Ryan commodities broker stops the buck in MF Global mess

Commodities broker Ken Ries says it's disgusting that nobody's stepping in to guarantee the losses of his clients in bankrupt commodities clearing firm MF Global, so he's going out on a limb.

Ries made a promise in a letter to about 100 clients Friday that could cost his company, at minimum, hundreds of thousand dollars as it appears right now. He said Ries Ag, his Ryan-based trading firm, will reimburse their account losses in MF Global if all their money hasn't been recovered when the bankruptcy and surrounding investigations are completed.

MF Global filed for bankruptcy early Monday. Its CEO, Jon Corzine, resigned before the end of the week amid revelations that the company tapped segregated customer accounts to cover its own corporate trading losses. The act was clearly illegal, Ries said, calling it an embarassing week for the industry and his company.

Ries was an introducing broker for MF Global. The global trading giant brokered commodities trades for Ries Ag and handled the money, while Ries worked directly with MF Global and received commissions.

When it emerged that MF Global had been tapping the segregated trading accounts of individual customers, Ries was disgusted. When he found out the Chicago Mercantile Exchange would not cover the losses of the traders, he was even more stunned.

Ries said he'd been telling customers over his 25 years in the business that the exchange would protect traders against just such kinds of ocurrences. With his own word at stake, he decided to act.

"In the face of this bitter frustration, we are resolved to doing the right thing, as we had assumed the exchange would," he wrote. "Just because you can't count on them doesn't mean you can't count on us."

By indicating the customers would be made whole at the end of the investigations and litigation, Ries may have bought his company a few years before any payout. He said it's possible that customers will be entirely compensated from MF Global funds by then.

Ries said he feels bad not only because of the reassurances that he offered clients, but because they are - like hiimself - farmers. Most of them didn't trade for pure profit in commodities, but to hedge against losses in their farming operations.

"If we have to sell land - whatever we have to do - we're going to make good," Ries said.

The exchange had begun transferring out about 58 percent of the value of MF Global clients' accounts to other viable commodities clearing firms by the end of the week. In a statement, the CME Group that runs the exchange said about 15,000 MF Global accounts and about $1.45 billion in clearing collateral would be completed by the end of Friday.

The MF Global bankruptcy could take years to unwind, according to Kent Jarrell, a spokesman for the bankruptcy trustee spokesman. He said it's unclear how much of the trading customers' funds can be recovered.

"That's what our investigation is about," Jarrell said late Friday, "and we don't know that right now."

Jarrell said he's unaware of any other brokers offering to guarantee clients' losses in MF Global accounts, but said he might not know if any were from his position in New York.