Trade process

Client requests for quote either by telephone or Bloomberg. MFM goes into the market checking exchange electronic platforms, individual market makers and the NYMEX pit when open. The best price quote, as defined by our Order Execution policy, is reflected to the client and it is either accepted, rejected or an order is submitted. Each step is recorded and is fully auditable. Once the order is crossed/blocked then the trades are given up to individual clearers.

Trade process chart

Crossing process chart

Credit risk can arise when trades ‘sit’ unclaimed on the books of any executing broker. In effect this trade is neither claimed by the buyer nor the seller, and is the responsibility of the broker. In the event that either the client or the broker falls into administration before the trade is claimed, then the loss, or profit, is attributable to the broker. It is always in the executing broker’s interest to ensure that trades are taken in quickly by the client’s clearer.

MFM’s exchange clearer is Goldman Sachs International. A clearing agreement signed by MFM, Goldman Sachs International and the Exchange (Eurex, Liffe etc) requires Goldman Sachs as MFM’s clearer to guarantee all contracts made by MFM on the exchange.

Crossing process chart

Clearing details

Credit risk
At the moment of novation, an important change in the legal character of the option contract takes place. Prior to novation the contracts are bilateral undertakings between the buyer and the seller with the attendant risk of counterparty default. However, from the moment of novation, to the clearing house the counterparty risk is eliminated for clearing members. The clearing member in turn extends a guarantee to the customer.

Clearing details chart