Tuesday, November 01, 2011

MF Global: Here We Go Again

MF Global, the eighth-largest US futures broker, has declared bankruptcy:
MF Global Holdings Ltd failed to protect customer accounts by keeping them separate from its own funds, said a top U.S. exchange regulator, another shock for commodity markets scrambling to contain fallout from the brokerage's bankruptcy.
The revelation on Tuesday by CME Group Inc, MF Global's immediate regulator, suggests MF Global violated a central tenet of futures brokerage. It could put client money at risk and erode confidence in a market that for decades has enjoyed a sterling reputation for safety.
The Associated Press, citing a U.S. official, reported that MF Global has admitted to using client money as its financial troubles mounted. A company executive made the admission to federal regulators in a phone call early Monday, the AP reported.
The fall of the brokerage led by ex-Goldman Sachs boss and former New Jersey governor Jon Corzine sent shockwaves through commodity markets as futures traders feared the damage could spread or that similar problems could hit other brokers.

And what are the possible consequences of all this? Not much, perhaps:
Government rules require securities firms to keep clients' money and company money in separate accounts. Violating them could result in civil penalties.
Government regulation of the financial markets has been a mangy toothless lion for a couple of decades now. Nothing the young lions of Wall Street would have to fear. And even though some dentures have been recently provided for the regulatory lion, they are kept in glasses of water on the bedside tables of the banksters who are still really in power. Regulation is only allowed if the industry agrees with it, and the industry is not at all interested.