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Liquidity Scramble Begins In MF Commingling Aftermath

Tyler Durden's picture


When sharing our perspective last night on why the alleged MF Global crime of commingling client capital with the firm's deficiency capital we asked, "What happens next? Why customers at all other brokerages, all other exchanges, afraid that their money will suffer the same fate as MF, even if they transact with perfect solvent clearers and agents, will proceed to pull their money, as they know they have nobody to trust but their own prudent and forward looking actions. Which in turn will start the kind of liquidity drain that killed not only Lehman, but froze money markets, and with that brought the complete capital markets to a standstill, only to be thawed after the Fed pledged multiples of the US GDP to rescue Wall Street in October of 2008." Sure enough, here it comes. "Reports of short falls of client money ... if true would be a disaster for all the smaller brokers and banks as nobody will trust them anymore," one London trader said. Reuters continues "MF Global filed for bankruptcy protection on Monday, putting a sudden end to Corzine's drive to transform the more than 200-year old MF Global into a mini Goldman by taking on more risky bets on euro zone sovereign debt. In Australia, trading in grain futures and options was suspended by bourse operator ASX Ltd , prompting concerns about the integrity of the country's agricultural futures market. "We're sitting out here with risk that we can't cover," said Jonathan Barratt, head of Sydney-based Commodity Broking Services. MF Global was one of the largest participants in the country's agricultural futures market. And it is all only going to get worse as the liquidity outflow avalanche is realized, following the market's most recent distraction with Europe.

From: "Clients scramble for money after MF Global shock":

The London Metal Exchange said in a statement it had suspended MF Global from trading with immediate effect, following a similar move by the CME Group, which operates the Chicago Mercantile Exchange.


The news also hurt other commodity markets.


"Grains were definitely affected. Grain options volumes were miniscule yesterday compared to normal, which suggests MF Global were pretty large options players in the U.S. grains," a European commodity fund analyst said.


CME Group data showed volumes on December corn options <0#CZ1+> almost halved on Monday to 33,872 contracts, from Friday's volume of 61,714 contracts.


Fears the collapse might hurt other market players spread on what was already a dark day for stock markets in Europe, after Greece said in a shock announcement it would subject its bail-out to a referendum, deepening the sense of crisis in Europe.


"A number of Chinese arbitrage players were caught out with cash and margin at MF Global which will likely lead to lighter trading volumes (and more volatility) until the situation is resolved," RBC Capital Markets said in a note.

But don't worry: while a 30 year old UBS trader is going to jail for being a complicit scapegoat in UBS wiping out a few billion of its own money, Jon Corzine, who has successfully undermined confidence in capital markets to a level not seen since Lehman, will not only walk away scott free, but may well get a $12.2 million gold parachute.

All is well in the world.



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Tue, 11/01/2011 - 11:23 | 1832418 GeneMarchbanks
GeneMarchbanks's picture

Corzine in cuffs, please.



American Citizen

Tue, 11/01/2011 - 11:27 | 1832426 redpill
redpill's picture

There once was a crook named John

He failed so badly in his biggest ever con

The lynch mob was mad

When they got ahold of the lad

Soon swinging from a tree on the lawn

Tue, 11/01/2011 - 11:27 | 1832445 gmrpeabody
gmrpeabody's picture

Cuffs will do for now, Redpill.

Tue, 11/01/2011 - 11:28 | 1832450 redpill
redpill's picture

Ask G-Pap, the mob doesn't usually go for half-measures.

Tue, 11/01/2011 - 11:49 | 1832580 CharlieSDT
CharlieSDT's picture

I'd prefer he goes to bang-your-ass prison for a while before.

Tue, 11/01/2011 - 11:52 | 1832600 Harlequin001
Harlequin001's picture

It will be interesting to see what happens to agriculturals now that the market is screwed. Should shoot, me thinks... until a new maker enters the market.

Tue, 11/01/2011 - 12:34 | 1832793 Don Birnam
Don Birnam's picture

The TSA should place Corzine's passport on a watch list. If ever there was a flight risk, Corzine is one.

Tue, 11/01/2011 - 11:42 | 1832530 Hot Apple Pie
Hot Apple Pie's picture

No, these guys are destroying more lives than a serial killer or mass murderer. They should face the same penalties.

Tue, 11/01/2011 - 11:48 | 1832576 DormRoom
DormRoom's picture

which is why you should rotate cash from your brokerage account to your personal account, which is insured.  I don't believe investment accounts are insured.


So if there's a market crash.. you can be sure your money is where it's suppose to be.

Tue, 11/01/2011 - 11:55 | 1832607 Harlequin001
Harlequin001's picture

and if it's not really there, they can always print some more, eh.

which is the only way you'll get your money out if the bank is insolvent, which they all are...

Tue, 11/01/2011 - 11:33 | 1832476 tmosley
tmosley's picture

I prefer head on a pike, preferably on a nice bridge somewhere.

Tue, 11/01/2011 - 11:44 | 1832540 Triggernometry
Triggernometry's picture

A halberd may seem more fitting.  In the meantime, we should start by removing the balls, and promptly feeding them, still warm.


Midieval is, midieval does

Tue, 11/01/2011 - 11:50 | 1832592 Abitdodgie
Abitdodgie's picture

Rocky mountain oysters, never had them never will.

Tue, 11/01/2011 - 11:44 | 1832543 sunnydays
sunnydays's picture

They advised the G20 and they invested Chinese government money.  This is going to get interesting.  Corzine needs to be put in jail right away, yet he won't.  Instead getting 12.1 million.  Simply outrageous.

Tue, 11/01/2011 - 11:29 | 1832458 Ruffcut
Ruffcut's picture

Is this something we picked up from the chinese?  Co Ming Ling.

I just knew they were behind this.....

Tue, 11/01/2011 - 11:35 | 1832477 The Big Ching-aso
The Big Ching-aso's picture

I doubt it.     Some congressperson will proclaim on tv that if he gets cuffed there'll be tanks in the street.   Not to be confused with wanks in the street.

Talent like that must be retained for future generations.

Tue, 11/01/2011 - 11:34 | 1832484 bullnutz
bullnutz's picture

Breaking News from Greece- Emergency Cabinet Meeting Called

Tue, 11/01/2011 - 11:35 | 1832488 CrimsonAvenger
CrimsonAvenger's picture

Hey, he had to govern New Jersey for four years. Hasn't he suffered enough?

Tue, 11/01/2011 - 12:31 | 1832751 Nascent_Variable
Nascent_Variable's picture


Tue, 11/01/2011 - 12:34 | 1832792 William113
William113's picture

Hmm, can anyone point out the difference in the names of these two scumbags Kwaku Adobol, Jon Corzine. Put all of them in jail.

Tue, 11/01/2011 - 11:24 | 1832430 Moneyswirth
Moneyswirth's picture

Let them fail.  Just don't ask for a bailout.  


Tue, 11/01/2011 - 11:33 | 1832472 curbyourrisk
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From what I understand, the commingling will play nicely into the GS and JPM of the world who might have lost money on this.  If they can prove commingly, there will be a bail out by the government of anyone who lost money. 


See...being stupid does pay.

Tue, 11/01/2011 - 13:12 | 1832921 Alea Iactaest
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"Do not confuse a money market mutual fund with an FDIC-insured money market deposit account"


"Increasingly, institutions are also offering consumers a broad array of investment products that are not deposits, such as mutual funds, annuities, life insurance policies, stocks and bonds. Unlike the traditional checking or savings account, however, these non-deposit investment products are not insured by the FDIC."


"The key point to remember when you contemplate purchasing mutual funds, stocks, bonds or other investment products, whether at a bank or elsewhere, is: Funds so invested are NOT deposits, and therefore are NOT insured by the FDIC - or any other agency of the federal government."



Tue, 11/01/2011 - 11:42 | 1832522 Snidley Whipsnae
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""Reports of short falls of client money ... if true would be a disaster for all the smaller brokers and banks as nobody will trust them anymore," one London trader said."


Perhaps the 'clients' are reconsidering physical PMs?

Tue, 11/01/2011 - 11:44 | 1832539 HelluvaEngineer
HelluvaEngineer's picture

My first thought too.

Tue, 11/01/2011 - 12:20 | 1832741 DoChenRollingBearing
DoChenRollingBearing's picture

eBay / physical gold premium now at 10% to paper gold price.  A little bit higher than normal.  It IS an imperfect measure of physical / paper price, but there it is.

Tue, 11/01/2011 - 11:24 | 1832432 Troy Ounce
Troy Ounce's picture


Tue, 11/01/2011 - 11:26 | 1832440 Ignorance is bliss
Ignorance is bliss's picture

We have yet to see how deep the MF rabbit hole runs. Bernanke will hit the print afterburners as he watches Europe and U.S. pillars of financial ineptitude crumble.

Tue, 11/01/2011 - 11:29 | 1832444 Dr. Engali
Dr. Engali's picture

The end is nigh. Who else are you going to pull down Johnny?

Tue, 11/01/2011 - 11:28 | 1832446 Belarus
Belarus's picture

Well...Europe isn't just a distraction: remember, part of MF demise was that "higher" yield seek on sovereign debt, namely Italy. 

I get the thesis: "no way does Italy go down. The ECB will print before that happesn." This of course is just a case of pre-mature reasoning and execution at best. 

The question now becomes: Who else wants the career risk by buying Italian and Spanish bonds? Righty-O. Let the slaughter continue. 

Tue, 11/01/2011 - 11:28 | 1832448 Tsar Pointless
Tsar Pointless's picture

Confidence has all this rigged casino has had to work with over the past 2-1/2 years.

Now, that's gone. Out the window. And it might not come back for quite some time.

If HeliBen doesn't provide $1 trillion-plus in "economic stimulation" tomorrow...well, things might get ugly real soon-like.

Tue, 11/01/2011 - 11:29 | 1832456 OpenEyes
OpenEyes's picture

MF Global = Black Swan

Tue, 11/01/2011 - 11:33 | 1832475 Ethics Gradient
Ethics Gradient's picture

More like Brown Sparrow at the moment.

G.Pap is the one doing the swan (dive) impression.

Tue, 11/01/2011 - 11:36 | 1832497 Big Corked Boots
Big Corked Boots's picture

I think Black Cygnet. Nobody knows what the Spawn of Corzine will grow up to be yet.

Tue, 11/01/2011 - 11:49 | 1832582 OpenEyes
OpenEyes's picture

Bingo!  I suspect that the Swan is hidden in the impending unwinding of this mess.  40-1 Leverage doesn't go gently into that good night.

Tue, 11/01/2011 - 12:08 | 1832683 blindman
blindman's picture
Eustace Mullins - Secrets of the Federal Reserve
1:31:25 - 2 years ago
Eustace Mullins "The Secrets of the Federal Reserve" Recorded during a visit to Hawaii around the year 1989, this lecture presents a unique opportunity for you to see and hear this remarkable man lay out the shocking truth about the privately-owned corporation known as the Federal Reserve System. There is also a fascinating Q & A session after the talk. Buy DVD here: Link to the online book:

Tue, 11/01/2011 - 12:40 | 1832826 DosZap
DosZap's picture


MF Global = Black Swan= LEAD SWAN,many more to follow.

Tue, 11/01/2011 - 11:32 | 1832459 DormRoom
DormRoom's picture

commodity leverage distorting prices, leading to misallocation. worse, produces economic artificial famines for millions.

MF is one player among many.

economic crimes.



Tue, 11/01/2011 - 11:29 | 1832461 Bunga Bunga
Bunga Bunga's picture

This is a real catalyst for the next meltdown, not this G-Pap distraction, they spill all over the place at the moment.

"MF Global broke rules requiring it to keep clients' money and company funds in separate accounts, the head of the Chicago Mercantile exchange said Tuesday."

Looting customer accounts and cooking the books is Madoff and Enron combined. Good job Wall St! It creates the confidence I need to close my brokerage accounts.



Tue, 11/01/2011 - 11:36 | 1832495 Racer
Racer's picture

They have all been cooking the books and skimming bonuses on the 'profits' , MF is just a bit more in your face and they can't hide it so well

Tue, 11/01/2011 - 11:59 | 1832640 Joe Davola
Joe Davola's picture

Rules?  We don't need no stinking rules!

Tue, 11/01/2011 - 11:30 | 1832462 lizzy36
lizzy36's picture

Until Corzines peer group step up and demand he end up in an orange jump suit, afraid to bend over in the shower, NOTHING WILL CHANGE.

Paulsons coup at Goldman was in part due to the fact the Corizone was attempting an end run on his partners on an M&A prospect. He took unreasonable risks and was decitful then, and he got a $400m reward for that behavior (when GS went public). He went on the fail the state of NJ and then pulled this crap at MF global.

This morning Cramer was defefending him "he is not a hack". Actually that is exactly what he is: A HACK. But because he is a very rich and connected hack, nobody in his peer group will demand his head on his plate.

So we will go on paying lip service to "CONFIDENCE", but until people like Corzine are forced from the sytem, by the people IN they system, confidence will continue to erode, until one day it will be impossible to resurrect.

Tue, 11/01/2011 - 11:58 | 1832635 T1000
T1000's picture

What if Corzine wasn't as stupid as people think? What if he did exactly what He was told to do. This could be the starting point in the next great collapse, and he got the ball rolling for us all.

Tue, 11/01/2011 - 11:31 | 1832464 scatterbrains
scatterbrains's picture

any more rogue trader incidents out of other firms about to hit the news wires ya think ?

Tue, 11/01/2011 - 11:31 | 1832466 SDRII
SDRII's picture

Awaiting the PD instructions manual

Tue, 11/01/2011 - 11:33 | 1832478 Josh Randall
Josh Randall's picture

Counterparty Risk is the new STD, people will flee from it and prophylactic themselves with PM's  

Tue, 11/01/2011 - 11:44 | 1832545 bernorange
bernorange's picture

First cum, first serve.

Tue, 11/01/2011 - 11:34 | 1832481 vegas
vegas's picture

200 year-old firm turned into dust by Grand Poobah Vampire Squid. Nice going Jon.

I'm thinking this may be his "karma" moment. He probaly has fucked over more people than a boatload of hookers, and never paid the price. Buys some European Sovereigns for diversity don't-ya-know and BAM!

I hope they put this fucktard in a hole and feed him nothing but lima beans and vegamite. When Karma comes looking for you Jon, you got a lot to answer for, and I'm afraid it isn't going to be pretty for you.

Tue, 11/01/2011 - 11:38 | 1832502 Big Corked Boots
Big Corked Boots's picture

"He probaly has fucked over more people than a boatload of hookers"

Eight million people in NJ alone. Oh, wait, he only f'ed those who pay taxes... maybe four million.

Tue, 11/01/2011 - 11:57 | 1832626 The Big Ching-aso
The Big Ching-aso's picture

"Trust but verify!!!"     Oh fuck it, just trust.

Tue, 11/01/2011 - 13:12 | 1832920 catacl1sm
catacl1sm's picture

Hey, I LIKE lima beans. Give hime something shitty like garbonzo beans or just tofu.

Tue, 11/01/2011 - 11:35 | 1832490 11b40
11b40's picture

He may print, but to what avail when everyone sees the game is over? The entire system runs on confidence, and that is one commodity that can't be special ordered and put on the credit card.

The music is about to stop, and there are not enough chairs.

Tue, 11/01/2011 - 11:36 | 1832494 franzpick
franzpick's picture

Those who have entrusted their capital to bankers and authorities who have over several years painted themselves into a corner of the financial boardroom, and have repeatedly announced solutions to the trap that require the use of more paint, should have seen the coming trouble.

Tue, 11/01/2011 - 11:36 | 1832496 Cdad
Cdad's picture

Cdad loves liquidity issues.  Can't get a borrow on my preferred short in the grain equity segment, but I don't think it matters.  Thees hedge fund guys are massively long dumb ass consumer discretionary stocks, some of which are overbought in the last ten sessions to staggeringly stupid levels.  Liquidity in this group has been hitting the wall, and the bid hitting side of this team is leaving the field.

Find your least favorite, over bought retail stock and sell light volume bid lifting...chop chop.

And these are supposedly the brightest minds in the nation.  Yeah...


Tue, 11/01/2011 - 11:37 | 1832498 Rainman
Rainman's picture

Jonny C  is a Chicago educated made guy with an advanced Squid degree. You better believe he's on the secured phone with Bill Daley, working out the details for a get-out-of-jail free card.

Tue, 11/01/2011 - 11:37 | 1832499 LoneStarHog
LoneStarHog's picture

Hey, Corzine, you f'ing ex-Goldmanite POS. May you hit this wall at full speed and not survive.  The world will be a better place with even one less Goldmanite on the loose.

Tue, 11/01/2011 - 11:39 | 1832503 orangedrinkandchips
orangedrinkandchips's picture

the corzine thing is a beauty, really. It's so fucking absurd it will finally get the attention of a 30 yr old scapegoat goes to jail with a big settlelment when he gets out (thus the big smile for the cameras) but seriously, Corzine just screwed the pooch and walks free with 12.2MM of OPM...other people's money!


Are you serious? How far does this charade go before there is change?

It's's coming...

Tue, 11/01/2011 - 11:40 | 1832510 Larry Darrell
Larry Darrell's picture

B of A dropping plan for monthly debit card fee.

Investors should love to hear that one more source of funds for the insolvent bank has shit the bed.

BofA to zero by X-mas??


Tue, 11/01/2011 - 11:40 | 1832511 Tinsu
Tinsu's picture

"all other exchanges, afraid that their money will suffer the same fate as MF, even if they transact with perfect solvent clearers and agents, will proceed to pull their money,"


And, where will they put it?  Goldman and JPM?  Are they the winners in all of this? Denninger says "local credit union."  Not sure that will work with the sums of money involved.  Or, do they buy treasuries, and Ben/Tim are the winners?

Tue, 11/01/2011 - 11:41 | 1832515 riley martini
riley martini's picture

 The Courts and the in-Justice Department is so corrupt it would be hard for them to jail anyone with connections without some blow back .

Tue, 11/01/2011 - 11:41 | 1832518 Imminent Collapse
Imminent Collapse's picture

Fast and furious as things unravel.  Pretty amazing that it has been kept together so long.  

Tue, 11/01/2011 - 11:56 | 1832621 XitSam
XitSam's picture

What is the symbol for Hopium?  I want to short it.

Tue, 11/01/2011 - 11:45 | 1832521 Artful Dodger
Artful Dodger's picture

One day a psychopathic CEO was bored and decided to change the business model all by himself, because he was so smart. The company went to ruins, affecting thousands of clients and employees, and the psychopathic CEO thought to himself, how much money will I get in severance? I only have a few hundred million now.

This has been a story from "Kronicles of Krony Kapitalism: How The Rich Do Everything Bad and Still Get Richer".

Tue, 11/01/2011 - 13:03 | 1832888 trav7777
trav7777's picture

all the people on the Board of Directors are their friends and cronies and part of the same country clubs and own high end condos in the same upper Eastside buildings.  And that CEO sits on the Boards of the companies that his directors are executives of.

So they all cover each others' asses with ever-more lavish pay packages.  Times are great for them.  If there isn't enough money, well, shit, just "cost cut" and pass that mandate down the management chain.  This results in lower-level employees getting laid off but executives DO NOT FUCKING CARE.  Their highest priority is to make their targets so as to get their bonus.  If they can lay off 10 workers making 50k, that's an extra $500k available for a bonus.

There appears to be no salary too low for a non-executive and no salary too high for an exec.  And their children grow up taught they are better than ordinary people because of how much smarter and harder the parents work (when in reality, they just got backscratching from cronies).

This executive forms an interlocking revolving door with government as union bosses rotate to Boards then rotate to gov appointments then rotate to executiveships, and when failing at all of them, rotate back to the union where the membership worships them like some kind of prodigal son nobility.

The question I have is, WHERE are the shareholders?  That's YOUR MONEY your employees are wasting.  Shareholders are like an owner where management just reaches into the cash register and takes all the profits and pockets them.  When the fuck is anybody going to wake up?

Fucking OWS is out there do they ask for?  MORE TAXES.  MORE gov't.  Just make that money train I described up there even stronger.  Why aren't they calling for owner empowerment?  Companies used to be forced to disgorge profits as dividends and higher payrolls for the rank-and-file.

Tue, 11/01/2011 - 11:45 | 1832550 Miss Expectations
Miss Expectations's picture

Jon Corzine, who has successfully undermined confidence in capital markets to a level not seen since Lehman, will not only walk away scott free, but may well get a $12.2 million gold parachute.

I'm going out on a limb here, but I think this time it really is different.  Anyway, it feels like that to me.  We've got a scape goat and an unpopular and unattractive one at that.

Tue, 11/01/2011 - 12:09 | 1832693 Village Smithy
Village Smithy's picture

OWS may have its first taste of justice here. Corzine is out front and center and Obama will have a tough time hiding him.

Tue, 11/01/2011 - 11:46 | 1832557 Caviar Emptor
Caviar Emptor's picture

My how the world has just 2 days! 

Last week, the thought of a high-profile Goldman alum being allowed to go under without a full Fed bailout was unthinkable, absurd! 

And the thought of a major sovereign bond default being allowed to happen was funny, ridiculous! Ha!

And the thought of a primary dealer with major market participation being allowed to fail? Puleeze!


Today we're talking bankruptcy and haircuts, and finally risk returns to the fairy tale market of 09-11

Tue, 11/01/2011 - 16:17 | 1834037 11b40
11b40's picture

It's only because the glare of the spotlight is so bright.  Sunshine truly is the best disinfectant.

Tue, 11/01/2011 - 11:46 | 1832558 FutureShock
FutureShock's picture

Are we to believe this guy took a huge irresponsible risk and that's it? He knows something and took a "It doesn't matter" position. Something is up, guys just don't do shit like this. His out was for a reason or distraction with others in the know. No one knows shit, but a handful of Elites sure do.

Tue, 11/01/2011 - 12:01 | 1832644 Caviar Emptor
Caviar Emptor's picture

Don't you see? He beleived in "The No-Risk", Fairy Tale Market of 09-11 where risk was a barbaric relic and Bernank-Trichet always had your back. MF took it's biggest position in Italian bonds, as Tyler revealed here yesterday. 

Within one nanosecond that true market forces were allowed to take hold MF was broke. They couldn't make it in a real market. Because they had aligned themselves with the bankster-Fed axis and were riding the taxpayer-funded gravy train

Tue, 11/01/2011 - 11:46 | 1832560 SunBlaster
SunBlaster's picture

REJOICE the price of CORN will finally drop!

Tue, 11/01/2011 - 11:47 | 1832562 tahoebumsmith
tahoebumsmith's picture

One video says it all..

Nuff said


Tue, 11/01/2011 - 12:44 | 1832841 I Got Worms
I Got Worms's picture

Holy hell. Everyone click that link. If you had any doubt that the banking elite truly runs the show and pulls the strings...

Tue, 11/01/2011 - 11:47 | 1832563 azzhatter
azzhatter's picture

Corzine will have to suck a lot of dicks to escape this one. Zippers in DC are all being lower as we speak

Tue, 11/01/2011 - 11:51 | 1832599 youngman
youngman's picture

I wonder how much of todays fall in PM´s is because of MF´s out of the markets......all the traders desks are quiet because they can´t settle trades...just wondering

Tue, 11/01/2011 - 12:03 | 1832653 Caviar Emptor
Caviar Emptor's picture

They were mainly in ags. But there's an atmosphere of caution

Tue, 11/01/2011 - 12:28 | 1832772 youngman
youngman's picture

I read the London Metals exchange locked them out...but I don´t know how much business they did there....just wondering

Tue, 11/01/2011 - 11:57 | 1832625 vegas
vegas's picture

Or everything could be a reaction to the Kim Kardashian divorce. I mean, I don't know but I'm pretty shocked it didn't work out. 72 days? I guess she got stopped out on that trade.

Tue, 11/01/2011 - 12:33 | 1832790 Arthur
Arthur's picture

She wanted to go long but he was short.

Tue, 11/01/2011 - 12:06 | 1832674 mberry8870
mberry8870's picture

Shocking, just shocking. A Goldman guy emeresed in politics stealing customer money. Nothing surprising to see here. We see it every day. Move along.

Tue, 11/01/2011 - 12:09 | 1832692 The Big Ching-aso
The Big Ching-aso's picture

Ya, it's not like he robbed a bank or something.

Tue, 11/01/2011 - 12:08 | 1832686 SamAdams1234
SamAdams1234's picture

Sharpen the blade. Haircuts anyone?

Tue, 11/01/2011 - 12:13 | 1832708 topshelfstuff
topshelfstuff's picture

passing this on by request:...paste:

"There ARE NOT WORDS in the English or Greek languages to describe how illegal this is."

Scoop for a journalist! MF Global Inflated Margins Posted by Ann Barnhardt - October 31, AD 2011 7:05 PM MST

Um, Journalists? ZeroHedge people? Mr. Denninger? Market-Ticker forum people? You might want to pick this up and triple check me on this.

Okay, the NY Times and Reuters are reporting the MF Global was tapping customer seg funds to prop up its proprietary positions, which is just about the biggest crime an FCM can commit, right? I saw in a ZeroHedge thread that back in April MF was charging initial margin requirements at 175% of the exchange. So, I decided to cruise on over to the MF Global website and pull up their latest margin requirement guide and compare that to my clearing firm's rates.

Ho-ho-ho. Johnny Corzine was charging massive overages on margin requirements relative to the Exchange's SPAN requirements. And guys, every SPAN margin that I am quoting below is the HIGHER SPEC MARGIN, not hedge. Um, now we know why. Some comparisons:


Corn: MF $3640 SPAN: $2365 = 53.9% overage
Soybeans: MF $5500 SPAN: $3375 = 63.0% overage
Wheat: MF: $3825 SPAN: $3040 = 25.8% overage
Unleaded Gas: MF: $11340 SPAN: $9115 = 24.4% overage
Crude Oil: MF: $9000 SPAN: $8100 = 11.1% overage
Live Cattle: MF: $3780 SPAN: $1620 = 133% overage
30-Year Bonds: MF: $5208 SPAN: $4185 = 24.4% overage

Note how the smaller ag contracts are more heavily inflated than the uber-competitive HUGE contracts like Crude Oil and Bonds.


Here are the two URLs I used:


Here is the URL for my clearing firm's margins: 

Nutshelling the MF Global Collapse Posted by Ann Barnhardt - October 31, AD 2011 11:14 AM MST

Yes, I called it late last week and strongly urged MF customers to make a hasty exit stage right, but I absolutely did not see what happened this morning coming. This is utterly unprecedented. The Chicago Mercantile Exchange issued an email circular this morning (I received mine at 8:39 am MDT) stating that all MF Global positions were limited to LIQUIDATION ONLY and all MF employees and brokers and traders were banned from the floor of the exchange.

1. As I mentioned last week, MF Global came to its present form back in 2005 when the then-biggest clearing firm, Refco, imploded and was bought by EDF Man. The new, huge firm was then renamed MF Global. When Refco imploded in 2005, NOTHING like this happened. It was a relatively smooth transition, trading was not interrupted, and most of the Refco employees were absorbed into the new company. There was absolutely NO interruption of customer access to positions.


2. Shutting off access of customers to their floor brokers and limiting them to liquidation-only is UNPRECEDENTED. If a big account did not have multiple clearing relationships, the risk exposure this morning for those firms is terrifying to ponder. I did not see this coming. The whole industry is pretty much in shock.


3. Let's not forget that a whole lot of people have just lost their jobs. All of the MF clerks, back office staff, everyone who worked for MF on Friday is now unemployed this morning. Those people matter. John Corzine views them as meaningless economic units who exist only to serve him and advance his power and increase his personal wealth, but John Corzine is an evil sociopath who should be permanently removed from society and imprisoned for the rest of his life so that he can do no more damage. Fricking jackal.


4. Speaking of Corzine, more info is coming out in the bankruptcy filings. First, Corzine stands to reap a $12.1 million severance package / golden parachute per the bankruptcy filing. But that isn't the worst. Corzine was hired by MF less than two years ago. He promptly went about loading the company up on European bonds. That in and of itself is damning enough. Remember, Corzine is Goldman Sachs. He knew EXACTLY what was going on in Europe and he knew that European paper was junk. But guess which European countries he loaded up on? Greece, Portugal, Italy and Ireland. The four little PIIGs. Corzine intentionally drove MF into the ground so that someone, and my money is on Goldman Sachs, could come in and buy the remains for 30 cents on the dollar or less. Watch the news. Watch and see who ends up buying the remnants of MF. If it isn't Goldman outright, I'll bet it is a "holding company" that is tied to Goldman. As an astute commenter over at said last night, it looks like Corzine never really stopped working for Goldman. He just moved his office into MF Global's suite.


5. And now, ONE MORE TIME regarding the financial industry regulators in this country.

Guys, they are evil, corrupt and incompetent. The regulatory bodies are run by evil, evil people at the top who are complicit in these goings-on. There is NO POSSIBLE WAY that MF Global could have passed any honest audit with the amount of exposure it was carrying in the European bond market. By the way, MF Global's audit would have fallen under the jurisdiction and oversight of the Chicago Mercantile Exchange itself AND the Commodity Futures Trading Commission on the Federal level.

It is just impossible that the CME and the CFTC didn't know MF's position and risk exposure all along. The second tier in these regulatory agencies are a combination of evil, greedy and incompetent bureaucrats who could very well be classified as "useful idiots" who will do anything, say anything, or overlook anything just so long as their salary check clears the bank every month. The third tier are full-blown useful idiots - and by that I mean totally, completely and astoundingly unqualified and incompetent "foot soldiers", many of whom are affirmative action hires. When things like this happen (and there are other examples of massive ponzi schemes being ignored in recent history, like the Sentinel Management Group fiasco) what these regulatory bodies do is lay the blame for "missing" the red flags at the foot of the affirmative action hires who are the on-site auditors and who are made to sign off on the audits. Do you see this? Do you see the evil we are dealing with here?


6. And now here is a paragraph that everyone in the financial industry, but most particularly the futures industry, should send viral. Every Introducing Broker and Futures Commission Merchant in the world is being targeted for extinction by the megabanks. They want you GONE. Goldman, Citi, JP Morgan, etc. They are working with and through the financial regulatory bodies and with the Federal Government via such legislation as Dodd-Frank to force out of business every FCM and fold all of that business into the megabanks. IBs like me are also a target, but we IBs are meaningless guppies compared to whale-sized FCMs.

Corzine was SENT into MF Global with the objective of collapsing it and rolling the remains into Goldman (presumably). And he was paid eight figures to do it, AND promised SEC TREAS after Geithner. If you had said six months ago that the largest FCM in the U.S. would be taken down, everyone would have laughed in your face, but here we sit. The only question is, who is next? How long will an FCM like ADM last before looking at Dodd-Frank and saying, "Screw this. We're selling our clearing operations and we'll just go back to straight-up product merchandizing." Why shouldn't they? If the FCM profit center is made impossible by the government and the corrupt regulatory bodies, why would they continue to operate an FCM? Why not sell to Goldman or one of the other megabank entites and then do their exchange-traded hedge business through them as a customer? When will the old Chicago boutique firms be similarly forced out, either through regulation that makes their business impossible, or through outright sabotage as with Corzine and MF? None of you FCMs are safe. THEY WILL COME AFTER YOU AT SOME POINT. You have been targeted for extermination. Either you wake up to this fact and expose these regulatory bodies, megabanks and the Federal Government and fight them, or you are going to end up like MF, being bought by Goldman or one of the other fascist government-connected megabanks for pennies on the dollar. You have been warned.

7. This MF Global collapse is a small-scale (yes, that's right, SMALL-SCALE) foretaste of what is going to happen to the entire system. When I say get your money out of the market, out of paper instruments, and turn it into something real that is physically located on your property, that you can then stand in front of with an assault rifle and physically defend, I'M NOT KIDDING.

Tue, 11/01/2011 - 12:29 | 1832773 blindman
blindman's picture
Eustace Mullins - Secrets of the Federal Reserve
1:31:25 - 2 years ago

Eustace Mullins "The Secrets of the Federal Reserve" Recorded during a visit to Hawaii around the year 1989, this lecture presents a unique opportunity for you to see and hear this remarkable man lay out the shocking truth about the privately-owned corporation known as the Federal Reserve System. There is also a fascinating Q & A session after the talk. Buy DVD here: Link to the online book:

Tue, 11/01/2011 - 12:42 | 1832828 blindman
blindman's picture

confidence ? how, exactly, would that be possible?
31 October 2011
Regulators Searching MF Global for Millions in Missing Customer Funds
Do you know where your account funds or assets owned through ETFs really are? Do the regulators and overseers of the markets? Do they care, or just look the other way?
"Kleptocracy, "rule by thieves" is a form of political and government corruption where the government exists to increase the personal wealth and political power of its officials and the ruling class at the expense of the wider population, often without pretense of honest service.

No outside oversight is possible, due to the ability of the kleptocrats to personally control both the supply of public funds and the means of determining their disbursal."

Tue, 11/01/2011 - 13:00 | 1832882 blindman
blindman's picture

this is good news ! no?
Market Pulse Archives
Nov. 1, 2011, 12:00 p.m. EDT

Accounting error trims Irish debt load
By William Spain CHICAGO (MarketWatch) -- Ireland's Finance Department has discovered an accounting error that will bring down its national debt by $4.9 billion, the Associated Press reports. The department said that the same liability had been double-reported in last year's accounts of two government agencies and was found during the preparation of a report on the country's medium-term fiscal outlook. The unexpected bonus will trim Ireland's 2010 debt to $197 billion, or 92.7% of GDP, as opposed to a previous 95%, the wire service noted. Projected debt for 2011 now is expected to reach 109% of GDP
via ..

Tue, 11/01/2011 - 13:05 | 1832898 blindman
blindman's picture

more good news ! no?
Germany Discovers Extra $78 Billion On Major Accounting Error
"Germany is 55.5 billion euros ($78.7 billion) richer than it thought due to an accountancy error at the bad bank of nationalized mortgage lender Hypo Real Estate (HRE), the finance ministry said.

Europe's largest economy now expects its ratio of debt to gross domestic product to be 81.1 percent for 2011, 2.6 percentage points less than previously forecast, it said.

The HRE-linked bad bank FMS Wertmanagement FMSWA.UL was set up after HRE was nationalized in 2009, so that HRE could transfer the worst non-performing assets to an off-balance sheet bank guaranteed by the German state.

"Apparently it was due to sums incorrectly entered twice," said a ministry spokesman on Friday, adding the reason for the error still needed to be clarified.
confidence !

Tue, 11/01/2011 - 13:32 | 1832984 robertocarlos
robertocarlos's picture

It's just 100 million. What about that guy who stole 700 billion? When is he getting his?

Tue, 11/01/2011 - 13:47 | 1833120 blindman
blindman's picture

i smell qe three.

Sun, 11/06/2011 - 23:40 | 1851942 FreeOregon
FreeOregon's picture

Since the Trustee grabbed all the excess cash in MFGlobal customer accounts and under an agreement between the Trustee and the CME only 75% of the cash collateral for new margins was transferred (the Trustee having grabbed the additional 25% too), everyone has a margin call Monday.

It seems that account segregation applies neither to the brokers, nor to Corzine, nor to the bankruptcy Trustee.

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