i am only an equity guy and don't know of any firm that permits "market orders" in after hours. it would be impossible for me to do a market order in after hours trading. my guess is he was short and then panicked by pressing market instead of limit and perhaps he only intended to cover a portion but he wound up covering everything? does'nt add up.
Rogue trader cost MF Global $142M
- Thread starter crgarcia
- Start date
Quote from Landis82:
You must be new to the world of commodities, eh?
MF Global is based in Bermuda.
They also have offices in London, NYC, Paris, Mumbai, Singapore, Sydney, Toronto, Tokya, Hong Kong, Tapei, and Dubai.
The company was started by James Man in London in 1783. It was renamed in 1869 to E D & F MAN after his two grandsons, Edward Desborough Man and Frederick Man.
MF Global separated from Man Group, PLC via an IPO in 2007 and the shares of MF Global are listed on the NYSE. (symbol: MF ).
ED&F Man entered the U.S. market in 1971. Along the way, they bought out Geldermann in '94, Tulletts in '99, First American Discount in '00, GNI in '02, and Refco and Lind-Waldock in '05.
They were the #1 clearing firm on the floor of the CBOT, CME, and Comex the first 9 months of 2007. On NYMEX, they were #2.
As is usually the case, the clearing firm is on the hook for the loss.
http://www.mfglobal.com/Pages/default.aspx
I have heard of Man Financial of course. I did not know that MF was out of Bermuda. One of the articles implied that the trader was out of Bermuda. I still don't understand; this guy was an independent trader who slippped thru margin, a prop trader for MF global, or an employee. The first article said that the "rogue" trader was fired and was a registered representative. If the latter is the case then, risk management like SocGen is a wink and a nod. That is kind of my point; it makes a big difference as far as the ethics go. On the one hand he is painted as a scoundrel vs a guy on the wrong side of a big trade ala Brian Hunter. I have no ill will towards MF or anyone else. I think it is sad that some hard working guys on the desk are gonna get canned because of the losses and who ever is left gets to work even harder. Maybe someone can clear this up.
The guy had all his skin in the game if he was trading his own account. An off balance sheet partnership perhaps. Trust me, the guy lost every last cent to his name.
is that true? thats a lot
isnt MF based in the Caribbean?
Dooley was an account executive. A guy who had customers that would trade in 10 lots. Small retail hedging or speculative accounts. He was a licensed commodites broker. A series 3 type customers man. MF has many of these type of agents. They bring in business that clears through MF global.
Because of this Dooley had electronic order access. I guess so he could enter trades for customers. Dooley also had a personal account. This is where he made the trades. For whatever reason, possibly because of his business relationship with MF, Dooley was able to override any position size controls with his order entry software. He built up a position short 14,000 wheat futures contracts in the electroninc only session starting at 6pm chicago time and ending at 5am. The trading reopened at 9:30am with Dooley still short. At around 10:20 am the price of the may contract spiked $2.00 ($10,000 a contract) in a few minutes. Why the price of wheat spiked $2.00 in a few minutes isn't certain. But 14,000 contracts * $10,000=$140,000,000.
MF was negligent in having order entry software that would allow someone to build up a position of that size. The margin requirements for that size is $80million. I am sure Dooley didn't have $80 million in his personal account.
IF MF fixes their order entry software and they keep their customers and investors regain confidence in MF's risk management systmes, I think the stock is a buy.
Because of this Dooley had electronic order access. I guess so he could enter trades for customers. Dooley also had a personal account. This is where he made the trades. For whatever reason, possibly because of his business relationship with MF, Dooley was able to override any position size controls with his order entry software. He built up a position short 14,000 wheat futures contracts in the electroninc only session starting at 6pm chicago time and ending at 5am. The trading reopened at 9:30am with Dooley still short. At around 10:20 am the price of the may contract spiked $2.00 ($10,000 a contract) in a few minutes. Why the price of wheat spiked $2.00 in a few minutes isn't certain. But 14,000 contracts * $10,000=$140,000,000.
MF was negligent in having order entry software that would allow someone to build up a position of that size. The margin requirements for that size is $80million. I am sure Dooley didn't have $80 million in his personal account.
IF MF fixes their order entry software and they keep their customers and investors regain confidence in MF's risk management systmes, I think the stock is a buy.
I don't think so.
$142M is peanuts compared to the damage to MF stock, Dooley may do if he starts talking in the courts, with all the media listening.
It may even backfire and end up in Dooley suing MF, we're in a litigious society, you know.
So, they just want this mess to fade from public opinion, and regain investor confidence.
MF slit their own throat with the cover. It's obvious they covered at the market. Because of Wheats volatility the Globex "book" is quite thin. I neglected to look at Time and Sales (I don't have access to T&S data more than a day old) but I'd guess that Man paid limit up on the bulk of the liquidation. From what I've heard the problem was less than 20mil on the RTH open.