The broker announced today that an error in its order entry system had allowed the US-based trader to put on massive directional trades in wheat futures on his own account yesterday morning. The trades were noticed and liquidated later that morning, but, as MF Global is responsible, it will have to cover the $141.5 million losses he incurred.
The trader, whose name is not known, has now been fired, MF Global said. It added that client funds had not been affected by the trades. The broker had taken a position of several thousand futures contracts on the Chicago Board of Trade, MF chief executive Kevin Davis said in a conference call today.
The Commodity Futures Trading Commission (CFTC) said that it "continues to be in close contact" with MF Global and the Chicago Mercantile Exchange, the designated regulator for the broker. "MF Global is currently in compliance with the agency's regulatory capital requirements," the CFTC added.
Wheat prices have been extremely volatile - winter wheat on the CME varied between $10.65 and $13.34 a bushel yesterday, an almost unprecedentedly wide range.
MF Global was formerly Man Financial before being spun off by the parent company in July 2007.
See also: Merrill Lynch misplaces $43 billion in derivatives cashflow
Kerviel acted alone, SG report finds
Mispricings at Credit Suisse cause $2.85 billion loss
Far too familiar
Back-office savvy aided SG fraud
The week in Risk.net, May 19-25 2017Receive this by email