Australian clients of failed broker MF Global face a nervous wait to learn the fate of their investments.
AUSTRALIAN clients of failed broker MF Global face a nervous wait to learn the fate of their investments with the company, which called in administrators yesterday after its US parent declared bankruptcy.
Fallout from the collapse has also hit three of Australia's big banks, which had deals linking their clients to the group over contracts for difference, or CFDs - bets on the size and direction of movements in share or commodity prices.
MF Global's implosion also forced the Australian Stock Exchange to suspend trade yesterday on two small commodity futures markets, in grain and wool, that the company dominated.
A deal to sell the entire group, run by former Goldman Sachs executive Jon Corzine, collapsed late on Sunday, New York time, when it was discovered that up to $US700 million ($A660 million) in client funds might be missing.
The administrator of MF Global's Australian arm, Chris Campbell of Deloitte, said there was no evidence that any local client funds were missing.
''At the moment, I haven't heard or seen anything to do with that,'' he said.
He said he was not yet able to say how many customers the company had or how much of their money it held.
The Australian group had two main arms, one of which sold over-the-counter CFDs to retail customers while the other was a futures dealer with mainly institutional clients, he said.
As of March 31, when MF Global ruled off its most recent set of books, the company held more than $160 million in client funds and had a trading book in excess of $400 million.
''Somebody might have multiple accounts and also a lot of positions were closed out over the past few days, so I just don't know how many live accounts are left,'' Mr Campbell said.
''There's something like 80 bank accounts that we've identified at the moment across pretty much all the banks in Australia,'' he said.
''We're just working through making sure all those accounts are frozen - there are funds in them and there are some substantial funds in them.''
Mr Campbell's task is made more complicated because he has yet to gain control of additional ''substantial funds'' held in clearing accounts by MF Global's trading partners, including Deutsche Bank.
Tens of millions of dollars more are caught up in transactions between MF Global's Australian arm and other members of the group's sprawling global network of companies.
MF Global's collapse left CFD clients confused and unable to withdraw funds from their accounts with the company, which they were told were frozen in an email from the company on Monday night.
''Yesterday they were allowing trading but I couldn't get the money out,'' one client, who said he had thousands of dollars trapped in an account with MF Global, told BusinessDay.
Mr Campbell plans to close out client accounts, and said he hoped to start sending notices to clients advising of their positions yesterday. A meeting of creditors could be held as early as next Friday, he said.
Mr Campbell said an investigation team would start looking at the company's history ''shortly''.
He said a $4 million dividend MF Global paid to its US parent in late June would be reviewed. The payment was disclosed in the company's latest annual report, which also discloses that its directors expected retail revenue to slump 65 per cent and ''professional customer relationship revenues'' to fall 60 per cent in the coming financial year.
Commonwealth Bank subsidiary Commsec has suspended the sale of over-the-counter contracts for difference that were hedged through a wholesale deal with MF Global. A bank spokesman said it would close out open CFD positions ''in an orderly manner'' and ''can commit to the return of any funds owing to clients in a timely manner''.
However, CBA warned it might take weeks to close positions in stocks in which there was little trade.
ANZ and Westpac both had relationships with MF Global in which their clients used the broker to trade contracts for difference, although both said only a small number of their customers were affected.
All three banks said their financial exposure to MF Global was either ''very small'' or ''not material'', as did NAB.
Frequently Asked Questions about this Article…
What happened to MF Global and why are Australian clients facing a nervous wait?
MF Global's US parent declared bankruptcy and the company's Australian arm called in administrators, leaving Australian clients uncertain about the fate of their investments. The collapse disrupted trading and left some client accounts frozen while administrators assess the group's books and relationships.
Are Australian client funds missing from MF Global?
The administrator of MF Global's Australian arm, Chris Campbell of Deloitte, said there was no evidence that local client funds were missing. However, it was reported that up to US$700 million in client funds may be missing at the US parent level, and the administrators are still reviewing accounts and clearing arrangements.
Can MF Global CFD clients withdraw their money or continue trading?
Many CFD clients were told their accounts were frozen and were unable to withdraw funds. Some clients reported they could still trade briefly but could not access withdrawals. Administrators have planned to close out client accounts and start sending position notices to clients.
What steps are the administrators taking for MF Global's Australian arm?
Deloitte administrator Chris Campbell is identifying and freezing around 80 Australian bank accounts linked to MF Global, reviewing substantial funds held in clearing accounts (including those with trading partners such as Deutsche Bank), planning to close out client accounts, sending notices to clients, and launching an investigation into the company's recent history and transactions (including a US$4 million dividend paid to the US parent). A creditors' meeting could be held as early as next Friday.
How have Australian banks and Commsec been affected by the MF Global collapse?
Commonwealth Bank's CommSec suspended the sale of OTC CFDs that were hedged through MF Global and said it will close out open CFD positions in an orderly way and return any owing funds, though this could take weeks for illiquid stocks. ANZ and Westpac had relationships where a small number of customers used MF Global for CFDs, and all three major banks (ANZ, Westpac and CBA) — along with NAB — said their direct financial exposure to MF Global was very small or not material.
Did MF Global's collapse affect Australian markets like the ASX?
Yes. The Australian Stock Exchange suspended trading on two small commodity futures markets (grain and wool) that MF Global dominated, as a result of the firm's collapse and the disruption to clearing and market-making activity.
How big were MF Global's client and trading positions in Australia before the collapse?
According to MF Global's most recent books as of March 31, the Australian arm held more than A$160 million in client funds and had a trading book in excess of A$400 million. Administrators also identified about 80 bank accounts in Australia with substantial funds, and tens of millions more are tied up in transactions across the group's global network.
What can affected investors expect next and how long might resolution take?
Administrators plan to close out accounts, send position notices to clients and hold a creditors' meeting (potentially as soon as next Friday). They will investigate the company's history and review payments such as the A$4 million dividend to the US parent. Banks have warned that closing out some positions and returning funds could take weeks, especially for illiquid stocks or complex clearing arrangements.
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