MF Global, the commodities and derivatives brokerage house, was forced to set aside additional capital in August after regulators grew concerned about the firm’s exposure to European sovereign debt. MF Global is headed by Jon Corzine, the former Goldman Sachs chief and former Democratic governor and senator from New Jersey. In a filing last month, MF Global told investors that FINRA was requiring it to “modify its capital treatment.” Regulators worried that should the value of that debt backing MF Global’s repurchase transactions collapse, the firm would need to post more money quickly to cover the trade. In its filings, MF Global said it had “increased its net capital.” A spokeswoman for the firm said that as soon as it became clear that FINRA would raise its capital requirements, MF Global reallocated capital to cover the transactions quickly. According to company filings, MF Global holds the debt of Belgium, Ireland, Italy, Spain and Portugal — countries facing debt troubles. In a filing, MF Global said it had about $6bn in exposure to the countries’ debt, a little more than 10%of its overall asset base. The worry about a default or restructuring of the debt of these countries and the potential turmoil it could inflict on the global economy has led to wild market swings and sell-offs in recent months. By allocating more money to the broker dealer division, where the trades backed by the European debt are housed, MF Global would be able to cover any losses incurred should the trade wind up a bad one. MF Global also said that the increase capital requirement would not harm its business. Additionally, the firm said that the sovereign debt it held was short term and would mature by the end of 2012, meaning that the increased capital requirement could decrease as the debt was paid off. As of last month, the firm held $167mn in net capital above what regulators require. [Dealbook, 10/17/11]