Here Come The "Unintended Consequences": Stock Futures Liquidity Dries Up Post MF Bankruptcy

Tyler Durden's picture

Just like with Lehman, when it took 3 days for the full consequences of the bankruptcy to manifest themselves in the form of a complete freeze of money markets, so too now we are starting to see the same phenomenon following the blow up of one of the world's largest exchanges. The first observation comes courtesy of Dow Jones which informs us that the MF Bankruptcy has "devastated stock futures liquidity." Specifically, "MF Global's departure from the clearing scene has "devastated liquidity" in stock index futures, a long-time CME floor broker said. He estimated about a third of the pit population is missing. On a normal day, six or seven filling brokers stand on the top rail. That's down to three. In the rate futures markets, another veteran broker sees "marginal" impact because MF's business in Eurodollar and Treasurys is not as large as Newedge USA and Goldman Sachs. "Whatever the effect, it will be extremely short- term in nature because accounts will find new clearing firms and executing brokers quickly," the rate futures broker said." One can only hope the futures broker is right. In the meantime, the CME's margin drop in Dow related margins from last week probably could not have come at a better time.

h/t London Dude Trader