MF Global, a US-based equity and derivatives broker, has filed for bankruptcy and has had its primary dealer status removed by the New York Federal Reserve.
The developments came after a number of exchanges including the CME Group, Singapore Exchange and NYSE Liffe prohibited MF Global from opening new derivatives positions, allowing the broker only to liquidate its existing positions.
According to press reports, MF Global CEO Jon Corzine, a former New Jersey governor and ex-CEO of Goldman Sachs, had been in talks to find a buyer for the firm. Reports suggested that broker and market maker Interactive Brokers expressed an interest in the firm over the weekend but a transaction did not materialise.
In its second quarter results statement presented on 25 October, MF Global reported losses of US$191.57 million, which included valuation allowances against deferred tax assets of $119.4 million.
The firm also revealed in its Q2 results that it had a net long position of US$6.3 billion in a short-duration European sovereign debt portfolio financed to maturity including government bonds from Belgium, Italy, Spain, Portugal and Ireland.
The firm also realigned its global equities unit in Q2, cutting 30% of staff in equity sales, sales trading and non-core research in Europe and Asia. Last week Moody’s cut MF Global’s debt to junk status citing the firm’s exposure to euro-zone government debt.
MF Global was formerly known as Man Financial, the brokerage unit of global hedge fund Man Group. The firm was renamed MF Global following its split from Man Group in 2007, at which point it listed on the New York Stock Exchange.