Division of Clearing and

Risk

Division of Swap Dealer

and Intermediary

Oversight

U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

115521 st Street, NW, Washington, DC 20581

Telephone: (202) 418-5000

Facsimile: (202) 418-5547

aradhakrishnan@cftc.gov

gbarnett@cftc.gov

Ananda Radhakrishnan

Director, OCR

Gary Barnett

Director, OSlO

November 2,2011

Tim Doar

Managing Director, Risk Management

Chicago Mercantile Exchange

Re: Notification of Post-Relief Transfer Pursuant to Commission Regulations 190.02(a)(2) and

190.06(g)(2)(i)

Dear Mr. Doar:

This letter is in response to your letter, written on behalf of the Chicago Mercantile

Exchange (CME), dated November 2, 2011 (the CME Letter), notifying the Commission of the

CME's intention to transfer certain customer positions as a result of the insolvency proceedings

of MF Global Inc. (MF Global), one of its clearing members. The CME Letter is submitted

pursuant to Commission Regulation 190.02(a)(2), which requires a clearing house, prior to

transferring customer positions under Section 764(b) of the Bankruptcy Code, to notify the

Commission of its intent. If the Commission is so notified and does not disapprove pursuant to

Commission Regulation 190.06(g)(2)(i)(B), such transfer may not be avoided by the bankruptcy

trustee.

The CME, in its letter, estimated that, at the close of business on November 1,2011, MF

Global's current segregated funds requirement was approximately $5,445,839,890, and that there

was a customer segregated funds shortfall at MF Global of $633,027,696, or a deficiency of

approximately 11.6%. In order to minimize disruption to the markets and to protect the integrity

ofthe marketplace and market pmiicipants, CME has worked to find clearing members who will

accept MF Global segregated positions. CME has identified potential transferee FCMs who are

willing to accept the transfer of all of MF Global customer segregated account positions of retail

customers and substantially all of MF Global customer segregated accounts of institutional

customers, but has not yet located transferee FCMs for all MF Global customer accounts of

"locals" who are members of an Exchange and act as liquidity providers. CME represents that a
Mr. Tim Doar

November 2,2011

Page 2

difficulty associated with transfer of such accounts is the somewhat unique risk profile they can

present, that CME will continue to work diligently with potential transferee FCMs in an effort to

facilitate the transfer of all MF Global customer segregated positions and that CME believes that

confirmation from the Commission that it will not disapprove the proposed transfers will assist in

this regard.

CME has proposed transferring such positions as have been accepted, and a portion ofthe

related customer segregated collateral it is holding (an amount sufficient to margin those

positions at the clearing firms receiving such positions). No funds that are at MF Global or in its

customer accounts at banks will be transferred. The total amount of MF Global customer

segregated funds on deposit at the CME is $2,434,265,227, and it is anticipated by CME that a

proportionate share of the roughly $1,449,069,869, or approximately 60% of the MF Global

customer segregated funds on deposit at the CME, would be transferred to the receiving clearing

firms to margin the positions being transferred to them. That proportion would be based on the

relationship of the SPAN risk plus short-option value less long-option value for the positions to

be transferred for each transferee and the SPAN risk plus short-option value less long-option

value for all of the MF Global customer positions cleared at CME. The balance of the MF

Global customer segregated funds would be retained by CME pending further direction from the

Commission and/or bankruptcy court.

CME anticipates that MF Global customer segregated account positlons will be

transferred to two or more of the following five clearing members in good standing: ABN

AMRO Chicago Clearing, ADM Investor Services, Dorman Trading, FC Stone, RJ. O'Brian,

and/or Rosenthal Collins Group.

The Division of Clearing and Risk (DCR) and the Division of Swap Dealer and

Intermediary Oversight (together with DCR, the Divisions) have reviewed the CME Letter.

Under Commission Regulation 190.06(g)(2)(i)(B), if the Commission does not disapprove the

transfer, such transfer may not be avoided by the bankruptcy trustee. Acting pursuant to the

authority delegated to them by Commission Regulation 190.1 O(d), the Divisions hereby notify

you that the Commission does not disapprove the transfer of such positions set forth in the CME

Letter and in the manner described therein.

On behalf of the Commission, the Divisions reiterate that customer segregation is the

foundation of customer protection in the commodity futures and swaps markets. Segregation

must be maintained at all times, pursuant to Section 4(d) of the Commodity Exchange Act (the

Act) and Commission Regulation 1.20. As mentioned above, MF Global does not have sufficient

funds in segregation to meet Commission requirements. The Commission intends to take any and

all action afforded to it, within the purview of the Act and the Bankruptcy Code, to ensure that

customers maximize their recovery of funds and to discover the reason for the shortfall in

segregation.

2
Mr. Tim Doar

November 2,2011

Page 3

This letter is based upon the representations of CME and applicable laws and regulations

in their current form. If you have any questions concerning this correspondence, please contact

Jon DeBord, Special Counsel, at 202-418-5478 or jdebord@cftc.gov.

Sincerely,

Gary Barnett

Director, DSIO

3

Anan hakrishnan

Director, DCR