DERIVATIVES DIARY: For Traders, One Bad MF Of A Week
November 04 2011 - 6:32PM
Dow Jones News
Last week, Jon Marcus backed MF Global Holdings Ltd. (MFGLQ)
Chief Executive Jon Corzine right up until the broker-dealer's end.
This week, Marcus got angry. Then he grew sad.
"It's a crying shame," said Marcus, principal of Chicago-based
Lakefront Futures & Options LLC, which relied on MF Global to
handle its customers' trades for 12 years. "I'm still furious, but
now it's more a feeling of depression."
Lakefront brokers trade for individual investors, farmers and
asset managers that hedge risk or make speculative bids on the
futures markets. MF Global cleared its business and managed its
trading collateral, but the company's dive into bankruptcy Monday
snared firms like Lakefront, locking them out of markets and
freezing money on deposit.
Over the past two days, Marcus said, a steady stream of emails
has arrived from MF Global staff, saying farewell and holding out
hope that their teams might jump to other firms.
"I pray I can get help those guys and gals find jobs elsewhere
in the industry," he said. Marcus doesn't expect to receive
commission payments for October from MF Global, however.
Cash Held Captive
Others among MF Global's tens of thousands of customers were
less sanguine, particularly those who seemed victims of unfortunate
timing. Syed Shah, a private investor in the U.K., said he tried to
close out his brokerage account with MF Global early last week but
to no avail. His account, with no outstanding trades on, holds
$57,000 in cash that still remains out of reach.
"People pick up the phone but they say 'we don't know what's
happening,'" said Shah. "I'm quite suspicious because I've made
withdrawal requests before and it was in my account the next day,
but not this time."
Bond Trade Bogged Down, Wool Trade Tangled
MF Global's demise sent out ripples in markets around the world
Monday, but it especially crimped business at GovEx, a State
Street-backed platform designed for the automated trading of U.S.
government issues.
The start-up relied on MF Global as its central counterparty for
all trades, and the broker-dealer's bankruptcy shuttered commerce
for about two days, according to GovEx Managing Director Tomas
Zikas.
By Wednesday, GovEx had lined up a new firm to facilitate
trading: longtime MF Global rival Newedge. The French firm also
stepped in to take on some of the failed firm's futures-trading
customers from CME Group Inc. (CME) in a mass transfer of client
accounts this week.
Australia offered another hairy episode as exchange operator ASX
Ltd. (ASX.AU) suspended trade in wool futures, where MF Global
accounted for 80% of all business, according to a notice from ASX.
Dealing in the white fluff resumed Wednesday.
Newsletter Goes Dark
While members of MF Global's Washington Research Group, acquired
in October 2010, continue to send out analysis, at least one New
York-based newsletter run by the collapsed firm is ending.
Jim O'Sullivan, chief economist at MF Global, said in an email
that Friday's "Macro for Markets," a weekly U.S. economics
newsletter, would be the last. "Unfortunately, this is the last
issue from MF Global, but we hope to be up and running again
somewhere soon," wrote O'Sullivan and Stephanie Chang, an economist
at the firm.
-By Jacob Bunge, Dow Jones Newswires; 312 750 4117;
jacob.bunge@dowjones.com
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