UNITED STATES BANKRUPTCY COURT 

SOUTHERN DISTRICT OF NEW YORK NOT FOR PUBLICATION 

In re: 

MF GLOBAL INC., 

Debtor. 

Case No. 11-2790 (MG) SIPA 

MEMORANDUM OPINION AND ORDER DENYING EMERGENCY MOTION TO 

COMPEL JAMES W. GIDDENS, TRUSTEE, TO AVOID USING FUTURES 

COMMISSION MERCHANTS AND CLEARING EXCHANGES 

A P P E A R A N C E S:

PAUL HAMANN 

Pro Se

511 Beverly 

Lake Forest, Illinois 60045 

HUGHES HUBBARD & REED LLP 

Counsel for James W. Giddens, Trustee for the SIPA Liquidation of MF Global Inc. 

One Battery Park Plaza 

New York, New York 10004 

By: James B. Kobak, Esq. 

 Jeffrey S. Margolin, Esq. 

 Josiah S. Trager, Esq. 

 Dina R. Hoffer, Esq. 

 

MARTIN GLENN 

UNITED STATES BANKRUPTCY JUDGE 

Paul Hamann (“Hamann”), pro se, filed an Emergency Motion To Compel James W. 

Giddens, Trustee, To Avoid Using Futures Commissions Merchants and Clearing Exchanges

(the “Motion”). (ECF Doc. #913.) James W. Giddens, Trustee for the liquidation of MF Global 

Inc. (“MFGI”), (the “Trustee”), filed an opposition to the Motion. (ECF Doc. #949.) For the 

reasons explained below, the Court denies the Motion. 

 

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BACKGROUND 

The background of this case has already been discussed in numerous opinions of this 

Court and will not be repeated here. On November 2, 2011, the Court approved the Trustee’s 

initial request to complete a bulk transfer of customer accounts containing open U.S. commodity 

contracts and a percentage of the associated margining collateral to futures commissions 

merchants (“FCMs”), other than MFGI. (ECF Doc. #14.) On November 17, 2011, the Court 

approved a second partial transfer of certain customers’ cash-only accounts. (ECF Doc. #316) 

(“Second Bulk Transfer Order”). On November 23, 2011, the Court issued an order establishing 

parallel claims processes for customers’ commodity futures claims and securities claims, which, 

among other things, established the Bar Date of January 31, 2012, to submit claims for former 

MFGI commodities and securities futures customers. (ECF Doc. #423.) On December 9, 2011, 

the Court approved a third bulk transfer of certain property of commodities futures customers, 

(ECF Doc. #717), and also a bulk transfer of certain property of securities customers, (ECF Doc. 

#718) (together, the “Third Bulk Transfer Order”). 

As of October 31, 2011, the filing date of MFGI’s liquidation proceedings, Hamann’s 

account at MFGI held physical property consisting of four palladium certificates, $16,389 in 

cash, and no open futures positions. Through the Second Bulk Transfer, Hamann received 

$9,834 in cash. After the Third Bulk Transfer, all eligible customer claimants had received a 

72% pro rata distribution of their property. Those customers claiming physical property had the 

opportunity to submit a deposit of 28% of the value of their property in order to receive their 

physical property; upon the receipt of the deposit, the Trustee arranged for the transfer of the 

physical property through an authorized derivatives clearing organization (“DCO”) to a 

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participating FCM, which would then transfer the physical property to the customer.1 Hamann 

elected to deposit 28% of the value of his physical property, or $28,460.66, and he received a 

distribution of four palladium certificates via a DCO (specifically, the Chicago Mercantile 

Exchange (“CME”)) to an FCM (specifically, R.J. O’Brien & Associates). In sum, Hamann has 

received a 72% pro rata distribution along with all other eligible customers in accordance with 

the bulk transfer orders of the Court. 

DISCUSSION 

In his Motion, Hamann appears to request that the Court direct the Trustee to transfer 

physical customer property either to the banks currently in possession of the property or directly 

to the customers themselves. See Motion, at 3. He also requests the Court to direct the Trustee 

to inform all former MF Global customers that the CME’s credit rating has been downgraded. 

See id. 

Pursuant to section 78fff(b) of the Securities Investor Protection Act (“SIPA”), “to the 

extent consistent with the provisions of [SIPA], a liquidation proceeding shall be conducted in 

accordance with, and as though it were being conducted under chapters 1, 3 and 5 of subchapters 

I and II of chapter 7 of title 11.” 15 U.S.C. § 78fff(b). The Trustee’s duties include liquidating 

the commodities broker arm of MFGI to the extent not inconsistent with SIPA. Id. § 78fff-1(b). 

The Trustee’s liquidation of the commodities broker arm of MFGI is governed by subchapter IV 

of chapter 7 of the Bankruptcy Code (the “Commodity Broker Liquidation Provisions”), as 

supplemented by the Commodity Exchange Act, 7 U.S.C. § 1 et seq., and the regulations 

 

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 The alternative was liquidation of the physical property, followed by a 72% distribution of the proceeds to 

the customer. 

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promulgated by the Commodities Futures Trading Commission thereunder, 17 C.F.R. §§ 

190.01–190.10 (the “Part 190 Regulations”). 

Under the Commodity Broker Liquidation Provisions, the Trustee is obligated to “return 

promptly to a customer any specifically identifiable security, property, or commodity contract to 

which such customer is entitled, or shall transfer, on such customer’s behalf, such security, 

property, or commodity contract to a commodity broker that is not a debtor under this 

title. . . . ” 11 U.S.C. § 766(c) (emphasis added). The Bankruptcy Code defines a “commodity 

broker” as a “futures commission merchant, foreign futures commission merchant, clearing 

organization, leverage transaction merchant, or commodity options dealer. . . .” 11 U.S.C. 

§ 105(5). Similarly, under the Part 190 Regulations, a “commodity broker” is defined as “any 

person who is registered or required to register as a futures commission merchant under the 

Commodity Exchange Act.” 17 C.F.R. § 190.01(f). 

The Third Bulk Transfer Order expressly instructed the Trustee to make transfers to 

customers “in consultation with the Facilitating DCO and in conjunction with the transferee 

FCM (if one has been established for that customer).” Third Bulk Transfer Order, at 3. That 

same order also provided that “the Trustee—upon advice and approval of SIPC—will seek and 

may use the assistance of the Chicago Mercantile Exchange Group, Inc., and other registered 

derivatives clearing organizations . . . that agree to facilitate the transfers.” Id. 

The instructions in section 766(c) are conjunctive. The Trustee is instructed to return 

promptly specifically identifiable customer property either to the customer or to a commodity 

broker that is not a debtor on behalf of the customer. The Third Bulk Transfer Order is 

permissive: “[T]he Trustee will seek and may use the assistance of the Chicago Mercantile 

Exchange Group, Inc., and other registered derivatives clearing organizations.” To facilitate a 

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rapid transfer of money and property in the context of this large and complex case, the Trustee 

proposed, and the Court approved, the Third Bulk Transfer Order that included the use of DCOs 

and FCMs to effect transfers of customer property. That procedure is permissible under the 

applicable statutes and rules. Neither Hamann nor other customers objected to the proposed 

order on the grounds asserted in this Motion. Hamann and all other eligible customers have 

already received their pro rata 72% distributions under the three bulk transfer orders. The 

Trustee has also stated that he does not envision further bulk transfers and is now at the point of 

settling individual claims through the parallel claims process established by this Court. There is, 

therefore, no live controversy whether a different procedure should now be ordered. For those 

reasons, Hamann’s request that the Court direct the Trustee to refrain from utilizing DCOs and 

FCMs is denied. 

Hamann’s request that the Trustee be directed to inform all former MFGI customers that 

the CME’s credit rating has been downgraded is likewise denied. No legal basis for this 

requested relief is provided. 

CONCLUSION 

 For the reason stated above, the Motion is DENIED. 

Dated: March 6, 2012 

 New York, New York. 

 

 _____/s/Martin Glenn_______

 MARTIN GLENN 

United States Bankruptcy Judge 

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