UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

In re

MF GLOBAL INC.,

Debtor.

Case No. 11-2790 (MG) 

SIPA

STATEMENT OF COMMODITY FUTURES TRADING COMMISSION IN 

SUPPORT OF TRUSTEE’S EMERGENCY MOTION FOR AN ORDER 

APPROVING THE TRANFER OF CERTAIN SEGREGATED CUSTOMER 

COMMODITY ACCOUNTS OF MF GLOBAL INC. AND RELATED 

MARGIN AND MOTION FOR EXPEDITED HEARING

The Commodity Futures Trading Commission (“CFTC” or “Commission”)

supports the emergency motion of James W. Giddens (“Trustee”), as trustee for the 

liquidation of the business of MF Global, Inc. (“MFGI”) under the Securities 

Investor Protection Act of 1970, as amended, 15 U.S.C. § 78aaa et seq., for entry 

of an order approving the transfer of certain segregated commodity customer 

accounts and related margin as well as the motion for expedited hearing. The 

CFTC is the federal agency responsible for the regulation of commodity futures 

and options, including the commodity business of MFGI, and for the protection of 

commodity customers. The CFTC’s regulations for commodity broker bankruptcy 

proceedings require the trustee to “immediately use its best efforts to effect a 
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transfer” of customer accounts no later than the fourth business day after the order 

for relief. 17 CFR § 190.02(e)(1). This requirement reflects the Commission’s 

judgment that liquidation of customer commodity positions in bankruptcy 

necessarily creates high risks to customers of loss of value of market positions as 

well as disruption of customers’ ability to use commodity positions for hedging 

risks and other business purposes. Liquidation of customer positions in connection 

with the bankruptcy of large commodity brokers such as MFGI also poses high risk 

of disruption of markets with effects on market participants beyond the 

immediately affected customers.

On October 31, 2011, the CFTC was advised by the General Counsel for 

MFGI that MFGI’s segregated accounts containing customer property and funds 

had a “significant shortfall.” See Declaration of Ananda Radhakrishnan ¶ 2 

(attached as Exhibit A). Segregation of customer funds is the foundation of 

customer protection in the commodity futures and swaps markets. Segregation 

must be maintained at all times, pursuant to Section 4d of the Commodity 

Exchange Act (“the Act”) and Commission Regulation 1.20. The Commission 

intends to take all appropriate action, within the purview of the Bankruptcy Code 

and the Act, to ensure that customers maximize their recovery of funds and to 

discover the reason for the shortfall in segregation. 
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The CFTC has reviewed the emergency motion and proposed order. The 

CFTC believes that the emergency motion offers the best available mechanism, 

albeit one that is imperfect, for minimizing losses to customers and disruption of 

markets. This is so notwithstanding the possibility that the planned transfer of 

accounts will not prevent all losses or disruption to customers.

The CFTC further strongly supports the need for an expedited hearing. The 

Commission’s regulations provide a limited time period for transfers to be 

accomplished while receiving the protection from avoidance provided by 17 CFR 

§ 190.06(g)(2). Derivatives clearing organizations must manage their risks, 

including by liquidating positions that are not supported by a clearing member. In 

the case of transactions cleared through MFGI, arrangements to pay obligations to 

clearing organizations promptly (i.e., once or twice a day) have been effectively 

suspended for three days as of the date of this motion. Derivatives clearing 

organizations that clear transactions of MFGI customers have, in order to facilitate 

protection of customers and avoid disrupting markets, extended forbearance, but 

such forbearance may end at any time the clearing organizations determine that 

protection of their membership as a whole and their proper functioning requires 

positions to be liquidated. As a result of MFGI’s inability to meet its current 

obligations, the accounts of its customers are currently frozen and, unless the 

positions are transferred promptly, are in imminent danger of forced liquidation.
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Following the proposed transfer, the CFTC will continue to work in 

cooperation with the trustee to identify and recover MFGI customer assets and 

ensure their return to customers.

Respectfully submitted,

Dan M. Berkovitz

General Counsel

Jonathan L. Marcus

Deputy General Counsel

____/s_Martin B. White

Martin B. White

Assistant General Counsel

Commodity Futures Trading Comm’n

1155 21st Street NW

Washington, D.C. 20581

(202) 418-5120 
EXHIBIT A

DECLARATION OF ANANDA RADHAKRISHNAN
UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

In re

MF GLOBAL INC.,

Debtor.

Case No. 11-2790 (MG)

SIPA

Declaration of Ananda Radhakrishnan

1. I am Ananda Radhakrishnan, Director ofClearing and Risk at the U.S.

Commodity Futures Trading Commission. In that capacity, I am responsible

for the oversight of all derivatives clearing organizations registered with the

CFTC and the activities ofits clearing members, which include CFTC

registered futures commission merchants.

2. On Monday, October 31, 2011, at 7:18 p.m., I received through my official

government e-mail account the attached e-mail from Laurie Ferber, General

Counsel for MF Global, Inc., advising the Commission that MF Global's

segregated accounts containing customer property and funds had a
"significant shortfall."

I declare under penalty of perjury that the foregoing is true and correct.

Executed on November 2,2011.

Ananda Ra hakrishnan

Director, Division ofClearing and Risk

U.S. Commodity Futures Trading Comm'n
Radhakrishnan, Ananda

From:

Sent:

To:

Cc:

SUbject:

Ferber, Laurie (NY Int) <LFERSER@mfglobal.com>

Monday, October 31, 2011 7: 18 PM

macchiarolim@sec.gov; Sollazzor@sec.gov; bujakb@sec.gov; Wasserman, Robert S.;

Radhakrishnan, Ananda; marren@cboe.com

george.c.gallagher@us.pwc.com

17a-11

This is to inform you that MF Global Inc. has discovered a significant shortfall in its segregated funds account. The

company is continuing to review the circumstances of the shortfall.

Laurie R. Ferber

Genral Counsel

DISCLAIMER: MF Global Ire. is a U.S.-registered futures commission merchant and member of the NFA and is a U.S.-registered broker-dealer and member of the CBOE,

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