Warning: MF Global scandal may cause massive commodities selling Friday

[Bern]

MF Global will have to liquidate any accounts that aren't transfered to other brokers by Friday:
The liquidation of these customer commodity positions in all likelihood will negatively effect the net value to the customers and the markets in general.

http://www.pmbug.com/forum/f13/mf-global-account-liquidations-might-cause-massive-commodities-125/

They have more than 50,000 customer accounts that are potentially in this pot.

[gonegolfin]

MF Global will have to liquidate any accounts that aren't transfered to other brokers by Friday:

http://www.pmbug.com/forum/f13/mf-global-account-liquidations-might-cause-massive-commodities-125/

They have more than 50,000 customer accounts that are potentially in this pot.
It is important to understand a few things here ...

#1 Investors that have futures accounts through either MF Global ... or have futures accounts through another broker that use MF Global as their trading partner and clearing merchant (Ex. E*Trade Futures account) have been able to liquidate positions during this mess. They simply cannot remove cash. According to some brokers at MF Global, this has certainly happened ... mostly out of customer fear and not knowing whether or not they will be able to close positions in the future. I know this because my futures account uses MF Global as the clearing merchant. So, it is quite possible that many retail customer positions have already been liquidated (Ex. on Monday and Tuesday).

#2 MF Global holds positions itself that it cannot liquidate. At some point, a court order can/will be issued to liquidate those positions. When that happens, it will have a market impact. But what if MF Global took a large number of positions on the other side of their customers ... maybe, a large number of Silver short positions? The closing of short positions would prompt upside pressure. The same thing would have happened with Bear Stearns in 2008 had JP Morgan not assumed their extremely large short positions in Silver. My guess is that the MF Global positions are not large enough to warrant a similar action (Silver would have gone parabolic in 2008 had the short positions been closed). But we shall see.

Brian

[Bern]

Thanks for the feedback Brian.