Futures brokers often are split into two main categories: retail and institutional brokers, and large dealers. The latter group usually are also the large dealing banks that have robust prime brokerage business and can deal directly with the Federal Reserve along with their regular clearing business.
When we spoke with MF Global chairman and CEO Jon Corzine a few months back he was gearing the long-time futures broker to play in that larger arena. In February MF Global took an important step in that direction by being granted prime dealer status by the Federal Reserve Bank of New York. MF Global is now one of 20 primary dealers that serve as counterparties to the New York Fed in open-market operations, participate directly in Treasury auctions, and provide analysis and market intelligence to trading desks at the New York Fed.
"Obviously, this is an important and positive step in our transformation to a broker-dealer," Corzine said during a Feb. 4 earnings call. "We would expect this designation to support the building of our client base, a broadening of our financing capacity and an improvement in our understanding of the flows of funds in the global marketplace."