Ford

Pursuant to the Termination Protocol, market participants should determine the termination date and compute the amount of gains or losses in accordance with the applicable termination and close out procedures of the agreement(s) that govern the Safe Harbor Transaction. In the event that a Safe Harbor Transaction is not governed by an agreement that includes termination and close out procedures, the Termination Protocol provides that the termination date should be a date that is between the date of the Termination Notice and November 30, 2011, and the amount of gains or losses should be calculated in a commercially reasonable manner that is consistent with market practices. Notwithstanding the Termination Protocol, any claims against MFGI that arise from the termination and closing out of a Safe Harbor Transaction, must be submitted in accordance with the formal claims processes that are established by the Court.

Requests for Additional Information

General information regarding the SIPA Case, including updates posted by the Trustee, is available online at For information concerning individual commodities accounts, including account balances or whether an account has been transferred, customers can send an e-mail message to, indicating their name, MF Global account number, office code and contact details.

If you require any further information regarding MF Global, the SIPA Case, the Order, the Termination Protocol, the Application or claims that you may have against MFGI or any of its affiliates, please feel free to contact your primary attorney at Seward & Kissel LLP.