The treatment of the non-insider investors and speculators by Wall Street is often shameful. This may be one of those times.
I think this has driven some of the recent trading, as the wise guys take advantage of the specs.
Brace for more odd swings in the markets.
Reuters
MF Global clients face day of reckoning as margins call
By Jeanine Prezioso and Karl Plume
NEW YORK/CHICAGO | Thu Nov 3, 2011 6:12pm EDT
(Reuters) - Call it the mother of all margin calls: Up to 50,000 former customers of bankrupt broker MF Global must find some $1 billion in additional collateral almost overnight, or be forced out of their trades.
Come Friday, with the mass transfer of commodity trading accounts from Jon Corzine's fallen firm to six of its erstwhile rivals, margin clerks will be wrapping up a reckoning of how much additional money is needed to cover millions of positions. Clients who can't quickly meet their margin will have to liquidate, making for a tumultuous day's trade.
A court order to move the trades late on Wednesday brought only marginal relief to clients who have been essentially frozen out of their funds and positions since Friday. While accounts will now be transferred more quickly, only 60 percent of the collateral will be moved to the new brokers.
That figure may yet fluctuate as brokers scramble on Thursday to work out the details, but the net result is still likely to mean that customers will be forced to post a hefty sum within a day or two. Many of MF Global's mainly small-scale clients may fail, triggering a mass liquidation of both short and long positions that may roil markets.
"I've got somewhere in the region of 8,000 positions. We can't afford to double margin those sorts of positions," said Tom Wacker, a proprietary gold futures trader in New York. "If we can't get our positions transferred they're going to be liquidated and we're going to lose a lot of money."
Eventually, in days or weeks, the remainder of the money should be returned. The $600 million that regulators say MF Global may have misappropriated from customers could remain outstanding, but that is less than a tenth of its funds.
In the meantime, however, brokers are unlikely to extend loans to new, unfamiliar customers to make up the margin gap -- and in some cases may simply refuse to take them at all.
"We are going to require full margin on our accounts," says Sean O'Connor, chief executive of INTL FCStone, the second-smallest of the six futures commission merchants (FCMs)selected to take the accounts....
