Traders seem to believe firm is next MF Global, Bear Stearns, or Lehman Brothers.

On Wall Street, where traders find an edge by having their orders placed a millisecond earlier than the next guy’s and the speed at which trades are executed seems constrained only by physical barriers like the speed of light, nothing moves faster than a negative rumor.

On Monday, March 10, 2008, rumor started that investment banker Bear Stearns was having liquidity problems. In fact, the maverick investment bank had around $18 billion in cash reserves. But soon, the speculation created its own reality, and the race was on to keep Bear Stearns’ crisis from ravaging the wider market. And we all know what happened after that.

As the reporting of unexpectedly gargantuan, supposedly once-in-a-lifetime losses by esteemed financial institutions has seemingly become the market’s norm during the ongoing financial crisis, investors have understandably become ever more skeptical. Multiplying their fear through the interconnected web of gossip and news that flows through the financial institutions of New York and London, they’ve grown almost paranoid, maniacally trying to avoid any situation where they’re the last one left when the party ends and the lights go off.

Could this be the case with Jefferies Group Inc., a mid-market pure play investment bank that has been battered for weeks first by a steady feed of negative rumors?

Here are the facts:…