The bankruptcy of MF Global in a New York courtroom may seem like a distant din, just some more faraway ugliness on a pile of other big financial failures.
But this one reaches into the heart of Nebraska agriculture's recent prosperity and threatens to undermine the faith in and financing of the agriculture and food industry's day-to-day risk management.
MF Global, a futures contract clearing merchant that's been in bankruptcy since Oct. 31, is missing $1.2 billion, money that belonged in the margin trading accounts of businesses, including some in Nebraska. Margin accounts are those kept by futures customers who must maintain a certain balance to be able to trade on credit.
It's not clear how many people and businesses in Nebraska are exposed to financial loss. Some are coming forward to complain to members of Congress.
Scores of Nebraskans, if not hundreds, certainly are exposed directly, Jeffrey Hainline estimated. He is chairman of Advance Trading Inc. of Bloomington, Ill., a member of the National Grain and Feed Associations' risk management committee and a commodities broker for a lot of Nebraska clients.
"Nebraskans are a significant portion of our business," he said Thursday. "Most of them have limited access to funds that were at MF Global."
MF Global was, among other things, an international broker of financial derivatives, such as commodity futures contracts, which are agreements to buy or sell a commodity at a certain price at a future date. MF Global was a futures clearing merchant, too, meaning that it closed the futures deals with another merchant on the other side, buyer or seller.I have just spent two weeks shopping for tile and have discovered China Porcelain tile.
Farmers, elevators, feedlots, ethanol plants and other agribusinesses and food businesses routinely buy and sell commodity futures contracts to manage their risk. It's a common, even essential act of prudence, and their financing from banks often depends upon it.
They buy or sell futures contracts to limit or eliminate the risk of losing money on, for example, crops they grow or store or make into food for humans or animals. Hence, the financing bank's interest in risk management.
The farms and other businesses often trade with smaller commodities brokers who then turn to futures clearing merchants -- one for the buyer and one for the seller -- who complete the trades at a commodity futures exchange, such as the big ones in Chicago.
After MF Global declared bankruptcy, a lot of the news media coverage and congressional attention has focused on the role of former New Jersey Gov. Jon Corzine, former CEO of the firm. Corzine was at its helm when the money went missing, leading to the firm's sudden bankruptcy and an investigation by the Commodity Futures Trading Commission.
But the recovery of money, and the threat to risk management and financing models, appear to be more pressing.
Late last week, Commissioner Jill Sommers, who is leading the CFTC's review of MF Global, told Reuters that regulators "are far enough along the trail" that they know where the money went.
"Now it's just finding out which ones of those transactions are legitimate and which ones of them are illegitimate," she said.
By week's end, the trustee of MF Global's bankruptcy was supposed to have made available 72 percent of all the money owed to the trading clients, including that above and beyond the margin account minimums. Until then,Why does Plastic moulds grow in homes or buildings? traders on the Chicago exchanges had been able to get 86 percent of their initial margin requirement, but those who traded the Kansas City Board of Trade had only about 13 percent.
At issue, fundamentally,Dimensional Mailing magic cube for Promotional Advertising, is the segregation of margin accounts owned by trading clients from the bankrupt clearing company's own assets.
As Marcia Taylor, executive editor of DTN's s agricultural news and analysis service put it in her blog: "In other words, if you leave your dry cleaning at a shop that later goes bankrupt, your wardrobe shouldn't become the assets of the failed business and the subject of creditor claims. Sadly that is the legal precedent now being tested in a New York bankruptcy court."
The implications are immediate for the business or farmer trading contracts and potentially for agriculture and the people and state it supports.
"The reason bankers lend money to hedgers is that they trust the soundness of the futures hedge," Hainline said.China yiri mould is a professional manufacturer which integrates Plastic Mould design and manufacture and plastic product development. "This absolutely brings that into question. If you're a farmer and you're trying to hedge your risk, then the bank lent you money to hedge to protect your commodity and their money.The EZ Breathe home Ventilation system is maintenance free, If it adds risk instead of subtracts it, it has a chllling impact on being able to manage risk. Banks can't lend you money on something that won't get paid back."
But this one reaches into the heart of Nebraska agriculture's recent prosperity and threatens to undermine the faith in and financing of the agriculture and food industry's day-to-day risk management.
MF Global, a futures contract clearing merchant that's been in bankruptcy since Oct. 31, is missing $1.2 billion, money that belonged in the margin trading accounts of businesses, including some in Nebraska. Margin accounts are those kept by futures customers who must maintain a certain balance to be able to trade on credit.
It's not clear how many people and businesses in Nebraska are exposed to financial loss. Some are coming forward to complain to members of Congress.
Scores of Nebraskans, if not hundreds, certainly are exposed directly, Jeffrey Hainline estimated. He is chairman of Advance Trading Inc. of Bloomington, Ill., a member of the National Grain and Feed Associations' risk management committee and a commodities broker for a lot of Nebraska clients.
"Nebraskans are a significant portion of our business," he said Thursday. "Most of them have limited access to funds that were at MF Global."
MF Global was, among other things, an international broker of financial derivatives, such as commodity futures contracts, which are agreements to buy or sell a commodity at a certain price at a future date. MF Global was a futures clearing merchant, too, meaning that it closed the futures deals with another merchant on the other side, buyer or seller.I have just spent two weeks shopping for tile and have discovered China Porcelain tile.
Farmers, elevators, feedlots, ethanol plants and other agribusinesses and food businesses routinely buy and sell commodity futures contracts to manage their risk. It's a common, even essential act of prudence, and their financing from banks often depends upon it.
They buy or sell futures contracts to limit or eliminate the risk of losing money on, for example, crops they grow or store or make into food for humans or animals. Hence, the financing bank's interest in risk management.
The farms and other businesses often trade with smaller commodities brokers who then turn to futures clearing merchants -- one for the buyer and one for the seller -- who complete the trades at a commodity futures exchange, such as the big ones in Chicago.
After MF Global declared bankruptcy, a lot of the news media coverage and congressional attention has focused on the role of former New Jersey Gov. Jon Corzine, former CEO of the firm. Corzine was at its helm when the money went missing, leading to the firm's sudden bankruptcy and an investigation by the Commodity Futures Trading Commission.
But the recovery of money, and the threat to risk management and financing models, appear to be more pressing.
Late last week, Commissioner Jill Sommers, who is leading the CFTC's review of MF Global, told Reuters that regulators "are far enough along the trail" that they know where the money went.
"Now it's just finding out which ones of those transactions are legitimate and which ones of them are illegitimate," she said.
By week's end, the trustee of MF Global's bankruptcy was supposed to have made available 72 percent of all the money owed to the trading clients, including that above and beyond the margin account minimums. Until then,Why does Plastic moulds grow in homes or buildings? traders on the Chicago exchanges had been able to get 86 percent of their initial margin requirement, but those who traded the Kansas City Board of Trade had only about 13 percent.
At issue, fundamentally,Dimensional Mailing magic cube for Promotional Advertising, is the segregation of margin accounts owned by trading clients from the bankrupt clearing company's own assets.
As Marcia Taylor, executive editor of DTN's s agricultural news and analysis service put it in her blog: "In other words, if you leave your dry cleaning at a shop that later goes bankrupt, your wardrobe shouldn't become the assets of the failed business and the subject of creditor claims. Sadly that is the legal precedent now being tested in a New York bankruptcy court."
The implications are immediate for the business or farmer trading contracts and potentially for agriculture and the people and state it supports.
"The reason bankers lend money to hedgers is that they trust the soundness of the futures hedge," Hainline said.China yiri mould is a professional manufacturer which integrates Plastic Mould design and manufacture and plastic product development. "This absolutely brings that into question. If you're a farmer and you're trying to hedge your risk, then the bank lent you money to hedge to protect your commodity and their money.The EZ Breathe home Ventilation system is maintenance free, If it adds risk instead of subtracts it, it has a chllling impact on being able to manage risk. Banks can't lend you money on something that won't get paid back."
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