Celente: MF Global Receivers Have Defaulted On Underlying Contracts

If this is indeed the case, then then this is a few orders of magnitude worse than understood for the past month or so.

The staggering thing here seems to be that they simply out-and-out defaulted on the underlying contracts (offering a "correction" to a new contract at a higher price, which you can re-up the cash to accept, is a default of the exchange). I hadn't heard anything about that previously -- supposedly they just raided the "excess" cash balances (if not collateral). Indeed; upping the value of the contract, and then asking for the entire par value to accept it, is an additional two instances of theft.

Not only then are the contracts themselves not sacrosanct on the exchange, but this represents an unprecedented avenue for thievery. As far as the underlying commodity goes (gold, for example), you are pretty much out your gold if this happens, unless you want to re-buy it at the current spot price, or perhaps take a cash settlement (at the old or new price or somewhere in between). In the former, the contract is simply vaporized (like the obligation never existed -- might as well have just waited and then bought the gold at spot), in the latter, you sure as hell don't end up with the gold you thought you were going to get.

How convenient if one is a distressed bullion bank heavily short in the metals.