MF Global Effect

csw2002

I pointed out in yesterday's watering thread that MF Global dealers were locked out by CME and CBOTS. That would cause a liquidity squeeze in the pit. I have now learned that the liquidity issue was more serious than just the pit. A number of big hedge funds and brokers also clear through MF Global. They (or their clients) were unable to trade at all!

What's the impact? Typically a liquidity squeeze would cause bid/ask spread to widen, volatility to increase and move to become more exaggerated. I believe we are starting to see the impact of it. Unless and until MF Global's clients find new clearing houses, expect more outsized moves.

ranchgirl

acoust