MF Global – a key derivatives trading firm – which filed for bankruptcy protection in court on Monday, saw its activities quickly curtailed by organizations through which it conducted transactions as one investment bank revealed exposure to the firm.

The company, formally known as MF Global Holdings Ltd. and its finance subsidiary MF Global Finance USA Inc. announced a filing on Monday under Chapter 11 of the U.S. Bankruptcy Code with a federal bankruptcy court in New York.

Activity Curtailed

MFGlobal – a key derivatives trading firm - has lost its ability to participate in various market related activities. The company confirmed Monday that the New York Federal Reserve has suspended its status as a primary dealer. MFGlobal confirmed the move.

CME Group – the world’s biggest derivatives market place – said Monday it is limiting all trading for customers of MF Global for liquidation only. CME says it no longer recognizes the company as a guarantor of floor trading privileges. Brokers and traders guaranteed by the company are now barred from accessing the floor. Pending transactions will be processed, however, at the request of customers.

Investment Banking Exposure

Jefferies Group Inc, an investment bank, said Monday its exposure to MFGlobal was less than $9 million in marked-to-market positions.

Primary Dealer Role

The New York Fed has a total of 21 active primary dealers, a list which includes more prominent companies which are subsidiaries of Citigroup, Goldman Sachs, J.P Morgan, and Merrill Lynch, among others.

Among the roles of primary dealers are to serve as counterparties to the New York Fed in its implementation of monetary policy as directed by the Federal Open Market Committee, which is headed by Federal Reserve Chief Ben Bernanke. Primary dealers provide market information to the New York Fed and participate in all auctions of U.S. government debt. The dealers are also market-makers for the New York Fed when it transacts on behalf of its foreign official account-holders.

Primary dealers are also required to participate in all auctions of U.S. government debt and to make reasonable markets for the New York Fed when it transacts on behalf of its foreign official account-holders.