MF Global Holdings Ltd. filed for Chapter 11 bankruptcy protection on October 31, 2011, shocking investors in what was the largest default of a Wall Street financial firm since the failure of Lehman Brothers in 2008. Although the economic repercussions of MF Global Holdings’ bankruptcy were relatively limited compared to those of Lehman Brothers’ failure, it did shake investors’ confidence as it showed that the European sovereign debt crisis could have a direct effect upon US companies.
MF Global Holdings was a provider of execution and clearing services for exchange-traded derivatives, such as futures and options, OTC derivative products, non-derivative foreign exchange products, and securities in the cash market. The proximate causes of the firm’s bankruptcy were bad bets on European sovereign debt. On October 25, 2011, six days before its bankruptcy filing, MF Global reported a $191.6 million quarterly loss from trading European government bonds.
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