- Patrick Young
Summary
Former Goldman Sachs Chairman Governor Jon Corzine is taking the helm of MF Global (NY SE ticker: MF) in a move which is likely to reshape the entire business. One of MF Global’s problems has long been its brand – or lack of a genuinely deep balance sheet. How can brand Corzine transform the futures/options specialist brokerage?
Analysis
The arrival of Corzine as Chairman and CEO of MF Global marks a revolutionary change of trajectory in the venerable commodity brokerage. Nowadays a leading player in the exchange traded derivatives brokerage markets (an ‘FCM’), MF Global has been stabilized after a tricky period, thanks to the stewardship of former Cargill Investor Services CEO Bernie Dan who was more recently in charge of the Chicago Board of Trade. Corzine is being handed a better organized company to take to the next level.
Corzine has already stated his intention to move MF Global in to more proprietary trading (e.g. the existing US Primary Dealer – Treasury Bond trading – application) operations although he notes the fact that MF Global has a modest 1 billion dollar balance sheet which will restrict a headlong shift in to trading.
Amongst other things, we can expect Corzine to exploit the advantages of MF Global in being neatly positioned thanks to its existing connections to leading exchanges and those increasingly vital CCP clearing houses. Likewise, it would only seem sensible that Corzine will endeavor to exploit whatever new opportunities arise as a result of regulatory reform in the US and Europe.
The opportunities for MF Global remain considerable, although one thing holding it back has been its modest balance sheet and the fact that its brand did not necessarily resonate customer confidence (for a host of historical reasons as well as the more pressing issue of recent fears for customer deposits on a broader basis) . The efforts of Interactive Brokers to stress its balance sheet and security during the depths of the ‘credit crunch’ were instructive while MF Global had a much worse time due to legacy issues. How far the company will be rejuvenated under ‘Brand Corzine’ is a fascinating one but certainly he is a CEO/Chairman with a vastly higher profile than any of his predecessors, and indeed anybody else heading an FCM or similar brokerage operation anywhere in the world.
Given that Corzine is also a partner at key MF Global shareholder JC Flowers, it is fair to presume that he has a remarkable mandate for change which is likely to have an even greater impact than his terms as a Senator or New Jersey Governor.
The future for MF Global is certainly most exciting given its various existing business units and likely additions to the group in the future.
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