FRANKFURT—The European Central Bank appears to be doing its part to help Greece reduce its crushing debt burden by transferring profits from its Greek bond holdings to euro-zone governments. There is just one problem: It remains far from clear that all this money will wind up in Athens. By handing over its profits to national governments, the ECB is simply adhering to its long-standing rules. But it has no control over how Spain, Italy and others use their share of the billions they stand to gain from the ECB's €50 billion ($66 billion) in Greek bond holdings. The ECB is expected to make a substantial profit on the bonds because it purchased them at a steep discount on the open market, and now it appears these bonds will be repaid in full.
Tuesday, February 21, 2012
Greece Left Holding the Short End of the Stick?
FRANKFURT—The European Central Bank appears to be doing its part to help Greece reduce its crushing debt burden by transferring profits from its Greek bond holdings to euro-zone governments. There is just one problem: It remains far from clear that all this money will wind up in Athens. By handing over its profits to national governments, the ECB is simply adhering to its long-standing rules. But it has no control over how Spain, Italy and others use their share of the billions they stand to gain from the ECB's €50 billion ($66 billion) in Greek bond holdings. The ECB is expected to make a substantial profit on the bonds because it purchased them at a steep discount on the open market, and now it appears these bonds will be repaid in full.
A key reversal for corn
Corn futures staged a key reversal in Tuesday’s after testing an important resistance level. Autochartist has been tracking the development of a large Triangle chart pattern as an emerging trade opportunity on the 240-minute time interval. The key reversal suggests it may be time for another move lower in the near term as the pattern approaches completion.
Is This The Golden Age of Natural Gas?
The world is in the midst of a natural gas revolution. Even the sober International Energy Agency refers to a scenario it calls a “golden age of gas”. If such optimism proves right, the implications would not only be far greater than those of the eurozone’s painful dissolution, but would also be economically positive. Never forget that ours is a civilisation built on cheap supplies of commercial energy. The economic rise of emerging countries is bound to make the demand for commercial energy increase dramatically in the decades ahead. Gas matters.
VIX Futures Reach A 19-Month High: A Bullish Sign?
Futures traders are pricing in the biggest increase in U.S. equity hedging costs since 2010 after the Standard & Poor’s 500 Index rose within 2 points of erasing last year’s slump. April futures on the Chicago Board Options Exchange Volatility Index closed at 25.10 yesterday, or 6.91 points higher than the level of the gauge, according to data compiled by Bloomberg. The gap widened to 6.98 points on Feb. 17. The last time two-month futures were that high in relation to the index known as the VIX was July 2010. The S&P 500 has surged 24 percent since Oct. 3 on optimism Europe will resolve the debt crisis. Now, traders are increasing hedges to protect against losses, according to Dominic Salvino, a specialist on the CBOE floor for Group One Trading.
25 Proven Strategies For Trading Options On CME Group Futures
Robert Charles & Co., L.P. is pleased to offer you the CME Group publication "25 Proven Strategies for Trading Options on CME Group Futures". Each of the strategies is explained in four sections:
- When to use
- Profit characteristics
- Loss characteristics
- Decay characteristics
Dubai Exchange Investment Doubled By CME
The CME Group announced on Tuesday that it would increase its stake in the Dubai Mercantile Exchange, delving deeper into a Middle Eastern oil trading business it helped create. CME, the giant exchange based in Chicago, said it would increase its holdings to 50 percent from 25 percent as part of a recapitalization plan. The exchanges did not disclose the terms of the deal on Tuesday.
Ethanol Follows Corn Lower
Ethanol declined the most in three weeks as corn fell on signs that demand for the grain may ease. The biofuel dropped 1.4 percent. Corn futures decreased for the first time in three days on speculation that near-record supplies of ethanol will reduce purchases of the biggest U.S. crop, the primary ingredient in U.S. production of the alternative fuel. “Ethanol followed corn,” Dan Flynn, a trader at PFGBest in Chicago, said by telephone. “Ethanol prices are down due to the big break in the corn market.”
MF Global And The Shame And Blame Game
MF Global was a Broker-Dealer/ FCM that speculated in highly leveraged sovereign debt with their proprietary funds. At some point they used their customer segregated accounts to support their proprietary positions. The result was a bankruptcy filing on Oct. 31 that has caused massive hardship to their customers and wreaked havoc on the futures industry. I've spent a great deal of time talking to and listening to people about what went wrong at MF Global and even more time talking to and listening to people about what is wrong with the futures industry. There is a lot of anger and finger-pointing. I recognize that much of the criticism is emanating from those who have lost money. While I sympathize with all those who haven’t yet recovered their funds, I feel it is important to set the record straight and point out some of the realities.
Greece plan flawed
This chart, from the European Commission’s debt sustainability analysis of Greece, has been doing the rounds today. I posted it last night, and it got picked up by Joe Weisenthal as his chart of the day; it’s a very striking visualization of the degree to which the Greece bailout plan lies somewhere between optimistic and delusional. I’m happy to say that Reuters was the first organization to get its hands on this analysis. At 4:21 EST, we ran our exclusive story, by Jan Strupczewski in Brussels, with the headline that Greek debt would still be 160% of GDP in the European Commission’s downside scenario. Jan took the 2,800-word analysis, and its wealth of charts and tables, and boiled it down into a 965-word story which was avidly read by news consumers around the world.
Crude complex at a nine month high
Feb. 21 (Bloomberg) -- Gasoline rose as oil traded near the highest price in nine months after euro-area finance ministers agreed on a second bailout for Greece. Futures touched a nine-month high as crude gained as much as 2.1 percent. European finance ministers approved 130 billion euros ($173 billion) in aid for Greece by tapping into European Central Bank profits and coaxing investors into providing more debt relief to shield the region from a default.
Crude complex at a nine month high
Gasoline Futures Rise as Oil Climbs to Nine-Month High on Greece - Businessweek
Feb. 21 (Bloomberg) -- Gasoline rose as oil traded near the highest price in nine months after euro-area finance ministers agreed on a second bailout for Greece. Futures touched a nine-month high as crude gained as much as 2.1 percent. European finance ministers approved 130 billion euros ($173 billion) in aid for Greece by tapping into European Central Bank profits and coaxing investors into providing more debt relief to shield the region from a default.
Corn Gets Hammererd
All it took was one good rain in Argentina and corn is down 15 cents per bushel to $6.26 as noon approached on the Chicago Board of Trade. Corn prices had been supported by reports of hot, dry weather during the South American growing season. But a good rain during last weekend damped demand in the futures pits. The Board of Trade said “reports of decent rainfall over Argentine growing areas over the weekend put the corn market on the defensive this morning, and more than offset what was seen as a positive tilt to outside market forces.”
S&P 500 Cheap Compared To Bonds
The Standard & Poor’s 500 Index is approaching the cheapest level ever compared with bonds as Federal Reserve Chairman Ben S. Bernanke’s zero-percent interest rates drive investors and companies from cash.
Update from Trustee to MF Global Forex Clients
UPDATE TO FORMER MFGI COMMODITIES CUSTOMERS WHO TRADED ON FOREIGN EXCHANGES
| Date: | February 20, 2012 |
At present, the vast majority of funds secured for US commodities customers who traded on foreign exchanges remain abroad under the exclusive control of UK Special Administrators. All foreign affiliates of MF Global Inc. that received funds from customers of MF Global Inc. agreed to secure and protect those funds as required by Commodity Futures Trading Commission Rule 30.7 (“CFTC Rule 30.7”).
The Trustee would like to assure former MF Global Inc. commodities customers who traded on foreign exchanges that he is pursuing those funds vigorously and is taking the necessary steps to bring those funds under his control so that they can be returned to customers.
- On January 6, 2012 the Trustee filed claim forms (for voting purposes only) with the MF Global UK Special Administrators. Among other things, the forms provided information supporting MF Global Inc.’s claim to $639,918,174 in client funds held by MF Global UK pursuant to CFTC Rule 30.7 (the “30.7 Funds”).
- The UK Special Administrators preliminarily objected to the classification of a significant portion of these 30.7 Funds as being either client money or client assets under relevant Financial Services Authority (FSA) rules.
- The Trustee actively sought and secured a seat as a client representative on the MF Global UK creditors’ committee. The Trustee has executed a Nondisclosure Agreement as regards his participation on the committee. The Trustee intends to participate vigorously on the committee.
- The Trustee continues to negotiate for the prompt return of all 30.7 Funds directly with the Special Administrators and their legal counsel.
- In a report filed with the UK Court on February 3, 2012, the UK Special Administrators asserted that the 30.7 Funds were not, at the time of insolvency, segregated as either client assets or client monies under applicable FSA rules. Accordingly, the Special Administrators have further asserted that the Trustee’s claim for the 30.7 Funds should be admitted only as a general creditor claim. The Trustee disputes the Special Administrators’ position that an agreement to secure client funds pursuant to CFTC Rule 30.7 does not require client funds to be segregated under the FSA rules or that such property would not be regarded as segregated under a proper interpretation of UK law in light of the circumstances and the dictates of European requirements as well as principles of international comity.
- The Trustee is actively engaged in discussions with the UK Special Administrators as both parties work toward resolving this dispute. However, the Trustee cannot now estimate how long these negotiations will take or whether they can be resolved without the need for litigation, and it is unknown when he will be able to make distributions to former commodities customers who traded on foreign exchanges.
- The Trustee has retained the firm of Slaughter & May as his principal English legal advisors, as well as a team of English barristers. If negotiations do not prove fruitful, the Trustee is prepared to litigate his claim.
A tale of two risk managers
Three months after MF Global became the eighth largest bankruptcy in U.S. history, Michael Stockman and Michael Roseman – the firm’s current and former chief risk officers, respectively – testified before the House Financial Services Committee. They detailed a contentious reporting relationship to Chairman and CEO Jon Corzine, stirring several more unanswered questions in the process. Henri Feuga, Head of Global Risk and Compliance Systems and a Senior Vice President at MF Global from October 2008 until November 2011, did not testify, but provides a more candid distinction of the roles of the two risk officers. “The reality is that Jon Corzine let go of Mike Roseman because he was not happy that the guy was criticizing his excessive risk taking,” Feuga says.
Things Are Swinging In Turkey As Currency Swap Agreement Signed With China
China, Turkey signs currency swap deal - Boston.comANKARA, Turkey—China and Turkey on Tuesday set aside differences on how to deal with the raging violence in Syria and signed a three-year currency swap deal worth $1.6 billion (euro1.2 billion) to enable bilateral trade in local currencies. Chinese Vice President Xi Jinping and Turkish President Abdullah Gul oversaw the signing of the agreement, which can be extended, between the People's Bank of China and Turkey's Central Bank. The leaders did not make any statement during the ceremony, but Turkish leaders were widely expected to relay their growing concerns over the violence in neighboring Syria.
Bonds down ahead of two year note auction
TOKYO, Feb 21 (Reuters) - Treasuries dropped in Asia on Tuesday as officials in Europe clinched a deal on a Greek bailout and ahead of three U.S. debt auctions this week.
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