A wheat trader at MF Global, one of the world’s biggest commodities brokerages, lost $141.5m by making “unauthorised” trades, the company reported on Thursday, in the latest trading controversy to hit global markets.
“This is embarrassing for us and it’s upsetting,” said Kevin Davis, chief executive of MF Global, which said it had “terminated” the employee, who it identified as Evan Dooley, 40, from the group’s Memphis office.
Although the amount lost is substantially less than the €4.9bn (£3.7bn) that Jérôme Kerviel, the French trader, allegedly cost Société Générale, the French bank, it is believed to be the largest suspected unauthorised trade loss in agricultural markets.
The news wiped more than a quarter off the value of the company’s shares.
MF Global originally said a failure in one of its computer systems had permitted the broker “to establish significant positions in his own account” that went above his authorised limits.
However, Mr Davis later clarified this, saying some buying power control limits had been removed because they could make trading desks less efficient when many customers were placing orders.
“Clearly that was a mistake, one we have now rectified,” he said. MF Global shares dropped 27.7 per cent to $21.19 by the close of trading on the New York Stock Exchange.
The money was lost on Wednesday, when US wheat markets underwent unprecedented levels of volatility, with prices falling 11 per cent but then jumping almost 20 per cent to a record $13.34½ a bushel in just three minutes.
It is unclear if the price volatility triggered MF Global’s losses but traders in Chicago familiar with Mr Dooley’s trading said he was betting on falling prices.
Mr Dooley could not be reached for comment.
The wheat market has become more volatile since US agriculture exchanges widened daily price limits from 30 cents to as much as 202 cents last week to allow futures prices to catch up quickly with higher prices in the cash market.
The Commodities Futures Trading Commission, the US regulator, said it was monitoring the wheat futures markets in light of recent volatility but based on current information the MF Global incident appeared to be an isolated event.
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