Business Insider recently spoke to two MF Global clients who’ve been affected by this whole debacle – both have had all or portions of their account money frozen due to the missing funds.
The lengthier write-up is here, but one tidbit that we thought was most interesting was what an independent investor, who wanted to go by his last name Patel, told us over email:
“I am a conservative investor. I maintained a significant amount of excess equity for my positions. Not making the excess equity available penalised individuals like me. All cash clients who liquidated last week even more.”
It’s true – of the 50,000 active accounts at MF Global, only 17,000 had positions on trades, according to the Wall Street Journal. Those 17,000 were moved to new brokers with only a portion of the margin. The remaining 33,000 – which just held cash or cash equivalents – are all frozen. So Patel – who had play it safe and taken measures to avoid risk by putting more money in his accounts to back up his trades – is now in the worst position as he cannot access the money he wasn’t even using to trade with. Any traders who had quickly liquidated positions in hopes of withdrawing their money before the bankruptcy are in the same situation.
Though honestly, no one’s in a good spot here. For investors who had open positions – the new brokers are asking them to put up more margin on the trades that were moved because not all the cash collateral was transferred with the trade. What a mess.