June 28, 2005

 

Lead Commentary

 

Onward to the IPO

 

The CBOT has received more than one expression of interest for a business combination.  The market says the CME is one of the expressers.  If they were not, I would think 20 South Wacker would fall into the Chicago River.  Meanwhile, we all know what the topic of conversation will be over in London for the FOW Derivatives & Securities World London event held at the Barbican.

 

I maintain my position that the best future for the CBOT is as a publicly traded independent entity.  I maintain that we don’t know what the value of the exchange is and won’t until the CBOT completes its initial public offering and shares begin to trade on the NYSE or Nasdaq.  Or ArcaEx???   Was the CME worth its IPO price of $35?  The CBOT building is full of traders.  They know the value in seeking an open and transparent auction for what they are willing to part with.  I am not convinced CBOT members are willing to part with control of the exchange at this time. I don’t believe the CBOT members are ready for new masters.  While the Board of Directors has to consider any “combinations” and “expressions” they receive prior to the IPO, I expect the political forces that push for any of these deals will be inwardly focused, i.e. what is the best combination that continues the status quo for the trading floors. 

 

I also maintain that an initial public offering price is not the same as a market clearing price that would be necessary to buy enough shares in the exchange to have a controlling interest.  The CBOT has also adopted what appears to be a Poison Pill, though this was previously mentioned in their other filings.  But here is their latest filing, an 8-K, http://www.sec.gov/Archives/edgar/data/1161448/000119312505132043/d8k.htm.

 

I am interested to hear who the players are, but if I were to guess between a “Brave New World” and “More of the Same,” my money is on more of the same.  I say onward to the IPO.

 

~ John J. Lothian

 

Lead Stories

 

CBOT approached on possible merger

The Chicago Board of Trade (CBOT) on Tuesday said it had been approached by a number of unnamed parties about a possible merger and would consider them "as part of a broader review of strategic alternatives".

The development comes only a week after members the CBOT approved a plan to make an initial public offering, ending the exchange's 158 years as a member-owned club.

http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=FT&Date=20050628&ID=4925190

 

**** FT Story on MSN.com.  Jeremy Grant is the reporter. 

 

CBOT receives offers for 'business combination'

Unnamed entities express interest in exchange

By Kate Ryan

CBOT Holdings Inc., parent of the Chicago Board of Trade, said this morning that it has received “expressions of interest” from unnamed entities that would like to enter a “business combination” with the exchange.

The overtures were non-binding and unsolicited, according to a statement by the exchange.   CBOT directors will weigh the offers along with other alternatives, including the exchange’s planned $150 million initial public offering, acquisitions, or a sale of the exchange, according to the statement. 

http://chicagobusiness.com/cgi-bin/news.pl?id=16949

 

**** I think Kate Ryan of Crain’s was first to publish this story.

 

CBOT Holdings, Inc. Receives Expressions of Interest in a Business Combination with the Company

CBOT Holdings, Inc. announced today that it has recently received unsolicited, non-binding expressions of interest in a business combination with CBOT Holdings, Inc.

http://www.cbot.com/cbot/pub/cont_detail/0,3206,1036+29101,00.html

 

CBOT considers 'combination' offer

By Mark Skertic

The Chicago Board of Trade's parent company has received offers for "business combinations," although CBOT Holdings Inc., has provided no details on what the proposals entail.  The offers come as the Board of Trade finalizes plans for an initial public offering, a move designed to raise $150 million at $33 to $36 a share.

http://www.chicagotribune.com/business/chi-050628cbot,1,2810968.story?coll=chi-business-hed

 

The Market is Never Wrong

CHICAGO MER EXC A (NYSE:CME) Delayed quote data 

 

Last Trade: 267.85

Trade Time: 2:40PM ET

Change:  12.35 (4.83%)

http://finance.yahoo.com/q?s=cme

 

**** It should be noted though that the CBOT press release said they have received “expressions” of interest.

 

Chicago Stock Exch. names president

Will also retain her current position as general counsel

By Alison Granito

The Chicago Stock Exchange promoted its general counsel, Ellen Neely, to president.

Ms. Neely spent the past six years as general counsel — a position she will retain — and played the lead role in the demutualization of the exchange. From her new post, she will oversee the implementation of the exchange’s new trading model, approved by the board of governors in June.

http://chicagobusiness.com/cgi-bin/news.pl?id=16946

 

Calyon Hires Russ Rausch as Head of N. American eBrokerage Sales

Calyon Financial Enters into a Strategic Software License Agreement with Trading Technologies

CHICAGO, June 28 /PRNewswire/ -- Calyon Financial Inc. is pleased to announce that it has entered into a strategic software license agreement with Trading Technologies International, Inc. ("TT"). Due to strong hedge fund demand, Calyon Financial has decided to add to its client offering TT's innovative front-end and fast architecture as well as its API and FIX solutions that allow clients to customize their trading systems. TT's system will further expand Calyon Financial's ability to address its clients' needs for efficient access and execution on global derivative markets.  In conjunction with this new relationship with TT, Calyon Financial has hired Russ Rausch as Head of eBrokerage Sales for North America. Russ, who was most recently Executive Vice President, Global Support and Services for TT, is generally regarded to be one of the leading experts on electronic trading issues in the futures industry. Russ' knowledge and experience with TT's product and the needs of its professional trader clientele, combined with his broad industry experience, will be a significant asset in enhancing Calyon Financial's next generation service offerings.

http://biz.yahoo.com/prnews/050628/nytu034.html?.v=11

 

***** Congratulations to Russ Rausch on his new position.  He has been a very valuable contributor to TT’s operations and success during his tenure with them and Calyon has made a great hire of one talented, classy guy.

 

FTSE GLOBAL MARKETS JULY/AUGUST FEATURES  

Cover Story: BNP - the Rule of 80

The Investment Services Report

Junk Bonds take Centre Stage

How the Jumbo took Flight

Long Bonds gain Favour

Smoothing the Path for Ultra Long Bonds

CME Sets New Business Benchmarks

http://www.ftse.com/globalmarkets/pdfs/gm8_part1.pdf

http://www.ftse.com/globalmarkets/pdfs/gm8_part2.pdf

 

**** CME story in part2.  Caution 3 MB download of latest edition of FTSE Global Markets Magazine.

 

CME Becomes First Overseas Derivatives Exchange to Open Telecommunications Hub in Asia

http://www.cme.com/about/press/cn/05-89SingaporeHub13740.html

 

CME and Goldman Sachs Partner To Conduct Economic Derivatives Auctions

Goldman Sachs and CME announced today that they will partner to enhance the auctions for economic derivatives, based on key U.S. and European economic indicators, through integrated clearing and trading solutions.

http://biz.yahoo.com/bw/050628/285494.html?.v=1

 

LIFFE Receives Approval To Offer Direct Electronic Access From Singapore

http://www.exchange-handbook.co.uk/news_story.cfm?id=53677

 

NYSE Sets Records For Daily Share Volume, Crossing Session II Volume

http://www.nyse.com/press/1119869203151.html

 

Dubai Gold, Commodities Bourse To Offer Gold Futures

DUBAI (Dow Jones)--Dubai Gold & Commodities Exchange plans to start trading gold futures in November as it starts its bid to become the world's second largest precious metals bourse, officials said Tuesday.

DGCX, a joint venture between the Dubai government, Multi Commodity Exchange of India and Financial Technologies India Ltd. (526881.BY), will roll out silver futures in December, gold and silver options in the first quarter of 2006 and other commodities contracts on fuel oil, steel and freight rates before 2007, said DGCX Chairman David Rutledge.

http://sg.biz.yahoo.com/050628/15/3t74o.html

 

Sale of Canadian Securities Institute will allow tighter focus on SRO mandate

As part of its effort to reform regulation, the Investment Dealers Association of Canada is planning to sell its educational arm, the Canadian Securities Institute, and suggests that it will entertain governance reform of its own.

http://www.investmentexecutive.com/client/en/News/DetailNews.asp?Id=29405&IdSection=144&cat=144

 

German regulator gives in-principle OK for potential Deutsche Boerse bid for LSE

FRANKFURT (AFX) - The German Cartel Office said it has given in-principle approval for a potential merger between Deutsche Boerse AG and the London Stock Exchange PLC. Despite having abandoned its original bid plans, the German exchange operator had sought regulatory approval for an offer for the LSE in case its shareholders decide to re-enter a bidding contest for the London exchange at a later

http://www.iii.co.uk/news/?type=afxnews&articleid=5336855&subject=companies&action=article

 

Deutsche Boerse to compile CEO candidate short-list by mid-August - report

FRANKFURT (AFX) - Deutsche Boerse AG is to compile a short-list of candidates for the post of chief executive by mid-August, Financial Times Deutschland reported, citing unnamed supervisory board sources.

http://www.iii.co.uk/news/?type=afxnews&articleid=5336605&subject=companies&action=article

 

Environmental Trading News

 

Ethanol trading bodes well for future

Ask someone how much unleaded gasoline is selling for in their community, and they can probably tell you within a few pennies to the gallon. Ask about the world price of crude oil, and you still may get an answer because crude oil prices are now part of business news every day.

http://www.newsdemocratleader.com/articles/2005/06/28/news/farm_news/fnews03.txt

 

Exchange & ECN News

 

Coveted MTS to operate in China

MTS, the operator of electronic bond trading platforms that is currently the target in a fierce takeover battle, has taken the first step into China by signing an agreement with the Shanghai Stock Exchange.

The two parties signed a strategic partnership in which they agreed to work towards combining MTS's European bond market model with the "distinctive domestic requirements necessary to create an electronic reference market for China", the two groups said in a statement yesterday.

http://news.ft.com/cms/s/c54826b6-e770-11d9-a721-00000e2511c8.html

 

Deutsche Börse adds low-latency feed

Deutsche Börse has expanded its real-time data feed offering with CEF alpha, a low-latency feed developed for automated trading applications. In response to customer demand from banks, financial institutions and hedge funds for access to ultra-fast market data, Deutsche Börse has developed CEF alpha, a special version of its CEF, to provide access to market data from Eurex and Xetra trading platforms.

http://www.bankingtech.com/ipi/bankingtech/indextemplate.jsp?pageid=article&contentid=20017305226

 

Week 7 CME EFP and CME SLEDS Testing

http://www.cme.com/clearing/clr/clradv/13728.html

 

Announcement Of Audit Trail Class On July 13, 2005

http://www.nymex.com/jsp/shareholder/notice_to_member.jsp?id=ntm257&archive=2005

 

Spot Month Procedures on the Eve of First Notice Day

http://www.nymex.com/jsp/shareholder/notice_to_member.jsp?id=ntm255&archive=2005

 

Cotton Web Presentation  Fri. July 8, 2005 @ 8:30am

http://www.nybot.com/cotton/cottonforumjuly05.htm

 

Pacific Exchange To Trade Nine New Options

http://www.pacificex.com/news/press/press-2005/press_05_nine_2.html

 

Philadelphia's Own Benjamin Franklin to Ring the Opening Bell on Friday, July 1

http://www.phlx.com/news/pr2005/05pr062805.htm

 

London Stock Exchange's CRE expands in Europe

http://www.londonstockexchange.com/en-gb/about/Newsroom/pressreleases/2005/creexpands.htm

 

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/dig062705.txt

 

UK's FSA fines Citigroup 14 mln stg

Britain's Financial Services Authority said on Tuesday it had fined the world's largest bank Citigroup 13.96 million pounds ($25.44 million) for failing to control its bond trading business effectively.

http://news.yahoo.com/news?tmpl=story&u=/nm/20050628/bs_nm/financial_citigroup_fine_dc_1

 

FSA fines Citigroup £13.9 million (€20.9mn) for Eurobond trades

http://www.fsa.gov.uk/pages/Library/Communication/PR/2005/072.shtml

 

Citigroup Pays $25 Million to Settle U.K. Bond Probe (Update2)

June 28 (Bloomberg) -- Citigroup Inc., the world's biggest bank, will pay 14 million pounds ($25 million) to settle an investigation by the U.K. securities regulator into a series of European government bond trades that roiled markets last year.  The bank must forfeit the 9.96 million pounds in profit made from the Aug. 2 bond trades and pay a 4 million-pound penalty, the Financial Services Authority said in an e-mailed statement today. Citigroup still faces probes in Italy, Belgium and Portugal.

http://www.bloomberg.com/apps/news?pid=10000087&sid=aslFZ3fmClG4&refer=top_world_news

 

Restitution not the business of a securities commissions, says BCSC

Role of regulators is one of guidance

http://www.investmentexecutive.com/client/en/News/DetailNews.asp?Id=29403&IdSection=144&cat=144

 

IDA calls for one self-regulatory body for investment industry

Single SRO would increase investor confidence and enhance industry efficiency and competitiveness, says IDA CEO Joe Oliver

http://www.investmentexecutive.com/client/en/News/DetailNews.asp?Id=29391&IdSection=144&cat=144

 

SIA President Lackritz's Statement On The SEC's Mutual Fund Board Of Directors Rule 

http://www.sia.com/press/2005_press_releases/04254898.html

 

National Cease Trade Order Database finds new home [CSA]

http://www.bcsc.bc.ca/release.asp?id=2611

 

NASD Cracks Down on Broker-Dealers Again

15 broker-dealers fined for preferential treatment of mutual fund companies. June 13, 2005- The NASD has fined 15 broker-dealers more than $34 million in total for directing brokerage in exchange for preferential treatment for certain mutual fund companies.

http://www.financial-planning.com/pubs/fpi/20050613102.html

 

U. S. Commodity Futures Trading Commission And The Committee Of European Securities Regulators Publishes Final Communiqué On Common Work Program To Facilitate Trans-Atlantic Derivatives Business

http://www.exchange-handbook.co.uk/news_story.cfm?id=53684

 

Managed Futures - Managed Funds

 

Retail investors fuelling industry growth

Even unsophisticated investors returning to fund market, says IDA’s Russell

http://www.investmentexecutive.com/client/en/News/DetailNews.asp?Id=29400&IdSection=144&cat=144

 

Disclosure the best course in compensation planning: Conference Board

Investors more concerned about the way the levels are determined than the actual amounts

http://www.investmentexecutive.com/client/en/News/DetailNews.asp?Id=29376&IdSection=137&cat=137

 

Hedge fund manager salaries jump

NEW YORK (Reuters) - Hedge fund managers earned an average of almost $1.2 million in total compensation in 2004, according to a survey published Tuesday, as average compensation packages rose for all financial professionals.

http://money.cnn.com/rssclick/2005/06/28/markets/fund_compensation.reut/index.htm?section=money_latest

 

June 2005 “Market’s Measure” - Preliminary Report - A Monthly Report From Dow Jones Indexes And STOXX Ltd. On The Performance Of U.S., European, Asia And Other Global Stock Market Indexes

 - Dow Jones Industrial Average Posts 1.68% Loss In June, European Stocks Gain 2.88%, Asia Rises 0.7% And World Equities Fall By 0.21% - Oil & Gas Sector Posts Biggest Gain For June In U.S., Europe, Asia & Worldwide - Industrials Sector Takes The Hardest Hit In June In U.S

http://www.exchange-handbook.co.uk/news_story.cfm?id=53685

 

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

 

FFastFill names new U.S. president

FFastFill, Inc. said Australian Hamish Purdey took over as president of U.S. operations for the London-based maker of electronic trading and risk management software.

http://chicagobusiness.com/cgi-bin/news.pl?id=16942

 

**** Another newsletter reader doing well.

 

Citigroup Adds More Than 30 to Energy-Trading Unit (Update1)

June 28 (Bloomberg) -- Citigroup Inc., the world's biggest financial-services firm, hired more than 30 people including former Enron Corp. executive Vincent Kaminski at its Houston energy-trading unit to rebuild a business once offered for sale.

http://www.bloomberg.com/apps/news?pid=10000103&sid=atD6IbF.nCRk&refer=us

 

Mack moves closer to Morgan deal

NEW YORK (MarketWatch) -- Discussions with John Mack involving the leadership of Morgan Stanley have picked up, and people involved in the talks expect a deal to be clinched in the coming days, according to published reports Tuesday.

http://www.marketwatch.com/news/story.asp?guid=%7B6697AA9B-D9BD-4BEC-A24B-EDBBF1F3619D%7D&siteid=google

 

Morgan Stanley benefits from Mack return

http://www.businessweek.com/ap/financialnews/D8B06B5G2.htm?campaign_id=apn_home_down

 

Odlum Brown CEO is new chairman of IDA

Sherwood promises to respond to investor demand for protection

http://www.investmentexecutive.com/client/en/News/DetailNews.asp?Id=29404&IdSection=144&cat=144

 

Market Risk – US Investors More Optimistic About Real Estate than Stocks

http://www.garp.com/risknews/newsfeed.asp?Category=6&MyFile=2005-06-28-11066.html

 

American companies find manners still matter

GOSHEN, N.Y. (Reuters) - Business etiquette coach Barbara Pachter likes to tell the story of a financial executive who, dining with a potential client, licked his knife clean at the end of the meal.

"It was a $30 million dollar lick," she said at a recent etiquette seminar in Goshen, New York, referring to the value of the deal the executive lost by offending the potential customer.

http://news.reuters.com/newsArticle.jhtml;jsessionid=B2OPCDBDJAO4QCRBAE0CFFA?type=reutersEdge&storyID=8915760

 

Lehman Brothers Plans To Expand Tech Products

The "commoditization of the electronic trading space" is one of those phrases that make David Cushing, managing director of execution services analytics for Lehman Brothers, cringe.

http://www.institutionalinvestor.com/default.asp?page=1&SID=521154&ISS=16363&type=8

 

GAIN Capital Group Announces Strategic Expansion Initiatives; Adds Senior Managers, Plans New York Presence; Online Foreign Exchange (FOREX) Dealer Poised For Continued Growth from Institutional and Individual Investors

BEDMINSTER, N.J.--(BUSINESS WIRE)--June 28, 2005--GAIN Capital Group, a leading non-bank provider of foreign exchange (FOREX) trading and asset management services, today announced new senior management appointments and expansion plans to meet sustained growth within the firm's rapidly expanding institutional and retail Forex business.

http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20050628005654&newsLang=en

 

John's Comments

 

From my good friends at Futures Magazine:

 

Futures Magazine July 2005 Preview

 

Futures Magazine features in its July issue: its mid-year economic outlook, the ISE's continued attack on exclusive licensing agreements for index options, the opening up of China's futures markets to foreign brokers, the TT/Patsystems agreement as well as in depth features on how to optimize trading systems without curve fitting, how to limit your risk while writing options and selecting CTAs. For a complete list of articles, and links to some of those listed here, go to http://www.futuresmag.com/library/contents.html

 

*********

 

Brent Crude Watch

 

IPE Brent Volume: 86,589

NYMEX Brent Crude Volume: 3528

NYMEX Percent of Total Volume: 3.93%

 

Yesterday’s numbers were backwards for IPE and NYMEX volume.  

 

********

 

Scorecard Sidelined due to market conditions.

 

 

Regards,

 

John J. Lothian

Publisher

John Lothian Newsletter 

www.johnlothiannewsletter.com

 

Futures Brokerage - Business Intelligence   John J. Lothian President- Electronic Trading Division The Price Futures Group, Inc. 141 West Jackson Blvd., Suite 1340A Chicago, IL 60604 jlothian@pricegroup.com johnlothian@johnlothian.com IM: LothianJohnJ http://www.pricegroupetd.com tel: tel2: fax: mobile: +1 312-264-4350 +1 800-713-0215 +1 312-264-4399 +1 312-203-5515

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