Update from the President - November 10, 2011

As events surrounding the MF Global financial crisis continue to unfold, I would like to provide an update on the situation, and once again reassure clients about the strength, financial stability and business focus of Archer Financial Services (AFS).

Over the last week, the MF Global (MFG) bankruptcy trustee directed positions and a portion of the corresponding margin balances that were at MFG to be transferred to other futures brokerage firms, including AFS.  Our staff has worked diligently to ensure that the transfer of accounts to AFS has been handled as smoothly as possible, and we welcome these clients and look forward to providing them with excellent services and great financial strength.  These clients have many questions and concerns about the transfer of their assets, and we are doing all we can to assist them through this difficult situation.  While the events of the past two weeks are deeply troubling and unprecedented, we remain confident that in time all matters related to MFG’s bankruptcy will be resolved and customer confidence in the futures industry will be restored.

Information on the MFG situation is changing daily, so we have created a page on our website that contains updated information, links to related sites, and Frequently Asked Questions and Answers.  Please check www.archerfinancials.com/mfglobal regularly for factual information.

As we wait for more facts to emerge, please allow me to provide some big picture perspective on the world of financial services.  Many of the events that are happening in financial markets, both at home and around the globe, are not within our control.  There are, however, some things you – and any investor in these uncertain times – can do right now to help bring clarity to your own situation.  First and foremost, be sure that the financial partners you choose are strong, stable and have the staying power to walk with you long into the future.  The checkpoints below can help you better understand those with whom you do business and build confidence for the steps ahead:

• Know the firm with whom you are dealing.  How long have they been in business?  What is the ownership and financial backing of the firm?  
• Understand their business activities, such as whether or not they engage in proprietary trading of their own money, which could put the firm’s finances at risk.   
• Understand the firm’s balance sheet and capital.  Selected financial data for all major FCM’s is available on the CFTC’s website www.cftc.gov/MarketReports/FinancialDataforFCMs/index.htm

I welcome you to explore these questions, and any others you may have, with ADMIS.  You will learn we do not engage in proprietary trading, and that we are the wholly owned subsidiary of the Archer Daniels Midland Company (NYSE:ADM) a Fortune 50 agricultural processing giant.  Our financial strength was described in detail in my letter of November 1, 2011, which is available on our website www.archerfinancials.com/mfglobal.  

The focus of ADMIS business is squarely on helping our clients be successful.  We remain steadfast in our commitment to our clients, and to operating a financially secure and stable brokerage firm that they can rely on long into the future.  Please feel free to explore our website, or contact me or any of our employees with questions.  I can be reached at 312.242.7126 or Tom.Kadlec@admis.com, and I welcome your inquiry.

Tom Kadlec
President, ADM Investor Services

AFS' Strong Financial Standing

Given recent events surrounding MF Global's financial crisis, customers have asked for reassurance regarding Archer Financial Services' (AFS) financial stability. AFS has always had — and continues to have — a very strong balance sheet. AFS is a firm built on financial stability, and it is this strength that enables us to withstand marketplace fluctuations with ease. We are strong, well-capitalized and prepared to continue navigating uncertain times.

• Our independent auditors, Ernst & Young, conduct a very thorough certified annual audit of our firm after each fiscal year ends on June 30th. Their most recent audit confirmed that Archer Financial Services' equity capital was $231 million as of June 30, 2011.
• Although AFS does not typically release quarterly updates of our equity capital throughout the year, these are extraordinary circumstances. As of September 30, 2011, AFS has $234 million in equity capital.
• Based on CFTC regulations, AFS is required to maintain $2.7 billion in a segregated account to secure our customer's funds. As of September 30, 2011, we have $583 million above and beyond this required number, or 22% in excess of the amount we are required to maintain.
• CME Group, Inc., our designated futures industry regulator, conducts an unannounced annual audit to ensure we are in compliance with all CFTC regulations. The audit reviews AFS Compliance, Financial and Risk Management practices and procedures to conform with industry regulations.
• The internal audit department of Archer Daniels Midland Company also conducts an annual, unannounced audit of AFS to ensure we are in full compliance with Sarbanes-Oxley 404 regulations, which govern internal controls over financial reporting.

Rest assured that AFS has always been, and continues to be, committed to providing excellent service as well as strong financial stability to all our clients. 

Frequently Asked Questions & Answers as of November 8, 2011

Q: When will all customer positions show on their activity statements?

A:  Most US Exchanges transferred the remaining positions over the past weekend; therefore the November 7th statement should reflect most, if not all, of their positions traded on US markets. Please note there are some positions still pending transfer from ICE US and NYSE Liffe. The communication flow from foreign markets has been less informative, especially out of the European and Asian Exchanges. AFS will work diligently with all Exchanges to ensure such transfer of positions is completed soon as possible. 

Q: When will I have access to my money?

A:  Access to funds rests in the hands of the MF Global Bankruptcy Trustee.  The trustee is regularly updating information on their website, www.mfglobaltrustee.com.

Q: My AFS statement reflects a different trade price on my position. 

A: Positions at MFG were transferred by the Exchange at the 11/2/2011 end-of-day settlement price.  AFS’ activity statements will only reflect the difference from the 11/2/2011 settlement price to top days’ settlement price. The profit or loss from the actual trade price to the 11/2/2011 settlement price will be reflected as cash in your customer’s account and will be credited to their account when the remaining funds are transferred from MFG.

Q: What margin rates will AFS charge (speculative and hedge)?

A:  AFS’ standard practice is to charge the applicable exchange’s minimum initial & maintenance margin rates. Hedge rates are available to those customers that complete and file a hedge letter with AFS; this letter should list the specific product(s) for which the customer uses to hedge risk(s) associated with their business.

Q: How do margin rates differ from MF Global?

A:  Generally, AFS margin excesses (or deficiencies) are computed by taking the account’s Total Equity (TE) plus the margin value (MV) of any securities on deposit (i.e. T-Bills) less the Initial Requirement (FIR). This method contrasts with the system brokers may be accustomed to at MF Global where the account’s Net Liquidating Value (NLV) less the Initial Requirement (FIR) was used. The key difference in these approaches lies in where the net option value is being attributed, whether that be on the liability component (margin requirement) as at AFS or the asset component (liquidating value) as at MF Global.

Q: How do I open a new customer account?

A:  New Account Applications are available via hard copy or pdf. You may request these documents by emailing newaccts@admis.com or calling 312-242-7150. AFS also has an online account application link which is available upon request.

Q: When will we have access to customer accounts online?

A:  Access to customer accounts can be obtained by contacting AFS Support Desk at supportdesk@admis.com in order to receive a username and password for the member website.

Q: How can I get access to online account information?

A:  Access to online account information can be obtained by contacting AFS Support Desk at supportdesk@admis.com.

Q: When will we have access to a trading platform?

A:  Access to a trading platform can be obtained by contacting AFS Support Desk at supportdesk@admis.com.

Q: What platforms will I have access to?

A:  AFS has its own proprietary trading platform called OAK; access to CQG, TT, and PATS is also available upon request.

Q: What are the costs for using the order entry platforms?

A:  There is no fee to use the Oak Trading Platform, and standard industry rates apply for use of platforms outside of OAK.  The AFS Support Desk can provide these costs to you which are based on the service levels selected.

Q: When will I be trained on the Oak trading platform?

A:  OAK training can be scheduled by contacting Matt King at (312) 242-7262 or emailing Matt at matt.king@admis.com.

Q: When does AFS credit deposits to customer accounts?

A:  AFS’ standard practice for electronic deposits (i.e. wires) is to credit the customer’s account on the day the funds are received into the AFS bank account.  Check deposits are credited to the customer’s account on the day that the funds are deposited into the AFS bank account.

Q: How do I know when customer funds are received by AFS?

A:  A daily account statement is generated and sent to each customer that has any activity in their account; such statements can either be sent via hard copy or email.  Online access to the account is also available by contacting AFS Support Desk at supportdesk@admis.com.