New York-based futures broker MF Global announced that it has suffered a US$141.5 million trading loss, due to an apparent rogue trader.

The firm announced that during the early hours of Wednesday morning, February 27, a registered representative in one of its U.S. branch offices, trading in the wheat futures market in his personal account, substantially exceeded his authorized trading limit. The registered representative concerned has been terminated effective immediately.

A failure in one of the company’s retail order entry systems permitted the representative to establish significant positions in his own account which were liquidated later that morning. The unauthorized activity resulted in him incurring a loss of US$141.5 million, which the company, as a clearing member, is responsible to settle at the clearinghouse. As a result, the company recorded a bad debt provision for the full amount.

The company says it believes it has made the appropriate adjustments to its order entry systems to prevent a recurrence of unauthorized trading of this type in the future. In addition, MF Global has engaged a third-party risk technology consultant to review its relevant order entry systems.

Client funds are not at all impacted by this event. And, the company’s capital and liquidity position remain strong, although the loss represents approximately 6% of the company’s equity.

The Commodity Futures Trading Commission says it appears that the trading loss at MF Global appears to be an isolated incident.

The CFTC reports that it became aware of the MF Global situation on Wednesday and continues to be in close contact with the firm and the CME Group, which is the designated self regulatory organization for MF Global.

The CFTC notes that it can confirm that MF Global is currently in compliance with the agency’s regulatory capital requirements.

“In light of recent volatility in the wheat futures markets generally, the CFTC has been monitoring trading in these markets very closely and will continue to do so. Based on current information, the incident reported by MF Global appears to be an isolated event,” it says, adding, “The CFTC continues to gather information and monitor the situation.”