shocking - MF Global aims for sale by Monday

[alex2006]

MF Global aims for sale by Monday - source | Reuters

I still have a live spread betting account with them but haven't traded for ages.

 

[pboyles]

MF Global aims for sale by Monday - source | Reuters

I still have a live spread betting account with them but haven't trading for ages.

That article says they have been increasingly using their own capital to trade and have suffered losses. I hope they havnt been using clients account money to trade, that would be a mess. I think some companies were fined for not properly segregating funds so I hope that's not the case here.

 

[Ingot54]

I think some companies were fined for not properly segregating funds so I hope that's not the case here.

You can kiss your money goodbye I'm afraid.

Many traders think that having their funds "segregated" equates to having their funds secure in the event of bankruptcy. The small print - and IG Index is exactly the same - states that they DO segregate your funds from other trading monies, but that in the event of a crisis, your funds are not secured on a first priority basis. The funds are STILL treated as general assets of the company, and will not be available on call until after the receivers have finished assessing the nett worth and division of assets.

Sorry to tell you this. I discovered it in the fine print in 2005, and decided then that I would not keep any more money in my IG Index a/c than was necessary to actually execute trades. Given that I can transfer money into my a/c in less than 3 minutes, I have no need to park cash with them, when I am earning 5% with my own bank

The word "segregate" should not be construed as "secure" although most traders relax when they see the word "segregated." We shall soon see how wrong it is to assume anything.

Troubled trader 'freezes client account' - ABC News (Australian Broadcasting Corporation)

The link is to an article on the Australian ABC Internet news:

"A local client of MF Global has told the ABC that he could not withdraw money from his contracts for difference (CFD) trading account.

He says the company told him today that client payouts were on hold pending either the sale or bankruptcy of the parent company.

MF Global Australia said it could not confirm the report and directed media enquiries to Singapore.

Calls to Singapore were not answered."

The next question we should be asking, is how safe is IG Index ... or here in Australia, how safe is IG Markets?

The current volatile conditions and insider information makes it very difficult for bucket shops like these two, to stay afloat. Brokers who place your orders into the Interbank (STP or ECN) and profit from spread alone, are probably a better proposition today.

But I would advise anyone to repatriate their money ASAP regardless of their broker's claimed security status. Your money is NOT secure, unless it is in your own account, and even then the Royal bank Of Scotland debacle is still fresh in my mind, as far as securing funds in a bank goes.

U.K. Faced

and who can forget Northern Rock, with the police on horseback dispersing customers queuing for their money?

Northern Rock - Wikipedia, the free encyclopedia

If this can happen to a bank, how secure are your "segregated" funds?

 

[pboyles]

That would be bad news if it all worked out that way. Isn't there some FSA protection though, up to a certain amount?

 

[pboyles]

Interesting article here about how they were operating.

MF Global: What Would a Buyer Be Getting? - Deal Journal - WSJ

In the last 18 months, Mr. Corzine has sought to reorient the firm around its principal trading activities, which involve taking the other side of clients’ trades using money on MF Global’s balance sheet. Such principal trading has long been performed by MF Global. But under Mr. Corzine, this part of the business has grown. Last year a little over half the trading was done in bonds, with commodities, equities and currencies other areas of focus.

 

[donaldduke]

The guy traded bonds at Goldman back in the 90's..before taking 10 years out and going into politics, seems he tried to do the same kind of Billion dollar trades we was used to doing in the good old days.

 

[pboyles]

m.guardian.co.uk

 

[Ingot54]

That would be bad news if it all worked out that way. Isn't there some FSA protection though, up to a certain amount?

That would be ok if it was a bank. But I don't think it applies to companies or other investments.

We would then have the moral hazard problem, of people taking risks knowing that the company would be bailed out in a loss situation.

I am certain that here in Australia the Federal Government did cover the savings of depositors up to $250,000 per a/c in the event of a banking collapse. This was formerly $1million from November 2008 until February 2010, when it down-sized to $250k.

Australian Government Guarantee Scheme: About the Scheme

But that scheme was closed "to new liabilities" from March 2010, and continues "for a fee." It served its purpose of providing stability in the GFC crisis of 2008.

But that is off-topic - it does not cover the other companies where funds have been deposited in good faith - at least not here in Australia.

The FSA can't do anything - it is a regulator, not a guarantor.

 

[pboyles]

I think there is some protection.

FSCS > Home

 

[Ingot54]

I think there is some protection.

FSCS > Home

There are quite a few proviso's in that link though:

If your financial services provider or advisor goes into default, you will only be eligible for FSCS compensation if your provider is authorised by the FSA. So it’s important to check in advance that they have FSA authorisation (sometimes referred to as a Firm Reference Number)

and If you look at "Step 2" of that FSCS site linked, they say you have to have money in one of 4 categories:

Investment Business
Home Finance (Mortgages)
Insurance Policies
Insurance Broking.

Step 3 shows that it is probably limited to banking investment services more than a trading company, for example. It would be interesting though, to see exactly what is, and is not covered.

It's on their front page under the button "Check if you're covered now"

 

[donaldduke]

Ofcourse MF Global uk is covered to the 85K limit, so are IG Index and every other FSA authorized spread bet firm.

 

[pboyles]

Ofcourse MF Global uk is covered to the 85K limit, so are IG Index and every other FSA registered spread bet firm.

I thought so, still I'm glad I don't have any money with them. There is some talk they will file for bankruptcy and try to sell the retail futures wing to IB. I imagine we'll find out when the US business day starts.

 

[Ingot54]

Of course MF Global uk is covered to the 85K limit, so are IG Index and every other firm FSA registered spread bet firm.

That is good news.

Their reg #160065 is "Currently Authorised" on the FSA register, so yes, you are correct.

What a sad state of affairs though - it must be difficult for both the firm and clients caught up in this. I guess management took risks based on older modelling - and with the GCF since 2008, those old models are defunct.

Actually I dealt with this in the latest post on my blog :THE NEW MARKET INDICATOR: Friday View 28th November 2011 forexapplepie.com

If you don't want to bother going there, the essence of my post was that we have moved away from Technical and Fundamental Analysis,towards Sentiment Analysis - Risk-on and Risk-off.

Sorry for getting off-topic (again) but I popped that in to illustrate how businesses can get into trouble if they fail to notice the markets have evolved. By all accounts, the CEO John Corzine was probably using higher risk strategies.

News just in says that MF Global plans to issue a statement shortly.

Local clients exit struggling MF Global

 

[MichelleK]

Your money is alot safer if you lodge it direct with the Clearer rather than going through an arcade. Although alot of Clearers don't deal with individuals unless very wealthy.

I know that Stone Futures Trading (Dartford) have a good relationship with their Clearer as I have just moved over to them. They opened an individual account on my behalf so that I have a direct relationship with the Clearer now so there is less risk to my money.

Micky

 

[pboyles]

Seems they have filed for bankruptcy today.

BBC News - MF Global files for Chapter 11 bankruptcy protection

 

[Pitscum]

just wondering how that leaves schneider trading associates. they cleared thru mf. hope the guys are ok given the amount of locals clearning through them. anyone from sta here to give us a heads up on the situation?

 

[Shakone]

It seems it's not always clear what's covered and what's not. Some firms claim SIPC protection, but that doesn't apply to forex accounts, and nor does it apply if there has been fraud. And if there has been bankruptcy with a broker, then there's a fair chance fraud played a part. Segregation doesn't seem to mean much either.

If FSA covers 85K as Donaldduke says, then that would mean FSA regulation is far better for forex than the US system. Because as I understand it, forex accounts 'in general' in the US are not covered at all.

You can check how well capitalised a broker is, but even that doesn't seem to work.

On the CFTC website from August 2011
http://www.cftc.gov/ucm/groups/public/@financialdataforfcms/documents/file/fcmdata0811.pdf

MFGlobal are required to have net capital of $328million, and the PDF above states in August they had $495million. You'd think they were safe. Obviously those figures don't mean a great deal, and nor does the regulation.

Worrying.

 

[donaldduke]

Large amount of Clients funds at MF are currently unaccounted for:

MF Global Probed; IBKR Nixed Deal Over ‘Missing’ $900 Million - Focus on Funds - Barrons.com

:-0

 

[Ingot54]

Large amount of Clients funds at MF are currently unaccounted for:

MF Global Probed; IBKR Nixed Deal Over ‘Missing’ $900 Million - Focus on Funds - Barrons.com

:-0

Good work Donaldduke.

This is the reason I do not have excess funds with my broker IG Markets - I do not need to, and they do not pay me interest on my money. If IG Markets goes bust, they won't get more than a day's pay out of me.

The other reason is what has just happened with MF Global - no one knows the true state of the company's financial health. The FSA and the CFTC and NFA may be "regulators" but they are as useless as an ashtray on a motorbike when it comes to preventing things like the current MF Global situation.

Forex Regulation | Forex Brokers

Who is regulating the regulators???

They only regulate after the event, because they do not have the guts to actually demand an audit and see the thing right through. Too much palsy-walsy-drinks-after-work-at-the-club going on at high levels for anyone to be pulled up for wrong-doing.

Too friendly to fine! Some of that was uncovered by the SEC after the inquiry into S&P, Moodies and Fitch after the GCF collapse of CDO's rated AAA by these agencies. By 2006 the agencies knew they were in trouble with these derivatives, but failed to act, due to the bubble in USA housing at the time.

That is exactly when, and why they SHOULD have acted.

Let's hope that the regulation of the Forex market really comes up better after the collapse of MF Global.

 

[donaldduke]

Good work Donaldduke.

This is the reason I do not have excess funds with my broker IG Markets - I do not need to, and they do not pay me interest on my money. If IG Markets goes bust, they won't get more than a day's pay out of me.

No need to be that paranoid if you are below the 100% compensation limit.

The run on northern rock was different as back in the day, only 90% of funds were covered up to the compensation limit. And the people queuing up didnt even want to lose 10% of the money they had on deposit, and who can blame them.