US Futures broker, MF Global, began its demise just a week ago when the company posted a quarterly loss and its shares fell by two-thirds. The firm disclosed $6.3 billion stake in the sovereign debt of some of Europe’s most indebted nations.
Market concerns over such exposures led to MF Global being downgraded to “junk” status by various credit rating agencies, sparking margin calls that threatened liquidity. Soon investors concerned about European debt pulled out all their money from the firm.
MF Global is the biggest U.S. casualty of Europe’s debt crisis, and the seventh-largest bankruptcy by assets in U.S. history.
The bankruptcy is reminiscent of the collapse of Lehman Brothers in 2008 at the height of the financial crisis. But market participants said the impact from this collapse is smaller and would likely be contained.
The 200-year old brokerage firm made a last ditch attempt to save itself by offering to sell a variety of assets to Interactive Brokers Group Inc . However talks broke down earlier on Monday, consequently leaving the firm with no choice but to file for Chapter 11 bankruptcy.
Jon Corzine, 64, was running MF Global and had previously ran Goldman Sachs before becoming a U.S. senator and then governor of New Jersey. Some say he was trying to turn MF Global into a “mini” Goldman Sachs by taking on more risky trades.