There’s a fool born every minute babe
But this time it isn’t me
It doesn’t take 20/20
To see what i can see
— Georgia Satellites – It’s All Over But The Crying
File Refco (RFX) under "it’s not what you know that you should be worried about…it’s what you don’t know that will kill you." Of all the worries — high oil prices, higher interest rates, crooked hedge funds — the one thing that most people didn’t expect was a broker-dealer to implode. Refco, the world’s largest independent futures broker (the one that constantly pops up wrong-headed ads — like that wasn’t a sign that something was amiss with this company), announced that its Capital Markets unit will cease to do business for 15 days. Does this mean that if you have a Refco account you won’t be able to get your money out for 15 days? I don’t know — from my reading it appears the Broker Dealer is still doing business as normal – I have no idea what the Capital Markets unit does…
The Company stated that the regulatory capital and excess regulatory capital of Refco, LLC, its regulated Futures Commission Merchant, and Refco Securities, LLC, its regulated Broker Dealer, have been substantially unaffected by the events of this week.
The business at these subsidiaries is being conducted in the ordinary course including customer deposit and withdrawal of segregated funds.
The stock is currently halted and I’m guessing that the stock might not open for a while until this mess gets settled out. Here’s hoping this was one IPO you didn’t get any shares in…
As an aside, these are usually the types of blow ups you see at market bottoms. Although this situation isn’t market related and depending on how bad the situation really is, this could be a sign that the markets are one step closer to a bottom.
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