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Rogue trader cost MF Global $142M
- Thread starter crgarcia
- Start date
Quote from NY_HOOD:
can MF go after Dolley for the cash he lost? that was my question .
Yeah, I'm pretty sure they can and will go after him for the losses just to make a show of it. However, after Dooley writes the necessary retainer checks to a civil and criminal (?) attorney he probably will not have much left to go after. The legal fees could be huge.
Also, I'm surprised more bodies haven't surfaced from the wheat action this week. I read an article from Reuters that the pit traders are none too happy with the crazy volatility that has been driving this market. Some have said they won't trade wheat anymore :eek:.
Quote from Pa(b)st Prime:
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.
Excellent post Pabst.
I was kind of thinking the SAME thing.
A total panic job.
Quote from Landis82:
Excellent post Pabst.
I was kind of thinking the SAME thing.
A total panic job.
Yeah, but you have to bear in mind that they had a position WAY above their risk limits. Every minute they stay with that position on, they are risking bankruptcy if some news comes out and sends wheat limit up for a few days in a row.
Just like Soc Gen, MF may have made a rational calculation that it would be better to lose a large but limited amount by exiting asap, rather than take the decision of improving the execution in exchange for a small (but real) risk of bankrupting the firm.
Quote from Landis82:
MF is probably a great buy down here.
The action in the commodities markets will ensure that they continue to do huge clearing volume, despite today's S&P downgrade from BBB+ to BBB.
Six of the company's executive officers bought roughly 180,000 shares of stock today. That comes to $3 million.
Closed at $17.55
-3.64 on 30 million shares. ( traded as low as $14.00 intra-day )
:eek:
That assumes the customers don't flee in droves. Seriously, who is going to keep money with them now after such a big screwup?
Quote from maxni:
Is it likely that the size of Dooley's (MF's) short position had already become an open secret amongst the big players in the market before the company decided to cover?
I was thinking this too. It is very curious that the price spiked $2 the morning they were trying to close the position down. I know they (MF) definitely lifted the market with their buying but I'm sure others got wind of it and decided to bid it up ahead of them.
SO is MF going to end up being the next refco? this thing has over 1 billion of market cap on a $141 million bad trade. is there more pain comming?
The decision to liquidate immediately despite adverse market effect and the possiblity to recover is I suspect more a corporate politics/job preservation decision than a market take decision. If you hold back from liquidating and it goes against you the question will by why didn't you liquidate immediately. If you liquidate and the position subsequently recovers, a defense that you could not know for sure that it would recover and so liquidated immediately to be safe will likely be accepted.