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Corzine, 64, who once ran Goldman Sachs before becoming a U.S. senator and then governor of New Jersey, had been trying to turn the more than 200-year-old MF Global into a mini Goldman by taking on more risky trades.

But once regulators forced it to fully disclose the bets on debt issued by countries including Italy, Portugal and Spain, it rapidly unraveled with no buyers willing to step in.

MF Global's meltdown in less than a week made it the biggest U.S. casualty of Europe's debt crisis, and the seventh-largest bankruptcy by assets in U.S. history.

The company's shares plunged last week as its credit ratings were cut to junk. The Chapter 11 bankruptcy filing came after talks to sell a variety of assets to Interactive Brokers Group Inc broke down earlier on Monday, a person familiar with the matter said.

There were also signs that some of its customer accounts that are supposed to be segregated and protected from the rest of the business had suffered what regulators described as "possible deficiencies."

"Early this morning, MF Global informed the regulators that the transaction had not been agreed to and reported possible deficiencies in customer futures segregated accounts held at the firm," the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission said in a joint statement.

A bankruptcy proceeding led by the Securities Investor Protection Corporation would be the "most prudent course of action to protect customer accounts and assets," they said.

The New York Times reported later on Monday that federal regulators had discovered that hundreds of millions of dollars in customer money had gone missing from MF Global.

Less than $700 million was missing by late Monday, down from nearly $1 billion earlier, the paper reported on its website.

Regulators are looking into whether the brokerage used some of the money to support its own trades, the Times reported, citing unnamed sources.

MF Global was not immediately available to comment on the Times' report.

Regulators had expressed "grave concerns" about the viability of MF Global, which filed for bankruptcy only after "no viable alternative was available in the limited time leading up to the regulators' deadline," the company's chief operating officer, Bradley Abelow, said in a court filing.

One of the regulators that pressed MF Global, the CFTC, was unhappy with the brokerage's failure to give it the required data and records.

"(T)o date we don't have the information that we should have," said a source close to the CFTC.

In the end, regulators and markets reacted swiftly to MF Global's troubles, which may have been exacerbated by Corzine's affinity for risk-taking over the course of a career that took him to the top echelons of Wall Street and then into politics.

"They went for what would be a very profitable trade with European sovereign debt that obviously has blown up in their face, and brought the company down," said Dave Westhouse, vice president of Chicago retail broker PTI Securities and Futures.

RIPPLE EFFECTS

The bankruptcy is reminiscent of the collapse of Lehman Brothers in 2008 at the height of the financial crisis. But market participants said the impact from this collapse, far smaller, would likely be contained.

Still, MF Global's 2,870 employees, as well as trading counterparties, were left scrambling and confused on Monday, as MF Global halted its shares but did not file for bankruptcy until well after U.S. markets had opened.

Trading activity in gold, crude oil and grain futures slowed to a crawl as the bankruptcy forced a chaotic scramble to untangle trading positions.

"Ultimately it will have lost all confidence of its investor base," Michael Epstein, a restructuring adviser with CRG Partners, said of MF Global. "I'm not sure what restructuring it actually does. In some respects, it's a baby Lehman, in effect."

There was also uncertainty over Wall Street's exposure.

JPMorgan Chase & Co's exposure for a $1.2 billion syndicated loan to MF Global is less than $100 million, a source at the bank said. Deutsche Bank AG is listed in the court filing as a trustee for bondholders with $1 billion of claims. The banks declined to comment.

The impact on the markets should be smaller and nothing like when Lehman failed and hedge funds had money locked up with the firm for months, said Jeff Carter, an independent futures trader in Chicago.

At the Chicago Board of Trade, three traders wearing MF Global jackets were seen leaving prior to the opening of pit trading, and floor sources told Reuters they had been turned away after their security access cards were denied.

Back outside the Manhattan office, one MF Global employee said all he knew about the bankruptcy was what has been on TV. The company's HR department, meanwhile, was busy making calls withdrawing job offers it made in the past few weeks, according to a person familiar with the situation.

"A sale here is potentially the best outcome for employees because the company will continue to operate as opposed to slowly winding down," said Dan McElhinney, the managing director of corporate restructuring for Epiq Systems.

"I think there will be a lot of effort to tee up the sale pretty quickly here."

The New York Federal Reserve terminated MF Global as one of its primary dealers. CME Group Inc, IntercontinentalExchange Inc, Singapore Exchange Ltd and Singapore's central bank, among others, halted the broker's operations in some form except for liquidations.

European clearinghouse LCH.Clearnet declared MF Global in default.

THE ROAD TO BANKRUPTCY

Corzine was trying to transform MF Global from a brokerage that mainly places customers' trades on exchanges into an investment bank that bets with its own capital.

In the past week, the company posted a quarterly loss and its shares fell by two-thirds as investors focused on the euro zone bets and the effect of low interest rates, which hurt profits from its core brokerage operations.

MF Global scrambled through the weekend and into Monday to find buyers for all or parts of the company, while at the same time hiring restructuring and bankruptcy advisers in case nothing could be done.

In the court filing explaining what went wrong, MF Global pointed a finger at regulators. The bankruptcy was hastened by pressure from the CFTC, SEC and the Financial Industry Regulatory Authority, wrote Abelow, the COO.

FINRA ordered that its U.S. broker-dealer unit, called MFGI, boost net capital, and then reveal a $6.3 billion stake in short-term debt from European sovereigns with "troubled economies," he wrote.

Market concerns over such exposures led to MF Global being downgraded to "junk" status by various credit rating agencies, sparking margin calls that threatened liquidity, he added.

"Concerned about the events of the past week, some of MFGI's principal regulators -- the CFTC and the SEC -- expressed their grave concerns about MFGI's viability."

MF Global in the filing did not elaborate on the regulators' concerns or the reasons behind them.

FINRA declined to comment.

According to a July proxy filing, Corzine would be entitled to $12.1 million in severance, prorated bonus and other benefits upon being terminated without cause. Two other executives would be entitled to more: retail operations chief Randy MacDonald could get $17.9 million and Abelow could get $13.7 million.

However, federal bankruptcy law may limit any possible severance payouts.

First-day hearings in the case were scheduled for Tuesday at 3 p.m. in U.S. Bankruptcy Court in Manhattan. Among other things, MF Global is expected to seek permission from Judge Martin Glenn to use cash collateral to keep operating its business, court papers show.

CLOCK TICKING

By filing for bankruptcy, MF Global freezes the value of its free-falling notes and gives potential suitors a clearer picture of the losses they would be taking on, said Bill Brandt, CEO of Chicago-based turnaround firm Development Specialists Inc.

If a sale is in the offing, he added, the buyer may be a European bank or sovereign government, as such entities would be particularly keen on stopping the slide and maximizing the value of the notes.

"The real question is how many assets will be left to transfer," said Niamh Alexander, an analyst at Keefe, Bruyette & Woods. "Customers might move very quickly and it may be that every hour that passes shrinks the portfolio of assets that could be transferred" to a buyer, she said.

The bankruptcy is the latest flop for finance-focused private equity fund J.C. Flowers, whose other recent investments include nationalized German bank Hypo Real Estate.

After dividends the private equity firm has received for its preferred shares, J.C. Flowers' net exposure to MF Global is $47.8 million, according to a source familiar with the matter. The firm declined to comment.

MF Global hired boutique investment bank Evercore Partners to help find a buyer, separate sources said last week.

The broker's deeply distressed 6.25 percent notes maturing in 2016 fell 4 cents to 46 on the dollar, according to the Trace, which reports bond trades. The price had earlier fallen as low as 15 cents.

MF Global shares remained halted in New York.

(Additional reporting by Paritosh Bansal, Jonathan Stempel, Caroline Humer, Matthew Goldstein, David Sheppard, Jessica Toonkel, Michael Erman, Lynn Adler, David Henry, Dan Wilchins and Lauren LaCapra in NEW YORK, Tom Hals in WILMINGTON, Doris Frankel in CHICAGO, Jessica Hall in PHILADELPHIA, Christopher Doering in WASHINGTON, Narayanan Somasundaram in SYDNEY, and Douwe Miedema and Dominic Lau in LONDON; editing by Erica Billingham, Matthew Lewis, Dave Zimmerman, Andre Grenon, Gary Hill)

Troubled brokerage MF Global Holdings (MF.N) was nearing a deal to file for bankruptcy protection and sell assets to Interactive Brokers Group (IBKR.O), according to reports.

The Institute for Supply Management-New York releases the October index of regional business activity at 8:30 a.m. EDT. In September, the index read 538.0.

At 9:45 a.m. EDT, the Institute of Supply Management Chicago releases October index of manufacturing activity. Economists forecast a reading of 59.0, compared with 60.4 in September.

Amazon (AMZN.O) has added more titles to Prime Instant Video with a new digital video licensing agreement with Disney-ABC television group, giving Prime members more video content for their new Kindle Fire.

The China unit of investment bank JP Morgan (JPM.N) won approval to become a trading member of the Shanghai Gold Exchange, the eighth foreign financial institute to obtain such membership, said the exchange on its website (www.sge.com.cn).

Google Inc (GOOG.O) is making another push to bring its Web savvy to television sets, hoping to tap into a vast new market despite consumers' lukewarm reaction to one of its initial offerings.

Allstate (ALL.N), the largest publicly traded home and auto insurer in the United States, reports quarterly results. Analysts expect its profit to tumble to 8 cents per share from 83 cents a year ago. Other companies announcing results included Anadarko Petroleum (APC.N) and Humana (HUM.N).

Groupon Inc is considering raising its IPO price range as underwriters grow more confident about demand after completing the East Coast leg of a two-week roadshow to woo investors.

European shares .FTEU3 fell 0.8 percent early on Monday, giving back a little of last week's strong gains, with miners hurt by falling metals prices after Japan intervened to stem the rise in its currency against the dollar.

Japan sold the yen for the second time in less than three months after it hit another record high against the dollar, saying it intervened to counter speculative moves that were hurting the economy.

The dollar leapt against the yen by the most in three years, hitting a three-month high after the intervention, while metals prices fell.

U.S. stocks closed out a fourth week of gains in quiet fashion on Friday, edging higher as the market took a breather after rallying 3 percent on Europe's deal to stem its debt crisis.

The Dow Jones industrial average .DJI gained 22.56 points, or 0.18 percent, to 12,231.11. The Standard & Poor's 500 Index .SPX.INX added 0.49 point, or 0.04 percent, to 1,285.08. The Nasdaq Composite Index .IXIC shed 1.48 points, or 0.05 percent, to 2,737.15.

(Reporting by Atul Prakash; Editing by David Holmes)

As per a tentative plan, MF Global's holding company would file for bankruptcy protection and derivatives trader Interactive Brokers would buy the assets, the Wall Street Journal and the Financial Times reported.

Interactive Brokers would likely make an initial bid of about $1 billion during a court supervised auction, the Journal said.

MF Global, the U.S. futures brokerage run by former Goldman Sachs (GS.N) Chief Executive Jon Corzine, has been struggling over the past week in which it posted a quarterly loss, its shares fell by two-thirds and its credit ratings were cut to junk.

The company is suffering because of low interest rates and bets it made on European sovereign debt, making it possibly the most prominent U.S. casualty yet from the eurozone debt crisis.

MF Global was in talks on Sunday with possible buyers, aiming "squarely" to do a deal, though all options remained on the table as the firm hired restructuring and bankruptcy advisers, sources familiar with the situation told Reuters.

The New York Times reported in its electronic edition that by Sunday evening, the talks had narrowed to one bidder, Interactive Brokers.

Sullivan & Cromwell's restructuring and mergers teams have joined the long roster of those advising MF Global, one source familiar with the situation said.

Weil, Gotshal & Manges was also hired to prepare potential restructuring options, a second source familiar with the situation said. The sources could not be identified by name because the talks were not public.

Weil would focus on MF Global's UK subsidiary if it needed to pursue a formal restructuring overseas, the Journal reported in its electronic edition.

The securities company also has hired firms Skadden, Arps, Slate, Meagher & Flom, the newspaper said.

MF Global and Interactive Brokers declined to comment. The law firms could not be reached immediately for comment.

A number of interested parties were considering several possible deals, including buying all or parts of MF Global, said the source, who requested anonymity.

"The goal is squarely for some sort of M&A transaction," the source said, adding the situation was "fluid."

QUARTERLY LOSS

Corzine, who became CEO in March last year after a term as New Jersey's governor, has been trying to transform MF Global from a brokerage that mainly places customers' trades on exchanges into an investment bank that bets with its own capital.

The plunge last week in MF Global's corporate bonds to distressed levels, and in its shares to below $1 at one point on Friday, makes it all the more urgent for the company to come up with some sort of solution before markets open on Monday.

MF Global has given potential buyers limited information about its financials and has not set up a data room for bidders to conduct due diligence, a buyside source earlier said.

The source, who is looking into deals both for the whole company and for its parts, said he was skeptical about the possibility of MF Global striking a deal over this weekend.

The company's positions are big and hard to value, especially the firm's sovereign risk exposure, the source said.

"How do you put a price on that? How do you get a deal done when the right side of the balance sheet keeps moving so dramatically?" the source said.

REACHING OUT TO BANKS

The company hired boutique investment bank Evercore Partners Inc (EVR.N) to help find a buyer, separate sources said this past week.

It reached out to banks including Barclays Plc (BARC.L), Citigroup Inc (C.N), Deutsche Bank (DBKGn.DE), Jefferies Group Inc (JEF.N), JPMorgan Chase & Co (JPM.N), Macquarie Group Ltd (MQG.AX), State Street Corp (STT.N) and Wells Fargo (WFC.N), a source familiar with the situation said on Friday.

Macquarie has shown interest in MF Global, but a source with knowledge of the development said he would be surprised if Macquarie did a deal immediately. The source was not authorized to speak to the media and thus declined to be named.

A Macquarie spokeswoman declined comment.

Private equity firm J.C. Flowers, which has a stake in MF Global, is also in talks about possibly taking it private, the Wall Street Journal reported on Friday.

The investment is the latest to go sour for the financial services-focused buyout shop, founded by ex-Goldman banker J. Christopher Flowers.

Earlier this year, the firm was among investors who failed to block the nationalization of German mortgage bank Hypo Real Estate.

MF Global, which runs a Futures Commission Merchant and a broker-dealer, was scrambling last week to reassure customers about its stability as signs grew that some of them were withdrawing money.

A drop in a broker's credit rating to junk erodes confidence in its creditworthiness and can then restrict its ability to borrow -- the bedrock of any financial institution -- and fund day-to-day operations.

(Additional reporting by Caroline Humer and Nick Brown in NEW YORK, Tom Hals in WILMINGTON, Jessica Hall in PHILADELPHIA and Narayanan Somasundaram in SYDNEY; Editing by Dale Hudson, Vinu Pilakkott and Muralikumar Anantharaman)

The dollar rose more than 4 percent against the yen to above 79 yen, hours after briefly falling to a record low of 75.31 yen. The dollar index .DXY as measured against six major currencies rose 1.3 percent.

Japanese Finance Minister Jun Azumi said Japan intervened unilaterally in the foreign exchange market on Monday to counter speculative moves that did not reflect the health of the Japanese economy.

U.S. crude futures also fell more than $1 as a stronger dollar made commodities priced in the U.S. currency more expensive for investors holding other currencies, thereby reducing demand.

The dollar's rally sent gold down more than 1 percent and silver down more than 2 percent.

The Nikkei .N225 ended down 0.7 percent at 8,988.39, but still logged a monthly gain of 3.3 percent. Investors locked in profits on concerns the yen won't stay down for long.

The yen's persistent strength has raised worries about Japanese companies' earnings. .T

The dollar has come under pressure as investors cautiously returned to riskier assets after Europe laid out a basic framework to tackle its debt crisis last week.

"A weak dollar, short-covering and an overbought market since the beginning of October was enough to trigger a correction (as the dollar spiked)," said Colin Bradbury, Daiwa Capital Markets' regional chief strategist for Asia ex-Japan.

"After rallying strongly to technically overbought territory, the markets were ripe for profit taking," he said.

MSCI's broadest index of Asia Pacific shares outside Japan slid 1.7 percent on Monday, after posting its best week in nearly three years as a long-awaited plan to resolve the European debt crisis sparked a huge relief rally.

Despite the steep falls, the index was set to end October up more than 12 percent for its best monthly gain since May.

Hong Kong's benchmark Hang Seng index .HSI was down 1.14 percent while the mainland's Shanghai Composite .SSEC fell 0.7 percent as investors locked in gains. But both indexes were set for their biggest monthly gains in 2-1/2 years on signs Beijing is selectively relaxing its tightening campaign.

EVENTFUL WEEK

The Singapore dollar and South Korean won fell on Monday as investors covered dollar-short positions with their central banks suspected of intervening, which caused reluctance to buy emerging Asian currencies.

Last week, emerging Asian currencies rose as investors added risk assets after Europe's debt deal. The won breached a technical resistance line to indicate more appreciation in the local currency.

"It became more difficult to short dollar/Asia here, especially after suspected intervention from most of Asia," said a Singapore bank dealer.

Copper also fell on a firmer dollar but was set for its biggest monthly rise since December.

"Investors are taking a wait-and-see attitude ahead of the slew of data this week," said CIFCO Future analyst Zhou Jie. "There wasn't particularly good news out of the euro zone this weekend, nor evidence of the anticipated monetary loosening in China yet."

Events this week include monetary policy meetings by the European Central Bank and the U.S. Federal Reserve, as well as the G-20 summit, with focus on any coordinated efforts to help stabilize global financial markets.

Among key data due this week were China's purchasing managers' index, as well as U.S. ISM manufacturing and jobs data, with investors looking for clues on the state of the economy at the world's two biggest economies.

"The momentum for risk appetite remains intact and the pressure on the dollar is expected to stay while the market shifts its focus from Europe to U.S. data and the Fed," said Junya Tanase, chief strategist at JPMorgan Chase in Tokyo.

"The follow-through buying of equities around the world after the European summit suggests there were other factors supporting sentiment, such as expectations for more U.S. easing, hopes the U.S. economy and corporate earnings will not be too bad," he said.

Tanase said if data this week fails to suggest clear risks of a hard landing in China or a U.S. recession, the risk-taking momentum will continue.

MSCI's all-country world stock index hit its highest level in nearly three months and posted its best week since July 2009 on Friday.

U.S. stocks in October were on track to be the best month since 1974, supported by strong earnings. Merck & Co Inc (MRK.N) and Chevron Corp (CVX.N) both topped expectations with financial results on Friday.

The CBOE Volatility index VIX .VIX -- a 30-day risk forecast of volatility in the S&P 500 -- fell on Friday to its lowest in nearly two months.

EURO NOT OUT OF WOODS

The euro fell 1 percent on Monday as the dollar rallied on Japanese intervention.

The single currency reached a seven-week high around $1.4247 last Thursday, and looked set to end the month up nearly 5 percent for its best monthly performance in just over a year. But uncertainty about a possible interest rate cut on Thursday by the ECB could limit its upside for now. <FRX/>

A weak sale of Italian bonds on Friday also underscored fragility of the euro zone's debt progress. The 10-year yield gap between Italian and German bonds widened after the auction to 378 basis points, about 10 bps wider on the day.

Italy paid record high cost of more than 6 percent to borrow on the debt market.

The head of EFSF, Klaus Regling, in Asia on a tour for potential investors, said on Monday he had been reassured by Japan's top currency official Tokyo would continue to buy its bonds. Last week, he played down hopes for a quick deal with China for its support behind efforts to resolve the crisis.

Asian credit markets weakened, reflecting fragility of risk appetite. The spreads on the iTraxx Asia ex-Japan investment grade index, a gauge for whether investor risk appetite is returning, widened five basis points on Monday.

(Additional reporting by Umesh Desai in Hong Kong; Jongwoo Cheon in Singapore and Carrie Ho in Shanghai; Editing by Kavita Chandran)