MF Global head steps down after Lehman losses

Kevin Davis, chief executive of US broker MF Global, has resigned as the company prepares to report unexpectedly high losses from the collapse of Lehman Brothers last month.

Davis will leave the New York company immediately, to be replaced by Bernard Dan, currently the chief operating officer. Dan joined the company in June as head of North American operations and was promoted to COO in September - he was previously chief executive of the Chicago Board of Trade, until its 2007 takeover by the Chicago Mercantile Exchange.

MF Global said on September 15 that it was insulated from Lehman's collapse: "In the normal course of business, MF Global evaluates and manages its exposure to all customers including major financial institutions. As a result of these ongoing assessments, MF Global believes it has no material exposure to Lehman Brothers".

But in a preliminary results announcement also released today, the broker revealed that it had taken pre-tax losses of "approximately $8.2 million" from bad debts associated with Lehman Brothers - its net income for the quarter will be between $8 million and $10 million, down from $14.3 million in the quarter to June 30 this year.

Trade volumes fell over the quarter, from 549.8 million contracts in the previous quarter to an estimated 495-505 million in the latest quarter - but chief financial officer Randy MacDonald commented: "Our performance was also negatively impacted by a significant industry-wide drop in exchange volumes in August. We believe that higher volatility levels and corresponding increases in exchange volumes in September are more indicative of the trends we're seeing in the market."

The broker's senior management has been largely replaced since the discovery in February that a single trader had run up $141.5 million losses through unauthorised trades. Michael Roseman joined as chief risk officer in September to lead a restructured risk department, and MacDonald took over from Ira Polk as CFO in April.

See also: MF Global names COO for North America
Rogue trade loses MF Global $141.5 million