Dan has “resigned from MF Global as CEO and as a director for personal reasons,” the company declared at about 3.30pm New York time on Tuesday March 23.
The move, which takes effect immediately, is surprising because Dan had only been in the post since October 2008. He had been appointed by MF Global with high hopes that he would restore its fortunes after a wheat trading scandal under the previous regime of long time CEO Kevin Davis.
Dan had joined the company as North American COO in June 2008, was promoted in September to president and COO and then became CEO when Davis resigned in October.
Dan is one of the most prominent figures in the US futures industry, having been CEO of the Chicago Board of Trade at the time when it merged with Chicago Mercantile Exchange. Before that, he had a long career with Cargill Investor Services, rising to be its CEO. Dan is widely respected in the market as an able and astute leader.
It is certain that neither he nor MF Global would have expected his tenure to be so short.
“It has been an honor and a privilege for me to lead MF Global,” said Dan in the statement. “However, a number of personal matters now require my full attention. I’d like to thank all of my MF Global colleagues for their contributions, and under the strong leadership of Jon, I firmly believe MF Global is well positioned for the future.”
Dan will stay until May 16 to help with the transition.
Corzine will also become chairman of MF Global, replacing Alison Carnwath, who is set to complete a three year term in August. She will then retire from the board.
Moving the company forward
In December, Dan had welcomed the end of what he described as MF Global’s “legacy issues”, after the Commodity Futures Trading Commission fined the brokerage $10m for four separate failures of risk supervision in previous years.
One of these was the improper wheat futures trading by “an associated person”, believed to be Evan Dooley, an independent retail trader in Memphis, which cost MF Global $141m in February 2008.
“This comprehensive settlement puts these legacy issues behind us. We are fully focused on the present and future of our company,” Dan said in December.
He appeared to have put MF Global back on the right track after a difficult period at the end of Davis’s leadership.
The brokerage, previously part of hedge fund group Man Financial, floated on the New York Stock Exchange at $25 a share in July 2007 and at first traded up, but between February 2008 and November 2009 its shares collapsed to a low of $1.91. They revived swiftly after Dan took the reins, breaking up through the $5 mark in April 2009, but the recovery has since plateaued at around $7.
Well positioned
Dan believed when he took over that MF Global was well positioned for growth because it had not suffered any losses from subprime mortgage exposure, and would stand to benefit from customers’ disenchantment with banks.
Also, he believed, exchange-based trading was set to grow as investors realised the risks of the OTC market.
In the event, the past 18 months may have been tougher than Dan expected – for brokers of all kinds.
Trading volumes, even on the exchanges, have been squeezed during the financial crisis by the contraction in hedge funds’ assets under management and their leverage, as well as retreats by other institutional and retail investors.
Dan pushed through some changes at MF Global, including a selective upgrading of staff and a strong push into fixed income.
The firm applied to become a US Treasury primary dealer in March 2009 and was the first broker to become a full member of International Derivatives Clearing Group, a new company owned by Nasdaq OMX that wants to clear interest rate swaps.
By May 2009, MF Global had hired 22 people in high grade corporate debt. It has also become an underwriter for Freddie Mac and the Federal Home Loan Banks, the mortgage agencies.
Meanwhile, in August 2009 Man Global, the broker’s original parent, agreed to sell the last of its shares – an 18.6% stake – to Nomura International under a three-to-four year variable sale agreement.
In January this year the company moved its corporate domicile from Bermuda to Delaware, to increase its flexibility in responding to changing regulation.
Bottom line pain
But financial rewards have remained hard to find. MF Global’s last full set of results, for the third quarter of its 2010 financial year (fourth quarter of calendar 2009), showed a net loss of $22.3m on net revenue of $251m, down from $422m in the year-ago period.
The company had cut compensation costs from $217m to $152m over the same period, but that still meant its comp ratio rose from 52% to 60%. Non-compensation expenses were down from $109m to $96m.
“We experienced growth in three of our four revenue streams quarter-over-quarter, driven by solid performance in commodities, foreign exchange and retail,” Dan said in February when the results were announced. “MF Global’s ongoing commitment to our strategic initiatives continues to help offset the broader macro challenges of weak volume growth, narrow spreads and lower interest rates.”
During the quarter MF Global realigned its US equity business, selling its interdealer broking team for US equities while expanding in derivatives, portfolio trading and electronic trading.
The broker said on Tuesday that it expected fourth quarter net revenues, to be announced in May, would be around $235m-$245m – slightly less than in the third quarter.
Top drawer hire
In Corzine MF Global has picked a leader from outside the futures and options industry, but one with enviable senior experience of financial markets and instant name recognition.
Corzine, 63, was one of the very top executives at Goldman Sachs in the 1990s, having worked at the firm since joining as a bond trader in 1975. At different times he was head of fixed income, senior partner, chief financial officer, co-CEO and chairman of Goldman.
However, he ultimately lost out in a power struggle and departed in 1998. That did not prevent him making an estimated $400m from the investment bank’s IPO in 1999.
Since leaving Goldman, Corzine has been prominent in Democratic politics in New Jersey. He was a senator from 2000 to 2005, when he was elected governor. He sought re-election in 2009 but was defeated by the Republican Chris Christie.
Corzine’s record as a politician is full of interest. He helped draft and sponsor the Sarbanes-Oxley Act, intended to improve corporate governance; was one of only 23 senators to vote against the Iraq war; secured assistance for 9/11 families; and worked to outlaw racial profiling.
As governor, he oversaw New Jersey’s abolition of the death penalty – the first state to take this step for 40 years. He also moved firmly to bring the state’s budget back into balance, shedding 8,000 jobs, but continuing to expand healthcare and education funding. He worked with President Obama on the economic recovery package.
Although Corzine’s political career was in New Jersey, he was born in rural Illinois and went to two universities in the state – giving him perhaps an extra sympathy with the Chicago-based futures market.
Jon Hay +44 207 779 8372 jhay@fow.com