MF Globals Break the Glass Document

8/3/2019 MF Globals Break the Glass Document

1/23

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2/23

Treasury, Finance and Risk teams developed a downgrade stress scenario:

Evaluated and developed a "break-the-glass" plan through discussions

with key global business leadership:

Downgrade to sub-investment grade by at least 2 rating agencies

Analysis performed on key operating entities (MF Inc and MF UK Limited)

Scenarios considered significant disruption to funding capabilities

Operational plans for each functional area, including preparation and immediate reactions,have been consideredand continue to develop

Dialogue continues, including maintaining/updating these analyses

Key message:

We remain solvent are able to manage liquidity through stress period as wereposition our business and stabilize our financing lines

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3/23

Rating Agencies: No action taken

Equity markets: No reaction

Financing: Funding continues

Rating Agencies: Downgrade Business

Equity markets: Minimal reaction As Usual;MonitorFinancing: Funding continues

Liquidity

Second QuarterResults

Rating Agencies: No action taken

Equity markets: Negative reaction

Financing: Funding challenged

Rating Agencies: Downgrade

Equity markets: Negative reaction

Financing: Funding challenged

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4/23

Based on the review of the business, capital and liquidity position as well asseveral stressed risk scenarios, including a downgrade below investment grade,

several conclusions emerged:

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5/23

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Main Stressed Uses of Cash

1. Financing of corporate paper becomes stressed = $1.0 to $1.5 billion

2. F inancing haircuts are increased by MF to maintain liquidity on other asset classes = $100 $150mm

3. C l earing houses increase margin requirements = $200 $250mm

4. Reduction in un-committed boxes at BONY Mellon = $100mm

5. Excess client balances are withdrawn (mainly institutional clients) = $100mm

Main Mitigants of Cash

1. Revolver draw = $0.9 billion

2. L i quidation of corporate paper / recover higher haircuts from clients where possible = $0.75 $1.0 billion3. L iquidation of other hard-to-finance inventory positions while minimizing P8 L impact = $100mm

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6/23

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Stress Scenario: MFG Inc downgrade or extreme drop in Mkt Value

Starting Seg Liquidity Pool 992

Fool Day0 Dayf Day2 Day3 Day4 Day5 Week2 Month1 Month 2 Comments (pleaserefertoAppendixslide15)

Non-Seg Liquidity Dai ly Outf laws -75 -345 -2 15 - 13 7 - 14 0 -14 0 -283 -271 -157 01, 02, 03, 04, 05, 06, 07, 08

Cumulative Oufflovr -75 -420 -6 35 -772 -912 -1,052 -1,334 -1 ,605 -1,762

Net Liquidity w,'o Mitigants (SoD) 992 91 7 572 357 220 80 -60 -342 -613

Net Liquidity w.'o Mitigants (EoD) 917 572 3 5 7 220 80 -60 -342 -613 -770

Non-Seg Liquidity Dail y Mit igants 38 59 80 68 76 77 195 193 110 M1. M2. M3. M4, M5, M6. M7. M8

C umulative Mitigants 96 177 244 320 397 591 784 894

Cumulative Outflows net of Mitig ants -75 -32 4 -459 -527 -592 -655 - 743 -8 21 -868N et Liquidity with Mitigants (SoD) 992 9 5 5 6 6 8 53 ." ' 4 6 5 400 337 249 171Net Liquidity with Mitigants (EoD) 95 5 6 6 8 5 3 3 465 400 337 2 49 171 124

Stress Scenario: MFG UKL downgrade or extreme drop in Mkt Value

Starting Seg Liquidity Pool 1.297

Day0 Day1 Day2 Day3 Day4 D ay 5 We ek2 Month1 Month 2 Comments(pleaserefertoAppendixslide15)

Non-Seg Liquidity Dai ly Outf low - 2 4 - 25 8 -45 -86 -50 -53 -108 -68 -23 P 1. P2. P3. P4. P5. P6. P7Cumulative Oufflovr - 2 4 -28 1 - 32 6 - 41 1 -4 61 - 51 4 - 6 2 2 - 69 0 -71 3

N et Liquidity w)o Mitigants (SoD) 1.297 1.273 1.015 971 885 8 35 78 2 674 607Net Liquidity w.'o Mitigants (EoD) 1.273 1,015 97 1 8 8 5 835 7 82 67 4 607 584

Non-Seg Liquidity Dail y Mit igants 0 0 213 0 0 0 19 56 0 N1,N2,N3,N4

Cumulative Mitigants 0 0 213 213 213 213 232 288 288Cumulative Oufflows net of Mitigants -2 4 - 281 - 11 3 - 19 8 -24 8 -301 -391 -402 -425

NetLiquiditywith Mitigants(SoD) 1.297 1.273 1.015 1.184 1.099 1 .048 99 5 906 895

Net Liquidity with Mitigants (EoD) 1 273 1 015 1184 1.099 1.048 995 906 895 872

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7/23

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Current Current Stressed Revenues Post Downgrade

Business Line AugYTD Revenues % Net Revs Downgrade Scenario (%) Revenues ($) New Revenue %

39.1 9%-15%

33. 2 10/0139.3 31% -50% 69.7 22%

12.2 3% -40% 7.3 2%

28.4 6/o -15/0 24.1 S/0

43.5 100/ -40% 26.1 So/

42.5 9% -10% 3S.3 12%

72.3 16%%d -25%%d 50.6 16%%d

3.2 1% 3.2 1%

-10.1 -2% 0% (10.1) -3%

7S.O 2 3

*Fixed Income & Client Balances Drive Balance Sheet

Liquidity

Business Line Stress Scenario

Low

Med; High for illiquid inventoryLow

Medium

MediumI I I Med; High for institutiona l clients

Low

High

High

Med; High for Corp inventory

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8/23

Quick Decisions to be made

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When to draw? How much? How long? What message are we

Draw on Revolver sending to the banks? To the investors? Drawing too much, too sooncould pre-signal distress.

Liquidity How do we optimize liquidity while minimizing impact to P&L?

Repos- Whatare the maturities? Do we extend maturities? Do we start now?

What is the P&L impact?Repos I RTM RTMs - Biggestdraw on cash today how do we respond and what are our

options? Can we novate? Hedge fully? Tenor of hedge (unwind after thestorm)? Need a clear strategy for this.

Reshaping thebusiness model: Who do we want to be? What business

Business Model do we wantto keep? What can be sold? What do we need to keep thecompany solvent?

Internal and External Communications Plan Developed Employees, Regulators, Banks, etc.

Functional Department Work-Streams Being Developed..'See appendix for details


9/23

- Continue to develop workstreams/action plans within and acrossfun cf.ions

- Additional dialogue on reshaping the business plan to prepare andrespond to such an event

- Ensure communication plans are complete and ready to be executed

- Meetings with the rating agencies Thursday/Friday October 20/21

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10/23

Appendix

I. Downgrade Timeline & Immediate Decisions Required (Details) p.10-11

I I. Operational Considerations p.12

III. Key Functional areas and Initial workstreams by function p.13-15

IV. Liquidity Stress Impact (Details of Assumptions) p.16-17

V. Balance Sheet Sources & Uses / Stress Scenario (US & UK) p.18-20

Vl. Business Line Impact Details p.21-22

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11/23

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< Prepare to draw on $0.9billion Revolver (banks mayCash Inflows < Continue unwinding reverse < Re-evaluate businessenforce MAC / MAE clause) *

< Sale of most liquid corporate inventory positions*repos model and re-build

~Ob'ective: franchise

< Sale of MF boxed positions*Optimize Immediate Liquidity Continue sale of inventory< Sale of Commercial Paper investments*with Minimal P&L Impact < Possible sale of< Unwind European RTM book to release margin*

< Liquidate Investment Portfolios ifContinue sell ing less l iquid strategic assets

assets and investmentsfunding from client balances and/orbi-lateral repo counterparties are lost* Excess cash situation

< Unwind UN-matched book if repo lines are lost* 4 Release of regulatory capital due to release ofas balance sheet contracts< Cancel all uncommitted liquidity extensions regulatory capital

< Inform traders to pause from using B/S

< Communicate to key clients about safety of their

excess and margin balances


12/23

Busine ss Impact (Earnings depletion, Balance Sheet shrinkage due to lower leverage, etc.) +

Once the downgrade is imminent (per communication from the credit agencies, etc.) there are a number of critical decisions to make with

significant implications.

Dr awing on the revolver: When to draw (immediately or after announcement); how much of the revolver should be drawn(a/I or

partial) a thoughtful, sophisticated analysis needs to be performed on each of these decisions and a need to consider the message

that goes out to the public, relationships with banks; rumors could have significant impact.

Li qu id ity - How do we optimize immediate liquidity with the least amount of P&L Impact; salelunwindinglliquidate inventory and MF

boxed positions.

Re pos how to respond extend maturities? Do we start now or wait until downgrade, whatis P&L loss, how much liquidityis being

generated, whatis the message to the streetif we start to do this?

RTMs biggest draw on cash today; loss today less the margins posted; generate liquidity with large P& L loss decisions: hedgefully, hedge for a short term(2-3 months and then unwind after the storm), novate? How will LCH respond, how much in excess of

margin will be required, time period, canlwill they force us out? Legal restrictions, terms of agreements? Need a clear strategy and

plan for RTM portfolio.

Co m munication to the regulators, banks, investors, employees Who communications, whatis the message, etc.

There are restrictions on the credit quality of assets that institutional investors can invest in (most are restricted from holding unon

investment grade" or "high yield" securities or taking unsecured credit exposure to such Firms). This has both positive and negative

implications.

Bu s iness Model - Itis necessary to determine how much is held by institutional investors and to estimate the potential loss; whatis

needed to run the business, which businesses do we potentially want to lose and concentrate on the areas we want/need to save;who do we want to be after the storm? How quickly do we want to send cash back to clients, whatis the message if we do not send

immediately, whatis the strategy if we want to keep the customer and wait until the storm passes. Do we revert back to agency-type

business.

Ultimately, clients might not want to do business with us i~mmediatel af tera downgrade, but it is how we handle ourselves during the

downgrade that will determine if they want to do business with us in the future.

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13/23

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Ope rat ional Considerations +

How will the multiple lines of business (BO/MO/FO/Static Data/Account Management/IT) co-exist to handle the vast increase in client requests?

Expe cte d vas t increase in redemptions that will put tremendous pressure on all lines of business to handle the excess.

Each function should have an "Emergency Plan" that would outline roles and responsibilities in a downgrade situation to help prevent disorder and

chaos.

Investor relations and corporate communications need plans specifically for a credit downgrade and addressing the media and clients alike

Front Office and IR should plan together on what should be said and what needs to be said. One trader saying something that a client perceives as

negative could spread very quickly across Wall Street and beyond.

"Weathering the storm" is critical to the plan if the firm is to survive. Senior Management should be briefed on what a potential downgrade could mean to

their roles (i.e., the middle office should understand that they are going to be buried with all kinds of requests coming from both back and front offices

due to redemptions, people cancelling business, etc) and plan to properly communicate to all of their employees the messaging from corporate

communications;

Ope rat ional Response +

Most normal business operations will cease and the firm should focus on "disaster recovery"

Investor Relations and Corporate Communications ready to respond and handle the situation with a unified, consistent message that is communicatedthroughout the organization and externally to all counterparties; Everything from being respectful when answering questions, to being able to properly

transfer them to the account management department to help close their account. Excess manpower should be provided to this group to handle the

rush of calls.

Directly contact all regulators and start the communication/address concerns;

Allocate manpower efficiently to handle all of the excess issues resulting from a downgrade;

Legal/Compliance/Investor Relations/Executive Management/Front Office proactively fielding questions/calls from clients, exchanges and regulators

All support functions maintaining 'all hands on deck' with all relevant team members for the foreseeable future

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14/23

The inner circle represents functional areas that will be most affected; the outercircle are areas that will provide direction, support or be responsible for

communicating with external stakeholders

/ TREA SU RYFINANCE

DESK

IRISK OPERATION

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15/23

T~reasur:

Concerns/Plan - concerns for Treasury are reflected throughout this presentation; response to the plan of action are included below:

Prepare for Revolver draw

Monitor secured financing stress

Monitor inventory positions

Monitor client funds withdrawals

Monitor funding requirements from clearing houses and regulators

Monitor off-balance sheet liquidity events (RTMs, customer financing lines, etc.)

Finance:

All hands on deck from an accounting and analysis perspective;

Ensure seg calcs are done daily

Ensure the completeness and accuracy of daily p&l calculationsMeet all reporting needs (i.e. internal management reporting/external regulatory reporting)

~Com lienee:

Concerns:

Mess agi ng to the street: key business decisions (i.e. terming repos) made on reducing exposures could send the wrong message if not handled

appropriately; rumors could significantly impact our ability to survive;

Plan:

No sp ec ific responsibilities but all hands on deck, on the floor, helping respond to queries and actioning, as well as helping to contact regulators as

requested.

~Oerations: Concerns are addressed throughout the document; response to the plan of action are included below:

No sp ec ific responsibilities above daily and beyond normal business other than handling the sheer volume of client redemptions in a rational and

orderly manner, ensuring customer accounts are handled appropriately; concentration on transactions with external counterparties, sec

/endinglborrowing/tri-party trades; butal/hands on deck.

IT: Concerns are addressed throughout the document; response to the plan of action are included below:

No sp ec ific responsibilities above daily and beyond normal business other than increased scruitiny around our trading platforms and ensuring they

are stable as more activity on part of some of our traders, pricing of trades and pricing glitches; need to be have appropriate resources to monitor

security on the systems, turning off access as appropriate and providing access where necessary. Al/ hands on deck

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16/23

Investor Relations:

Concerns:

Significant pressure on equity creating broader client implicationsAnalyst downgrades, earnings and price target revisions

Prominent and broad based negative media coverage

Client withdrawals

Liquidity rumors

Plan:

Investor Relations, Corporate Communications, and Marketing are responsible for communication and messaging bothinternally and

externally; teams already have detailed plans in place on how to respond to this situation; need to ensure these plans are known by

executive and senior management and that the messaging both internally and external are consistent and executed appropriately.

Leceal:

Plans: Reviewed (1) all material (non-customer) contracts, including revolver, long term debt, Series A 8 B, non-committed bank facilities,

etc. and (2) sample customer and other trading agreements (e.g., electronic trading agreements) for any contractual provisions

implicated in the event of a downgrade, liquidity crisis and/or as a result of other trigger events post downgrade (including demands

for adequate assurances);

Updating information re all regulators, exchanges and clearinghouses and anyone else we are legally obligated to notify (orotherwise should notify) in immediate response to downgrade (or other triggers); compiled all triggers for notification and/or other

reasons we would reach out, contact points and best relationship people to make contacts; messaging to be coordinated with IR;

Updating customer document re security of customer funds and improving detail as necessary or helpful;

Make sure using right assumptions based on where ratings action effective if only by one rating agency vs majority;

Consider options to current structure of trading relationships (between US 8 UK) and the regulatory and accounting implications on

any change to this structure;

Consider whether any limits to the requirements FSA can impose and develop contingency plan to approach Federal Reserve Bank

(NY and Washington) and possibly Treasury for support if FSA requests might threaten firm.

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17/23

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Driving Scenario 1: MFG downgrade or extreme drop in stock price

Analysis for MFG Inc. (US) Starling Non-Se g Liquidity Pool 992Starting SegLiquidity Pool T 2,000

Resulting Scenarios Oufflow Pool Day 0 Day 1 Day 2 Day 3 Da 4 D a 5 We ek 2 Month 1 Month 2CommentRepo lines gets pulled back, haircut increased, and excess

Haircuts increases forun-matched repo book, and the01 pulled back, mostly impacting the unmatched part of the repo -25 -25 -25 -10 Combined we would require $130mm based on increased hair cuts.

treasury inventoryfinanced externaffy(Tray, MBS, Agn)book

Approx 60% of 1.7bn & 300/300mm of IG, or $1000mm of

Certain Corp paper returned; part of it put into the box, and counterparties such as State Street and AIG returned; approx$500-50 -5 0 -50 50 -100

part funded internally. put into committed and uncomitted boxes, rest financed internally.Repos are staggered.

Client pull back excessor unwind of un-matched book- 15 -15 15 Approximately1/3 of B/D excess generated from customers

causes drop in B/D excessSLB increased margin or l ines get pul led back by Haircut widening; for matched book and forthe customer -5 -5 Book is small and perfectlymatched; 10mm is conservativecounterparties inventoryfinanced bySLB.

Our BNYMbox is uncommitted, so theycan shrink it at anytime. We03 BNY reduces the size of the box or returns part of the collateral B NY c loses a po rtion of the uncommitted box NSL -83

assumed approx1/3rd reduction.04 Increased haircuts at CCPs for Repo (EUREXand LCH) LCH NSL -7 Outffowis 90% add-on As per rulebook; BB+ 200%

LCH.SA NSL -158 Outflow is 90% add-on As per rulebook; BB+ 200%

EUREX NSL -49 Assuming oufflowis 50% add-on

18 of client excess is sent back to customers, requiring

05 Customers decide to pull back their excess in FCM Treasuryto finance more of their corp book externaffyand SL -50 -50 -50 100 -100 -250 300 -10 0 $1 bn of client access gets pulled back.

paying haircuts.only 50% of additional corporate bonds could be funded uses

in case of client excess pull back ($1bn), more of corporate -25 -25 -25 -50 -50 -125 150 -50 external lines, rest funded internaffyusing resources including thebond book needs externalfinancing.

secured boxes.Customer don't pull at the same time.

10% of the remaining 50% as haircut required by externalNSL -3 -3 5 -5 -13 15 co unterpartiesCustomers xpit out 1 B in IM, pulling their excess, reducing

AffectsSeg /Margin Excess only(Day1-250, Day2-250, Day3-250,06 Certain large FCM customers decide to leave MFG the internal financing of Treasuryexchange eligible NSL -2 -2 -5

Day 4 -100, Day 5 -100, Week 2 -50portfolio, requiring external financing including FICO

ISDAThresholds gets triggered, requiding MFG to keep post07 FX and others NSL -3 -3 -3 -3 Conservative approximation based on FAS161 history

more liquidity(FX, QTC Comm, others) OTCCommodities NSL -5 -5 -5 -5 -5 Conservative app roximation based on FAS161 history

08 Increased collateral at clearance banks CLS (5() NSL -25 Currently 50M has been as high as 100MNon-Seg Liquidity 3utf lowe 0 0 0 0

Cumulative Outffowsj 0 0 0 ~ 000 00 00

~0 0

Net Liquidityw/o Mitigants (SoD) 992 992 9 92 992 992 992 992 992 992Net Liquidityw/o Mitigants (EoD) 992 992 9 92 992 992 992 992 992 992

Seg Liquidity 3ufflows 0 0 0 000 00 00

0 0

CumulativeOutflow' 0 0 0 0 0Resulting Scenarios Mitigant CommentRepo Haircut increases or lines get pulled back by

Haircut increase passed onto clients 0 15% of increase passed to customercounterparties 4 4i 2 2 2 4i 0

Liquidation of part of the corp paper 38 38 38 38 38 38 75 75 75 75% of portfolio liquidatedSLB increased margin or l ines get pul led back by Wind down of the SLB business; keeping onlythe

Assume orderly liquidation based on current portfoliocounterparties minimum clientfacitation position 1 2 ~ 5

Reduction in appetite for certain collateral, requiring MFG toLiquidate perl of the returned assets 21 10 Liquidate 1/2 of the returned assets

fundmismatch

Novate some positions to OTCcounterparties, benefit is 10% ofM4 Increased haircuts at CCPs for Repo (EUREXand LCH) Movetocounterparties with favourable terms 21

exchange increase)M5 Customers decide to pull backtheir excess in FCM Unwind pos iti one - smailer liability at exchanges No mitigation

C,Liquidation of the corp paper porlfolio, previously funded

19 19 19 38 3 8 94 113 38 75% of internaffyfunded portfolio liquidatedinternally

Approximated at 1/4 point, only for liquidation purposes. Actual canLosses on Liqu idation of Corp Porffolio -1 -1 -2 -4

vary a lot.Potential margin neffing benefit, and reduction in regcap

M6 Certain large FCM customers decide to leave MFG No mitigationrequirements.

ISDAThresholds gets triggered, requiring MFGto keep post Novate positions to favorable OTC counterparties to reduce impact bySome counterparlies will be paying us for forward loses 10

more liquidity 25%

(FX, OTC Comm)M8 In cr eas ed co ll ater al at clearance banks F ind alternative relationsh ips We recently negotiated down with BofAfrom 100 to 50

Non-Seg LiquidityMitigants 3 8 59 80 68 76 77 195 193 1 10 MRMCumulative Mitigants 96 177 244 320 39 7 5 91 784 894 % 5 ~ ~ I

Cumulative Outllows net of Mitigants 0 96 177 244 320 39 7 5 91 784 894 a i~r a~ iNet Liquiditywith Mitigants (SoD) 992 1,03 0 1,08 8 1, 169 1,236 1,312 1,3 89 1,583 1,776 %J I V M l sI I .Net L iquidi t w ith Mit igan ts EoD ~ 1 030~1 088 1 169 ~1 236 1312 1,389 1 ,583 1,776 1 ,886


18/23

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DrMng Scenario 1: fi/IFGdowngrade or extreme drop in stock priceMFG UKL Starting Liquidity Pool 1 ,297

Resulting Scenarios Outf iow Day 0 Day1 Day 2 Day 3 Day 4 Day 5 Week 2 Mth1 Mth 2 Comment

Repo lines get pulled back bycounterparties, haircutIncreased haircut of 200%now paid to counterparties based on current

D1 increased, and excess pulled backmostly impacting Haircuts double for the o/n rolls -4 -30/N Repo

the un-matched part of therepo book Counterparties no longer payus haircut We no longer receive haircut fromcounterpartiesCertain counterparties pull back their lines, and can We are no longer able touse lines and are liable to higher haircuts to

-2 -2 -2 -2be replaced onlyat higher haircuts finance positionsCustomers pull back someexcess they leave in the Customers no longer keepexcess over requirements with us reducingrepo book

-2~ 2 -2~ -2the non seg liq pool

SLB increased margin or lines get pulled backbyHaircuts double -8 -8 -8 -8 -8 -8 - 4 Increased haircut paid to counterparties based oncurrent 0/N SLB

counterparties

r Counterparties no longer payus haircut -6 -6 -6 -3 We no longer receive haircut fromcounterpartiesTop quality stocks charged 15%haircut by PB(271M)CFD Book -41 -40 Lower uality become SiBand fully financed by MFG(41M)Increased haircuts at CCPsfor Repo(EUREXand

LCHLCH) Outflow is 90%add-on - Asper rulebook; BB+ 200%

LCH.SA -158

EUREX -49 Assuming outllow is 50%add-onSome customers pull back their excess andothers Historical data for client withdrawals during 2008

Client non seg freeequity -1 0 - 10 -10 -10 -15 -20leave MFG 40% reduction in NonSegFree Cash (464M) over 4 days

Reduction in appetite for certain collateral, requiring-5 -5 -5 -5 -5 - 1 5 - 1 0 Assume 10%8haircut increase for Corporates in Treasury porffoko (499M)

MFG to fund mismatchP As a result of customer leaving, MFGloose some of the

Unwind ofmargin nettingbenefit -2 -2 -2 -2 2 -3 -6 -8 -3 Loss ofnetting benefit is 15 ofdrawdown.netting benefits at theexchanges

ISDAThresholds gets triggered, requiring MFGto keepOTC Commodities -1 -1 -1 -1 -1

post more liquidity Conservative approximation based onFAS161history

(FX, OTCComm) FX -1 -1 -1 -1 -1

DailyDufflows -24 -258 -45 -86 -50 -53 -108 -68 -23

Cumulative Outfiows - 2 4 -281 -326 -411 -461 - 51 4 -62 2 -690 -713

Net Liquidity w/oMitigants (SoD) 1,297 1,273 1 ,01 5 971 885 835 782 674 607

Net Liquidity w/oMitigants (EoD) 1,273 1,0 15 971 885 835 782 674 607 584Resulting Scenarios Mitigant Comment

Repo Haircut increases or lines get pulled backbyMove to counterparties with favourable terms 6 6 Assume re-finance 50%with favourable counterparfies

counterpartiesWind down trading book

SLB increased margin or lines get pulled backbyMove to counterparties with favourable terms 13 13 Assum e re-finance 50%with favourable counterparbes

counterparties

Increased haircuts at CCPsfor Repo(EUREXandM LCH)

Pass haircut increase to client 213 MFGUKpasses any margin increase to MFGI

MF Sells the Corporate bond book atthe prevailing38 MFG sell s 75% of the corporate holdings

market

Daily Mitigants 0 0 213 0 0 0 19 56 0

Cumulative Mitigants 8 8 213 213 213 213 232 288 288Cumulative Oufflows net ofMitigants -24 - 28 1 -113 - 198 -248 -3tll -391 4 tl2 4 28

17 Net Liquidity with Mitigants (SoD) 1,297 1,27 3 1 ,0 15 1 ,1 84 1,0 99 1 ,0 48 995 906 895Net Liquidity with Mitigants (EoD) 1,273 1,0 15 1 ,1 84 1 , 09 9 1, 04 8 995 906 895 872


19/23

A

MFG INC MFG UKL

SOURCES (in millions): SOURCES (in millions): Note 1: Data is from Aug 31balance sheet

Cash 374Cash 40Restricted Cash/Securities 393

Restricted Cash/Securities Note 2:Assuming APAC is7,400Reverse Re o & SB 7,632*** net liquid after stress

Reverse Re o & SB 58,227** scenarioSec. Owned 1,348

Sec. Owned 4,500Sec Rec as Collateral 49 "" MFG inc Repo/Reverse

Customer Receivables 276Customer Receivables 240

Repo information is from the

Affiliate HTM Rec. 9/30 Gross Tenor Report7,375 Affiliate HTM Rec. 89B/D & Clearin Or s 565 B/D & Clearin Or s 2,021

"""MF L/KL Repo/Reverse

Other Rec. Repo data was obtained fromOther Rec. 84 the10/4Gross Tenor ReportTotal 78,384

Total 12 230 CashInflows: (Green)USES (in millions): USES (in millions): CashOutflows: (Red)

Customer Pa ables 8,780 Customer Pa ables 2,623

B/D & Clearin Or s Pa able B/D & Clearin Or s Pa able 263

Re os & SLRe os&SL 8,118 ***58,563 **Secs sold, not et u rchased 107

Secs sold, not et u rchased 3,312Affiliate Pa able 456

Affiliate Pa able 621Accrued Ex & Other Liabs 322

Accrued Ex & Other Liabs 653Obli . to return Sec Borrowed 49

Total 72 195 Total 11,938

NET CASH: $6,189 NET CASH: $292

Liquidity Impact due to Stress (worst-case scenario) Liquidity Impact due to Stress (worst-case scenario)

1) Take undrawn portion of credit revolver ($1.26b) 1) Curren tly $583m of available funds to aid in a stress scenario:2) Increase maturities of Repos before stress scenario (thru UKL has LAB excess: $320mm

CCP) in an amount close to $2.4bn U KL hasnon-seg deposits: $199m m1) Mov e Non-CCP Repos to CCP UKL has non se cash at bank 63mm

3) Sell boxed collateral; Sell Investments (HTM) Total Liquidity: $588mm4) Cancel any uncommitted lines extended to clients5) Shut-down Contract for Difference "CFD" business and raise Note: this does notinclude the required LAB of$469mm which

margin levels to 30% (similar to 2007). should not be used and is not taken into account for general6) Increase LCH Margin requirements to $300 million use purposes

18 Global


20/23

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gocrrtros e)srad 4 485 70.' 445970) I ugtr fui NOSd le SOI Ie tales iqsrdrr

fbckms Dsonrs snd Clsanrs] Cren 56e 35!' M 358 56r5 350 ln mary ie pact- carnal rett an ths m Ihe amodel IarmRectrsshtea - Cuktrrrets 276 '16s 27lj 162 278 162

ygil nsit ta reri d ths HN4 ponktld arsumss 50!k in 1ark le I.marsh bs i-nrs

arabtas AI5kalos ItffM bsasbrurrssj 7 375 30, 7 375 ) 0! ) 587 6'4 ] 667 654 50rksalar 1 moat

Reemmbhe -Oltm s65: 8 85T 8 85r ImrrdtetillCtamboishps r axr"sispr st rod 2 73 2 737 2 7:I! Canml htn dmiuen -rsm to hs r.1 n srhd bur n","n e gun g

PiFvlur Equpmma osd Iassellokl IIlppnsrenmms nal 35 9T! 3) 975 3 975 fice expected draftyt]oodil I I I Nol sopor!ed dmcllr

'ffd nsod to be conoasrad n lerms d cvrtoma instr~slaps ona gerrsg hvnsid bans

ntsngdda Assets net 3) 59. 3] 59T 30 597bra mll hnm an mmsdtae mpxtitlier As I dsr no Jsongs

' i i l : I Aiul I 11! i'Iu. rm li r I 4 i s ',Ii'ss,mr r! )cl (hf

kCH 14ospn ttequremhst 30] 000 Ioo out t

Bios leim bornsngs rc cu-snt ponsot el LT bnr vmngs 4' 651 851 ij 851!Ien-CCP Rebus ard Block Loose 29.515 875 24 85s ]6' I.rs)2,9]6 ) rb] 6 6 Unsane testee psohrv Customers mt disa m Ihs Non.CCP ds uut inmcrtg can hr

CCP Rapes ond greek Iotas 29 046 733 I ' 70t..Sfk ).tetr,y 7 7 512 89' rermdad r CCP smrh 4 enon t tsgnor harculs out gmoer expenses

alai Qepvr and 81oes Loo' i 14 350235 58 5626NiJbsgmv tc return sscumas burroed

5eetetre a atd nts IW eutehaand St ftrl SO4e ] 312]g. 3 312 39T ].312 ]gr no charge

aydda: - lbokrvs Cusstm Ckrsmg Orgs 266 4]I 266 431 ?frd4'll May mnesss shm I mcnthtnewldte insect stemmed SIB drsle Jonsl k ndr rtcrssar frsl reek ands nr

Syrbtes Cuatrrser birulree 8 K58I 8 TX 581 1000'Xg 3 421 grs] 4 35.' 691 53 4B nisdrnorkK ont relrd r Trit rtats 4i a lute' ol 5]gs cf elbaleas

St]Irate 620 77! 6?0 774 670 77e ttosdr. in Os consist>ed sr mama carom Tdsn

5brsrk ad ed Debt 5]i Ii ' 5].212 5s2's Bang 4nded neh Dett nut Equsy hum Ho!rings

nngervl . IAlrmrna 60' 00!i 69! 00) 605 00'. Bang 4nasrt sslh Dou md l suet fram H ldngt

TOTAL LIAB 28,029.4$) 72,541,85) sr 665 941 8252.08] 19.$T)830

adds uriel Pnd rt Creel I Bemg 4rsded trf Celt rrd Ersrny kern Hddrsgs

Accrsvubsad Dsh'n Bong 4nosd bt Cbc oxt Eqraty kern HodngsTOTAL Eu 284 22) ?bt22) 28422) ?84,?2] 20432)

'OTAL LlfiB AND Eu 26 31' i05 if] 826]j7 4 L1 50.1sj4 0 M6 3rd n) 1)6.05)

ui Jlrmnatctr vsg .5 ' i rmr sii r sbr s'u

Areas tmpocrod

I.CH Morph Reqrrremrre ]008ttt t Duels ne'olev nsngrs requmrnMs

Cast snd Eqmuores ' !i ii: i T ake Unryon port an ef imohor

CCP rwpol snd 5twk Loans : 788.225 IArr52 8bn Ollkrn-CCP Rr~ IO CV anom:meoether mdtunten

19 Global


21/23

i e

Se r Bal ance ghent To! ta t Gross -Evela Grit mt-ak' ' 1-s ekto1mn t 1 DD Or

Qd! ard Cash E uraerr.:. 3 "'I ::I 615 37o tl I

;,eskr c:recCah Ird dirtier 392 ee 0 "corn ryusmrncsail cra . aI the,',on33P .I ac shu iranan".ca; be

ima. Fee!ss Pexsa d .'>SekEcnoes 4 .61:80 Dl 5' 6.-'97 013 ' 459433 rer rested n O.P aria ilmpxi higha area:andnea=rexoenses=ec;,ac~sada' C=ILteia 48 979 48 979 03 993:entreesJr> ed I .Jyr wg ',.di.gk! 702297 -:45. Bt !retd Io ralr tc utica tqadtyilokas. B-:atrrs ad Cemnq Jlgs " 'it '6e '..IQ X5 7 nli ree In mani!os~am airm ray a the InmI-mega:=-arm

CanLe met usCnlOeee.n:in r;jjedxelam-StreesI OXCnate thr du I

rte~taacr - Cus::nret 740 jr 240 K 740 6' so..os.-,ecerahes -Arqta'.Ss!HTtrt learn-rtms! 88:-'5 '38 91: Ji Ja Usd a.apzcxma:cn amtht Ferelcsges us:dfalnrqereraixe= - 0th:. Dt:d6 ea N6 Dt 516 inv i .c alIdemexile i. exdta ge a:oa 166 166 1!.:li Ca sel.btceason emslo e male sn htbulmss sasgangF JnkJe. Eq;uxne< endlee'etoL unpre.~a"z. nN 'r 5.2' 6 Bmr.pa:ted cimCIGr>rkdl Ilo'.I picotJcl re>

yid Iedr: be Xnad!ed n I rma Oi uetem aacnrnpe On aa i'q fmadkeaS

hrangbb =ms 'mr LICrelha a: mr dae rmpaC' r'r'-I S i 18 219 1* no+age

TOTALA55E 8.730lit 12.fii8,214 1.798.485

Bhat=.am brrsrrgs nc cure%;on>al lr'LT ccmrlnp 43 4:3 ki 503!Jmirc Mee pcscoru ryustomJS ail crau snthe ';on OCP:Idr b!x lnnanygra Le

Total q>ipseani Blxk Lease 4 430:73 8 118D15 82: 8';4 1:BD ."Ii rer o:ted n u.F aria. il rnpacl hgha "areas a>dpeaa expenses

Oct gmen;S.Am st ca!b~t.bnc:c 48 979 48 979 '6 9=m!rs:oL nm let plr'.haed a far iaue 107 387 IC 3:r 1!) 4 no J!ageFa>abes- B!J!as Ced Clranq Crgs 262 & 26.7 8:~ 262 WIda> mace:e aye! .-m:nthFalebcs-0!ma".erbala cm 2 33435 2 623435 qi;i 671 172J25 IJs-:d a" apmxmmcn ann th= Ferat!cages us=d Er ln/4iae 366 -'! 45624 3556217HWs lo Le ccnadaed n o.eml ~eel Ja.'sac+i ~ se e md rtjer labs I I 72 143 ?2143

Benitoacted: s an Eqajcelans 961,61.' kl=LKp!ftl arryex es LOandnrrsegdexsts o -simba k

~et>m CM 1&i 9


22/23

~

A A

Fixed Income

Overall significant impact on business (greater than 50% likely); higher haircut and higher expense

Ratings Downgrade: + Junk Status + (50%) estimated change lose of counterparties and their funding;

(A) $4b in Treasury/Agencies (customer cash providers, lose all in terms of bi-lateral business (6 counterparties); funding can be made up with FICCcounterparties (higher haircut/expense); (B) $3b in Agency/MBS, lose 10-12 counterparts ($275m down to 100m in liquidity); (C) Investment grade

Corporates (lose more than half of the 10 counterparts) & lose funding ($2b down to $1b in funding which is a direct drain, no CCP offset; of the

customers that stay, will mean required higher haircuts, cannot fund but can sell out of portfolio and take a p&l hit; (D) match-book income lost both

sides of balance sheet ($200m funding) excess liquidity lost; GCF higher haircuts (another $50m loss)

Financing: impacted immediately, additional margin support required

Clearing:negative impact on revenues and volume, clients would have to set up new clearing arrangements

Inc r eased col lateral requirements, revised settlement funding lines, increase clearing/settlement charges

Given current Fixed Income dynamics globally, the profits on the Fixed Income business are already lagging, but any trigger event could reduce the

profits to "razor-thin" levels.

Forei n Exchan e

Overall significant impact on business, especially in the US where currently building the business (40% likely)

Ratings Downgrade: + Junk Status + (40%) estimated change

CLS Bank Settlement Impact: -An additional factor following a significant "trigger event" would be the potential reluctance of our CLS settlement bank

to continue to provide FX settlement services. This is something that MFG has experienced historically, and there are a limited number of banks that

offer these services.- Following a downgrade or "trigger event", liquidity providers would be even less inclined to settle trades bilaterally with MFG

outside of CLS (other than in the instances where MFG had "winning" trades which they may wish to delay settlement on if it appeared that we were in

distress), so this would have significant impacts and would mean that we would not be able to execute business.Retail

Overall potentially less material impact on business (less than 25% likely)

Ratings Downgrade: + Junk Status + (25%) estimated change

General Brokerage(UK/We/ch): $1.6b held, benefits from very strong long-standing customer relationships., which with management of the news

flow and reassurance of the Desk Head should limit the flight of customers, and this was the case historically.

Electronic Direct i Online Trading:(US/Sachs): $1.0b

CFD+ FO (APAC): $200-250million, we have a greater exposure to white label F/0 than we do to CFDs (which are manufactured by DB).

21 Global


23/23

Commodities

Overall significant impact on business (potentially greater than 40% if junk status)

Ratings Downgrade: + Junk Status + greater than (40%) estimated changeMetals:Less significantly impacted than other 2 from historical figures and customer relationships in UK, believe it would be hit (20-25%)

Agriculture:Significantly impacted, upwards of 50% decline in revenues;

Energy:Significantly impacted (already currently impacted due to market cap and stock price); upwards of 50% decline in revenues;

Regulatory capital for commodities is $300 million; margin requirements $2 to $3 billion, it would cause $800 million in balances to be pulled out (30

40%).

Expect Metals (mostly non-seg customers in UK) cash surplus would likely reduce from $200 million to $100 million.

~Euities

Ove ral l potentially less material impact to business (approx 10%, maybe 15% if junk status and/or multip le events occurred ) Rat i ng s Downgrade: + not si gni ficant impacted due to the nature of the business (85% DVP).

Cash Equity. makes up 46% of US Equities, mostly DVP and as such, a trigger event will not have a vast impact;

Equity Derivs:makes up 37%, largely consists of listed derivatives and are largely DVP, a trigger event will not have a vast impact (looking to build up

OTC Equity Derivs, but not applicable at this time);

Electric Trading:DMA makes up 11% (of which 30% is flat @ EOD) and the rest is 6%, this business is largely DVP, a trigger event will have a

minimum impact;

Interest Rate Products

Overall non-material impact on business between(10%-15%) likely

Ratings Downgrade: + Junk status + Lose clearing accounts

Execution:accounts for close to 85% of the business, given past considerations the phone lines were back up to normal business in a few days.

Clearing: wouldnot be affected greatly but when the split between execution and clearing trends towards 60/40 in the future the impact will be greater.

Prime Services

Overall non-material impact on business (less than 10% likely)

Ratings Downgrade: + not significantly impacted due to the nature of the business and client relationships;

Client Solutions:across these lines of business there is $4.6 billion in capitalization in what are considered "Middle Markets".

90% of this is deemed to be safe considering the nature of the client relationships

22The 10% lost will be due to the largest CTA's and hedge funds G lo b a l

MF Globals Break the Glass Document

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