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Tuesday, December 13, 2011

Update: MF Global

by Calculated Risk on 12/13/2011 06:42:00 PM

I posted yesterday about some speculation that the losses at MF Global might be related to rehypothecation. Several people who know better than me have told me that is unlikely.

Terrence Duffy, the chief executive of the CME Group, suggested today that there was a "loan" of customer money to MF Global.

From the NY Times DealBook on the Senate Panel Hearing on MF Global

Terrence Duffy, the chief executive of the CME Group, the exchange responsible for regulating MF Global, says he has information that indicates Mr. Corzine knew about some of the missing customer money.
Mr. Duffy is claiming that he was told of this revelation on Saturday by someone in his legal department, and did not know it when he testified before Congress last week.

“Somebody went in and violated the rules of the CME and the rules of the government,” he said.
While Mr. Duffy clearly aimed to throw the attention on what Mr. Corzine knew of the illegal transfers, subsequent guidance (or lack thereof) from CME has softened the accusation. They are now saying that the information they received indicated Mr. Corzine knew about the loans, but not whether they knew these loans were illegal or improper. They cannot comment on that, they said.