CME, ICE cut margin needs to limit MF Global fallout

Mon Nov 7, 2011 2:06am EST
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By Jane Lee

KUALA LUMPUR (Reuters) - CME Group (CME.O: Quote) and IntercontinentalExchange Inc (ICE.N: Quote) moved over the weekend to limit the fallout from the MF Global Holdings Ltd MFGLQ.PK bankruptcy on futures markets by lowering margin requirements on some accounts.

The CME also asked brokers who have taken over customer accounts from MF Global, which filed for bankruptcy protection on October 31, to not disburse any of the money until at least the close of business on Tuesday as it looks to verify the amounts involved.

"The exchanges have lowered the margins to help the transition until the cash arrives," said Jonathan Barratt, managing director at Commodity Broking Services in Sydney.

"While it's a prudent thing that the exchanges are allowing people to transfer the positions away from MF Global, funds should also be transferred as well, instead of having people pay the margins twice."

Traders had worried that a rush to cover margin requirements on MF Global accounts transferred to other brokers could lead to heightened market volatility.

There was little evidence of this on markets for CME futures like U.S. crude or wheat on Monday.

Volumes on ASX Ltd's Australian grain futures leapt on Monday, after slowing to a trickle last week, with January wheat trading a record quantity. [ID:nL4E7M70AJ]