The news channels and papers report that their credit lines are closing. But the best story I heard was of their FX desk in London. Apparently the guys were doing their stuff when their screens suddenly blacked out. They called over the IT support desk to get it fixed quickly - currency markets move quickly and even 10 seconds out the market can be costly. However, rather than receiving support they were told that their credit lines were pulled and that the FX desk was closing for the time being.
Michael Greengerger of the University of Maryland was quoted in the Sunday Times as saying that Refco could be the harbinger of a far bigger problem. Apparently he said:
"My fear is that Refco is the canary singing in the mine. I hope I'm wrong."
And
"There is a potential 100-year storm in the market."
Being part of a glorious capitalist I've had to think "what does all this mean for me?". Well, I have no account with Refco and clear through one of Wallstreets biggest banks. Should my clearer go down the drain then it'll probably get bailed out, as happenned with Long Term Capital Management.
I'm therefore fairly confident that my future trades will be honoured and that I'll be able trade in the belief that no one is going to run off with my money.
In terms of actually trading I'm looking forward to any resultant chaos that may ensue. My markets were unaffected last week but rumour mill says that Refco's London arcade was home to a load of 500 lot Bund traders. Worries about their livelihoods, and the fear (from other participants) and potential to do dodgy shit with give up trades could add some nice volatility. I just hope that some of it transfers to the European equities that I've been trading lately as October has been a bit of a crap month.
For the latest news on Refco, please Click Here.
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