Commodity trading chill lifts
MF Global resumes trading, but angst remains
CHICAGO/ NEW YORK — Commodity trading slowly returned to normal on Tuesday as MF Global resumed selling off client positions, although new revelations about missing money sent chills through the markets.
The higher trading volume across all the major U.S. futures markets after Monday’s near-paralysis belied the deeper angst and frustration among many traders whose collateral funds were still frozen and who now feared that the stricken broker may have failed to separate customer accounts from its own money.
“There is a smoother operation of the open outcry and the CME Group was able to get market markers back on the floor,” said Dan Flynn, analyst at PFGBEST Research in Chicago.
“There is still some fear in the market because the question is whether it was just sloppy back office or not, in terms of the segregation of funds or not.”
After a temporary freeze on all trading activity, MF Global was allowed to resume liquidating customers’ grains and livestock positions on the Chicago Mercantile Exchange and all ICE Futures positions around midday.
Fresh concerns centered on the CME Group’s revelation that MF Global failed to protect customer accounts by keeping them separate from its own funds, adding to client worries about how and when they would get their money back.
The abrupt failure of MF Global — which billed itself as the number one broker on the New York Mercantile Exchange and COMEX, and the second largest on the CME — brought activity on Monday to a crawl, with most major exchanges severely limiting activity or suspending its membership.
But trading volumes for gold, oil and agricultural commodities neared normal levels on Tuesday.
MF Global, led by ex-goldman Sachs top man Jon Corzine, has become the most high-profile victim so far of the eurozone debt crisis, reviving memories of the collapse of Lehman Brothers in 2008 that triggered global turmoil.
The broker admitted to using clients’ money as financial troubles mounted, the Associated Press reported, citing a U.S. official. The breach of segregation left brokers and traders shocked.
“You’d think that in today’s regulatory climate, and with all that’s happened in the last two years, how could this even be a possibility?” said one MF Global employee, who asked not to be named.