Traders scrambled to cover trading exposures to MF Global on Tuesday, as administrators sought to save what money was left in the collapsed U.S. brokerage's London arm.
In Australia, trading in grain futures and options was suspended by bourse operator ASX Ltd , prompting concerns about the integrity of the country's agricultural futures market.
"We're sitting out here with risk that we can't cover," said Jonathan Barratt, head of Sydney-based Commodity Broking Services. MF Global is one of the largest participants in the country's agricultural futures market.
The group, lead by ex-Goldman Sachs top man Jon Corzine, has become the most high-profile victim so far of the euro zone debt crisis, reviving memories of the collapse of Lehman Brothers in 2008 that triggered global turmoil.
The London Metal Exchange said in a statement it had suspended MF Global from trading with immediate effect, following a similar move by the CME Group , which operates the Chicago Mercantile Exchange.
Fears the collapse might hurt other market players spread on another dark day for stock markets in Europe, after Greece said in a shock announcement it would subject its bail-out to a referendum, deepening the sense of crisis in Europe.
"People have to liquidate positions... there's a lot of transfers going on, people have to close out positions in an orderly fashion," one London-based metals traders said, though other factors were driving the market down.
European stocks suffered their biggest one-day sell-off in a month after the news out of Greece. The FTSEurofirst 300 index of top European shares lost 2.3 percent, with financials hardest hit.
MF Global filed for bankruptcy protection on Monday, putting a sudden end to Corzine's drive to change the more than 200-year old MF Global into a mini Goldman by taking on more risky bets on euro zone sovereign debt.
Britain's Financial Services Authority said late on Monday that accountancy firm KPMG had been appointed as special administrators to MF Global UK, under a new rule aimed at "the swift return of client assets".
The New York Times reported that federal regulators had discovered that hundreds of millions of dollars in customer money -- supposed to be segregated, and protected from the rest of the business -- had gone missing. .
"Reports of short falls of client money ... if true would be a disaster for all the smaller brokers and banks as nobody will trust them anymore," one London trader said.
Market participants said because MF Global, although highly leveraged, was far smaller -- its balance sheet, at $41 billion, was less than a 10th the size of Lehman's -- the wider impact of its fall would be contained. But it would still be felt.
"Inevitably it is something that is weighing on a variety of markets until there is full clarity and the situation has been cleaned up, I think this is clearly an additional negative," said Nic Brown, head of commodities research at Natixis.
Trading activity in gold, crude oil and grain futures slowed to a crawl as the bankruptcy forced a chaotic scramble to untangle trading positions. MF Global brokers were barred from trading floors, according to Chicago traders.
Commodities such as natural gas and crude, where MF Global had a strong presence, have been hit harder than others.
One Sydney-based LME trader said MF Global's failure could encourage more market players to use clearing houses because they offered greater protection than over-the-counter (OTC) trading -- something regulators are pushing for.
"If there are customers who are in an OTC arrangement with MF Global, and these are not cleared by a clearing house, they may be exposed," said the trader.
"But we don't know who these people are."