European customers of MF Global – particularly those with positions on the London Metal Exchange (LME) – have been struggling to close or transfer positions to other brokers. The LME and LCH.Clearnet, the clearinghouse for the exchange, say they have been working with administrators of the bankrupt holding company’s UK unit on the problem.
KPMG, the administrator appointed to wind down MF Global’s European arm, reportedly has said that the company had 10,000 clients in Europe, but a spokeswoman for the LME declined to say how many of those were LME clients or how many had so far transferred positions on the exchange. “That is proprietary information and we are blocked from providing that information,” she said.
The LME said it is working the LCH.Clearnet Ltd. and KPMG to facilitate transferring clients to more than 40 other LME clearing members. Before being suspended by the exchange on Monday, MF Global UK Ltd. was a Category 1 ring dealing member of the LME and one of 12 member companies that participated in the twice daily open outcry sessions on a small ring of red leather benches.
LME clients in the United Kingdom told reporters this week that information on how to get out of positions with MF Global had been difficult to come by and one told London-based Metal Bulletin that attempts to sell a copper position in a falling market so far had been impossible because MF Global trades had been frozen.
“So I’ve got a stagnant position in a falling market, which I could have closed out this morning at a substantially higher price,” the MF Global client said.
By the end of the week, customers able to work with other brokers were told by LCH.Clearnet to complete required documentation listed on its website to transfer positions to other LME clearing members.
Metals brokers were increasing the credit lines of clients to take on the additional positions because KPMG had not yet authorized release of margin payments previously made to MF Global. “Clients should be made aware that positions are being transferred without any collateral,” the LME said in a statement. “Clients that wish to transfer will need to make arrangements to post collateral with their replacement clearing member.”
The LME added that surplus collateral will be returned by KPMG “in due course” and that clients who do not elect to transfer positions will be closed out. While LCH.Clearnet has said that it intends to continue to transferring clients on Friday and then reassess the positions at the end of the day, the reassessment is expected to be ongoing.
As of Friday and continuing through Tuesday, the LME said that LCH.Clearnet will be rolling all LME contracts for TOM/Next delivery to the Nov. 9-11 prompt date. “The situation will then be reassessed,” officials said. The spokeswoman declined to predict when the process would be completed.