More MF Global Fallout

Posted by Jeff Carter
on May 31st, 2012

More MF Global fall out. Received a note from someone-”got laid off from XXX last week. They did a reduction in force and I got caught up in the numbers games. Volume was down and they had to make some cuts, as they told me this was all indirectly related to the MF fiasco.”

Corzine has cost people their livelihoods. These aren’t rich steak eating bankers. They are backbone people in the industry. They work the back offices, they make sure things run on time. They are the people that make sure things are in compliance with regulations.

But it helps to quantify things. Corzine stole $1.2 billion. That’s not the half of it. Volume is down across the board in the futures industry because of it, impacting the operations and earnings of companies like $CME, $ICE, and $NYX. Of course, hedge funds, and independent traders are making less too. And it goes without saying if volume is down, banks like $GS, $MS, $JPM, $C, $BAC are all losing money too.

But there is more. Since October 31, membership values at the CME have plummeted, and lease prices have dropped. On 10/17/11, a B-1 share traded $730,000. Last week, one sold for $450,000. That’s $175M loss in equity value. A B-2 on 10/27/11 sold for $345K. Last week, $250K. $77.2M in loss. A B-3 traded for $131K on 10/27/11. Last week, $80K. That’s $70.7M in loss. $323,000,000 in total losses on intangible assets held by seat holders of just the CME. That doesn’t take into account what went on at the CBOT, NYMEX or COMEX.

Wait, there is more. Check out these charts on exchange prices.
CME has lost over 6% of the value of its company since Oct 31.

CME data by YCharts

ICE has lost almost 6% of its company value since October 31.

ICE data by YCharts

The reasons for the rallies early in the year? CME altered its buyback and dividend policy. In addition, a rising tide lifts all boats and these stocks were no exception. Check out the price action immediately after October 31, and into February. These stocks were down close to 15%.

I think you get the picture. If you were long “Corzine puts” you did well.

The shareholders of banks and exchanges, and really any company tied to the financial services industry ought to sue Corzine personally. He is the catalyst that caused all this equity value to evaporate from the marketplace.

He crushed the little people.

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