MF Global Seeks to Calm Investors as Stock Plunges

By Lisa Shumaker

CHICAGO (Reuters) - MF Global (MF.N), the world's largest broker of exchange-listed futures and options, sought to reassure investors it had enough funds for normal business, even as its stock plunged on Monday.

MF Global shares dropped by as much as 78 percent on speculation the brokerage may have liquidity problems similar to those that caused the collapse and fire sale of Bear Stearns Cos Inc BSC.N. Banks and brokerage stocks were hit hard on Monday on fears of a widening credit crunch that could topple more Wall Street firms.

MF Global, which was rocked by a huge loss from unauthorized commodity trades last month, said it has sufficient funding to conduct normal business and $1.4 billion in committed, undrawn credit facilities, according to a news release. The company said it has no exposure to subprime mortgage-backed securities and that Bear Stearns investor Joseph Lewis was not a client.

Lewis, who made his fortune trading currencies, last year accumulated a stake of almost 10 percent in Bear. He has lost about $1 billion and markets were worried he could not make margin calls with clearing brokers to cover losses.

Despite the drop in its stock price, MF Global remained in compliance with the Commodity Futures Trading Commission's financial requirements, the top U.S. futures market regulator said in a statement.

Both NYMEX Holdings Inc NMX.N and IntercontinentalExchange Inc (ICE.N) said MF Global continued to meet all of its obligations and remains in good standing.

The reassurances helped the stock recover somewhat, but MF Global still closed down more than 65 percent at $6.05 on the New York Stock Exchange.

Brokers contacted at MF Global said Monday was a "bad day" for the firm, but it did not appear that any of the trading desks had been asked to liquidate positions to cash out.

MF Global had $10.4 billion in segregated customer funds as of Jan. 31, according to the U.S. Commodity Futures Trading Commission.

MF Global's stock was the second-biggest decliner on a percentage basis on the New York Stock Exchange, behind Bear Stearns, which has fallen as much as 88 percent. MF Global's stock also took a large hit in late February when it announced it would have to set aside $141.5 million to cover losses made by a rogue trader in wheat futures.

"In sympathy with the Bear Stearns news, several other companies, including MF Global, have gotten hammered today," said William Lefkowitz, option strategist at brokerage firm vFinance Investments in New York.

"Speculation is that clients are pulling money away from these financial companies leading to tremendous sell-offs and a lot of put buying," he added. "Investors are very fearful that there will be more problems in financial companies and that the potential for more bankruptcies exist."

In addition to MF Global, inter-dealer broker GFI Group Inc (GFIG.O) fell 21.7 percent to $51.01 and FCStone Group Inc FCSX.O dropped 40.5 percent to $21.44 on Nasdaq. Interactive Brokers Group Inc (IBKR.O) slid 14.6 percent to $25.37.

(Additional reporting by Doris Frankel and Mark Weinraub in Chicago and Robert Gibbons, Gene Ramos and Robert Campbell in New York, editing by Richard Chang/Andre Grenon)