MF Global Files Chapter 11 Bankruptcy

MF Global Holdings (NYSE:MF) filed for Chapter 11 bankruptcy protection on Monday, according to court records. The filing comes after talks to sell a variety of assets to Interactive Brokers Group broke down earlier this morning.

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MF Global Finance USA also filed for Chapter 11 protection today, with both entities filing for protection from creditors with the U.S. bankruptcy court in Manhattan.

The news comes shortly after the New York Fed suspended MF Global (NYSE:MF) from conducting new business with the central bank, also suspending shares from trading as it works on a deal for its future.

“The Federal Reserve Bank of New York has informed MF Global Inc. that it has been suspended from conducting new business with the New York Fed,” the Fed said. “This suspension will continue until MF Global establishes, to the satisfaction of the New York Fed, that MF Global is fully capable of discharging the responsibilities set out in the New York Fed’s policy.”

MF Global’s shares have fallen by two-thirds and its credit ratings were cut to junk after it posted a quarterly loss last week. Shares were suspended in New York today, ahead of trading.

Interactive Brokers was expected to make an initial bid of about $1 billion during a court supervised auction for the U.S. futures brokerage. MF Global is no longer taking on new business and is closing out positions.

“It was quite difficult to get our money out on Friday, because they had a lot of redemption calls,” said one trader. “The company is not initiating any new position. They are trying to close down positions that they already have with clients that are open.”

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The company is suffering because of low interest rates and bets it made on European sovereign debt. MF Global was in talks on Sunday with possible buyers, but has also hired restructuring and bankruptcy advisers, taking no options off the table. According to The New York Times, talks had narrowed to one bidder, Interactive Brokers, by Sunday evening.