MF Global brokerage deal with CME held off by judge

NEW YORK--A judge on Wednesday held off approving a deal between the trustee unwinding the brokerage of MF Global Holdings Ltd. and CME Group Inc. that calls for the futures exchange operator to turn over about $130 million in property that will go to former customers of the collapsed brokerage.

Judge Martin Glenn of U.S. Bankruptcy Court in Manhattan said he would take the matter "under submission," a common line used by the laborious judge throughout this and other cases.

The latest version of the deal includes an agreement between the brokerage trustee, James W. Giddens, and Louis J. Freeh, the trustee in charge of MF Global's parent company. Essentially, Mr. Freeh wants the right down the road to fight the $130 million being allocated to customers. It's possible that Mr. Freeh will pursue claims against the brokerage as an individual customer, which typically gets paid ahead of other creditors in a brokerage liquidation.

"We believe the likelihood that such a challenge ever occurs is remote," said Hughes Hubbard & Reed LLP's James B. Kobak Jr., a lawyer for Mr. Giddens.

In all, CME would transfer $160 million and the proceeds from exchange memberships to Mr. Giddens. The $130 million will then be turned over to brokerage customers, to be split between U.S.-based and overseas accounts. The additional $ 30 million would go to Mr. Giddens and would be allocated later.

James Koutoulas, a lawyer representing a group of MF Global's commodity customers, said in court that he hopes customers get the money as soon as possible.

The judge didn't indicate why he'd wait to rule on the settlement, which has wide support among parties involved in the case. Most bankruptcy judges rule from the bench on such matters.

Read the rest at Dow Jones.

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