John
Lothian's Daily Futures & Securities Industry Newsletter
February 12, 2002
Lead
Stories
COMMODITY
TRADER AND TWO MICHIGAN COMPANIES CHARGED WITH $2.9 MILLION FRAUD; GOVERNMENT
ALLEGES FICTITIOUS TRADING
http://www.cftc.gov/opa/enf02/opa4606-02.htm
NEW
YORK COMMODITY BROKER CHARGED WITH ILLEGAL TRADING AND VIOLATION OF A
COMMISSION ORDER
http://www.cftc.gov/opa/enf02/opa4605-02.htm
Senator
Slams SEC Chief on Enron; Lay Due Today (Reuters)
...On Hollings' barbs, SEC spokeswoman Christi Harlan said, "Chairman Pitt
has said all along that he now represents the...
http://story.news.yahoo.com/news?tmpl=story&u=/nm/20020212/ts_nm/enron_dc_22
Datek
looking for buyer, has E*Trade bid - report (Reuters Securities)
Datek Online Holdings is shopping for a potential buyer, and E*Trade Group Inc.
has already submitted a bid, the New York Post
reported on Tuesday, citing sources familiar with the situation.
http://biz.yahoo.com/rf/020212/n12327597_2.html
S&P
Implements Annual Weightings Changes for the S&P Commodity Index
http://www.nybot.com/pressRelease.asp?releaseID=385
NYBOT
Announces FCOJ Trading Hours For Last Trading Day
http://www.nybot.com/pressRelease.asp?releaseID=384
Eurodollar
trading surge lifts CME earnings (Reuters Securities)
Chicago Mercantile Exchange Holdings Inc., the parent of the world's second
largest futures exchange, said Monday a surge in
trading of its Eurodollar contracts and higher clearing and transaction fees
boosted fourth-quarter earnings 270 percent.
http://biz.yahoo.com/rf/020211/n11306270_2.html
Depository
Trust & Clearing Corporation Selects Percussion Software's Rhythmyx Content
Manager to Manage 250,000 Content Items
Across Its Enterprise (Business Wire)
... a holding company that oversees two principal subsidiaries, The Depository
Trust Company (DTC) and the National Securities
Clearing Corporation (NSCC)....
http://biz.yahoo.com/bw/020212/122237_1.html
Exchange
News
CBOT
Position Change Bond, Feb 11, 2002 - 02.11.2002
http://www.cbot.com/cbot/www/cont_detail/0,1493,10+24+268+5826,00.html
2002
Holiday Schedule - 02.11.2002
http://www.cbot.com/cbot/www/cont_detail/0,1493,10+24+268+5827,00.html
CBOT
Hosts Crop Report Briefing February 8 - 02.11.2002
Commentaries and analysis on the crop data was provided by John Welsh,
Peregrine Financial, and Dan Roose, U.S. Commodities.
http://www.cbot.com/cbot/www/cont_detail/0,1493,10+24+null+5824,00.html
IPE
EXTENDS NATURAL GAS FUTURES TRADING HOURS
http://www.ipemarkets.com/w1/news/2002/020211.php
Karachi
stock markets soars, but some are wary of future (AP)
The Karachi bourse is living days of glory with a meteoric 40 percent rise in
the index so far this year, but there is now concern that
optimism over Pakistan's new relationship with the United States has pushed
stocks up too fast, too soon.
http://story.news.yahoo.com/news?tmpl=story&u=/ap/20020212/ap_wo_en_bu/pakistan_stock_market_1
Regulatory
News
The
SEC News Digest
http://www.sec.gov/news/digest/02-11.txt
Ohio
Stockbroker Charged with Massive Fraud (Reuters)
...Lehman has a relatively small brokerage business compared to Wall Street
rivals Merrill Lynch and Co....
http://story.news.yahoo.com/news?tmpl=story&u=/nm/20020211/ts_nm/crime_broker_dc_2
Reports
Bond
Talk Today's Events
http://www.bondtalk.com/global.cfm?S=todaysevents
Miscellaneous
News
Instinet
Profit Up on Deep Cost Cuts
http://story.news.yahoo.com/news?tmpl=story&u=/nm/20020211/bs_nm/financial_instinet_earns_dc_1
Instinet
Announces Fourth Quarter and 2001 Results (February 11, 2002)
Instinet Group Incorporated (Nasdaq: INET) today announced net income for the
12 months ended December 31, 2001 of $144.8 million, or $0.63 per share,
compared to $148.2 million, or $0.72 per share, in 2000. For the fourth quarter
of 2001, net income was $45.7 million, or $0.18 per share, compared to $36.0
million, or $0.17 per share, in the fourth quarter of 2000. Excluding
investment gains, restructuring costs and excess insurance recoveries, 2001
full-year and fourth quarter earnings per share
were $0.64 and $0.14, respectively.
http://www.instinet.com/ir/earnings.shtml
UBS
Warburg Hosts 14th Annual Energy and Utilities Conference (PR Newswire)
...Individual corporate strategy reviews, the future of OPEC cohesion and
future commodity price direction, deregulation
trends,......The second panel probes into who could be the eventual winners in
the marketing and trading arena with panelist VJ Hogan,
president of TXU Energy Trading;...... financial structuring, fixed income
issuance and trading, foreign exchange, derivatives and risk
management....
http://biz.yahoo.com/prnews/020212/nytu030_1.html
Merrill
Lynch Expands Global Foreign-Exchange Team (Business Wire)
Merrill Lynch & Co. Inc. today announced the appointment of three senior
traders to its global foreign-exchange business.
http://biz.yahoo.com/bw/020211/112390_1.html
Enron
Witnesses Taking Fifth (AP Financial)
...The Securities and Exchange Commission is pursuing a civil inquiry into
Enron and Andersen,...... they already have strong evidence
of illegal activity surrounding the failure of the energy-trading
company.......``We'll be talking to them in the near future.''..
http://biz.yahoo.com/apf/020211/enron_investigation_12.html
Enron
Gives Emerging Market Risk Managers More Reason To Say That America’s Financial
System Is Hypocritical
The first
few hours of GARP’s 3rd annual risk management convention in New York proved
how far the ripple effects of Enron have stretched. Risk managers from both
Brazil and Korea explained how the collapse of the energy company has shown
that America needs to focus on improving its own corporate governance.
http://www.garp.com//newsfeed.asp?Category=6&MyFile=2002-02-12-4446.html
Debunking
the Privacy Myth, Line56
Deregulation
Offers Chaos for Some, Opportunity for Energration, eyeforenergy
UBS
Warburg Completes Takeover of Enron Trading, Set to Begin Operations,
eyeforenergy
Coalition
Forms Against Bush User-fee Proposal
WASHINGTON (HedgeWorld.com)—The derivatives exchanges and futures commission
merchants lined up last week against the proposed user fee on futures
transactions
..
http://www.hedgeworld.com/news/read_news.cgi?section=dail&story=dail6095.html
The
Giving Tree Is Still in Full Bloom—Hedge Funds Really Do Care
http://www.hedgeworld.com/news/read_news.cgi?section=dail&story=dail6075.html
Merrill
Lynch HSBC Announces Client Access to Morningstar Canada and Briefing.com
http://www.newswire.ca/releases/February2002/12/c0910.html
HSBC
Bank Canada 2001 results - highlights
http://www.newswire.ca/releases/February2002/12/c0783.html
EU
approves ADM buy of Germany's Toepfer (Reuters Securities)
The European Commission on Monday approved plans by Archer Daniels Midland to
purchase Alfred C. Toepfer International of Germany.
http://biz.yahoo.com/rf/020211/l11157261_1.html
Merrill
forms operating committee under O'Neal (Reuters Securities)
Merrill Lynch & Co. Inc., the No. 1 U.S. full-service brokerage, has
created an operating committee under President Stan O'Neal
and without Chief Executive David Komansky, according to an internal memo.
http://biz.yahoo.com/rf/020211/n11344944_2.html
Merrill
hires three foreign exchange traders (Reuters Securities)
Merrill Lynch & Co. Inc. said on Monday it hired three foreign exchange
traders, boosting its global currency trading operations
even as the Wall Street firm scales back in other areas.
http://biz.yahoo.com/rf/020211/n11148118_2.html
J.
P. Morgan Seems to Feel the Ripples (The New York Times)
..." said James Ellman, who runs the Merrill Lynch Global Financial
Services Fund, which owns J. P. Morgan shares. Ms...
Not
Your Typical Fidelity Manager Departures (Morningstar.com)
...Merrill Lynch
and the former Kemper family (which was absorbed into Zurich Scudder) provide
two examples...
http://biz.yahoo.com/ms/020212/13194.html
US
cattle group backs Republican meat packer study (Reuters Securities)
... the farmer-owned cooperative Farmland Industries and privately owned
Cargill Inc. Wythe Willey, the new president of the National
Cattlemen's Beef Association,...
http://biz.yahoo.com/rf/020211/n11158305_1.html
Dundee
Precious Metals Launches New Website And Commences Daily Pricing (CCN Newswire)
... Precious is a Toronto Stock Exchange listed investment company, managed by
Dynamic Mutual Funds Ltd., a subsidiary of Dundee
Wealth Management Inc., providing investors with an opportunity...... related
investments with the principal objectives of capital
appreciation and the provision of a hedge against long term inflation....
http://biz.yahoo.com/ccn/020211/vbmz7klraxfn_3qxdwb4ww_1.html
DAILY
BRIEFING -- Is Global Crossing Double-Crossing Investors? (Business Week)
...``Accounting isn't black or white, its gray,'' says David Mersereau, an
investment adviser representing more than 50 Global Crossing
investors with nearly 600,......``breached fiduciary duties'' by not seeking
alternatives that would have resulted in more money for
investors.......``Global Crossing is obligated to consider alternative offers
from other investors....
http://biz.yahoo.com/bizwk/020212/xmld7cqkj7u9yx_ogxmt_w_1.html
FTSE
closes up, Rolls stalls on accounting nerves (Reuters Securities)
...MAN Group rose 3.9 percent while Schroders put on 0.6 percent....
http://biz.yahoo.com/rf/020211/l1163838_3.html
From
the Los Angeles Times THE FALL OF ENRON An Edge to Enron's Lobbying Strategy
WASHINGTON -- Jeffrey K. Skilling was visiting Capitol Hill to press the case
for energy deregulation. It was September 1999, and Enron Corp. was the darling
of Wall Street.
http://chicagotribune.com/business/la-000010594feb11.story
Preventing
another Enron
Blood is in the water in Washington as Congress encircles Enron. The public
thrashing of company officers has begun, but Congress also needs to focus on
institutional reforms that could keep a similar collapse from happening.
John's
Comments
The stock
market rally yesterday helped O-Fund manager Mark Brown recoup some of his
earlier losses as his O-Fund climbed to a loss of just $13,940 as of the close
yesterday. My randomly picked O-Fund closed with a gain of $88.13 since
the start of this exercise a week and a half ago. Barry Viljoen's O-Fund
shows a gain of $1736.88 as of yesterday's close and Bill Wynne's O-Fund was
showing a loss of $8092.50.
The
equivalent X-Fund values would be:
Brown
$861
Lothian
$1001
Viljoen
$1017
Wynne
$919
X-Fund 1
yesterday only traded 1 contract and closed at 998.
X-Fund 2
traded 3 contracts yesterday and closed at 1004.
*************
Grain
trading this morning was delayed due to a problem with order routing
systems. Electronic Clerk devices in the CBOT financial room were also
affected, but trade has continued so far.
*************
One area
where I feel a deficiency in my industry education is in learning the nicknames
or slang for the new contracts introduced and spreads involving those contracts.
For examples, the S&Ps are called SPOOZ. We have Soybeans, which go
as beans, but when they are spread versus the meal and oil it is the
crush. Trading Crude versus heating oil and unleaded gas is a CRACK
spread. The CRB is the CRAB, but what is the new SPCI contract? I
just don't know.
How about
the X-Funds? What if I want to trade the X-Fund Spread? What is
that? The symbols for the first two X-Funds are X and Y, which kind of
sounds like a chromosome thing.
We have
Spiders and QQQs, or Qs, and Diamonds. Think of all the ETFs and narrow
based indices coming soon. Where will the names for all those products come
from?
The Goldman
Sachs index has the Goldman Roll. Many contracts have Rollover, which is
when the front month changes from one month to the next and traders need to
spread their existing contracts into the new spot month. Is there an
equivalent term for the new SPCI contract? I just don't know.
There are
several slang terms for the spreads down on the CBOT trading floor. For
example:
Ten Years
versus Bonds are NOBs.
Ten Years
versus Five Years are FITs, pronounced Fights.
Five Years
versus Two Years are TOFs
Two Years
versus Bonds are TUBs.
Municipal
Bonds versus Bonds are MOBs
Muni Bonds
versus Ten Years are MUTs
Muni Bond
versus Five Years at MUFs
There are
some others, but I may be wrong about the names. I think the Ten Year
versus the Agencies was the TAG and the Ten Years versus the Swaps is the
TOS. But I could be wrong. But what about the new Swaps at the CME versus
the Eurodollars? What are the names of those spreads?
Of course
in the old days we all traded the TED spread, the difference between the Tbills
and the Eurodollars. Today we have STRIPS and all kinds of packages in
the Eurodollars that have names that I am not privy to. I don't stand in the
Eurodollar pit or trade them that much, so I just don't have a need to know the
names.
Why is this
important? Well, as more markets go electronic the ability to trade those
spreads electronically will increase. I would like to be able to create
nicknames on my screen to identify the spreads. We have enough symbols
and are getting new ones all the time. With the introduction of Single Stock
Futures, this is only going to get worse.
One of my
dreams for a trading platform is to be able to assign specific names to
specific contracts or spreads. So if someone wants to put the March NOB
up on the screen, the trader can label the trade as such. Or they could
call it the CBOT-MARCH-NOTES-OVER-BONDS if they wanted.
One of the
functionalities of the TruExchange matching engine that I liked was the ability
to create spread relationships among electronically traded contracts. The
system administrator would simply respond to the request of a trader and create
the Feeder Cattle Corn Spread on a 2 by 5 basis. What the name of that
spread is I don't know, but it would be easy to create with the TruExchange
matching engine.
Spreading
of electronic markets is the next great trading frontier. Pairs trading
of Single Stock Futures will be one area where electronic spreading will be
useful. Of course, trading Eurodollar strips and packages will also be a
huge trade for the electronic matching engine that can replicate the ease and functionality
of the pit.
The
difference between trading spreads in the pit and trading on the screen is that
traders don't need to have the common lexicon anymore. Since they are not
communicating face to face, the slang and lexicon of the trading pit is not
needed. And the increase in the number of contracts, spreading
opportunities and distributed electronic trading population indicates that the
value of use of common slang terms will diminish. This means that traders
will need to have the ability to name the spreads and contracts themselves on
their trading screens.
Perhaps
some of those names will gain acceptance in new virtual trading communities,
much like they do in the trading pit. But traders will need that
functionality to help simplify and increasingly complex trading world.
IMHO.
Regards,
John J.
Lothian
The Price
Futures Group, Inc.
Electronic
Trading Division
Chicago
Board of Trade Building
141 West
Jackson Boulevard, Suite 1340A
Chicago, IL
60604
Phone:
1-800-713-0215 or 312-648-2426
Fax:
312-902-6437
Web site: www.pricegroupetd.com
E-Mail: JLothian@pricegroup.com
Disclaimer: This letter is strictly the opinion of its writer, and not necessarily
those of The Price Group and its management, and is
intended solely for informative purposes and is not to be construed, under any
circumstances, by implication or otherwise, as an
offer to sell or a solicitation to buy or trade in any commodities or
securities herein named. Information is obtained from sources
believed to be reliable, but is in no way guaranteed. No guarantee
of any kind is implied or possible where projections of future
conditions are attempted.
Futures and
options trading involves risk. Past results are no indication of future
performance.
Hypothetical performance results have many inherent limitations, some of which
are described below. No representations are being made that nay account
will or is
likely to achieve profits or losses similar to those shown. In fact,
there are frequently sharp differences between hypothetical performance results
and the actual results
subsequently achieved by any particular trading program. One of the
limitations of hypothetical performance results is that they are generally
prepared with the benefit
of hindsight. In addition, hypothetical trading does not involve
financial risk, and no hypothetical trading record can completely account for
the impact of financial risk in
actual trading. For example, the ability to withstand losses or to adhere
a particular trading program in spite of trading losses are material points
which can adversely
affect actual trading results. There are numerous other factors related
to the markets in general or to the implementation of any specific trading
program which cannot
be fully accounted for in the preparation of hypothetical performance results
and all of which can adversely affect actual trading results.