Rogue trade loses MF Global $141.5 million

Interdealer broker MF Global has lost $141.5 million after it was forced to cover trading losses made by one of its employees.

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

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here