MF Global Ltd., a leading broker of exchange traded futures and options, today announced that it has modified an exclusive clearing agreement with Man Investments, a subsidiary of MF Global's former parent and largest shareholder, Man Group plc. While Man Group remains committed, under the terms of the original agreement, to clear 90% of the listed futures and options transactions of certain managed funds through MF Global, the new arrangement will ultimately remove the need for MF Global to allocate up to $800 million of its existing liquidity. Under the original agreement established at the time of MF Global's spin-off and initial public offering in July 2007, MF Global had committed to provide clearing services for 90% of listed derivative transactions on an exclusive basis to certain independent fund entities managed by Man Investments. For OTC instruments, principally in foreign exchange (FX), MF Global had committed to provide a facility of up to $800 million to fund unrealized gains. Man Investments intends to identify new providers for forward FX services, while continuing on a non-exclusive basis to use MF Global to clear spot FX trades, which generally require funding support at substantially lower levels. MF Global will continue to provide segregation for any unrealized gains for spot FX positions as well as for a number of current forward FX transactions until such transactions settle. MF Global estimates that for the nine months ended December 31, 2007, foreign exchange and other OTC transactions cleared for Man Investments funds accounted for less than one percent of the company's pre-tax profit. Kevin Davis, CEO of MF Global, said, "This is a very positive development because it is an attractive way to redeploy a portion of our available liquidity for general corporate purposes, while continuing our excellent working relationship with Man Group." As previously announced, MF Global has $1.4 billion of undrawn, committed liquidity facilities. Any thoughts on this gentlemen??
my first thought was that this was a positive development but then I thought a bit longer and wondered why the need to free up extra liquidity?? And it seems that their exclusive agreement with man is no more. Like they're trying to make a bad thing sound good
This certainly sounds like a move in the right direction for MF. Why would anyone want to take on the "funding" headache of guaranteeing capital to Man Investments when such clearing business only generates a mere 1% of the entire clearing business for MF Global. This will undoubtedly free-up capital for the firm AND it will provide them more liquidity should something go "wrong" thereby negating the fall-out of having to go to a repo window somewhere for money. They probably were thinking of doing this a long time ago but had no "leverage" to cut ties with Man Investments. Given today's liquidity issues across the board with most every broker and investment bank, severing funding ties to Man Investments now becomes imperative ( and timely ) from a strategic business philosophy going forward due to the volatility in the markets. Just my 2 cents.
also the BSC CEO just lost 1BB and countless other CEOs the only tangible use, imo, for insidersales/buys is when we are cominging out of a recession now will be time to see who is buying. and subsquent quarters