Archive for May, 2007

« Older Entries

Two’s company, three's a crowd and four is a mess

Thursday, May 31st, 2007

The latest twist in the battle for the Chicago Board of Trade occurred Wednesday morning as the Intercontinental Exchange (ICE) and Chicago Board Options Exchange (CBOE) announced that the two have entered an exclusive agreement regarding CBOE Exercise Rights as part of ICE’s proposed merger with the CBOT.

As part of the agreement, full CBOT members holding CBOE exercise rights would receive $500,000 in value for each right. The $500,000 payout will be split between the ICE and CBOE. Each exchange will offer $250,000 in cash to CBOT members holding rights or debt securities convertible into stock. On the ICE side that would be stock in the newly combined CBOT/ICE and on the CBOE side, common shares of CBOE after a demutualization. The agreement is contingent on the completion of a merger between the CBOT and ICE.

The package is worth up to $665.5 million, which is equal to the outstanding 1,331 exercise rights times $500,000. Only those CBOT full members eligible to use their exercise right qualify for the consideration. That means they must hold their Class B-1 membership, the exercise right privilege (ERP) and 27,338 Class A common shares. Those that hold the first two and have sold off stock can qualify if they purchase enough stock to bring them back up to the 27,338 threshold by a certain date.

After the most recent compromise between the CBOT and CBOE preceding the CBOT IPO, the ERPs were allowed to trade separately. The CBOE bought back 68 in a Dutch auction and retired those ERPs. Prior to yesterday’s announcement the most recent ERP sale was for $175,000, yesterday an ERP sold for $230,000 and the bid ask was $250,000 at $290,000.

As part of the agreement, ICE and CBOE also have agreed in principal to a broad commercial partnership where they will work jointly on technology, product development, and access to each exchange’s distribution.

The agreement puts pressure on the Chicago Mercantile Exchange, whose enhanced offer to the CBOT, which was unanimously approved by the CBOT board of directors, was still lower than ICE’s offer as well as the market price of the CBOT.

Why take less?

With the CBOT board of directors deciding to endorse the revised CME offer despite it not only being below the ICE offer but also the market price of CBOT stock, perhaps it was only a matter of time before a lawsuit was filed over the whole process. The CBOT has often been bogged down by time consuming expensive lawsuits as it has attempted to transition it business over the last several years.

(more…)

Tags: , , , ,
Posted in Buy outs | No Comments »

Dubai, Oman drop Platts

Wednesday, May 30th, 2007

I see the government of Dubai has (surprise, surprise) announced that it, like the Sultinate of Oman, will tie its export prices for crude oil to the Dubai Mercantile Exchange instead of to Platts. Any ideas on what this means for oil pricing???

Posted in International | No Comments »

Donohue comes in at #43

Tuesday, May 29th, 2007

With all the drama surrounding the Chicago Board of Trade sale to, well, who knows, we tend to forget the executives behind the curtain. In the latest listing of Crain’s Chicago Business Fortunate 100, two Chicago exchanges are represented. Craig Donohue, CEO of the Chicago Mercantile Exchange, came in 43rd on the list of the Fortunate 100, with total 2006 compensation of $4.7 million, which was about $1.7 million above 2005. His salary was listed at $850,000, with a $1.16 million bonus. This also included another $2.5 million in stock options. Donohue was definitely worth his weight in that gold as the exchange brought in $1.2 billion in revenues, with a market capitalization of $17.7 billion, while shareholders got a 39.4% return for the year. Across the loop at the Chicago Board of Trade, CEO Bernie Dan was ranked at 57, with 2006 compensation of $3.5 million in 2006 compensation, which appears lower than his total 2005 payout of $6 million. Dan has done even better for shareholders, getting them a 61% return for the year. Other industry players on the list include OptionsXpress former president and CEO John E. Carroll Jr., who resigned this April. He had a $2.6 million compensation in 2006. Not on the list yet: the InterContinental Exchange’s Jeff Sprecher. Who topped the list? Chairman and president of UAL Corp Glenn F. Tilton, who made $39.7 million dollars in 2006. His generals seems to have done well also, topping the list of highest paid non-CEOs. Obviously it pays to fly and it shows.

Tags: , ,
Posted in Roundups | No Comments »

OMX, Nasdaq, Dubai – and the return of Per Larsson

Tuesday, May 29th, 2007

Rumors of an imminent announcement by OMX and LSE were followed instead by an announcement from OMX and Nasdaq – specifically, that OMX had agreed to be taken over by Nasdaq for nearly $4 billion. The deal makes sense on two fronts – first, OMX has a network of exchanges across Northern Europe and the Baltic region that have done exceptionally well in light of the small numbers of listings generated in those countries. Second – and perhaps more importantly – because both OMX and Nasdaq have had designs on the London Stock Exchange. Nasdaq has a 30% stake in the LSE, while OMX is majority shareholder in EDX, the joint derivatives venture that OMX and LSE run in London.
But now new reports are surfacing of a counter-offer from Dubai International Financial Center (DIFC), a state-run business park in the United Arab Emirates that owns the Dubai International Financial Exchange (DIFE). The man in charge of DIFE: former OM boss Per Larsson, who had been laying low since being squeezed out of OM after it merged with the Helsinki Exchange to form OMX. He took the Dubai job last year.
Larsson had taken over from OM founder Olof Stenhammar in the 1990s, and was an early mover on scores of innovations that have since become mainstream – among them the clearing of OTC products, which is EDX’s core business…

Tags: , , ,
Posted in Buy outs | No Comments »

LSE and OMX: Deal in the Works?

Thursday, May 24th, 2007

Some interesting rumors out of London this week focus on speculation of an impending ‘closer cooperation’ between Scandinavian exchange operator OMX and the London Stock Exchange (LSE). The two already cooperate in managing the EDX derivatives platform, and both have been linked to takeover bids from NASDAQ – one real, one fictional. Specifically, NASDAQ owns a stake in the LSE and has made no secret of its desire for the operation, while last month both OMX and NASDAQ denied reports in a Swedish newspaper that NASDAQ had made an offer for the Scandinavian exchange operator.

The most recent speculation began Thursday, when Clara Furse reportedly made an unscheduled meeting with top OMX management. Details are sketchy — and unconfirmed — but developments bear watching…
(by Steve Zwick in Germany)

Tags: , , ,
Posted in Buy outs | No Comments »

RJO's new look

Tuesday, May 22nd, 2007

With the news that R.J. O’Brien & Associates, Inc. (RJO), one of the oldest private futures brokers, took on partners in an attempt to capture more market share as futures continue to display dynamic growth, the street was abuzz. The two private equity firms, Spectrum Equity Investors and Technology Crossover Ventures (TCV), together will hold a combined majority stake in the company, while the O’Brien family will retain a substantial minority ownership.

The restructured board will consist of current R.J. O’Brien Chairman John O’Brien, RJO CEO Gerald Corcoran, RJO President Colleen Mitchell, three representatives from Spectrum and three representatives from TCV, once the transaction is complete. Corcoran will take on the chairmanship upon close of the transaction.

Despite predictions that the private equity boom is near a bust, RJO CEO Gerald Corcoran and RJO President Colleen Mitchell, in an interview shortly after the announcement, said the move was positive and stressed that RJO will continue as they have but with more resources to execute their growth strategy.

Mitchell said, “It is an opportunity for us to continue the RJO legacy. We have been doing things well for 93 years and we anticipate taking our reputation and high level of client services and continuing to grow it in the U.S. and also internationally.”

That strategy will include possible acquisitions and a greater international presence.

Corcoran added: “We really want to expand our reach globally. Both in attracting new customers overseas as well as expanding our market share in the foreign futures market space.”

Corcoran points out that their new partners have a history of investing in successful tech companies.Some of the firms Spectrum and TCV are invested in include, RiskMetrics Group, Expedia, e-harmony and netfllix. Both have more than $4 billion in investments. “They really know how to invest in companies were technology is important to the success of the firm,” Corcoran adds.

The deal also raises the specter of an initial publics offering, though Corcoran says, there are no plans for one as yet. “An IPO has always been an opportunity for the O’Briens and it will remain an opportunity under the new structure but there are no immediate plans for an IPO. We could have done an IPO but we rather stay private and have the flexibility to run the business with a lot of oversight from the public markets.”

Corcoran told us he wants to see RJO move to the top 10 in Futures’ annual listing of Top Brokers, measured by customer segregated funds. “We want to be in the top 10 soon…We are totally psyched about this.”

Tags: , ,
Posted in Buy outs | 1 Comment »

Playing a merger arbitrage

Thursday, May 17th, 2007

One of the more innovative new product offerings in the futures space of late has been binary options. These products allow traders to take a position on possible events by a certain time period. They are valued from 0-100 and expire either at 0 or 100 depending on the outcome. They have been used to take positions on sporting events, political events and economic reports.

They are the basis of the Iowa Electronic market first began in 1988 and used on sports gaming sights but more recently are the basis for contract or proposed contracts on numerous regulated exchanges including Hedgestreet, the US Futures Exchange, the Philadelphia Board of Trade, the Chicago Board of Trade, the Chicago Mercantile Exchange and CBOE Futures Exchange.

Hedgestreet has just introduced a group on contracts based on mergers and acquisitions. Traders can take a position on whether a particular merger will close by a certain date. One of the contracts listed is on the possible merger of NYSE Euronext and the International Securities Exchange (ISE). Russell Andersson, co-founder and vice president of Hedgestreet, when asked if they had any inside information given the announced deal between Deutsche Borse and ISE, said, “We don’t know anything at all but we do think it is a possibility given the current discussion between Deutsche Börse and its shareholders. Hedgestreet is also listing a contract on whether a Deutsche Börse/ISE merger will be consumated.”

It is not even the first contract of its kind as the US Futures Exchange has already launched contracts on who will acquire the CBOT.

Andersson says that that this is a simplified way for retail traders to participate in the merger arbitrage strategy. He points out that they also can participate in what is called “Chinese Merger Arbitrage.” A typical merger arbitrage trade involves buying the stock of a company being acquired and selling the stock of the acquirer. In “Chinese Merger Arbitrage” you do the reverse after that spread has narrowed and you suspect a possible deal will unwind.

As we have learned recently no deal is final until the last “T” is crossed and “I” is dotted, so it may make sense to monitor these contracts.

Tags: , , ,
Posted in Mergers | No Comments »

Dry season means corn rocks

Tuesday, May 15th, 2007

“Two weeks ago, we were behind as far as putting the crops in the ground,” says Brian Cullen, a senior market analyst at New World Trading. Now, just weeks after the publication of the USDA’s planting intentions report, which indicated a total of 90.76 million acres of corn would go into the ground this spring, up 12 million acres from last year, only 78% of that is planted, roughly equivalent to the five-year average.

Not getting crops in the ground, and not getting rain, through the middle of May has made the market more volatile. July Corn futures ,which were as high as $3.96 per bushel on May 3, were as low as $3.54 per bushel a week later.

“And now we have another scarcity of rain,” Cullen says. “Even though we have the crops in the ground, without rain, they are not going to do anything.” He notes that to date, only 39% of the crop has emerged, only slightly higher than the five-year average of 36%. That could put pressure on supplies, driving corn futures up, especially with driving season upon us.

The question is, he says, is whether farmers will now scrap the crop in favor of soybeans, and if so, how big an affect it will have on the markets.

Tags: , ,
Posted in Markets | No Comments »

Refco motions denied

Tuesday, May 15th, 2007

U.S. District Court Judge Gerard E. Lynch of the Southern District of New York recently made a decision on motions to dismiss various charges against several key people at the former Refco.Some of the denied motions were brought by Phillip Bennett and Tone Grant; nothing surprising there. But some names are closer to the futures side of the business: Joe Murphy, former EVP of global marketing, former CFTC general counsel, Dennis Klejna who came on board as Refco general counsel in 1999 and EVP and COO William Sexton. In the decision Judge Lynch denied motions to dismiss several counts against Klejna, Murphy and Sexton. One note the judge made in his lively 87-page opinion was despite the access by the three to specific documents that may have raised red flags to the problems at Refco, they may not have been suspicious enough to investigate: “In this case, there certainly was a monster under the bed; the question was whether anyone had a reason to look there.” Yet in the end, the judge still had reason to believe they were involved enough in the Refco day-to-day activities to deny their motions to dismiss certain charges.
Download file

Tags: , ,
Posted in Regulatory/actions | No Comments »

The Greening of racing?

Monday, May 14th, 2007

Despite the enormously successful efforts to clear up Nascar’s image, you just can’t deny that the sports roots are steeped in corn liquor, as the early drivers like Wendell Oliver Scott and Ralph Earnhardt got their start running bootleg liquor across state lines in the prohibition days, testing the limits of their driving skills against each other and the police.

Now Indy racing is going back to its roots, but in a far more politically correct way. They call it the greening of racing, and they don’t call it corn liquor anymore. They call it ethanol.
Anyway, a decent size clutch of people gathered beside the Chicago Board of Trade this morning to see Indy race car driver Jeff Simmons, his 100 percent fuel-grade ethanol car and to hear about IndyCar’s transition to 100% fuel-grade ethanol in 2007. CBOT Chairman Charlie Carey was behind the podium supporting the ethanol fuel, especially as the CBOT is home to corn and ethanol futures.

Tags: , , , ,
Posted in Markets | No Comments »

« Older Entries