MF Global should keep ASIC busy by: John Durie From: The Australian October 31, 2011 12:52PM
CFDs have long been on ASIC boss Greg Medcraft's watchlist, which makes you wonder what he is doing about the apparent implosion of third-ranked player MF Global.
MF has about 5 per cent of the contracts-for-difference market in Australia, plus white-label deals with Comsec and eTrade, which boost its market share to around 11 per cent.
This is well behind market leader IG with 34 per cent direct and CMC with 20 per cent.
According to market reports this morning, MF raised the minimum margin on all trades from five to 25 per cent, which in a highly leveraged game like contracts for difference is tantamount to putting the shutters on the business.
The immediate concerns may ease, as an imminent deal has been mooted with an as-yet unnamed player said to be close to a deal to buy MF Global worldwide.Just how that affects the Australian market is not known.
...An official for its Australian operations declined comment, and chief Tony Fay was unavailable.
The parent company last week reported a loss of $US198 million ($184m) and its debt was immediately cut to junk status by the big ratings agencies.
The Wall Street Journal reported the firm was in talks at the weekend to sell all, or parts, of the business.
The firm is run by former Goldman Sachs chief and former New Jersey governor Jon Corzine.
Its main problem is $US6.3 billion in European debt spread from Spain to Portugal to Belgium.
In recent weeks, its market capitalisation has fallen from $US612 million to $US200m.
MF has operations across the world and generates over half its revenue from executing and clearing futures contracts.
An official from the Australian Securities and Investment Commission was not immediately available to comment on the implications for the Australian market.
ASIC has run several investor education campaigns on contracts for difference, to make retail investors wary of the risks involved.
These have been strongly supported by market leaders IG and CMC
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