The Incurable European Mess

http://www.jsmineset.com/2011/11/01/the-incurable-european-mess/

Poor MF Global.  They hedged correctly by purchasing insurance against their long Euro bond positions in the form of credit default swaps.  Problem is, the other banks who wrote the swaps determined the Greek haircut wasn't really a default--hence, there was no trigger event and no pay out for holders of said cds.

It's analogous to buying auto insurance in the event of an accident.  The problem occurs when the insurer doesn't acknowledge there's been a major accident.  Hence, the insurer doesn't pay off the insured, which eventually causes the insured's bankruptcy.  Credit default swaps are not traded on an exchange, but in unregulated, opaque over-the-counter markets.

The system is so rigged, even the riggers are getting smoked.