Magazine article Modern Trader

What Did You Know.?

Magazine article Modern Trader

What Did You Know.?

Article excerpt

I'm a proud American but sometimes when watching Congress at work I wonder if our Founding Fathers were a bit daft. Case in point: The House Agriculture Committee hearings on the MF Global failure held Dec. 8. Between the redundant, silly, random and political ax grinding questions, it's a wonder anything was learned. However:

* We did learn Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler was in Europe during these hearings, which made some Congressmen indignane.

* Jon Corzine admitted that he didn't know where the missing money was, and that he was "stunned" when told on Sunday, Oct. 30, "that MF Global could noe account for many hundreds of millions of dollars of client money."

* We also learned from Corzine that the $ 19 1.6 million second quarter loss was largely made up of deferred losses that had to be recognized. Only $18 million ofthat was due to operating losses, none of which, said Corzine, was due to the repurchase transactions to maturity or RTMs, which was a main focus of the hearing by the Congressmen.

* MF Global had been a troubled company for years. In February 2008, in the so-called "Dooley Trading Incident," the firm lost $141 million alone because of a rogue broker out of Memphis. That fiscal year it had a $71 million loss, followed by a $69 million loss in 2009, $168 million loss in 2010 and 201 1 was looking more bleak. So despite the effort to make it look like it was only the sovereign debt trading that put the nail in MF's coffin, it was many factors.

* CME Chairman Terry Duffy testified that on Thursday, Oct. 27, two CME auditors (CME was the designated self-regulatory organization for MF Global) made an unannounced visit to MF's Chicago offices to review the daily segregation report, and they found "segregation was intact." The auditors continued reconciling the books until Oct. …

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