News went across the wires that MF Global($MF) didn’t segregate their customer funds. The bankruptcy just escalated from really bad business decisions, to fraud.
When you’re a trader and put up money into your account, those funds are segregated from every other account in the firm. If the firm goes kaput, or a fellow trader goes bust, your money is safe. All you do is create a new account at a new firm, transfer the money and positions and you are in business.
Segregating those funds is a sacred trust between trader and firm. There is no higher calling for a firm. Your customer accounts are sacrosanct. You might earn a little yield over night on the excess in the overnight Repo market, but you never put those funds at risk. That’s the traders job.
MF Global may have put them at risk. That’s fraud, and if they in fact did it there should be people doing a perp walk.
There are people that ask me why I do business with Shepard International Trading. “They are too small.” they might say. Or, “Bill is a tough guy.” Or, “They don’t give you any benefits like airplane miles for trading.”.
Now you see a case and point why I do business where I do business. I trust them. They are honest. They play it straight and they don’t monkey around.
Some people have ethics. Some people think they are above it all. Since I have branched out from trading, I have noticed the “real world” acts a lot differently. The ethical standards are a lot different. I may have gotten taken when trading in a pit on a floor but I generally knew who was taking me and either why, or I could get back at them. In the business world, people screw other people all the time in the normal course of business and it’s not a problem. The business world is a much tougher navigable channel than the trading pit.
And just an aside. Wasn’t Dodd-Frank supposed to end all this crap? Weren’t they going to be able to see into the future and predict this, head it off at the pass? Repeal it, now.
Corzine thought he was above it all. Goldman, Senator, Governor. He is going to find out that he isn’t if MF indeed played fast and loose with customer funds. Ironically, it’s another case where rules and ethics are for the little people.
In my case, I may be direct with people. But I found it pays to be honest and transparent.