MF Global collapse hits Australia commodities futures
ASX, the Australian exchange operator, has shut down the country's agricultural commodities market after the collapse of MF Global, highlighting the impact that the bankruptcy of the US-based broker is having on futures markets.
The exchange said it took the decision on Tuesday to close the grain and wool markets "until further notice" given the large amount of outstanding contracts held by the US broker.
The indefinite shutdown in Australia goes far beyond the measures taken on Monday by other leading commodities exchanges, including the CME Group, IntercontinentalExchange and the London Metal Exchange, which only suspended the broker while the rest of trading continued unaffected.
MF Global has an outsize market share in Australian commodities markets. The company said on its website that its customers accounted for "over" 80 per cent of the turnover in the country's wool contracts, suggesting the market could be heading for a long shutdown. MF Global was "fortunate to count among its clients the majority of the leading traders, exporters and processors in the wool industry," according to its website.
Australia is the world's largest wool exporter and the country's wool futures are one of the most important global benchmarks for the fibre industry.
"Given the significant percentage of open interest held by [MF Global], in order to maintain a fair, orderly and transparent market, the agricultural markets for grain and wool have been suspended until further notice," the exchange said on a notice to its members.
MF Global has been a key force behind the development of futures contracts for Australia wheat after the liberalisation of the country's grain market in 2008.
In the absence of MF Global, the exchange would need to find additional participants to ensure sufficient turnover in the contracts once trading reopened, said a Sydney-based broker.
"They [MF Global] were quite happy to make markets. You remove them from the market then the market now has to look for another liquidity provider. I think that will happen but we'll really need to give it a bit of time," said Jonathan Barratt, head of Australia's Commodity Broking Services.
ASX did not answer calls seeking comment.
Additional reporting by Sarah Mishkin in Hong Kong
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