May 17, 2005
Lead Stories
BY DAVID ROEDER Business Reporter
Leaders of the Chicago Stock Exchange said Monday they plan to introduce an electronic trading system that they hope will win business from hedge funds and other firms that account for large volumes of stock trades.
http://www.suntimes.com/output/business/cst-fin-chx17.html
ISE Chairman Receives Industry Award
NEW YORK--(BUSINESS WIRE)--May 16, 2005--The International Securities Exchange (NYSE: ISE) said today that its chairman, Ivers W. Riley, was awarded the Joe Sullivan Award by the Options Industry Council in honor of his contributions to the industry. The award was bestowed by the OIC at the 23rd annual Options Industry Conference. The council's mission is to educate investors about options. It is comprised of the six
http://phx.corporate-ir.net/phoenix.zhtml?c=176358&p=irol-newsArticle&ID=710538&highlight=
Story from Sosland's "Food Business News"
Electronic Exchange: Electronic trading slow to take hold in
http://www.kcbt.com/news_2.asp?id=276&home=1
Broker System Problem Causes Nasdaq Errors May 16, 2005
The stock exchange saw exaggerated stock prices because of the broker's mistake.
By Michael J. Martinez, The Associated Press
NEW YORK (AP)--A computer problem at an unidentified stock trader caused erroneous, exaggerated prices--some as high as $950 per share--to be posted to the Nasdaq Stock Market Friday morning for 1,680 different stocks, a spokeswoman for the Nasdaq said.
http://informationweek.com/story/showArticle.jhtml?articleID=163104189
China to launch options on copper, other commodities
SHANGHAI -
http://dailynews.muzi.com/ll/english/1363131.shtml
Technical Fault Shuts IPE Oil Trading For 40 Minutes Mon
The exchange, the world's second-largest energy marketplace, has repaired the glitch, which caused slowness in some futures markets, forcing the full shutdown of all IPE futures trading.
"Apparently, there was some slowness in some markets," said Kelly Loeffler, spokeswoman for Atlanta-based IntercontinentalExchange (IEX.XX), the IPE's parent company. "To address the problem, we proactively shut the markets down."
http://news.morningstar.com/news/DJ/M05/D16/200505161607DOWJONESDJONLINE000499.html
President Hu Jintao tried yesterday to reassure
http://www.nj.com/business/ledger/index.ssf?/base/business-0/1116306777252740.xml
Market Data Piracy Uncovered in
May 16, 2005 - First, pirated CDs. Then, pirated DVDs. Then, pirated software. Now, you can buy pirated real-time market data in
http://www.securitiesindustry.com/article.cfm?articleid=15564
Environmental Trading News
Environmental Investments Discussed at Forum in
http://www.novinite.com/newsletter/print.php?id=47772
With CO2 trading in Europe at $20+/ton, shouldn’t we be thankful the
http://www.earthvision.net/ColdFusion/News_Page1.cfm?NewsID=28084
COLOGNE, Germany, May 13 (Reuters) - The fledgling market for carbon dioxide emissions has experienced a bright start in Europe and will see trading volumes increase over the next year, a senior industry official told Reuters in an interview.
http://www.alertnet.org/thenews/newsdesk/L17306399.htm
Mayors from across US signing up to initiative to get American cities to meet the USʼs Kyoto environmental target.
http://www.guardian.co.uk/usa/story/0,12271,1485595,00.html?gusrc=rss
Radical change in water use urged to avoid food shortages
By Jeremy Grant in
Governments must start devising ways of allocating water more efficiently if they are to avoid food shortages and political instability, the World Agricultural Forum (WAF) will warn today.
The call, to be made at the group's annual meeting in
"We have to manage water much better and that's going to require a new system of allocation," said Jim Bolger, the former
http://news.ft.com/cms/s/2ab383f2-c5b0-11d9-87fd-00000e2511c8.html
Carbon on the Balance Sheet
By Ian Jones, senior reporter
NEW YORK — Denise Furey, a senior director for global power at Fitch Ratings, pointed to a bullet point on her slide presentation about emissions trading in corporate finance. Two years ago, it wouldn’t even have been included, she said, but today it’s the most important point on the slide: the vocal desire of energy industry participants to reduce regulatory risk.
http://www.scudderpublishing.com/headlines/story2.php?PHPSESSID=ba4dfb229379dbf4b46541df8130061b
Exchange & ECN News
Citadel to pick up Susquehanna options business
By Doris Frankel
CHICAGO, May 16 (Reuters) - Global hedge fund Citadel Investment Group on Monday said it plans to acquire many of the equity options books of Susquehanna International Group on the Philadelphia Stock Exchange or PHLX. The move would expand Citadel's derivatives arm, Citadel Derivatives Group, on the fourth largest
http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=8506744
Benefits of CBOT South American Soybeans
http://www.cbot.com/cbot/pub/cont_detail/0,3206,1027+26484,00.html
CBOT Trader Newsletter: May 16, 2005
http://www.cbot.com/cbot/pub/cont_detail/0,3206,1027+28187,00.html
South American Soybean Salient Features
http://www.cbot.com/cbot/pub/cont_detail/0,3206,1027+26444,00.html
South American Soybeans Frequently asked Questions
http://www.cbot.com/cbot/pub/cont_detail/0,3206,1027+27298,00.html
REVISED "Blackout" Days for Live Cattle Delivery Points
http://www.cme.com/clearing/clr/clradv/13214.html
ISE Names Two Officers
NEW YORK--(BUSINESS WIRE)--May 16, 2005--The International Securities Exchange (NYSE:ISE) said today that the Board of Directors elected Amit Muni, Principal Accounting Officer, and Thomas Gibbons, Investor Relations Officer.
http://phx.corporate-ir.net/phoenix.zhtml?c=176358&p=irol-newsArticle&ID=710537&highlight=
NYMEX
http://www.nymex.com/jsp/news/press_releas.jsp?id=pr20050516a
Exchange Announces Margins, Position Accountability Levels, and Reporting Requirements for Freight Swap Futures Contracts
http://www.nymex.com/jsp/news/press_releas.jsp?id=pr20050513b
Exchange to Decrease Margins on Gold Futures Contracts
http://www.nymex.com/jsp/news/press_releas.jsp?id=pr20050513a
NYBOT Announces New Cotton And
http://www.nybot.com/releases/pressRelease.asp?releaseID=874
NexTrade Signs Agreement With UNX
NexTrade Holdings Inc. is pleased to announce that its wholly owned subsidiary OnTrade Inc., the operator of its ECN -- Electronic Communications Network, entered into an agreement to provide ECN services to UNX Inc., a progressive brokerage firm of
http://biz.yahoo.com/prnews/050516/flm023.html?.v=7
Citigroup Global Markets Submission To The UK Competition Commission Inquiry Into A Possible Acquisition Of London Stock Exchange Plc By Deutsche Börse AG Or Euronext N.V.
http://www.exchange-handbook.co.uk/news_story.cfm?id=52933
Trading In Foreign And Multiple Currencies In The Main Segment Of The SWX Swiss Exchange
http://www.exchange-handbook.co.uk/news_story.cfm?id=52932
SIS Swiss Financial Services Group AG Submission To The UK Competition Commission Inquiry Into A Possible Acquisition Of London Stock Exchange Plc By Deutsche Börse AG Or Euronext N.V.
http://www.exchange-handbook.co.uk/news_story.cfm?id=52927
Regulatory News
The SEC News Digest
The SEC News Digest provides daily information on recent Commission actions, including enforcement proceedings, rule filings, policy statements, and upcoming Commission meetings.
http://www.sec.gov/news/digest/dig051605.txt
Sebi censures UBS for role in 'Black Monday'
Sebi has issued an order against UBS for its role in 'Black Monday'. The firm has been barred from renewing or rolling over any offshore derivatives already issued against the current positions for one year.
The Securities and Exchange Board of India, Sebi, has barred investment firm UBS, its affiliates and its agents from issuing offshore derivatives for a period of one year, reports CNBC-TV18.
http://www.moneycontrol.com/backends/News/frontend/news_detail.php?autono=167838
OSC reinstates registration of Norshield
http://www.investmentexecutive.com/client/en/News/DetailNews.asp?Id=28804&IdSection=8&cat=8
OSC extends temporary orders against Portus
Hearing adjourned until September 16
http://www.investmentexecutive.com/client/en/News/DetailNews.asp?Id=28800&IdSection=8&cat=8
Deputy Assistant Secretary D. Scott Parsons Remarks before the Identity Management in Financial Services
Beating Identity Crime: How the Public and Private Sectors are Working Together to Help Consumers and Put Fraudsters Behind Bars
http://www.ustreas.gov/press/releases/js2444.htm
Speech – Donaldson Addresses Corporate and Mutual Fund Crises
http://www.garp.com/risknews/newsfeed.asp?Category=6&MyFile=2005-05-17-10803.html
Refco Group Ltd., LLC Receives Wells Notice From SEC
Refco Group Ltd., LLC announced today that its subsidiary, Refco Securities, LLC, has received a "Wells Notice" from the Securities and Exchange Commission arising out of the SEC's previously announced investigation of Refco Securities that commenced in 2001 relating to short sales of stock of Sedona Corporation as well as other transactions.
http://biz.yahoo.com/prnews/050516/nym256.html?.v=5
Commission Charged Defendants with Violations of FTC Act and Telemarketing Rule
The Federal Trade Commission has settled a complaint against a set of California-based defendants whose telemarketers and promotional brochures allegedly misled hundreds of consumers about their ability to make big money by speculating on foreign currency prices.
http://www.ftc.gov/opa/2005/05/britishcapital.htm
FERC Sweeps Month
The FERC Sweeps, or Rather, the Name The Next Chairman Show is heating up a bit as Chairman Wood’s tenure winds down to a mere matter of weeks. So we thought it was a good time to introduce some of the folks in play.
http://www.scudderpublishing.com/headlines/story1.php?PHPSESSID=ba4dfb229379dbf4b46541df8130061b
Managed Futures - Managed Funds
Hedge funds cash up to pay off clients
By James Drummond
Hedge funds are liquidating positions in the expectation that investors will be redeeming substantial sums in early July, according to prime brokers and fund managers.
http://news.ft.com/cms/s/c1dad680-c633-11d9-b69b-00000e2511c8.html
Front Street hedge fund closes $178 million offering
Long/Short Income Fund begins trading on TSX
http://www.investmentexecutive.com/client/en/News/DetailNews.asp?Id=28801&IdSection=1&cat=1
John Henry
The John W. Henry & Company, Inc. web site -- < www.jwh.com > -- has been updated with detailed composite performance information on our various investment portfolios through the month of April 2005.
Blackstone Group to invest $1 b in
THE New York-based investment and advisory group, The Blackstone Group, has announced an allocation of $1 billion for investments in
http://www.thehindubusinessline.com/2005/05/17/stories/2005051702240100.htm
Man Group suffers as hedge fund gloom grows
These are tough times for the hedge funds industry and so it was no surprise that shares in Man Group, one of
http://news.independent.co.uk/business/analysis_and_features/story.jsp?story=638961
CalPERS Enters Environmental Technology Market - Fund Commits Up To $15 Million To California-based, Cleantech Venture Fund
http://www.exchange-handbook.co.uk/news_story.cfm?id=52922
Reports
Bond Talk Today's Events
http://www.bondtalk.com/global.cfm?S=todaysevents
USDA Today
http://www.usda.gov/nass/PUBS/TODAYRPT/TODAY.HTM
Miscellaneous News
http://www.thestandard.com.hk/stdn/std/Markets/GE17Ag01.html
http://news.yahoo.com/news?tmpl=story&u=/afp/20050517/bs_afp/chinaeconomyforex_050517070736
EDGETRADE Integrates Their DMA and Algorithmic Technologies on to the Bloomberg System
EDGETRADE, a leading provider of "pure agency based" trading technologies and brokerage solutions has announced that its has fully incorporated its algorithmic and DMA order types onto the Bloomberg system.
http://biz.yahoo.com/bw/050517/175487.html?.v=1
SunGard Announces Expiration of Hart-Scott-Rodino Act Waiting Period in Connection with Its Acquisition by Consortium
SunGard announced today that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired at 11:59 p.m.,
http://biz.yahoo.com/bw/050517/175790.html?.v=1
Morgan Stanley ordered to pay damages
http://news.yahoo.com/news?tmpl=story&u=/nm/20050517/bs_nm/financial_morganstanley_perelman_dc_9
Court rules for Perelman vs. Morgan Stanley
Billionaire financier Ronald Perelman stands to become even richer after a jury verdict yesterday in his case against Morgan Stanley, the nation's second-largest securities firm.
http://www.newsday.com/business/ny-bzmorg4263250may17,0,4134382.story?coll=ny-business-leadheadlines
Backed by a stiff penalty to Wall Street firms, a new PBS series teaches how to ....Chill out and invest
Instead of using complicated worksheets and lots of financial jargon, Pam Krueger is trying to educate Americans about investing using wine, cheese and real people.
A former stockbroker turned financial instructor, Krueger developed "MoneyTrack," a 13-part series scheduled to start airing on Sundays at 11 a.m. on July 3 on WLIW/21, and on WNET/13 sometime after that. The program teaches viewers about a range of topics - including investing basics, scams and corporate fraud, debt, annuities and retirement savings - with real-world examples and a casual atmosphere.
http://www.newsday.com/business/ny-bzeduc174263252may17,0,4555177.story?coll=ny-business-headlines
NYTimes.com to Offer Subscription Service
http://www.nytimes.com/2005/05/17/business/media/17times.html
John's Comments
South American Soybean Facts of the Day
In honor of the launch of South American Soybean futures at the CBOT, here are a couple of Facts of the Day:
--
--South American soybean production is up 183 percent in the last decade.
********
Julie Sell of the Economist is leaving
Good luck to Julie in
*******
Securities Week Report
Securities Week is reporting in its latest edition that White House staffer Reuben Jeffery III is under consideration for nomination as CFTC Chair, according to unnamed industry sources cited in the story. Jeffery has held 3 positions in the Bush administration and spent 18 years with Goldman Sachs in
*********
Harvard to Commit $50M to Women Programs
Tuesday, May 17, 2005 10:25 a.m. ET
http://news.lycos.com/wired/story.asp?section=Breaking&storyId=1035026
**** This story will make sense if you read below.
******
Option Industry Conference Highlights and Notes
The highlight of the Options Industry Conference in
Joe Sullivan was a former Wall Street Journal reporter and CBOT executive who became the first President of the Chicago Board Options Exchange and was critical in its formation and success.
Ivers Riley has had a long and illustrious career working for some of the industry’s leading institutions, including the
Earlier this year, Mr. Ivers was honored by the Futures Industry Association in
In Mr. Riley’s brief but inspiring comments upon receiving the award, he spoke about two qualities that he learned and were the basis of his success. He humbly said that intelligence and physical abilities will wane as we age, but that “persistence” and “resilience” were the keys to success.
It is a lesson I shall remember well.
*********
Fighting over a Growing Pie
In 1974, 5.7 million equity options were traded in the
*********
Exchange CEO Exchange
Fairness in the marketplace is what the exchanges represent
The leaders of the 6
By comparison to some recent futures exchange CEO panels I have witnessed in the last couple of years, this panel was downright entertaining.
Options industry newcomer Neal Wolkoff, a former NYMEX executive, said the thought the NYSE-Arca-Ex merger would produce an “increased availability of underlying (stocks), which will drive options growth.”
I liked what I heard from the CEO of the Box, who said innovation does not come from large monolithic organizations, but from smaller ones. Take that NYSE.
However, Philadelphia CEO Sandy Frucher said that regulatory process can impede innovation. I won’t go into the details Mr. Frucher’s more descriptive word play for the problem, but let’s just say it is nothing that a good laxative would not fix.
While there was much discussion about possible exchange consolidation, one of the observations was that the options industry has consolidated at the level beneath the exchanges already. Specialists, Market Makers and brokers have already consolidated, leaving very few independent market makers. Consolidation was “way off” one of the exchange leaders said, and that was the general tone at the conference for the concept.
A major factor discussed at this panel and others was the problem of the increase in the number of quotes broadcast and the bandwidth required to support those quotes. The number of quotes per trades went from 300 to1 in 2000 to 2300 to 1 quotes per trade today, according to statistics cited.
There was some discussion of intellectual property rights and the innovative process. I was particularly enthused to hear the AMEX’s Neal Wolkoff say innovation must have a reward for that innovation, despite offering some concern over the impact intellectual property fights could have on the industry.
********
Electronic Trading is Gender Blind
At a press luncheon, I asked Philadelphia Stock Exchange CEO Sandy Frucher what his exchange and the industry were doing to attract more female customers and traders since electronic trading has allowed more than just type-A personality men to participate in the markets on the trading floor. You should have seen the writing utensils of the female reporters go up as he admitted he agreed with Harvard President Larry Summers on some of his comments about gender differences.
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The Derivatives Guy
By John J. Lothian
I readily admit I have always been a futures guy. The options I know and use best are options on futures. The options industry is something the guys in the wheat, corn pits and soybean complex at the CBOT created in the late 1960s and early 1970s because they were bored and looking for other things to trade, or so I have been told.
In fact, somewhere in the CBOT historical record there must be a line “then the CBOT begat the CBOE and there were exchange traded options. And they were good and the pit traders were well pleased and the customer order flow was like honey.”
But even though I am futures guy, I decided I needed to expand my horizons and learn more about exchange traded equity options and the exchanges, traders, customers and brokerages that trade them. Thus, I decided to attend the Options Industry Conference last week in
The conference is smaller than the Futures Industry Association bash held in
When I was on my way down to the event I was wondering what I would write about the conference. I thought it might be about my evolution from a futures guy to a derivatives guy.
This is a lot of a harder for a futures guy than you might think. The options business has things like internalization of order flow (i.e. brokers taking the other side of customer trades) and payment for order flow (i.e. outsourcing internalization) that would make any free market futures guy’s blood boil.
Then there is this whole NBBO thing, the National Best Bid and Offer. There are things like linkages between exchanges, an organization called Opera (OPRA) without any singing fat ladies and another named “Oh I See.” I think they invented this latter organization to help teach people about options and when the students finally get it they say, “Oh I see.” (It is the Options Industry Council, or OIC.)
Actually, the options industry is doing a lot of things right these days. There is fierce, but friendly competition. The exchange and their traders compete for customers’ business, but the exchanges also work together on teaching people about options with the previously mentioned “Oh I See” and with the common clearing organization, the OCC.
Each of the exchanges has their own unique story and strategy. There is the oldest exchange, the CBOE with its Hybrid trading platform, a trading floor, experienced leadership and a nascent futures exchange. There is the all electronic ISE, newly publicly traded and full of a spirit of innovation. There is Arca-Ex, which is buying the Pacific Exchange, but is itself has plans to merge with the NYSE. There is the Philadelphia Exchange, which is led by the always entertaining Sandy Frucher, and could change to all electronic with the flip of a switch, or so
I was actually surprised I did see any representatives from either the New York Stock Exchange or Eurex at the event. Certainly the NYSE was represented by the Pacific Exchange and Arca-Ex in terms of current participants or players, but I would have expected a NYSE bird-dog at the event to just to show they are serious about including options in their integration plans. Additionally, given all of Eurex AG’s stated interest in recent years in the
Regardless, the futures, options and securities worlds are interlocked and getting closer together all the time. Hedge funds are big clients in each world. Electronic trading is present, growing and a force and menace in each world. In the options markets, peak message traffic for the OPRA quote system was 3573 in 2000. In 2005 it is about 64,000 messages per second. OPRA all day messages averaged about 75 million in 2000. In 2005 all day OPRA message traffic averages 627 million.
I am a futures guy in my brokerage and trading, but attending this conference made me truly realize I am a derivatives guy when it comes to this newsletter and reporting and commenting about the issues affecting the futures, options and securities industries. Be careful. If it can happen to me, it can happen to anyone.
*****
Brent Crude Watch
IPE Brent Volume: 90,774
NYMEX Brent Crude Volume: 6394
NYMEX Percent of Total Volume: 6.58%
********
Percent Electronic
CBOT: 66/10%
CME: 74.08%
CME Eurodollars: 82.53%
CME Live Cattle: 1.32%
CME Currency Products: 81.43%
CBOT Soybeans: 4.83%
CBOT Options: 4.62%
CME Options: 8.04%
Volume
OneChicago Volume: 32,374
Eurex
Euronext.liffe Eurodollar Volume: 45,697
CBOE Futures Exchange Volume: 1280
Market Share
CBOT 100 oz. Gold Volume: 793
NYMEX 100 oz. Gold Volume: 61,132
CBOT Share: 1.28%
CBOT 5000 oz. Silver Volume: 123
NYMEX 5000 oz. Silver Volume: 10,422
CBOT Share: 1.17%
CBOT Mini Gold Volume: 729
CBOT Mini Silver Volume: 158
CME Emini Russell 1000 (100X) Volume: 4114
Eurex
NYBOT Mini Russell 1000 (50X) Volume: 1052
CFE Mini Russell 1000 (100X) Volume: 0
CME Emini Russell 2000 Volume: 106,501
Eurex
CFE Mini Russell 2000 Volume: 369
Notes: OncChicago traded 18,500 Home Depot contracts yesterday by EFP.
Liffe Eurodollar Over-Under
Liffe/Globex: 3.77%
Liffe/CME: 31.4%
Regards,
John J. Lothian
Publisher
John Lothian Newsletter
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Disclaimer: The John Lothian Newsletter is a product of John J. Lothian & Company, Inc. The opinions expressed are strictly the opinion of John Lothian, and not necessarily those of his employer, 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. Security futures are not suitable for all customers.
Futures and options trading involve risk. Past results are no indication of future performance.
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