August 8, 2005

 

Lead Stories

 

Was Someone Squeezing Treasuries?

A STORM swept through the United States Treasury market in June, creating big losses at banks and brokerage firms and bringing back memories of the infamous short squeeze by Salomon Brothers in 1991 that ultimately brought the firm to its knees.  Widening GapThe recent turmoil is a troubling sign that the pools of capital at hedge funds and investment firms have grown so enormous that they can easily swamp the government securities market, one of the world's deepest, most liquid and heavily used financial markets. The upheaval also involved a short squeeze - financial-speak for what happens to short-sellers when they are forced to stanch their losses in a buying spree that sends prices higher and higher.

http://www.nytimes.com/2005/08/07/business/yourmoney/07gret.html

 

CBOT warned on futures contracts change

By Jeremy Grant in Washington and Jennifer Hughes in New York

The Chicago Board of Trade could cause "lasting damage" to one of its key markets and disruption to pension and hedge funds after the exchange changed some of the terms of its Treasury futures contracts, the main futures industry body has warned.  The Futures Industry Association, whose members include trading arms of Wall Street banks, has taken aim at the exchange for limiting the size of investors' positions in the last 10 days of trading before US Treasury contracts expire.  The FIA says this forces a change on market participants before trading positions have been closed out - that is, where there is still "open interest".

"An exchange should not adopt unilateral changes to the terms and conditions of contracts in which there are open positions, absent a market emergency," the FIA said in a letter to the CBOT, seen by the FT.

http://news.ft.com/cms/s/aaf025d6-07a8-11da-a742-00000e2511c8.html

 

***** I will say this, as a market observer and news junkie; the CBOT Board of Directors has done a lousy job of explaining the necessity of this change in terms of the Treasury futures.  Beyond any management-PR-legalese explanations, the Board of Directors should have been visible and vocal about the reasons this change in terms was necessary.  Forget the quiet period excuse; this is unrelated to any change in ownership or structure.  Is there a flaw in the Treasury futures contract structure?  What does “cheapest to deliver” really mean?   Where is the exchange “leadership” on this issue?

 

NASDAQ ANNOUNCES INTENTION TO WITHDRAW FROM ITS PLAN

New York, August 8, 2005 — The Nasdaq Stock Market, Inc. (NASDAQ: NDAQ) today announced its intention to withdraw from the Intermarket Trading System (ITS) Plan in 2006 upon implementation of Regulation NMS. NASDAQ’s withdrawal from the ITS plan has been approved by its Board of Directors and will be filed with the Securities and Exchange Commission for approval.  As a result of the market structure changes brought about by Regulation NMS, the 25-year old Intermarket Trading System can now be replaced with a more efficient, technologically advanced inter-market linkage. Through the acquisition of BRUT LLC in 2004, NASDAQ implemented a high-speed, low-cost linkage system that interconnects other U.S. exchanges and is specifically designed to accommodate the trading activity of the future.   “Regulation NMS enables NASDAQ to select a more effective, high-speed private linkage over the older, less-flexible ITS Plan. This announcement represents a critical step forward in modernizing the trading of U.S. equities,” said Chris Concannon, Executive Vice President, NASDAQ Transaction Services.

http://www.nasdaq.com/newsroom/news/pr2005/ne_section05_078.stm

 

Nasdaq aims to pull out of Intermarket system-WSJ

NEW YORK, Aug 8 (Reuters) - The Nasdaq Stock Market Inc. (NDAQ.O: Quote, Profile, Research) wants to withdraw from a system that links major U.S. stock markets, the Wall Street Journal reported on Monday.

http://today.reuters.com/news/newsArticleSearch.aspx?storyID=103197+08-Aug-2005+RTRS&srch=nasdaq

 

ICE and Nymex to end dispute 

By Kevin Morrison in London

The New York Mercantile Exchange and its rival the Intercontinental Exchange, owners of the world's two largest energy...

http://news.ft.com/cms/s/f02e7eae-07a8-11da-a742-00000e2511c8.html

 

**** Online FT subscription required.

 

Eurex 'set to close' US operations

Eurex, the German-Swiss derivatives exchange, was today reported to be set to close its US-based operations after a 17-month fight. A decision is expected next month. 

http://www.efnmail.co.uk/r/217523/MjM5OTY6ODg0OSAg/

 

**** Online efinancialnews.com subscription required.  This story does not make sense.  Why would Eurex close the US operations when Eurex US is about to launch FX futures on September 23?  Is there really that much acrimonious politics going on at Deutsche Boerse in Frankfurt that they can’t see the positive impact Eurex US has had on Eurex AG’s business?  Can’t they see they are undermining the U.S. effort by playing politics with it?  Is it really such a political slugfest at Deutsche Boerse that they will harm the Eurex franchise and its customers to win the battle for control of Deutsche Boerse?  Where is the “leadership” at Deutsche Boerse?

 

Stock option plans draw new fire from foes

NEW YORK (Reuters) - Here's some fresh ammunition for critics of companies that dole out stock options to top executives -- a new study has found a link between handsome option grants and financial shenanigans at businesses.   When large option packages are handed out to chief executives, there's a greater likelihood that accounting misrepresentations will be uncovered at the company, according to the University of Minnesota study.

http://news.reuters.com/newsArticle.jhtml;jsessionid=MCGZPLTRLX10YCRBAEZSFFA?type=reutersEdge&storyID=9290883

 

Deutsche Börse Expands Range of ETFs Available in the XTF Segment

Three new ETFs tradable as of Tuesday/ XTF segment with the largest selection of international ETFs

http://deutsche-boerse.com/dbag/dispatch/en/listcontent/gdb_navigation/press/10_Latest_Press_Releases/Content_Files/13_press/pm_news_xtf_0808.htm

 

Futures in jute bags soon

Calcutta, Aug. 5: Futures trading in gunny bags is likely to begin on the National Multi-Commodity Exchange (NMCE) from next year. NMCE offers a basket of 60 commodities, including raw jute and gunny bags, for online trading on the Ahmedabad-based exchange.

http://www.telegraphindia.com/1050806/asp/business/story_5079096.asp

 

ETrade agrees to by rival HarrisDirect

http://www.businessweek.com/ap/financialnews/D8BRLHQ80.htm?campaign_id=apn_home_down&chan=db

 

ETrade to Buy HarrisDirect for $700 Million

http://www.nytimes.com/reuters/business/business-financial-etrade.html

 

**** Consolidation is a 13 letter word and 3 plus 1 is 4.

 

BMO Financial Group to Sell Harrisdirect to E*TRADE FINANCIAL Aggregate proceeds CDN$910 million

TORONTO, Aug. 8 /CNW/ - BMO Financial Group (TSX, NYSE: BMO) today announced that it has signed a definitive agreement to sell Harrisdirect to E(*)TRADE FINANCIAL Corp. for a purchase price of US$700 million, payable in cash. In addition, at closing, Harrisdirect will distribute approximately US$50 million to BMO Financial Group, resulting in aggregate proceeds of approximately CDN$910 million (US$750 million). The transaction, which is subject to normal regulatory clearances, is expected to close by BMO's fiscal year-end in October 2005.

http://www.newswire.ca/en/releases/archive/August2005/08/c7919.html

 

Japan futures trading volume slump 

NEW YORK – Trade on Japan's seven commodity futures exchanges slumped 33 percent in July, the Japan Federation of Commodity Exchanges said.

About 8.3 million commodity futures contracts traded last month, compared with 12.4 million a year earlier, the Tokyo-based group said in a statement dated July 29.

http://www.biz-day.com/read/commodities/07_aug_05/ix4z4-c/japan_futures_trading_volume_slump.htm

 

Still Life of the World Markets

Global finance is now a thick network, with multiple circuit breakers. Yet these same links may prove too weak to contain the next crisis.

http://msnbc.msn.com/id/8852254/site/newsweek/

 

**** This just in, the sky is falling.

 

China to move slowly on currency hedge instruments

China will gradually encourage foreign exchange forwards and other financial derivatives as its currency regime becomes more flexible, but the fear of speculation will force the government to move slowly, according to Chinese officials and bankers.

http://news.ft.com/cms/s/7048698e-07a8-11da-a742-00000e2511c8.html

 

Arab Exchanges Open to Women

Middle Eastern stock markets are on a tear. But in a twist for the region's conservative, male-dominated societies, women are starting to play a big role in the bull run.

http://online.wsj.com/article/0,,SB112346659712707242,00.html?mod=home%5Fpage%5Fone%5Fus

 

**** Online WSJ subscription required.

 

CBOT Reparat Sonitem

 

New Issues, Fresh Hopes

The 2005 IPO market, uninspiring thus far, nevertheless has a few potential winners waiting for their debuts.

Google galvanized investors when it went public last August, and it has tripled in price since then. Among today's fledgling public stocks, which ones might be the great performers of tomorrow?  ....Another prospect: CBOT Holdings, more familiarly known as the Chicago Board of Trade. The exchange, trafficking in commodities and financial futures, has been around since 1848. Two similar organizations that went public this year and have done well, rising 53% and 32% respectively, are the options-trading International Securities Exchange and the derivatives brokerage GFI Group.

http://www.forbes.com/home/free_forbes/2005/0704/086.html

 

Environmental Trading News

 

Special Report: London leads in carbon market

Trading in emission allowances has reached £40m a day and is set to grow rapidly, writes Angus McCrone

WHEN Dorothy Thompson arrives to start her new job near Selby next month, she will be in charge of an 850ft chimney and 12 enormous cooling towers — and also the hottest seat in one of the City’s fastest-growing financial markets.  That market is carbon emissions trading, and Drax Power, the company at which Thompson was appointed chief executive last week, is as big in carbon as Halifax is in mortgages.

http://www.timesonline.co.uk/article/0,,2095-1723941,00.html

 

20 million tons of CO2 traded on ECX/ IPE

After 15 weeks of activity, ECX CFI contracts traded on the IPE platform reached on Friday 5 August a total of 20,213,000 tons of CO2 allowances.

http://www.europeanclimateexchange.com/pages/page281.php

 

Ethanol plants gather steam, but at a price

The sweet, musty reek of fermenting corn and pure alcohol hovers over the towering distillery here, one of a rising number of farmland factories turning food into fuel. It sounds like the perfect answer to rising gas prices. And indeed, ethanol is a...

http://www.chicagotribune.com/business/chi-0508060261aug07,1,4065218.story

 

**** Free Chicago Tribune subscription required.

 

Exchange & ECN News

 

CBOT Strike Price Notice August 8, 2005

http://www.cbot.com/cbot/pub/cont_detail/0,3206,1032+29809,00.html

 

CORPORATE EVENT: Unocal Corporation (UCL)-Anticipated Adjustment Due To Proposed Merger

http://www.cme.com/clearing/clr/clradv/14694.html

 

Amendment to COMEX Rule 104.46, Reportable Requirements for Copper

http://www.nymex.com/notice_to_member.aspx?id=ntm319&archive=2005

 

Notice of Extension of Trading at Settlement Programs (TAS) for NYMEX Heating Oil and Unleaded Gasoline Futures Contracts

http://www.nymex.com/notice_to_member.aspx?id=ntm317&archive=2005

 

Amendments to NYMEX Rules 4.01 ("Customer Margins") and 4.03 ("Unsecured Loans")

http://www.nymex.com/notice_to_member.aspx?id=ntm316&archive=2005

 

Monthly Market Report July 2005

http://www.londonstockexchange.com/en-gb/about/Newsroom/Market+Reports/2005/mmrjuly05.htm

 

London Stock Exchange Avg Daily Trades +43%

0950 GMT [Dow Jones] London Stock Exchange (LSE.LN) July average daily trades rose 43% to 221,822 versus 154,546 a year ago, but size of trades and margins on them are falling so no corresponding uplift in revenues, says Bridgewell's Katrina Preston.

http://www.newratings.com/analyst_news/article_958415.html

 

Stock index options contracts whose last trading day approaches

http://www.ose.or.jp/e/news/0508/050808a.html

 

Winnipeg Commodity Exchange Market Report For July 2005

http://www.exchange-handbook.co.uk/news_story.cfm?id=54354

 

 

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/dig080505.txt

 

SEC Files Emergency Action to Freeze Proceeds of Alleged Insider Trading in Reebok Securities

http://www.sec.gov/news/press/2005-109.htm

 

Dutch regulator seeks probe into alleged insider trading at ING 

The Dutch securities regulator has asked the public prosecutor to probe alleged insider trading by staff at ING Bank, amid...

http://news.ft.com/cms/s/326f2346-07a8-11da-a742-00000e2511c8.html

 

SEC Examiners Peer Into Omnibus Oversight For First Time

The Securities and Exchange Commission is pressing fund companies for the first time on how they ensure that their policies such as those on redemption fees, breakpoints, market timing and other issues are being adhered to at distributors.

http://www.institutionalinvestor.com/default.asp?page=1&SID=569431&ISS=18622&type=8

 

Spitzer Seeks Dismissal of U.S. Regulator's Suit (Update2)

U.S. Aug. 7 (Bloomberg) -- New York Attorney General Eliot Spitzer sought dismissal of a case brought by a banking regulator, saying it attempts to strip states of their power to probe mortgage-lending practices at national banks.

http://www.bloomberg.com/apps/news?pid=10000103&sid=a3Az7AfInhFY

 

Director of SEC's Pacific regional office to leave

WASHINGTON (AFX) -- Sandra Harris, the director of the Securities and Exchange Commission's Pacific regional office, will leave the agency at the end of September, the SEC announced Monday. Based in Los Angeles, Harris's office oversees nine Western states.

http://www.iii.co.uk/news/?type=afxnews&articleid=5374170&subject=companies&action=article

 

CFTC taps Leiss as CIO

The Commodity Futures Trading Commission has chosen Wayne Leiss, currently chief of the federal financial systems branch in the Office of Management and Budget’s Office of Federal Financial Management (OFFM), to become the commission’s new chief information officer.

http://www.gcn.com/vol1_no1/daily-updates/36608-1.html

 

Managed Futures - Managed Funds

 

Hedge Funds: Fees Down? Close Shop

It looks as if more portfolios whose returns don't produce steep performance payments for managers are doing just that

http://www.businessweek.com/bwdaily/dnflash/aug2005/nf2005088_1711_db042.htm

 

Asia becomes haven for US hedge funds

All Financial Times NewsA growing number of US hedge funds are setting up offshore, especially in Asia, as the maturing industry becomes increasingly global and funds look beyond US borders in a bid to boost waning returns.

http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=FT&Date=20050807&ID=5023469

 

A Money Scandal That's Rocking Hip-Hop

GABRIELE T. SMITH seemed to carry an all-access pass to rap music's circles of power. Usually decked out in designer clothes, she vacationed with the music supercouple Jay-Z and Beyoncé in the Caribbean. She dined at Mr. Chow in Manhattan. She traveled in style to the N.B.A.'s All-Star game.  In fact, Ms. Smith had nestled so comfortably into the bling-encrusted embrace of the industry's heavyweights that she established herself as the money manager to the stars. At major investment houses and then through her own company, Premier Business Management L.L.C. in New York, Ms. Smith built a client list that included the president of the Def Jam Recordings label, rap stars like Fabolous and DJ Clue, and an assortment of wealthy young music executives.  These days, however, many of those same executives and artists are accusing Ms. Smith, a 35-year-old stockbroker and former talent scout, of running an elaborate hustle. In lawsuits filed against her and the banks where she maintained accounts, former clients say Ms. Smith stole more than $3 million, using some of their money to pay other investors and pocketing the rest.

http://www.nytimes.com/2005/08/07/business/yourmoney/07hip.html

 

August 2005 Alternate investment expert Morgan Stark talks about the nitty-gritty of investing in and managing hedge

Hailed by many as alternate investing and hedge funds guru, Morgan Stark, managing member, Ramius Capital, is widely recognised for his aptitude in selecting funds and fund managers.

http://www.zawya.com/story.cfm/sidZAWYA20050803081756

 

OPTIMATION INVESTMENT MANAGEMENT RECEIVES SIGNIFICANT ALLOCATION FROM CAXTON

Dr. Peter Matthews, managing partner, Optimation Investment Management, today announced the firm has signed an agreement with Caxton Associates under which it is intended that Optimation will manage a significant allocation from Caxton.  Monique Miller, Director of Caxton’s Strategic Quantitative Division, said:  “We are very happy to have concluded this deal with someone of Peter Matthews’ reputation, track record and proven quantitative skills.  We believe that Optimation’s strategies are ahead of the curve, combining high return potential, a low volatility profile and tremendous capacity across the world’s futures and foreign exchange markets.”  Optimation Investment Management is a registered CTA/CPO.  The firm develops its proprietary quantitative methods through a combination of research into the latest scientific findings in finance, intensive statistical simulation studies and state-of-the-art trade execution technology.  For further information, call:  Dr. Peter F. Matthews, Managing Partner, Optimation Investment Management LLC, 46175 Westlake Drive, Suite 100, Potomac Falls, Virginia 20165, (703) 773-7001

 

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

 

The Debate Over Doing Good

Some companies are taking a more strategic tack on social responsibility. Should they?

http://www.businessweek.com/magazine/content/05_33/b3947109_mz017.htm

 

Social Responsibility: 'Fundamentally Subversive'?

Economist Milton Friedman explains how companies are just serving their own interests when they serve the community

http://www.businessweek.com/magazine/content/05_33/b3947115_mz017.htm

 

Omens signal trial by fire for new Fed chief

The first chairman of the US Federal Reserve, Charles S. Hamlin, took office in August 1914, less than a week after Britain declared war on Germany. His successor two years later, W.P.G. Harding, had been in charge only eight months when the US entered the first world war.

http://news.ft.com/cms/s/1cbe5032-0616-11da-883e-00000e2511c8.html

 

Standard & Poor's Announces Changes In The S&P/TSX Venture Composite Index

http://www.exchange-handbook.co.uk/news_story.cfm?id=54355

 

SEIFFE: The Benefits of Corruption

…….Nevertheless, with lost industry, this month’s Southwest Airlines in-flight magazine ranks Chicago as America’s most underrated city. In an article that examines all sorts of underrated things--including the CBOT--Chicago appears as item number one.

http://www.illinoisleader.com/news/newsview.asp?c=27620

 

Ameritrade Makes Executive Changes and Realigns Organizational Functions

Ameritrade Holding Corporation today announced the realignment of certain management team functions and related changes to three executives' roles. The following organizational changes are effective immediately.

http://biz.yahoo.com/bw/050808/85483.html?.v=1

 

NinjaTrader Joins TT Partner Program

http://www.tradingtechnologies.com/news/050808_NinjaTraderJoinsTTPartnerProgram.pdf

 

Woman Eats 35 Bratwursts in 10 Minutes

SHEBOYGAN, Wis. - Sonya Thomas, at 99 pounds, gobbled her way to another speed-eating title over the weekend by attacking a Wisconsin staple - the bratwurst.

The woman known as The Black Widow on the competitive-eating circuit downed 35 brats in 10 minutes to win the first Johnsonville Brat-Eating World Championship. She edged out her nearest competitor by half a brat to win.  "I don't know where she puts it," spectator Sue Van De Kreeke said. "I got sick watching her."

http://www.phillyburbs.com/pb-dyn/news/1-08072005-524747.html

 

Trend toward foreign currency trading pays off for local firm

http://www.woodtv.com/Global/story.asp?S=3686079&nav=0RceczLx

 

John's Comments

 

Embattled Chicago mayor still thinking big 

By Jeremy Grant

For most of his 16 years as mayor of Chicago, Richard M. Daley has made a virtue out of thinking big. Mr Fitzgerald has...

http://news.ft.com/cms/s/02f97d72-07a9-11da-a742-00000e2511c8.html

 

**** Washington-based Jeremy Grant writing about Chicago’s embattled Mayor.

 

******

 

New Issue of FI Magazine

 

July/August issue featuring:

Algorithmic Trading: 4 Perspectives

Improving Market Efficiency: The Participants’ Perspective

Large Trader Reporting: The Great Equalizer

President's Message

Trading Volume: Interest Rate Futures and Equity Options Pace Global Growth

News Briefs

FCMs Ranked by Customer Equity

Product Profile--Copper Futures: The New Money and the Old

The Inbox

Prominent People

http://www.futuresindustry.org/fimagazi-1929.asp

 

******

 

Brent Crude Watch

 

IPE Brent Volume: 135,190

NYMEX Brent Crude Volume: 3580

NYMEX Percent of Total Volume: 2.58%

 

********

 

Chicago Electronic Trading Scorecard for August 5, 2005

 

Percent Electronic

 

CBOT: 63.24%

CME: 65.24%

CME Eurodollars: 82.01%

CME Live Cattle: 2.24%

CME Currency Products: 87.79%

CBOT Soybeans: 3.43%

 

CBOT Options: 5.55%

CME Options: 4.62%

 

Volume 

 

OneChicago Volume: 1684

Eurex US Volume: 2019

Euronext.liffe Eurodollar Volume: 5440

CBOE Futures Exchange Volume: 628

 

Market Share

 

CBOT 100 oz. Gold Volume: 1113

NYMEX 100 oz. Gold Volume: 56,427

CBOT Share: 1.93%

 

CBOT 5000 oz. Silver Volume: 338

NYMEX 5000 oz. Silver Volume: 21,213

CBOT Share: 1.57%

 

CBOT Mini Gold Volume: 1200

CBOT Mini Silver Volume: 775

 

Notes:

 

Liffe Eurodollar Over-Under

 

Liffe/Globex: .38%

Liffe/CME: .31%

 

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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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.

 

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