MacroScope

MF Global hangs over futures conference

MF Global is front and center at the U.S. Futures Industry Association’s annual conference – and hanging around attendees’ necks.

A schedule of networking events tucked behind participants’ name badges mistakenly advertises MF Global, the failed brokerage run by former Goldman Sachs CEO Jon Corzine, as the sponsor of a café on Wednesday and Thursday. The firm was a big player in the industry and sponsored the café, a centralized meeting point, last year.

Eurex took over as the sponsor after MF Global collapsed. It is correctly identified in other promotional material at the three-day conference in Boca Raton, Fla.

A Eurex representative referred questions about the mix-up to the futures association. The association declined comment.

The mistake keeps MF Global’s bankruptcy in the face of industry members upset the collapse has hurt confidence in futures markets and reduced trading volumes. It also reinforces the large position MF Global held in the sector, where it specialized in commodities futures trading.

MF Global knows its former clients’ pain

Futures customers who smartly pulled their money out of failed MF Global Holdings Inc. in the weeks or months before the broker’s Oct. 31 collapse may not have escaped calamity after all.

As Reuters’ Jeanine Prezioso reports, some are worried the bankruptcy trustee could come after those funds to force them to share in any losses.

MF Global knows the feeling. It’s been there, and done that.

After futures broker Sentinel Management Group Inc failed in 2007, the trustee in that case, Frederick Grede, sued 50 of its former customers to recoup $600 million in funds withdrawn prior to the bankruptcy.

MF Global: back to the futures

The implosion of MF Global Holdings Ltd, the largest independent U.S. futures broker until it filed for bankruptcy protection on Monday, calls to mind the collapse of Refco – which in its time was the largest independent U.S. futures broker – after revelations that Refco’s CEO had defrauded his investors. (London hedge fund company Man Group Plc bought Refco’s futures brokerage just about six years ago, and later spun off its brokerage and renamed it MF Global.)

But now that questions are arising on the whereabouts of assets that clients entrusted to Jon Corzine’s firm to back their futures trades,  it may also be worthwhile to bear in mind the bankruptcy of another futures brokerage – that of Sentinel Management, in 2007.

Sentinel was a different kind of futures brokerage than MF Global. The company largely managed money for other futures brokers, delivering outsized returns that, Sentinel’s bankruptcy trustee says, were juiced up by improperly using customer money to secure bank loans that went to fund risky trades.  When the credit crisis hit in the summer of 2007, the scheme unraveled, and Sentinel quickly plunged into bankruptcy. Sentinel managed about $2 billion in customer assets; about $600 million of it was never recovered, and clients are still wrangling over how to divvy up what remains.