MF Global Suspended From LME Trading CME Clearing After Bankruptcy Filing

Post on: 2011-11-02 By: admin

The holding company for the futures brokerage and broker- dealer run by former New Jersey governor and Goldman Sachs Group Inc. (GS) co-chairman Jon Corzine sought court protection today, less than a week after reporting a record quarterly loss and disclosing a $6.3 billion wager on European sovereign debt.
The holding company for the futures brokerage and broker- dealer run by former New Jersey governor and Goldman Sachs Group Inc. (GS) co-chairman Jon Corzine sought court protection today, less than a week after reporting a record quarterly loss and disclosing a $6.3 billion wager on European sovereign debt. Photographer: Mandel Ngan/AFP/Getty Images
MF Global Holdings Ltd. (MF), the holding
company that filed for bankruptcy protection, was suspended from
trading on the London Metal Exchange. CME Group Inc., the
largest futures market, also suspended the broker-dealer unit MF
Global Inc. as a clearing member.
MF Global U.K. Ltd. was excluded from LME electronic and
floor trading after it was declared a defaulter by LCH.Clearnet
Ltd., which clears transactions, the LME said in an e-mailed
statement yesterday. The unit is one of 12 category 1 members,
giving it the right to trade in the LME’s 6-meter-wide (20-foot)
ring, home to London’s last open-outcry transactions.
“Clients that trade on exchanges are generally protected
by the mechanisms that are there with clearing houses and
initial margins and everything else that work to protect them
from major defaults,” said Jeremy Goldwyn, head of overseas
business development in Asia for Sucden Financial Ltd., who has
been involved with the LME for 25 years. “I don’t think we are
going to see a forced mass liquidation other than any positions
that MF Global themselves had. I suspect we probably have seen
most of that already.”
MF Global Holdings sought bankruptcy protection yesterday,
three years after the failure of Lehman Brothers Holdings Inc.
which triggered the worst global recession since World War II.
Phone Trading
LME suspended MF Global’s access to telephone trading as of
7:15 p.m. London time yesterday at LCH.Clearnet’s request, Chris Evans, head of business development at the LME, said by phone
today. The company was allowed to trade by phone briefly after
6:55 p.m. to let MF Global staff transfer positions, he said.
Jeremy Skule, MF Global’s spokesman in New York, didn’t
return a Bloomberg call seeking comment yesterday and an e-mail
today.
The company was ranked first by trade volume based on
cleared business on the Comex division and the New York
Mercantile Exchange in the year ended March 31, the company said
on its website. The firm also ranked second on CME and fourth on
Liffe, it said. It was the eighth largest futures commission
merchant by Aug. 31, with customer segregated accounts of $7.27
billion, according to Commodity Futures Trading Commission data.
The holding company recorded $2.87 billion worth of
commodity derivative contracts as assets representing 79 percent
of total derivative contracts as of June 30, the firm said in
its quarterly filing to the Securities and Exchange Commission.
Foreign-exchange derivatives ranked second at $436 million.
“They are big players and this certainly raises concerns
in the market,” Jonathan Barratt, a managing director of
Commodity Broking Services Pty, said by phone from Sydney. “We
have agricultural positions with them and for now, we’ll just
have to wait and see what happens.”
‘Complex Operations’
MF Global Securities Ltd. and MF Global Australia Ltd. were
placed in administration and their trading activities were
halted, said the Australian SecuritiesInvestment Commission.
ASX 24, the Australian Stock Exchange’s 24-hour trading
platform, suspended grain and wool futures trading to preserve
the integrity of the market, it said. NYSE Liffe, where coffee,
sugar and cocoa are traded, also declared MF Global U.K. a
defaulter.
Deloitte Touche Tohmatsu, administrator for the Australian
companies, is working “to resolve what are complex operations
in the interests of the companies’ clients and creditors,” it
said. “The total process will take some time.”
Sydney Exchange
MF Global is a full participant member of the Sydney
exchange with agricultural-desk clients representing more than
80 percent of the volume in the three traded wool contracts,
according to its website. The company’s so-called Forward Offer
Board provides a way to trade domestic physical wool and it has
a physical grain brokerage operation, it said.
Intercontinental Exchange Inc., owner of the world’s
largest credit-default swap clearinghouse, said yesterday it has
limited all trading for customers of MF Global to liquidation
only and blocked brokers backed by the company from the trading
floor. The Monetary Authority of Singapore directed MF Global
Singapore Pte Ltd. not to take on new positions except for
reductions or liquidations.
The Hong Kong Mercantile Exchange suspended and restricted
the trading of MF Global Hong Kong and declared MF Global U.K.,
a clearing member, to be a defaulter, bourse spokeswoman Aubrey
Ho said today. The exchange trades gold and silver futures.
To contact the reporters on this story:
Agnieszka Troszkiewicz in London at
atroszkiewic@bloomberg.net;
Glenys Sim in Singapore at
gsim4@bloomberg.net
To contact the editor responsible for this story:
James Poole at
jpoole4@bloomberg.net
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Article original from: http://www.bloomberg.com/news/2011-11-01/mf-global-suspended-from-lme-trading-cme-clearing-after-bankruptcy-filing.html