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Tonight's Issue: Continued Participation or NotCraig Harris I'm sending the weekend edition a little early here on Friday evening. So I have to say a few more words about MF Global this weekend and put my other commentary on the cutting room floor. This is important. This isn't some poser internet goof coming from mom's basement talking about futures trading. This is someone who's done it professionally and for a living for decades. I've been on the inside and the outside. According to many I would be part of the 1 percent. Feel free to share it. According to what I have read, 150,000 accounts are affected, many through Lind-Waldock and other subsidiaries. It has already put a lot of futures introducing brokers out of business and probably subject to litigation through no fault of their own. I have linked and re linked several MFG articles this evening. The usual sequence of events in a bankruptcy such as this would be to do a bulk transfer of all the accounts to a solvent broker. In this way, the customer maintains his ability to trade, and if he doesn't like the new broker, then he could transfer to a different broker. It's a very simple process and can all be done by computer handshake. It is done. All the time. It has been long assumed that the exchange acts as a guarantor of all exchange members, MF Global being one. These ideas are all breaking down now right in front of us. For decades, when an exchange member FCM goes bankrupt, first the positions transfer, then the customer segregated margin transfers. Bada boom. No problems. It is a completely mechanical computerized process. That's what the CFTC and the Exchange are there to guarantee through their fees and audits and commissions. It is fundamental to the continued viability and existence of the futures markets which are in turn fundamental to the existence of this financial system as we know it today. I see this event shaping up as the beginning of the end. It is the beginning of the loss of all or any remaining legitimacy. Customers are supposed to and need to remain wholly solvent and able to trade the entire time. This is the way this system is supposed to work. This is the way it has worked for decades. By it working this way it has allowed the development of what we have today. Now comes MFG and we have customer segregated account funds frozen, clients unable to trade for weeks, requests for more margin to maintain positions...and now the court appointed trustee saying it is unclear if customers will get all their money back. This is a regulatory fail, a moral fail, a political fail, a system fail and overall an epic fail. All the way around I hear bells and buzzers ringing. It is shaping up as a theft so large it is not even being recognized by the governments, courts their media and regulatory bodies as a theft. So this blasts a hole in the notion of customer segregated funds. MFG passed a CFTC audit days before they declared bankruptcy and wired customer segregated funds to JP Morgan to the best of the currently available information. That is all criminal activity which happens to fit in with my current view of the world which is that it has developed into a giant criminal enterprise and corrupt system which is incapable of prosecuting or correcting itself. The regulatory bodies and the government have the doublespeak that they don't know what happened. Who does? A criminal enterprise which they are all obviously part of. There is no hesitation to rip people off because there are no consequences for doing so. MF Global is developing into a much bigger deal than people are allowing for. Right off the bat you have 150,000 people who may now see the light if they hadn't already. You have basically every other market participant who wasn't affected, people like me, watching and waiting for the outcome. I don't think they're going to like it. I don't like it so far. I told a VP who I've met personally and known for years at the firm I trade with that I think this is going down a path that has the potential to effectively kill the retail futures industry. I am therefore watching this closely. The path it is going down is not a good one. The path this is going down argues for non participation. I have been thinking about this a lot. Almost night and day. This is how I make my living. I have most of my liquid net worth in a futures account. It's a lot of money. I had planned to do this for the forseeable future. Despite my feelings that my broker is above board, that they are a non proprietary trader, this event is setting a precedent. Suppose my broker's bank declares bankruptcy and the customer segregated funds went missing. That's not my broker's fault. The bigger issue is that there is now effectively no protection because a precedent is being set as we speak. If your money is in a futures account, any futures account, it is all at risk and subject to confiscation at any time. -- All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident." -- Arthur Schopenhauer ### Craig Harris 321gold Ltd |
