May 20, 2005
Lead Stories
Greenspan: Economy to Weather Oil Prices
The economy, which had hit a temporary soft patch from surging energy prices, probably will weather the situation well, Federal Reserve Chairman Alan Greenspan suggested Friday.
Soybeans in
The Chicago Board of Trade, the world's largest grain market, began trading South American soybean futures today as
http://quote.bloomberg.com/apps/news?pid=10000086&sid=apUwOVqaP3r4&refer=news_index
SEC Chairman Comments on Exchange Mergers
William Donaldson, chairman of the Securities and Exchange Commission, testified before a Senate committee amid concern about the potential impact of the market-shaping mergers on competition and investors. As the NYSE plans to merge with all-electronic rival Archipelago Holdings Inc. and the Nasdaq finalizes its $934.5 million purchase of Instinet Group's electronic trading network, Donaldson said the mergers will combine with a sweeping new trading rule, narrowly approved by the SEC last month, to create a more competitive marketplace that should benefit investors.
http://accounting.smartpros.com/x48325.xml
SEC sees 'heated' post-merger Wall Street
Stock markets will stay competitive despite consolidation from proposed mergers, said the top U.S. securities regulator on Thursday, adding he expects the Nasdaq Stock Market will soon win formal government recognition as an exchange.
http://www.reuters.com/financeNewsArticle.jhtml?type=businessNews&storyID=8548949
CLEARING CORPORATION ANNOUNCES STOCKHOLDER ELECTION RESULTS
The Clearing Corporation ("CCorp") held its Annual Meeting of Stockholders yesterday. The following directors were elected to serve new terms.
http://www.clearingcorp.com/press/pressreleases/050519electionresults.html#P1_0
Patsystems settles TT patent claim
Electronic screen dealing firm Patsystems has agreed to settle a patent infringement lawsuit brought by
The suit was filed yesterday in the United States District Court by TT, alleging that Patsystems has infringed certain of TT's patents. In a brief statement, Patsystems says the lawsuit will be disposed of once the settlement has been approved by the Court.
http://www.finextra.com/fullstory.asp?id=13701
ADM quits Nymex Dublin pit
Global brokerage ADM Investor Services International (ADM) has pulled out of New York Mercantile Exchange (Nymex)'s Dublin Brent open outcry exchange, effective 20 May, choosing to trade Brent only on International Petroleum Exchange (IPE)'s electronic platform.
http://www.fow.com/articles/foweek_article.asp?storyCode=3346
***** The wave continues…
Cargill, Crystalsev and Fluxo Agree to Form JV to Invest in Açucareira Corona
Cargill announced today that it has agreed in principle to invest in the Açucareira Corona sugar mills through a joint venture with Crystalsev and Fluxo. The joint venture would encompass Açucareira Corona’s Bonfim and Tamoio mills, the company’s lands, long-term leases and customer portfolio as well as approximately 7,000 employees.
http://www.cargill.com/news/news_releases/050519_sugarmillcorona.htm#TopOfPage
Archipelago CEO sees melding of trading systems
The chief executive officer of Archipelago Holdings Inc., which last month agreed to a merger with the New York Stock Exchange, said on Friday that he sees an eventual convergence of the two institutions' trading systems.
http://chicagobusiness.com/cgi-bin/news.pl?id=16561
Hong Kong sees derivatives market boost from FXI China 25 Futures/Options
Hong Kong Exchanges and Clearing Ltd said the local derivatives market may get a significant boost when a new China-related index derivatives product starts trading on Monday. The new product -- FXI China 25 Futures and Options -- is in addition to the wide range of China-related products currently trading on HKEx's securities and derivatives markets.
http://www.iii.co.uk/news/?type=afxnews&articleid=5301873&action=article
Exchange & ECN News
LSE paid takeover advisers £2 million a month
THE London Stock Exchange has been paying fees of £2 million a month to a range of professional advisers helping the exchange with this spring’s twin takeover approaches.
http://business.timesonline.co.uk/article/0%2C%2C8209-1619816%2C00.html
The future of the London Stock Exchange may be temporarily on ice amid scrutiny from market regulators about bids from Euronext or Deutsche Boerse, but the race for European equity supremacy is ready to heat up again.
http://www.washingtonpost.com/wp-dyn/content/article/2005/05/19/AR2005051900870.html
CBOT Strike Price Notice, May 20, 2005
http://www.cbot.com/cbot/pub/cont_detail/0,3206,1032+28322,00.html
CBOT Trading
http://www.cbot.com/cbot/pub/cont_detail/0,3206,1032+28326,00.html
Applications for Regularity in South American Soybeans
http://www.cbot.com/cbot/pub/cont_detail/0,3206,1032+28329,00.html
Coffee Rebagging Statistics- May 19, 2005
http://www.nybot.com/releases/pressRelease.asp?releaseID=877
CBOE - Important Web Site Maintenance Notification
http://www.cboe.com/AboutCBOE/Special/SiteMaintenance.aspx
Regulatory News
The U.S. Commodity Futures Trading Commission (CFTC) announced today the filing of an enforcement action in the United States District Court for the Western District of Oklahoma against Randy Steve Lanier, of
http://www.cftc.gov/opa/enf05/opa5077-05.htm
FSA creates new accounting and auditing sector team
http://www.fsa.gov.uk/pages/Library/Communication/PR/2005/052.shtml
Cost of regulation study gathers pace
http://www.fsa.gov.uk/pages/Library/Communication/PR/2005/053.shtml
CFTC Weekly Advisory
http://www.cftc.gov/opa/adv05/opawa21-05.htm
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/dig052005.txt
John B. Hoffmann and Kevin J. Mccaffrey Settle Enforcement Actions Based on Their Failure to Supervise Jack Grubman
http://www.sec.gov/news/press/2005-78.htm
Settled SEC Actions Against Hedge Fund Advisers for Illegal Short Sale Activity
http://www.sec.gov/news/press/2005-77.htm
New NFA Brochure Available
http://www.nfa.futures.org/investor/introNFA/introNFA.pdf
Managed Futures - Managed Funds
Blenheim Capital Hires Senior Management Team
Blenheim Capital Management today announced that Joseph F. Esposito and James P. Wohlmacher have joined the firm as senior vice presidents. Willem Kooyker, Blenheim’s founder and president, said the hires allow Blenheim to enter a new phase of growth.
http://www.hedgefundlounge.com/modules.php?name=News&file=article&sid=450
Hedge Funds Play the Heavy
Royal Air Force pilots have long blamed gremlins for technical foul-ups; in a way, it's easier on morale to blame mythical creatures than to seek out the real culprit. Today, when things go wrong in markets, Wall Street has its own version of the gremlin: the mysterious hedge fund, believed to be roiling everything from the Dow industrials to the oil market. Like the RAF gremlin, it's a myth.
MAPAs winners announced
MARHedge and Allenbridge Hedgeinfo last night announced the winners of the 2005 MARHedge Annual US Performance Awards (MAPAs).
http://www.marhedge.com/news/Cover.Hedge.asp?s=HedgeH-2005-05-18-16-52-56p1.htm#
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
Commentary: Indian regulator puts UBS in legal quicksand
UBS, which has been barred by
http://www.iht.com/articles/2005/05/19/bloomberg/sxmuk.php
JPMorgan Chase to Roll Out No-Swipe Card
JPMorgan Chase & Co. said Thursday it will offer a new credit card that allows users to pay for items by holding the card near a terminal instead of manually swiping it.
***** …and instead of having to enter your PIN code, you just wiggle your fingers in the air.
The Bond-Rating System Isn't Broken, Say Researchers
Is the fact that Moody's Investors Service was still touting WorldCom debt as "investment grade" just four days before the firm went bankrupt proof that the bond-rating system is broken? Not at all, argue the authors of a new research study, who say that "certified" bond-rating agencies such as Moody's and Standard & Poor's serve a highly specialized institutional clientele with needs that are markedly different from those of other investors.
http://www.institutionalinvestor.com/default.asp?page=1&SID=506639&ISS=14977&type=3
Other Voices
From email received today from Meg Bode, of Bode & Associates:
Alternatives TLC, a novel hedge fund training and learning center, has been formed and classes will soon be underway, according to Carol R. Kaufman, founder and chief executive officer.
Initially, Alternatives TLC’s focus is on operational concerns in the alternative investment industry such as accounting, compliance and strategic planning. The company will provide on-site instruction addressing these concerns for established alternative investment businesses and traditional money management firms that choose to diversify into alternatives.
“Alternatives TLC aims to add value by providing client companies with the ability to hire and train personnel whose skill sets will appreciate faster, with a substantially reduced ramp-up time,” explained Ms. Kaufman. “Additionally, by creating a proper training and support atmosphere, employee proficiency, loyalty and retention should increase -- attributes that also enhance investor confidence.”
Ms. Kaufman built a previous company, Organizer Systems, Inc., which was acquired by SunGard in 2002.
For more background please visit www.alternativestlc.com.
John's Jon’s Comments
Confidential to “Needing Solution”
I loved seeing that mysterious Ann Landers heading back when I was a kid, an answer-without-a-question to an unknown somebody posted in the newspaper instead of her just sending a letter back. Ah, innocence. Anyway, my comments last week about the cessation of 30-year bond issue being an unwise move at a time when the wheels have fallen off the debt cart, prompted a request to actually provide a solution rather than simply adding my voice to the chorus of people pointing out a problem.
I promised that I’d try to come up with an answer to that, and after thinking about it for a while, the truth is, I don’t HAVE a solution. To reduce the debt would require a major change in the country’s core fiscal policy. To change policy that dramatically would require a completely different mindset in the national government. To change the mindset would require that the public demand a new way of thinking and enforce it in every election season. And to make the national population want to reduce its debt load, especially while we are being reassured firmly yet vaguely that it isn’t really necessary… search me… I don’t have a clue how you’d accomplish that.
Coming up with an academic economic solution is relatively easy, compared to trying to convince tens of millions of voters that they need to ignore bland reassurances in favor of actually thinking, swallowing hard and taking responsibility for the current mess.
Changing Gears – South American Soybeans Friday Fact
Moving away from something that sounds dangerously like politics -- a wearisome topic – DID YOU KNOW…
Soybean production in
The race is on! South American soybean production is expected to continue to grow more rapidly than in the
And for the record: No, I didn’t know that either.
And Finally, The Winds of Change Whisper in the Market Data Arena
(Be warned -- this is a shameless plug for my current project.)
John made me promise not to get too geeky or long-winded if I talked about what I was working on these days, so don’t worry, I am going to behave.
Lots of people use historical market data, for lots of different reasons. There are a number of people out there who use it to test some aspect of trading performance, whether to demonstrate a mechanical system, or to test methods against times in the market that were known to be difficult to trade.
The problem is, people run out of new historical data very quickly. It’s hard to make history faster than one day at a time. This lack of new information inevitably leads either to overoptimization as historical data are overused, or insufficient understanding about potential trading performance in the market under trade.
Wouldn’t it be great if there were some way to generate an endless supply of market data that looked and felt just like the real thing? That’s what I thought, too.
Some people make randomly generated data, but for most applications that’s (in my opinion) useless or worse. Random market bars don’t look like the market being tested, except by accident, and there’s no way to control the kinds of behavior that the market is producing.
Other people are deep into chaos theory or other methods to try and derive mathematical rules for market motion, but so far there’s been no commercially viable success there. It’s a daunting task to create rules for the unpredictable, and frankly I don’t think my head is quite the right shape to participate in those efforts.
Since random is useless and chaos is unproductive, I had to come up with a different approach, and that’s what I did. I’ve created a way to measure and quantify market events in real markets. I avoided the whole issue of creating mathematical models for market motion, and instead looked at what the market itself displayed for behavior. Daily market ranges, bar placement, frequency and size of things like trends and congestion patterns… all that and more leads to a nice, comprehensive picture of what a given market typically and atypically does.
I’ve also created a nifty piece of software that generates market data. It uses the modeling parameters to tailor its output to look like the real market under test. It welds together random decision making with a dynamic where-are-we-now overseer to make sure that overall the market data ends up behaving the right way, while still being totally unpredictable in how the bars actually come out.
The software can not only generate an endless supply of behaviorally-similar data, but it can also generate endless variations on REAL historical data! How? I can hand the program a script of past events in the real market, and tell the program to re-create those events. Over and over, the program can produce sequences of data that look eerily familiar, but are not the same. If you’re worried about whether you’ve overoptimized a mechanical system to limited market data, this is a great way to find out. Don’t alter your system’s parameters and change what you’re testing; alter the market underneath the system.
This is a whole new way of thinking about data generation and market motion. There are several commercial applications I’ve thought of for this idea, from educational tools to providing data for system testing and simulated trading platforms, and I’m sure I’ve missed some.
Defender Capital is looking for a company out there who can work with me to take on this idea and prototype, and create a suite of programs to overrun the conventional data providing and simulated trading world. If you want to learn more and take a closer look, feel free to contact me! You can send me email at jonm@defendercapital.com , or call me at 503-235-8913.
Thanks for your time in reading my comments, and for reading John Lothian’s newsletter. I’ve enjoyed my stint as guest editor, and though my culling of stories lacks the practice and panache of Mr. L, it has been lots of fun to do. I wish you all success, and hope I get a chance again in the future to inflict my point of view on the reading public.
Regards,
Jon Matte, Editorius Usurpius
…on behalf of,
John J. Lothian
Publisher
John Lothian Newsletter
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