BIG ENOUGH TO CAUSE A LOT OF DAMAGE.

BIG ENOUGH TO CAUSE A LOT OF DAMAGE. The good news about the MF Global bankruptcy is that the institution seems to have been small enough to be permitted to fail. It was also apparently not involved in so many transactions that its business was too complicated to fail. Nevertheless, the failure has done a lot of damage. Most of the employees lost their jobs, and, because MF Global was a broker-dealer, a large number of customers have had their accounts frozen and trading has been disrupted. Articles by John Gapper and Izabella Kaminska and by Hal Weitzman in the Financial Times (November 5-6) point out that customers of MF Global made up more than 28% of the trading volume on the Chicago Mercantile Exchange. Trading accounts that were frozen range from the hundreds of thousands of dollars to tens of millions. Trading in futures markets has been affected. If you were designing a financial system, you would probably avoid having risky transactions carried out by entities that are engaged in clearing transactions for customers. But that is what happened during the last two years when MF Global changed its business.