From today's Telegraph:
A sole wheat trader has triggered losses of $141.5m (£70.9m) at MF Global after a failure in the commodity broker's trading technology allowed him to breach trading limits.
MF, which was spun out of London-based hedge fund manager Man Group last summer, blamed the losses on a failure in its systems - which it says have now been corrected.
The trader, Evan Dooley from its Memphis office, was fired as soon as the losses, which were run up on Wednesday morning, were discovered.
The incident highlights the fragility of financial trading systems in fast-moving and volatile markets such as wheat, particularly at times of heightened nervousness in the financial system.
Mr Dooley is understood to have taken a large short position in the wheat futures market on Tuesday night, which turned sour when the markets opened on Wednesday morning, as volatility and prices jumped to record highs.
On the CME, soft wheat futures dropped an initial 11pc on news of MF Global's losses, but rebounded by 21pc within five minutes.
Shares in MF Global fell $4.97 to $23.42 as investors worried whether the $141.5m might be just the tip of the iceberg.
But chief executive Kevin Davis stressed that it was an isolated incident, calling it an "aberration" in MF's risk-trading systems, which he believes have now been fixed.
He also said the company will introduce limits on positions taken by all of its traders and customers, including professional traders who have not previously been subjected to MF's automatic close-out system that prevents unsustainable positions from being built.
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Last updated 22 Oct 2010
Minneapolis March wheat, free of limit restrictions under new rules just introduced by the exchange, last night hit a record high of $25 per bushel before closing up $4.75 at $24.00/bushel.
No you haven't read that wrong, UP 475 CENTS IN ONE GO.
The equivalent of almost 8 limit moves in Chicago in one fell swoop. Up almost 25% in one session and up almost 132% since the start of 2008!!
Overnight trade sees nearby March down 120c as I type at 11am this morning.
Certainly fluctuations of that magnitude are only for the very largest of players as one margin call could wipe out a small trader.
Another indication to my mind that the physical market is becoming more & more divorced from the futures market.
Buoyed by news that Northern Rock is to be relaunched as a "Good Bank" as part of the government's efforts to stimulate lending, the lender today announced it's latest innovative product.
"You've all heard of the so-called Buy-to-Let mortgages that got lenders like Bradford & Bingley into so much trouble. Well this new package we are calling Buy Forget," said new Northern Rock CEO Sir Kevin Keegan.
"Basically, what this mortgage will do is allow you to borrow up to 500% of the value of a property, with no proof of income whatsoever, then simply forget that you ever borrowed the money and walk away," explained Keegan.
"The government want to stimulate lending and me and the lads had a bit of a chat and came up with this. It's already proving very popular as we've lent £500 billion so far this morning and it's only half-past ten," Keegan added.