Commodities Brokers Scramble To Reassure Customers, Shareholders

Mar 18 2008 | 9:13am ET

It’s official, this is the week of the denial. At the end of yesterday’s volatile trading day, in which rumors of MF Global’s demise abounded, that firm and others sent their public relations departments into overtime refuting rumors that they had exposure to sub-prime mortgages or were suffering from a lack of liquidity.

Even the government got in on the game. 

The Commodity Futures Trading Commission issued a statement late yesterday addressing concerns over commodities broker MF Global and its regulatory standing.

“The CFTC’s Division of Clearing and Intermediary Oversight can confirm that MF Global is currently in compliance with the agency’s regulatory financial requirements,” read the statement.

Shares of the largest futures broker—which spun off from hedge fund Man Financial last year—lost nearly two-thirds their value Monday, causing many to speculate that it would be the next casualty of the volatile markets after Bear Stearns. However, the firm denies that it is in any trouble.

“Our clients continue to show strong support, and our counterparty relationships are sound," MF Global said in its own statement.

Meanwhile, another commodity risk management firm, FCStone Group, issued a statement following a plunge in its share price yesterday. The Kansas City, Missouri-based firm said that it has no direct exposure to the sub-prime mortgage market or mortgage-backed securities. It also stated that it does not used third-party repo lines to provide liquidity to its regulated entity, FCStone.

“In light of the current market conditions, we felt it important to inform both our customers as well as our shareholders that we remain confident in our ability to continue to execute across all of our operating segments,” said FCStone CEO Pete Anderson.

Firms associated with suspect firms—justly or unjustly—are also getting in on the rumor control game. Penson Worldwide—a provider of securities and futures processing services—issued a statement on Monday saying that “the company has no meaningful exposure to commodities broker MF Global Ltd., nor does MF clear through Penson, contrary to rumors currently being circulated.”

However, Penson did note that its futures subsidiary, Penson GHCO, currently clears one commodity through MF, and has less than $1.25 million in customer segregated funds on deposit with MF to support margin obligations in this commodity. The firm’s shares were down 20% yesterday.


In Depth

Related-Company Fees: Normal Industry Practice or Conflicted Compensation?

Nov 11 2015 | 4:23pm ET

Regulatory agencies as well as investors are increasingly exploring whether certain...


Ferrari Roars in Wall Street Debut

Oct 21 2015 | 4:28pm ET

Shares of supercar maker Ferrari jumped as much as 15 percent to a high of nearly...

Guest Contributor

Private Debt - What is the Opportunity?

Nov 11 2015 | 3:28pm ET

In this contributed article, Rob Allard, founding partner of Firebreak Capital...


Editor's Note

    Oct 21 2015 | 10:41am ET

    One of the most unique charity benefits in the hedge fund industry, A Leg To Stand On's (ALTSO's) Hedge Fund Rocktoberfest - NYC, raised nearly $500,000 last Thursday thanks to the generous support of major sponsors and nearly 1,400 attendees from the Tri-State finance, business and hedge fund communities. Read more…