The fallout from the collapse of MF Global Holdings rippled through global exchanges on Tuesday, as operators moved to suspend the US futures broker or limit trades of its customers.
MF Global filed for bankruptcy protection on Monday following bad bets on euro zone debt.
London clearing house LCH.Clearnet declared it a defaulter.
In Australia, trading in grain futures and options was suspended by bourse operator ASX Ltd on Tuesday, prompting concerns about the integrity of the country's agricultural futures market.
"We're sitting out here with risk that we can't cover," said Jonathan Barratt, head of Sydney-based Commodity Broking Services.
The London Metal Exchange said in a statement on Tuesday it had suspended MF Global from trading with immediate effect, following a similar move by the CME Group, which operates the Chicago Mercantile Exchange, Chicago Board of Trade and New York Mercantile Exchange.
Untangling Positions
On Monday, CBOE Holdings Inc said it was restricting trading by customers of MF Global to closing out their positions on its platforms, the Chicago Board Options Exchange, the C2 Options Exchange and the CBOE Futures Exchange.
Trading activity in gold, crude oil and grain futures slowed to a crawl as the bankruptcy forced a chaotic scramble to untangle trading positions. MF Global brokers were barred from trading floors, according to Chicago traders.
Commodities such as natural gas and crude, where MF Global had a strong presence, have been hit harder than others.
One Sydney-based LME trader said MF Global's failure could encourage more market players to use clearing houses because they offered greater protection than over-the-counter (OTC) trading.
"If there are customers who are in an OTC arrangement with MF Global, and these are not cleared by a clearing house, they may be exposed," said the trader. "But we don't know who these people are."
The New York Federal Reserve terminated MF Global as one of its primary dealers and IntercontinentalExchange Inc, which operates futures exchanges in Europe and North America, Singapore Exchange Ltd and Singapore's central bank halted the broker's operations except for liquidations.
MF Global Sify Says Trading Normal In India Operations
MF Global Sify Securities India Pvt Securities, an Indian securities firm that is 70 per cent-held by collapsed US futures broker MF Global, is functioning normally, its head told a local television channel on Tuesday.
Vineet Bhatnagar, managing director, told CNBC-TV18 that he was not aware of any discussion to sell MF Global's stake to its partner Satyam Infoway, which holds the remaining 30 per cent.
"I would only submit that under the shareholders agreement that is presently there between MF Global and Sify Securities, Sify of course has the flexibility to weigh all its options," he said.
MF Global, run by ex-Goldman Sachs chief executive Jon Corzine, filed for bankruptcy protection on Monday following bad bets on euro zone debt.
The brokerage's meltdown in less than a week made it the biggest US casualty of Europe's debt crisis, and the seventh-largest bankruptcy by assets in US history.
The London Metal Exchange said in a statement on Tuesday it had suspended MF Global from trading with immediate effect, following a similar move by the CME Group, which operates the Chicago Mercantile Exchange, Chicago Board of Trade and New York Mercantile Exchange.
Bhatnagar described MF Global's 70 per cent stake in the Indian venture as a portfolio holding for the US firm.
"If there is a situation where the receivership in the US results in a process where this 70 per cent in India asset comes for a change of hands, I would imagine this is a very well supervised process in the USA," Bhatnagar said.
"We are a pure agency broker in India, we don't have any outstanding proprietary positions and we also do not have asset under management," said Bhatnagar.
In India, MF Global is a trading and clearing member on the Bombay Stock Exchange, National Stock Exchange, and is also a depositary participant on the Multi Commodity Exchange and National Commodity and Derivatives Exchange.
The company has a capital base of $14.5 million, as per information on its website. MF Global Sify offers online and offline equity and derivatives trading for retail customers as well as execution and clearing services for financial institutions.
