Lessons Learned From MF Global

On October 31, 2011, MF Global Holdings, Ltd. and certain affiliates (MF Global) declared the eighth largest bankruptcy in U.S. history, claiming assets of approximately $41 billion and debt of approximately $39.7 billion. Immediately thereafter, the Securities Investor Protection Corporation initiated a Securities Investor Protection Act (SIPA) liquidation proceeding against MF Global, Inc. The proceeding directly impacted more than 150,000 customers of MF Global and sent shock waves throughout the futures industry.

The SIPA liquidation proceeding had an immediate and dramatic effect on many agricultural producers, grain elevators and processors who utilized MF Global as a clearinghouse for the hedging of their products. The inability of customers to access their accounts in the immediate aftermath of the liquidation proceeding temporarily prevented customers from entering or exiting hedging transactions and accessing equity in their accounts.

In an article for Feed & Grain, the authors offer considerations for producers who rely on futures to manage their commodity price risks and for lenders who may be asked to quickly advance funds to cover margin calls.