The story of MF Global


Richard Moore

Bcc: FYI
rkm website

MF Global traces its roots to the sugar trading business started by James Man in England in 1783, which evolved into broader commodities trading before its later transformation into a financial services business during the 1980s.

MF Global serves as a poster child of the rise and fall of Anglo-American capitalism. MF (under another name) was founded near the beginning of the Industrial Revolution, based on business in the real-world economy. In 1980, in synch with the launch of the neoliberal assault on national economies, MF launched into to the more virtual world of finance. In 2011, MF went under, in synch with the collapse of capitalism generally.


MF Global

From Wikipedia, the free encyclopedia

MF Global (OTC Markets GroupMFGLQ), formerly known as Man Financial, was a major global financial derivatives broker. MF Global provided exchange-traded derivatives, such as futures andoptions as well as over-the-counter products such as contracts for difference (CFDs), foreign exchangeand spread betting. MF Global was also a primary dealer in United States Treasury securities. The company filed for bankruptcy protection on 31 October 2011, with the brokerage unit to be liquidated[2] after liquidity problems arising from investments in European sovereign bonds. The company is considered to be the first major American victim of the European sovereign debt crisis.[3][4]
MF Global was the brokerage segment of Man Group until 2007, when the business decided to split the investment and brokerage businesses so they could each focus on their own markets. An IPO was done for the brokerage business which was renamed MF Global to distinguish it from the investment business which remained as Man Group. The company was registered in Bermuda, but subsequently moved its registration and headquarters to the United States.[5]
MF Global traces its roots to the sugar trading business started by James Man in England in 1783, which evolved into broader commodities trading before its later transformation into a financial services business during the 1980s.[6]
Its former parent, then known as ED&F Man, diversified from pure cash commodities into commodity futures in the late 1970s, and established the Anderson Man futures brokerage in 1981. It later changed its name to ED&F Man International and then Man Financial, before adopting the current brand following the IPO and separation of the brokerage from the asset management operation.
ED&F Man operated as a partnership through to the 1970s, when it started an international expansion which, by 1983, saw its staff climb to 650 employees. ED&F Man listed on the London Stock Exchange in 1994, changing its name to Man Group in 2000. Its agricultural business, which retained the EDF Man name, was sold to management the same year.
The rapid expansion of the Man Investments unit in the emerging hedge fund management business shrouded many investors from the development of its brokerage unit.
Man Financial embarked on a series of acquisitions, which expanded its product capability and geographic reach, starting in 1989 with the purchase of the Chicago-based GNP Commodities, and including well-known industry names such as Geldermann, Tullett & Tokyo Futures, First American Discount Corp., Australia’s Ord Minnett and GNI.
The 2002 purchase of GNI was the largest of these and gave Man Financial access to the then growing Contract for difference market and GNI’s trading platform GNI touch.
However, 2005 saw Man Financial make its largest deal with the transformative $323 million acquisition of client assets and accounts from entities of Refco, following the U.S. financial-services group’s collapse in late 2005. The Refco deal followed a hotly-contested auction with Cerberus Capital, the private equity group, and boosted Man Financial’s scale in retail and institutional business.[7]
On March 17, 2008, shares of MF Global plummeted on liquidity fears.[8] The CME,[9] ICE,[10] Nymex[11] and CFTC[12] issued statements confirming MF Global was in compliance with regulatory and financial requirements.

[edit]Bankruptcy protection

On October 25, 2011 MF Global reported a $191.6 million quarterly loss as a result of trading on European government bonds. In response Moody’s andFitch cut the company’s credit rankings to junk. Jon Corzine, the former New Jersey governor who led MF Global, was working to find a buyer, according to several reports.[13]
The firm’s board met through the weekend of October 29/30 in New York to consider options including a sale to avert failure, according to a person with direct knowledge of the situation. It was stopped from doing new business with the New York Fed until it showed it was able to fulfill its responsibilities as aprimary dealer, according to a statement on the regulator’s website. Trading in MF Global’s stock was halted.
On October 31, 2011, MF Global filed for Chapter 11 bankruptcy. The Wall Street Journal reported that MF Global would seek Chapter 11 bankruptcy protection after investing $6 billion in sovereign bonds issued by European countries.[14][15] According to the CME Group Inc., MF Global broke rules on keeping customer money separate from its own trading accounts. On August 31, 2011 MF Global had $7.3 billion in customer assets, according to Commodity Futures Trading Commission data.[16][17]
In papers filed in U.S. Bankruptcy Court in Manhattan, MF Global listed debt of $39.7 billion and assets of $41 billion. U.S. regulators have subpoenaed MF Global’s auditor, PricewaterhouseCoopers LLP, for information on the segregation of assets belonging to clients trading on U.S. commodity exchanges . The company is being investigated by regulators for money that may be missing from client accounts. The U.S. Securities and Exchange Commission is also reviewing trades in MF Global Holdings Ltd. (MF) convertible bonds to determine whether some investors sold the debt based on confidential information before the firm’s demise,. [18]


On February 28, 2008, MF Global announced a bad debt provision[19] in the amount of $141.5 million. The provision was the result of unauthorised trading by a representative in a MF Global branch office, who on February 27, 2008, while trading in the wheat futures market in his personal account, substantially exceeded his authorized trading limit. MF Global held a conference call[20] at 11 a.m. EST on February 28 to discuss the matter.
MF Global was fined $10,000,000 by the CFTC over the incident and an unrelated Natural gas incident from 2003.[21][22] The CME Group also fined MF Global $495,000 over the wheat incident.[23]

[edit]Board of directors

At the time of its bankruptcy filing, MF’s board of directors was:[24]
In the immediate wake of the bankruptcy, Corzine[25][26] and the board[27] were criticized in the financial press for their apparent non-awareness of the company’s condition in the immediate lead-up to the event and their apparent inabilities to manage the risk the company had assumed.