Commodities investors who did business through MF Global, the historic broker-dealer that went bankrupt last week, have been warned they may not get back all the money they had in their accounts with the company.
Around 30,000 accounts contain cash that remains frozen as liquidators struggle to locate hundreds of millions of dollars of missing money, and if the full amount is not found, it is possible that customers will have to take a share of the losses.
Unpicking MF Global was yesterday still causing short-term difficulties in some parts of the commodities market, while investors said the realisation that their cash is not safe could have long-term consequences for relations with broker-dealers.
MF Global collapsed last Monday after customers and trading partners lost confidence in the company, a "run on the bank" that began when it revealed it had bet $6.3bn on eurozone sovereign debt. Regulators said that about $600m did not appear to be in the right place, and MF Global may have inappropriately dipped into customers' trading accounts, which are supposed to be kept segregated from its own trading.
Investors have to post some collateral with their broker to back speculative positions, and many keep excess cash in their margin accounts to make that process quicker and easier. While liquidators have been transferring positions, including collateral, to new brokers, the excess cash is being kept back. If there are losses, commodities investors will have to share them. Securities investors will be compensated by the Securities Investor Protection Corp.