After MF Global collapse Asian regulators step in

Post on: 2011-11-02 By: admin

-- $33 million in client funds frozen at Japan unit.
-- Deloitte appointed as administrator for operations in Australia.
-- Hong Kong unit sought voluntary suspension of trading.
-- "Business as usual" at 70%-owned Indian brokerage.
(Adds details on Japan in 4th-8th paragraphs, Australia in 9th-12th paragraphs, Hong Kong in 13th-15th paragraphs, and India in 16th-20th paragraphs.)
TOKYO (MarketWatch) -- Regulators in Asia scrambled Tuesday to suspend operations at local units of MF Global Holdings Ltd.
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in the wake of the U.S. company's collapse, the biggest failure by a securities firm since Lehman Brothers Holdings Inc. filed for bankruptcy protection in September 2008.
Even as some MF Global overseas operations said they're meeting their financial obligations, insolvency administrators were appointed in Australia, futures positions were being wound down in Hong Kong and accounts in Japan were frozen to protect investors the day after MF Global filed in New York for Chapter 11 protection in the eighth-largest corporate bankruptcy in U.S. history.
MF Global's business in Asia is tiny compared to the U.S., but Japan's Financial Services Agency wasted little time Tuesday in freezing some 5,000 operational accounts to secure customer deposits. As of the end of September, the accounts contained a total of about Y2.5 billion--or about $33 million--according to the FSA.
The regulator also said it has issued an order to the company's Japan unit, MF Global FXA Securities Ltd., which has been mostly active in foreign exchange business but recently began stock brokerage services, to protect its assets in Japan.
Separately, the Tokyo Stock Exchange said it will suspend the brokerage from clearing any securities on the Tokyo bourse from Wednesday for the foreseeable future.
Though the Japanese unit, which had 53 employees and Y935 million in capital as of the end of March, had earlier this year targeted significant expansion, market turmoil over the summer dashed those hopes. It laid off roughly 15 employees around mid-September, according to one current employee and one former employee of the company.
In a statement posted on its website Tuesday, MF Global FXA Securities said it would suspend its operations. Calls to MF Global's Tokyo and Singapore offices went unanswered Tuesday.
In Sydney, the Australian Securities & Investments Commission said MF Global Australia Ltd.'s trading activity has been halted and that accountancy firm Deloitte has been appointed as administrator for the group's operations in the country.
Concerns about MF Global's European debt investments caused business partners to grow cautious last week, leading to a severe cash crunch, the company said in papers filed in Australian federal bankruptcy court.
In Australia, MF Global offers financial products and services including futures, options on futures, foreign exchange, contracts for difference and equities.
Meanwhile Hong Kong's stock exchange said the local unit sought voluntary suspension of trading on the local bourse.
The exchange said that MF Global Hong Kong, which is a clearing participant of the exchange's securities and derivatives clearing houses, is winding down its outstanding futures positions "in an orderly manner," and has been meeting its financial obligations to the exchange's clearing houses.
The exchange said it will continue to monitor developments regarding MF Global "to determine what additional action, if any, is required."
Despite the concerns elsewhere, the company's Mumbai-based Indian arm MF Global Sify Securities India Pvt. Ltd. said its operations haven't been hurt, and that the local company remains "financially strong and robust."
"There are no linkages with the international business and all clients' monies are safe. We have excess funds with the exchanges in India that we are members of," Vineet Bhatnagar, managing director of MF Global Sify Securities, told Dow Jones Newswires.
MF Global Sify Securities India is a 70:30 joint venture between MF Global and Sify Technologies Ltd. (SIFY). The joint venture offers equity and derivatives trading for retail customers as well as execution and clearing services for financial institutions.
Bhatnagar said the local unit of MF Global Holdings is "working very closely with the regulators and the exchanges on this development and we are operating with business-as-usual status this morning."
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