Allan D Grody looks at how to recover from MF Global, the smallest Too-Big-to-Fail Systemically Important Financial Institution (SIFI) that was on no one’s radar screen.
During MF Global’s debacle, the Trustee reported
it transferred 10,000 commodities customer accounts
representing $1.5 billion in collateral supporting three
million open positions
a notional value
of $100 billion. One could think sm
all potatoes when looking at trillion dollar notional values in
OTC derivatives markets. However,
the Trustee went on to say
this represented 40% of all
commodity futures exchange activity in US markets and had they
not acted swiftly it could have caused serious market
disruption. While this says much about quick regulatory
response it says a lot more about SIFI and Global-SIFI (G-SIFI)
designations based on asset size that doesn’t yet
accommodate all significant financial institutions
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