Securities: MF Global financial crisis
It's almost undignified - until reality sets in. Despite all the talk of home regulators being principally responsible for companies headquartered in their jurisdiction, when push comes to shove, the lesson from the current global financial crisis is that it's every regulator for himself. And with the first collapse of a near-worldwide financial services business since Lehman Bros, MF Global is a test for the new attitudes. Why haven't you heard of MF Global? Its because you probably know it by its former name: Man Financial.
When MF Global declared itself insolvent yesterday, there were tidal waves of shock across the world.
MF Global is the vehicle of the somewhat famous Jon Corzine. A former Governor of New Jersey, he was also a chairman (they had mnre than one at the time) of Goldman Sachs Group.
MF Global is not - at least not officially - out of business. It applied for protectiion under US Insolvency law after admitting that it had made a catastrophically bad call on European soveriegn debt and lost some USD6,00 million.
But a notice on the Group's principle website does not bode well:
"Notice regarding CME, NYMEX and ICE Action
"Due to MF Global Holdings Ltd. and its finance subsidiary, MF Global Finance USA Inc., filing for Chapter 11 Bankruptcy Petition, the CME Group, NYMEX and ICE are accepting "liquidation only" orders from MF Global clients, and have restricted electronic access to their markets.
" This means that you may place offsetting orders for current open positions at MF Global, but may not place any new orders. Performance of your trades is guaranteed by exchange clearinghouses."
But the website also carries a sales pitch that rings hollow today : "Bringing together superior market access, well-timed market insights and powerful trading and hedging solutions. It’s our passion. And it’s why clients rely on MF Global to sharpen their edge in the world’s ever-changing markets. "
As time zones rolled around the world, Australlia jumped up:
ASIC is aware that companies in the MF Global group have been placed into administration. This impacts [upon] a number of companies in Australia.
Insolvency firm Deloitte has been appointed administrator to the MF Global group in Australia. The administrator will contact clients to advise how their positions and funds are affected.
Activities affected are:
Equities - MF Global Securities Limited is in administration. Trading activity has halted. Clients of other firms that use MF Global Securities for trading should contact their provider directly. The Administrator will advise how this impacts [upon] clearing for recent trading.
Futures trading - MF Global Australia Limited is in administration and trading activity has halted. The Administrator will advise how this impacts [upon] clearing for recent trading.
Futures Clearing - ASX Clear Futures has advised ASIC that MF Global UK Limited has been put into an event of Default. MF Global UK Limited has also entered the Special Administration Regime in the UK. The Administrator will advise how this impacts [upon] clearing for recent trading.
ASX 24 has advised ASIC that Grain Futures will not open today and Wool Futures have been suspended to preserve the integrity of the market.
FDs - MF Global Australia Limited is in administration. Clients of other firms who receive MF Global CFDs should contact their provider directly. The Administrator will advise how this impacts [upon] clearing for recent trading.
Half-way around the world, things were already moving in the UK:"The Financial Services Authority (FSA) confirms that MF Global UK Limited (MF Global UK) has entered the Special Administration Regime (SAR) and Richard Fleming, Richard Heis and Mike Pink of KPMG LLP have been appointed as joint special administrators. This follows a decision taken by the board of MF Global UK. ...The Special Administration Regime came into effect in February 2011 and sets three objectives for a special administrator:
- to ensure the return of client assets as soon as practicable;
- to ensure timely engagement with market infrastructure bodies and the authorities; and
-
either to rescue the firm as a going concern or wind it up in the best interests of the creditors.
In an ordinary corporate administration proceeding only the third objective would apply."
It is the first time that the regime has been used.
Back across Asia, Japanese regulators froze trading accounts in the wake of announcements in the USA that federal prosecutors and regulators were to investigate allegations that substantial sums are missing.
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