The Federal Bureau of Investigation will check if millions of
client accounts are missing after American brokerage firm MF
Global filed for bankruptcy protection on Monday over its $6.5
billion eurozone debt exposure.
News of the filing led stock exchanges, including the
Australian Securities Exchange, to suspend trading in MF Global
shares. Reports said the company plans to sell its assets to
competitor Interactive Brokers Group.
MF Global Australia is the fourth largest dealer of high-risk
instruments called contracts for difference (CFDs) in the
country. It handled white label trades for eTrade, CommSec,
Westpac and others.
MF Global Australia, which holds more than $400 million in its
trading books and enjoyed a 5 per cent market share, is the
largest of the CFD brokers to encounter financial problems.
Previously, margin lenders Opes Prime and Lift Capital have
MF Global has acknowledged that money was missing from its
customer accounts, although as of Aug. 31, $7.3 billion of
customer funds held by MF Global were segregated, according to
data from the U.S. Commodity Futures Trading Commission
CFTC regulations require futures brokers that trade on
exchanges to keep their clients' collateral separate from the
company's accounts to reduce risk in futures trade. .
The filing for bankruptcy protection followed MF Global's
report of a $191.6 million quarterly loss which caused the
company's shares to fall by two thirds and its credit rating
reclassified to junk.
The company was co-chaired by Jon Corzine, former New Jersey
governor and officer of Goldman Sachs Group. Mr Corzine informed
regulators on Monday about deficiencies in accounts that MF
Global managed for clients in the futures marker.
With the admission, Mr Corzine would also face a regulatory
investigation. The MF Global co-chairman used $6.3 billion of
company funds to purchase sovereign European debts to hike the
firm's profit. However, because of the spread of the European
debt contagion, the company instead logged a $191.6 million loss
for the last quarter.
JPMorgan Chase and Deustche Bank are the biggest creditors of
MF Global. JPMorgan has claims of over $1.2 billion and Deutsche
has more than $1 billion claims. On news of MF Global's Chapter
11 filing, shares of JPMorgan went down 3.3 per cent while
Deutsche Bank slipped 8.7 per cent.