A disturbing point regarding the MF Global debacle that we have made here on several occasions is that the further we get away from the bankruptcy event, the less clear things become. Some are now suggesting that this could be on purpose. It is hard to argue with that.
Case in point is a Wall Street Journal article from Jan. 30 that ominously states in its headline: “Money from MF Global Feared Gone.” Worse yet the story states that the money “could have vaporized.”
During the past 40 years — Futures marks its 40th birthday this month, which we plan on celebrating with special articles all year long — the industry has gone through dramatic changes. The days of using these markets only to hedge grains and livestock are long gone, and along the way, currencies, bonds and stocks — traded by hedgers and speculators alike — joined the commodities trading club. Options and ETFs also would join, and soon the entire world got into the business. Exchanges popped up in Europe and South America, Asia futures trading expanded beyond Japan. And the Germans launched an electronic exchange, pushing the floor-centric U.S. exchanges to jump on board. Today trading is a 24/7 business. Derivatives are traded by all levels of speculators, fund managers, investment banks and corporations. Even OPEC uses the market, as do central banks. (more…)
Better late than never is how the Commodity Customer Coalitions (CCC) responded to the Commodity Futures Trading Commission’s brief, filed on Wednesday Jan. 18, clearly stating that former MF Global Inc. customers have priority over all other claimants. (more…)
I’m a proud American but sometimes when watching Congress at work I wonder if our Founding Fathers were a bit daft. Case in point: The House Agriculture Committee hearings on the MF Global failure held Dec. 8. Between the redundant, silly, random and political ax grinding questions, it’s a wonder anything was learned. However: (more…)
As we now are weeks in the debacle following the bankruptcy of MF Global on Oct. 31, the latest casualty has just been announced. Already individual traders, commodity trading advisers and introducing brokers have felt sting, but now charitable foundations are beginning to as well. According to Reuters, CME Group, which has given $22 million to Chicago-area schools and charities over the past five years, has stopped making grants through its main foundation, citing the collapse of MF Global. (more…)
“If this can happen to a highly regulated company like [MF Global], who can we trust in the future? Now speculators have three concerns: 1. The market, 2. Our own poor judgement and 3. To hope the clearing [firm] will not steal the accounts.” Futures reader
It’s time to wipe that smug smile off our face, the “our” meaning the futures industry. The bankruptcy of MF Global revealed a breakdown of an industry that has thrived knowing that customer margin was “safe” because of segregated fund protections. The sacrosanct institution of protecting margin at the exchange clearinghouse level while enforcing a strict segregation at the clearing firm has been tested throughout the years: Refco, Stotler, Lehman, et al. Sometimes it wasn’t as it should be: Volume Investors, Sentinel. But typically the funds were moved over with accounts and positions so clients would not have to worry about where their money was in addition to market risk. (more…)
There was a rumor going around — later confirmed by multiple sources — that during Jon Corzine’s initial conversation with MF Global’s vast network of brokers shortly after he took the helm of the large futures broker, he became perplexed with numerous references to MF Global’s IBs.
At one point he stopped and asked why all these references to Investment Banking? The joke at the time was that Corzine came in with a lot of experience operating an investment bank but was a neophyte in the world of futures and didn’t know he was addressing MF’s vast network of introducing brokers.
I had a strange feeling of deja vu as I left work on Friday. MF Global had dropped precipitously after a poor second quarter earnings report came out on Tuesday and there were numerous reports that they were looking to sell. Then on Friday word came out that ratings agency Fitch had downgraded their debt to junk status. (more…)
The financial meltdown of 2008 kicked off a battle royale between the futures industry/financial institutions and Washington, and the legislative crackdown on trading and finance rages on today. But lately, instead of trying to reign in or regulate financial institutions, some Washington veterans are choosing instead to join them.
MF Global had a pretty tough first quarter as rogue trader Evan Dooley cost the firm $141 million in overnight wheat trades in February and rumors of a connection with a Bear Stearns investor pushed its stock price to below $5 on March 17. Since then, MF stock has inched its way back to the somewhat depressed levels that followed the wheat incident.
Today MF Global announced in its 2008 fiscal fourth quarter (first quarter) earnings report and tried to place a positive spin on it but the biggest item was that private equity firm J.C. Flowers & Co. LLC would make a $300 investment in MF Global.
MF reported a $71.1 million loss for the quarter and losses of $57.6 million for the fiscal year ending in March. It also reported total futures and option volume grew 38% year over year and net revenues increased by 10%.
