Yesterday, we spoke with CFTC and Congress about how new regulation coming out of Washington would affect traders. We also sat down with former CFTC Chair Sharon Brown-Hruska, now a vice president in NERA’s securities and finance practice. Brown-Hruska says that while it’s justified for the CFTC to crack down on illegal forex operations, the agency’s current proposal to limit leverage in OTC forex to 10:1 “overshoots the mark.”

Continue reading ‘From Washington: Get ready, new regs coming’ »

Today I saw the following two headlines: “Bank Sees Economic Link Between Commodity Prices” and “Speculation and Speculators don’t cause oil price swings.”

Oddly enough both stories were citing the same study produced by analysts with JP Morgan.

Continue reading ‘Make sense of this’ »

By now you have all heard that Federal Reserve Board Chairman Ben Bernanke said that the recession is probably over following a speech last week.

Those words probably don’t mean a lot to those who have lost their jobs or those who will soon lose their jobs as the economy continues to shed jobs, albeit at a slower pace than in the heart of this recession.

Continue reading ‘Ben, put your rep where your mouth is’ »

The Financial Times reported today that the Federal Reserve Bank of New York is “aggressively hiring traders” to manage its growing securities portfolio.

The New York Fed implements the Fed’s monetary policy and according to the FT plans to increase the staff in its markets group to 400 by yearend. That is up from 240 at the end of 2007. And no wonder, the Fed has been purchasing fixed income securities at a record pace, doubling its holdings to more than $2 trillion in the last year according to the FT.

Continue reading ‘Ten bid on two — $2 trillion that is’ »

Apparently, no where. In looking at the latest financial data for futures commission merchants that must be filed on a monthly basis, it seemed the amount in overall customer seg funds had dropped about $5 billion from the previous month (June data filed by July 31). But an inside the numbers look shows some surprises: A year ago, the total customer seg funds was a whopping $169 billion for the same period verses $138 billion in 2009. That certainly shows erosion in customer funds, which can be a rough gauge of customers in the market. But to give more perspective, for the same period in 2007, total customer seg funds were $115 billion, while a year earlier they were $106 billion. The summer months typically show a dip, and this year was no exception. Where were FCMs last fall when markets and companies were going off the charts? November 2008 had total seg funds of $166 billion. Overall all, discounting a few billion here and and a few billion there, the industry still has grown dramatically over the past couple years, at least according to the financial data filed into the Commodity Futures Trading Commission.

As if picking on oil speculators wasn’t enough, now high-speed traders are under the spotlight. The rumor is so called “flash” orders get preference to everyone else. Well Joe Ratterman, chairman and CEO of Bats Trading wasn’t having any of that and posted an e-letter explaining his company’s position.  In it he throws down the gauntlet: if everyone else eliminates flash trades, his company would also. Let’s see how many bites he gets.

The Dow Jones Indexes’ mid-year economic outlook broke down into a discussion over the hedge exemption afforded swap dealers and index traders who hedge their cash positions in the futures markets.

Despite a Commodity Futures Trading Commission (CFTC) study released last September that disputed consistent and relentless arguments that speculators caused last year’s spike in crude oil, several members of Congress have persisted in pinning the blame on the large index funds that track various commodity indexes. There are several efforts to take away the hedge exemption that allows index traders hedging their cash exposure to commodity markets with futures to trade beyond speculation limits.

Those blaming speculators for price volatility would like to limit hedge exemptions to the traditional commercial participants who actually make or take delivery of a commodity.

Continue reading ‘Are you a real bona fide hedger?’ »

Perhaps it’s satiric humor, but today’s Borowitz Report’s lead story seems close to the truth.  The headline is, “Goldman Sachs in talks to acquire Treasury Department.” The tongue-in-cheek story discusses why Goldman, which in reality hit record profits during its period of receiving U.S. TARP money, was looking to purchase the U.S. Treasury Department. One person in the “story” noted:

Mr. Hestron said the only challenge facing Goldman in completing the merger “is trying to figure out which parts of the Treasury Dept. we don’t already own.”

Maybe it isn’t real news, but seems very close to Goldman’s very cozy relationship to the U.S. government.

Monday morning Bernie Madoff received a 150-year sentence for operating an estimated $65 billion Ponzi scheme, the maximum sentence he could have received from the U.S District Court. Hundreds of scathing comments are flowing into blogs and other news venues spewing venom at Madoff for his incredible crime.

We would like to see some of this anger reserved for the agencies whose job it was to regulate Madoff.

Continue reading ‘Madoff gets maximum’ »

We recently received a letter from a reader challenging something we had written regarding the performance of managed futures in 2008. The reader cited a study highlighted in a popular business magazine entitled, “Fooling Some of the People All of the Time: The inefficient Performance and Persistence of Commodity Trading Advisors.”

The timing seemed odd as the study, which was put out by the Yale International Center for Finance, came out in October in the midst of one of the best years for CTA performance in the last two decades.

Continue reading ‘Bad timing or odd timing?’ »