Rumors of MGRM’s problems began to surface in early December. In response
to these developments, the New York Mercantile Exchange (NYMEX),
the exchange on which MGRM had been trading energy futures, raised its margin
requirements for the firm. This action, which was intended to protect the
exchange in case of a default, further exacerbated MGRM’s funding problems.
Rumors of the firm’s financial difficulties led many of its OTC counterparties to
begin terminating their contracts. Others began demanding that it post collateral
to secure contract performance.