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James L. Koutoulas, Esq. (Pro Hac Vice Pending) 190 S. LaSalle St., #3000 Chicago, IL 60603 (312) 836-1180 James L. Koutoulas Vincent P. Schmeltz III (Pro Hac Vice Pending) Deborah L. Thorne (Pro Hac Vice Pending) Kathleen L. Matsoukas (KL-1821) BARNES & THORNBURG LLP One N. Wacker Drive, #4400 Chicago, IL 60606 (312) 357-1313 Attorneys for Commodity Customer Coalition UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

In re: MF GLOBAL HOLDINGS, LTD, et al., Debtors. In re: MF GLOBAL INC., Debtor.

Chapter 11 Case No. 11-15059 (MG) Jointly Administered

Case No. 11-02790 (MG) (SIPA)

OBJECTION TO THE SIPA TRUSTEES EXPEDITED APPLICATION FOR ENTRY OF AN ORDER ESTABLISHING PARALLEL CLAIMS PROCESSES, ETC. Certain commodity broker customers (the Commodity Customer Coalition)1 of MF Global Inc. (MFGI), hereby object to the Trustees Motion for an Order: (1) establishing parallel claims processes for commodity futures customer and securities customer claims; (2) approving the

The Commodity Customer Coalition speaks on behalf of over 7,000 MF Global Customers. Within that group, about 80 representatives have formally retained Mr. Koutoulas as pro bono counsel, including, a hog farmer from central Illinois, as well as those other customers listed on Exhibits A and B, have more than $25 million held in customer segregated accounts frozen.

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form and manner of the publication and mailing of the notice of commencement of this proceeding; (3) specifying procedures and forms for the filing, determination, and adjudication of claims; (4) fixing a date for the entry of a meeting of customers and other creditors; and (5) fixing an interim reporting procedure pursuant to SIPA. In support of their objection, the Commodity Customer Coalition states: 1. The Commodity Customer Coalition (CCC) is a grass roots organization and

represents a growing number of former MF Global clients, currently numbering over 7,000. The CCC is organized by a volunteer group of commodity futures professionals who are working on a pro bono basis to represent MF Global customers in the bankruptcy process. In a very short time, the group has created electronic communication networks, a website, organized thousands of customers with frozen assets, and is working on behalf of all MF Global commodity account holders to ensure the swift and complete return of these assets. 2. In addition to authoring a white paper on the bankruptcy crisis for non-financial

professionals, the CCC has already filed two motions with the bankruptcy court. One seeks to protect the primacy of customer segregated funds over the claims of creditors, while the other seeks a swift alternative claims process to the arduous one proposed by the SIPC Trustee. The CCC has already developed an outline to such a plan. The CCC is also working in support of the motion filed by Thomas Butler seeking the immediate release of 85% of customer funds and has supported the National Introducing Broker Associations efforts on behalf of introducing brokers. The CCC also is seeking the formation of an ad-hoc committee to represent the interest of former MF Global customers in the bankruptcy processin both matters being administered by this Court. The CCC also will seek to work with Mr. Rosens group of 40 NYMEX floor brokers, as well as any other interested MF Global customers.

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3.

The Trustee has filed a motion, with nearly no notice, that impacts the rights of all

MFGI customers, perhaps irreparably. By implementing a claims process, the Trustee effectively cements this as a liquidation under the Securities Investor Protection Act (SIPA), even though a SIPA Liquidation may not actually be in the best interests of all of MFGIs customers. 4. There are at least three major flaws in the Trustees planalthough the Commodity

Customer Coalition has only had a few hours to examine the Trustees seventy-six page submission and prepare this response (Exhibit G is the Trustees plan). The Commodity Customer Coalition respectfully suggests that it could craft a more efficient plan that returns customer funds far more quickly than the Trustees plan and already has an outline of this plan that it is prepared to discuss with the Court at this hearing. 5. The first, most glaring, flaw is that the plan (and a SIPA liquidation, generally) does

not necessarily account for the priority that commodity investors should receive.2 Commodities investors do not necessarily have a right to insurance under the SIPA, in the same manner securities investors do. Instead, commodities investors rely on the concept of segregated accounts, which are supposed to be held inviolate under CFTC Regulation 4.20(c). They also rely on the right of customers in a futures commission merchant (or FCM) to receive a first-priority right of recovery under 11 U.S.C. 766(h) and 17 C.F.R. 190.08. 6. Yet, under a SIPA liquidation, it is not clear that Securities Investor Protection

Corporation (SIPC) agrees that commodity customers will receive a first-priority right of recovery.

A SIPA liquidation is the tail wagging the dog, given that SIPC only has a stated guarantee of approximately 400 securities accounts, as compared to over 50,000 active commodity accounts and upwards of 150,000 total commodity accounts. Moreover, neither the Trustee nor SIPC has taken a position as to whether the cash, TBills, and other cash equivalents held in commodity accounts are covered by SIPC, nor has the Trustee delineated his view as to how the duties of the Trustee in liquidating a commodity futures merchant may be inconsistent with SIPA.

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Indeed, as set out in Subchapter IV of Chapter 7 of the Bankruptcy Code, Section 766(h) accords the customer first-priority in the distribution of customer property. 11 U.S.C. 766(h) (2011). It would appear that SIPC does not agree with this view and, instead, under the Securities Investor Protection Act (SIPA), the SIPC has an equal or greater priority claim on the general estate. See Andrea M. Corcoran, Markets Self-Assessment and Improvement of Default Strategies After the Collapse of Baring, 2 Stan. J.L. Bus. & Fin. 265, 281 n. 51 (Spring 1996). 7. Indeed, the Trustee has issued a plan that seems to favor SIPC in the liquidation. As

noted, SIPC is obligated to backstop securities investors. In return, it has a right to recover from the estate of a defunct broker-dealer (here, MFGI). The plan the Trustee has issued attempts to make sure that the SIPC will not have a hole to fill for securities investors that it cannot recover from MFGI. This is an untenable situationand may work to the irreparable detriment of commodities investors. 8. In addition, the Trustees plan has the Trustee exercising discretion as to whether or Under the Bankruptcy Code, no such discretion exists

not to make certain distributions.

commodity investors should get their funds immediately. It is inappropriate and unfair, given the disparity in rights between securities investors (who receive SIPC insurance, much like the FDICs protection of bank depositary accounts) and commodity investors (whose only protection is to receive first-priority distribution of their segregated accounts), to give the Trustee the discretion to treat commodity investors like everyone else. 9. It also makes almost no sense to begin a claims process for creditor claims. No

creditor claims should be processed in either this case, or In Re: MF Global Holdings, Ltd., Case No. 11-15059 (MG) until 100% of customer funds held in customer segregated accounts have been returned.

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10.

The next significant flaw in the Trustees plan is that he does not intend to meet with

creditors (or, really, customers) until well into the process. These meetings should take place right now, so that customers have a say in how their segregated property will be treated. Their property is not the Trustees, over which the Trustee could exercise his discretion; quite simply, it is the customers property. 11. Indeed, the failure to include customers in the process is reflected in the significant

problems and damages caused by the implementation of the transfer process. For example, clients of Typhon Capital Management, LLC had significant positive open trade equity in livestock trades placed by Typhon on customers behalf. This open trade equity was sufficient enough to provide self-financing to the positions, even with the limited amount of collateral transferred during the Trustee-supervised transfer process. However, during the Trustee-supervised transfer process, these trades were not simply transferred. Rather, they were liquidated at MF Global, resulting in the open trade equity being converted into cash that was left in the clients segregated accounts at MF Global. This deficiency in the Trustee-supervised transfer process deprived customers of the value of the trades, and in many cases, resulted in further damages as the trades were then automatically reestablished at the destination FCMs without enough margin to finance them, resulting in a second liquidation of the positions. 12. The final flaw in the Trustees plan is simply the amount of time it will take to return

the property of MFGIs customers. In paragraph 17, the Trustee provides for a six-month claim period. The plan that CCC is developing for the court provides for a far more efficient, automated approach to returning customer funds. Then, in paragraph 43, the Trustee provides for a report every 6 months. This seems to indicate that the Trustee anticipates a long, drawn-out and very expensive liquidation process. See Lawmakers Question MF Global Trustees Work on Lehman Brokerage

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by Robert Schmidt, for Bloomberg Businessweek, http://www.businessweek.com/news/2011-1114/lawmakers-question-mf-global-trustee-s-work-on-lehman-brokerage.html. 13. At a minimum, MFGI customers ought to have the opportunity to form an Ad Hoc

Committee (as the Commodity Customer Coalition has requested in the companion bankruptcy and intends to request in this liquidation, as well), work with the Trustee to determine whether a SIPA liquidation will negatively impact commodity customers rights, and either propose an alternative plan or work with the Trustee to modify the current plan. WHEREFORE, the Commodity Customer Coalition respectfully requests that the Court delay approval of the Trustees Motion until November 22, 2011, by which time: (i) an Ad Hoc Committee of Commodity Customers will have been appointed; (ii) the Ad Hoc Committee can assess whether the proposed liquidation is appropriate; and (iii) the Ad Hoc Committee can form an alternative plan or negotiate amendments to the Trustees proposed plan.

Dated: November 16, 2011

By:

/s/ Kathleen L. Matsoukas Vincent P. Schmeltz III (pro hac vice pending) Deborah L. Thorne (pro hac vice pending) Kathleen L. Matsoukas (KL-1821) BARNES & THORNBURG LLP One N. Wacker Drive, #4400 Chicago, IL 60606 (312) 357-1313 James L. Koutoulas, Esq. Pro Hac Vice Pending On Behalf of Commodity Customer Coalition and Plaintiffs Listed in Exhibit A 190 S. LaSalle St., #3000 Chicago, IL 60603 (312) 836-1180