The big (and expected) news yesterday was that MF Global has declared bankruptcy.

A buyout by Interactive Brokers was abandoned at the last minute due to realisation that some money was missing from some customers accounts.

Regulators are now investigating whether MF Global diverted some customer funds to support its own trades.

The failure of MF Global has been largely blamed on their current CEO Jon S. Corzine, who joined them just last year and tried to convert MF Global from a pure brokerage house into an investment bank with its own trading desk.

The US$6.3 billion bet on European sovereign debt had turned very wrong. Interestingly, none of the sovereign debt was from Greece but the write-downs in the bonds of the other countries was enough to cause the damage.

In Singapore, the extent of the impact might be felt beyond direct customers of MF Global.

I know of at least one local brokerage house which uses MF Global as it’s CFD provider. Clients have been told earlier on to top up to a minimum margin of 25% for their existing trades or close off their positions. And then there is this note which clients of this brokerage house would have received in an email:

Please be reminded that any cash collateral furnished by you is being held with MF Global and you are taking MF Global counterparty risk.
 

I am sure many will be stunned by that revelation. Minibond saga part 2?

MF Global, one of the world’s leading broker-dealer of exchange listed futures and options, has emerged as one of the biggest casualties from Europe’s crisis.

MF Global is now suffering from its US$6.3 billion exposure to European sovereign debt, and is looking for buyers to save itself.

In the past week, the corporate bonds of MF Global has plunged to 40+ cents on the dollar as Moody and Fitch downgraded the company to junk status. At the start of the week, the bonds were still trading at 90 cents on the dollar.

The share price has also collapsed from above $3.50 to less than $1.50.

In Singapore, MF Global has an investment platform MF Global Singapore which offers CFDs, forex, ETFs, gold and commodities trading to retail investors.