Thursday, 31 July 2014
Last updated 10 hours ago
Nov 1 2011 | 10:36am ET
MF Global, the former futures brokerage arm of the Man Group, filed for bankruptcy yesterday after it became clear that hundreds of millions of dollars of customer money was missing.
The revelation of the missing money scuttled a proposed deal to sell much of the firm to Interactive Brokers Group, an agreement struck over the weekend. It remains unclear exactly how much money was missing—originally, $950 million was unaccounted for, a figure that had fallen to less than $700 million by last night—or where it might be, The New York Times reports.
One possible explanation came today from the CME Group, MF Global's primary exchange regulator. The Chicago Mercantile Exchange owner said today that MF Global had failed to keep its customer accounts segregated from its own capital and that it was conducting an investigation.
"CME has determined MF Global is not in compliance with Commodity Futures Trading Commission and CME customer segregation requirements," CEO Craig Donohue said. Regulators are also looking into MF Global's books to determine whether the missing money and failure to keep customer and proprietary capital separate are the result of sloppy bookkeeping, or something more sinister. Among the prospects authorities are looking at is whether MF Global diverted customer money to prop up its own controversial investments in European sovereign debt, the revelation of which began the firm's downward spiral. It has also been suggested that at least some of the money was being held by banks loath to send customer money to a failing firm, although MF Global has not produced evidence to show that the missing money is deposited with banks.
Neither MF Global nor its CEO, former New Jersey governor and Goldman Sachs Chairman Jon Corzine, have been accused of any wrongdoing.
MF Global, which spun off from Man four years ago, has been scrambling since late last week to sell its European debt holdings and eventually itself. But all of those efforts foundered upon each other or following the news about the missing money. MF Global told regulators about the issue yesterday, although those regulators had suspected a problem as early as last week, the Times reports.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…