MF Global, the commodities broker spun off from the UK's Man Group last year, has sacked a rogue trader whose unauthorised dealing in the wheat market cost the group $141.5m.
The company moved quickly yesterday to limit the fallout from the incident, which came just a few weeks after Société Générale's Jerome Kerviel put the rogue trader phenomenon back on the front pages.
The errant trader at MF Global was unmasked as Evan Dooley, a broker in its Memphis office, who placed large bets against the price of wheat, which has surged in the past week.
MF Global said the trades were bigger than Mr Dooley was allowed to place and were detected and unwound within hours on Wednesday morning. He has been dismissed, the trading system loophole that allowed Mr Dooley to act has been closed, and the company tapped its banks for $150m to replace the lost capital.
MF Global is a broker and does not trade with its own money, but some employees are allowed to trade on their own accounts and the company has had to step in to cover Mr Dooley's losses. "I'm afraid to say the individual concerned doesn't appear to be terribly long of assets," the chief executive, Kevin Davis, said yesterday. "This is an absolutely awful event, but an aberration."
The loss wipes out 6 per cent of the equity value of the company, but commodities regulators expressed their confidence in MF Global's financial position yesterday – and Mr Davis promised that managers would share the pain with shareholders. There will be "bonus pool sacrifices", he said. "Senior managers around the company will expect to feel this personally in their wallets, myself included."
Surprised by a reporter from the Wall Street Journal, Mr Dooley appeared to blame MF Global's IT systems. "The computer system failed on a lot of things" including "setting limits", he said.
MF Global hired outside IT contractors to review the security of its systems, and said internal trading terminals would now automatically set trading limits, even if that meant they ran slower. "We will sacrifice some efficiency for ultimate security," Mr Davis said.
The company's shares tumbled 20 per cent on the news, and are now 21 per cent below the price at which they were sold by Man Group in July.