The process, according to interviews with more than half a dozen industry executives, was a scramble: a patchwork of urgent phone calls, emails, "handshakes" and news gleaned from press reports read by executives who were asking - and being asked - to take on MF Global customers during a month-long effort to transfer more than 25,000 accounts and some $2 billion in collateral.

MF Global's fall presented a rare opportunity for any one of a dozen independent Futures Commission Merchants (FCM) to quickly gain valuable new customers from one of the world's most active commodity houses - a welcome boost for mid-tier firms who are fighting to survive in an industry beset by ultra-low interest rates and the advent of electronic trading.

The result: Two of Chicago's oldest, most venerable independent brokers saw a combined $1.2 billion increase in segregated customer funds in November, their biggest one-month increase in more than three years, according to a Reuters analysis of Commodity Futures Trading Commission (CFTC) data.

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GRAPHIC: Picking up the pieces after MF Global: link.reuters.com/zek46s

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R.J. O'Brien Associates, a founding member of the Chicago Mercantile Exchange that started trading in 1914 as a cash butter and egg specialist, saw a November inflow of customer accounts of almost $800 million, an increase of 31 percent. The gain was nearly five times its monthly average increase of $175 million over the past three years, the analysis found.

Rosenthal Collins Group, founded in 1923 as a grain broker, saw an increase of $362 million or 26 percent, nearly five times its three-year monthly average increase of $75 million.

One other - ADM Investor Services, the broker subsidiary of agribusiness firm Archer Daniels Midland Company - saw a $315 million rise, a more modest 13 percent gain in its funds.

But none of the other FCMs that agreed to take on MF Global accounts saw as large an increase in customer funds as RJO and Rosenthal, Reuters found, and some actually saw declines.

The task of divvying up the accounts fell to the CME Group, the world's biggest futures bourse and MF Global's first-level regulator. Few dispute the Herculean task it undertook to unfreeze trading accounts within a week, but questions over the handling of the process linger.

"I think the entire process should be transparent," said Mark Melin, a Chicago-based futures markets author and investor. "The expectation should be, 'Are they doing honest bidding and are they open to being transparent about how things were handled?'"

While the CME has been blasted over the past three months for its failure to act more quickly to protect customers amid the collapse of one of its most active brokers, its role in doling out customer accounts has been largely unexamined.

CME'S SOS

When MF Global declared bankruptcy on October 31 and reports surfaced that it had "lost" hundreds of millions of dollars of client funds, tens of thousands of traders' accounts and about $6 billion of customer funds were thrust into limbo.

The CME and the court-appointed bankruptcy trustee were put in the awkward position of having to arrange for the transfers of customer accounts - en masse - among competing merchants.

The fact that MF Global's client base was vast, diverse but typically quite small - from retail speculators to professional energy traders to agriculture hedgers and "introducing brokers" - meant that no single broker could or would take on all those accounts. Allowing individual customers to choose their new broker would complicate and delay the process.

So the exchange reached out to a number of different brokers over a period of days, effectively soliciting volunteers to take on the financial and administrative task of absorbing thousands of individual accounts, many of them underfunded - only two-thirds of the requisite margin was transferred with accounts.

The top 10 Wall Street broker-dealers, which control some 90 percent of all segregated funds catering to large-scale clients like hedge funds, corporations and merchant traders, showed little interest in dealing with the hassle of tiny accounts.

"We reached out to a broad range of firms and worked with those firms that most quickly confirmed they were willing and able to take significant customer accounts in bulk," CME said in a written statement to Reuters. "Not all firms were able to take on this significant obligation, but we worked closely to make the process as smooth as possible for clients and those that served as receiving firms."

In many respects R.J. O'Brien and Rosenthal were obvious candidates: behind MF Global, they were the two largest fully independent FCMs measured by segregated funds. Their client bases were similar.

But even so, the customer funds they received in November dwarfed most of the other brokers who were selected by the CME Group, including bigger and better-known global names like French-owned Newedge and Australian bank Macquarie.

EARLY IN THE QUEUE

While the futures industry has coped with the collapse of brokers before, the apparent loss of customer funds made MF Global's demise unprecedented. The broker was forced to shut down, leaving customers frozen out of their accounts, and forcing the CME and the bankruptcy trustee to step in quickly.

Many traders recalled the difference with Refco, a major FCM that had over $4 billion in segregated funds before it collapsed in 2005. Its brokerage arm had been able to continue functioning, and was ultimately auctioned off to Man Financial, as MF Global was then known, for $323 million.

"With MF Global, no one knew what was going on. No one knew where the accounts were going. We were relying on the courts for information. The whole situation was incredibly disorganized," says Philip Silverman, who manages $21 million in client funds at New York-based fund Kingsview Capital LLC.

As early as Friday, October 28, after MF Global's shares had tumbled by as much as 66 percent but three days before it filed for bankruptcy, the CME was preparing for a worst-case scenario, reaching out to leading brokers including R.J. O'Brien about the possibility of taking over some accounts

"They were just testing the waters. They were taking precautionary steps," said R.J. O'Brien president Gerald Corcoran.

His firm was a natural fit for much of MF Global's business, and was particularly eager to take on the Lind-Waldock retail arm, which had been part of Refco and was seen as a prize asset.

RJO ultimately got 20,000 accounts in November, including Lind-Waldock, and has retained the majority of them, accelerating its business plan by "a year or two", Corcoran said.

But it wasn't without risk. The O'Brien family - which had bought the family firm back from two private equity investors in late 2010 - injected $50 million to bolster its capital.

"We took on operational risk and we took on credit risk. We had no transparency into the credit capability of these customers," Corcoran said. "There was absolutely no cherry picking."

The CME Group declined to comment on detailed questions related to the process and timeline of transferring accounts.

WIDENING CALL

By Sunday, Oct 30, the CME was widening the call. As MF Global prepared to file for bankruptcy protection the next day, the exchange was distributing a list of customers and account numbers, one person involved in the process told Reuters.

Brokers were required to take all the individual customers that fell under the first 3-digit prefix of the 10-digit account numbers, which grouped similar accounts.

"We got the list on a Sunday night and distributed it to our management. Monday morning we came in to start going through the process and by 2 o'clock it was done," said the person.

The process was highly competitive. Initially, the merchants didn't know who else was looking at the list of MF Global customers. But the exchange eventually let them know that many of their competitors were looking at the same clients.

"This was a list that was diminishing by the hour," said the merchant. Eventually, his firm ended up with about 20 percent of the MF Global accounts it asked for.

Even then surprises arose: Some accounts contained trading positions on the Intercontinental Exchange, a CME rival, even though there had been no communication from the ICE.

MF Global brokers had been allowed to continue executing some orders on Monday and part of Tuesday, but the volume of redemptions quickly overwhelmed the depleted staff, many of whom had been barred access to trading floors. It was soon clear that customer accounts would be moved, in bulk, to new brokers.

By Tuesday afternoon, a shortlist of four such firms initially circulated among traders. The next day, the CFTC announced that the CME had found six firms to take on the accounts; by Thursday that list had grown to ten. Eleven firms ultimately participated in the bulk transfers.

"We ended up taking clients on that fit the profile of our firm," said John Streich, chief executive of Penson Futures, a Chicago-based FCM. "It was fast. Everything was really done on a handshake."

PYRRHIC VICTORY

Executives contacted by Reuters said ending up with some additional clients from MF Global's demise was bittersweet.

Iowa-based futures brokerage PFGBEST, a smaller independent broker about one-quarter the size of RJO, had issued a press release shortly before the first transfer arguing against "allowing regulators and exchanges to force to any particular futures commission merchant."

PFGBEST was ultimately given some accounts in a second transfer. But of the 700 accounts with some $200 million in cash that it received, less than 40 percent have remained with the broker, said Russell Wasendorf, chief operating officer.

"I think some firms were trying to look at it as a land grab," he said. "Our major concern was to give customers their money." And if the customers realized during the process that his firm provided them good service, "that was the only real benefit that we saw out of this."

INTL FCStone, another broker that has grown aggressively through a series of acquisitions over the past few years and nearly matched Rosenthal in client funds, was content with the outcome, chief executive Sean O'Connor told Reuters. They bought MF Global's London Metal Exchange operations.

"We may not have ended up with more customers, but we ended up with a business," O'Connor said.

Ultimately, for most brokers, any concerns over the scramble for market share have been dwarfed by fears that MF Global's apparent misappropriation of up to $1.2 billion in client funds - an unprecedented violation of the industry's most sacrosanct rule - may cast a lasting pall across the entire industry.

"On the one hand it's given us a leg up on customer funds," says Leslie Rosenthal, partner with Rosenthal Collins. "On the other hand it's dampened volumes and commissions."

(Additional reporting by Tom Polansek and Ann Saphir in Chicago and Marcy Nicholson in New York; Editing by Alden Bentley and Ed Tobin)

• A Permanent Economic Emergency