Archive for May, 2008

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That settles it?

Tuesday, May 20th, 2008

Bloom et al have settled with Sentinel Management Group’s bankruptcy trustee Frederick J. Grede for $10.7 million, which, considering that the trustee was seeking $350 million, doesn’t’ seem like a lot of money.

According to the settlement, $10.7 million “represents substantially all the assets of the Settling Defendants, other than assets which are or are claimed to be exempt.” As a stipulation of the settlement, the defendants will not challenge bankruptcy petitions by or against Sentinel Investment Group (SIG), parent company, and waives interest in any tax refund due to SIG.

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Sentinel trustee goes after Alaron founder

Tuesday, May 20th, 2008

Sentinel Management Group’s bankruptcy trustee Frederick Grede filed suit against Joel W. Greenberg, founder of the Alaron Trading Group, in an effort to retrieve $82,000 in dividend and redemption payments Greenberg received as a preferred shareholder from Sentinel, the fraudulent futures commission merchant. According to the suit, Greenberg is the only one of the Sentinel Investment Group (SIG) shareholders to have not returned or agreed to return the payments.

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One floor

Monday, May 19th, 2008

If you see anyone wandering along Wacker Drive in downtown Chicago with a confused look on their face and a mustard yellow jacket on, you may want to direct them to the Chicago Board of Trade building as one era ended on Friday and a new era began today as CME Group completed the integration of its trading floors to the CBOT building.

Friday was the last day of open outcry trading at the CME’s 20 S. Wacker Drive location. As of today all open outcry trading in futures and options on futures took place at the CBOT. The last sector to switch was meats, the cattle and hog markets that made the CME famous prior to the age of financial futures.

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I’m OK—you’re OK

Friday, May 16th, 2008

The Intercontinental Exchange (ICE) put out a statement this morning praising Congress for the Passage of the Farm Bill, which included the CFTC Reauthorization Act of 2008.

Yesterday we indicated that the May 9 statement criticizing Congress had to do with Sen. Diane Feinstein’s (D-Calif.) announcement on May 2, that her measures to close the so called “Enron loophole” would be included in the final Farm Bill conference report, it did not. Instead it was referring to the Oil Trading Transparency Act and Consumer-First Energy Act of 2008, according to an ICE spokesperson, neither of which were included in the Farm Bill. Provisions in those two bills, among other things, would require the CFTC to apply U.S. futures regulation to non U.S. exchanges and set higher margin levels for crude oil futures contracts.

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Bad day for ICE

Thursday, May 15th, 2008

Perhaps it was a sign of things to come.

The Intercontinental Exchange (ICE) had to halt trading on all markets at 9:45 central today due to a “power issue at the ICE Primary Data Center” in Chicago.

Later the Senate passed the Farm Bill by a veto proof margin. The Bill included the CFTC Reauthorization Act of 2008, which included a measure added by sponsor Diane Feinstein (D-Calif.) to eliminate the so called “Enron loophole,” and add quite a bit of regulatory oversight to ICE’s over-the-counter energy platform.

Feinstein has been fighting for years to give the Commodity Futures Trading Commission (CFTC) added regulatory authority over energy markets. In a release last week after the measure was added to the Bill, Feinstein said, “This Bill puts all the significant energy trades on electronic platforms within the regulatory confines of the CFTC and will impose limits on the size of trader’s positions to prevent excessive speculation.”

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Crushed ICE

Thursday, May 15th, 2008

Due to a power outage in the Chicago data center this morning, The Intercontinental Exchange has stopped all trading in all markets.

“The ICE system is shut down. It just stopped. They didn’t notify us or anything,” says cotton trader Jurgens Bauer. “With 20 seconds left, they say ‘we are closing in 45 time.’ This is at 44 and 20 seconds. You can’t even call customers! They say there is a power outage in Chicago. I’m sorry, but ICE is located in Atlanta,” he says. “This is another good reason to have open outcry as a back up.”

Representatives at the ICE were not available for immediate comment, but they did post this message on their home page. “There has been a power issue at the ICE Primary Data Center. All Markets are closed and all orders have been suspended. Please check http://www.theice.com for further updates and market status. The current ETA is 1 hour. Further updates will be provided by the “Market Status” section in the lower right of www.theice.com”

According to an ICE spokesperson, trading is expected to resume at 12:45 eastern time.

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Seller’s remorse 2

Wednesday, May 14th, 2008

Yesterday we noted how opposition to the purchase of the New York Mercantile Exchange (Nymex) by CME Group has been building among Nymex members. One member told Bloomberg News that exchange Chairman Richard Schaeffer had confided that he didn’t support the current price for the deal.

While Nymex and Schaeffer have not officially denied the report, the Form 8K filing on March 20 by Nymex noted that Schaeffer along with President and CEO James Newsome and several large corporate shareholders had signed a “Voting and Support Agreement” with the CME in connection to the merger.

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Energy costs drop in April: Really?

Wednesday, May 14th, 2008

There has been growing angst in the Country. People are worried about falling housing values and are having to deal with dramatically higher food and fuel costs. That the government measures inflation without perhaps the two most vital elements—food and energy— is not only non-sensical but given the current state of affairs, dangerous.

People are getting mad. Perhaps there are times when citizens accept, even like, being lied to by government; now is not one of them. So when during a time when gas prices have surpassed the $4 level for a great deal of Americans, the Bureau of Labor’s Consumer Price Index report for April showing that the cost of energy has dropped based on seasonal adjustments could be the last straw. That is right lower energy cost this April according to the CPI.

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Seller’s remorse

Tuesday, May 13th, 2008

The move to one all-encompassing U.S. futures exchange with the purchase of the New York Mercantile Exchange (Nymex) by CME Group may have hit a snag as numerous Nymex shareholders have expressed displeasure with the CME Group’s offer for Nymex.

Like every parent who thinks their child is the brightest and prettiest, I guess every exchange thinks that they are the best and worth more than the market prices them at.

Futures reported in the May issue about this displeasure as one member had filed suit charging the CME offer undervalues Nymex and another group of members have petitioned for a special meeting (scheduled for early June) to go over Nymex bylaw 311G, which provides for payments to members when electronic volume reaches 90%. This rule would be null once the deal closes but is directly related to the payout members are to receive for their trading right.

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Energy reg rumble continues

Monday, May 12th, 2008

The Wall Street Journal reported today that the House and Senate are set to hold hearings on speculation in the energy markets in May and June, setting their sights on the role of hedge funds and investment banks in driving up the price of oil. Crude futures on the New York Mercantile Exchange (Nymex) set a new record on Friday, closing at $125.96. The hearings news comes after a Senate panel questioned Commodity Futures Trading Commission (CFTC) Acting Chairman Walt Lukken on speculation in the energy markets and proposals by the Senate last week to increase federal oversight in global energy markets. The Intercontinental Exchange released a statement condemning the proposals and Nymex said the proposals would result in “a significant step backward in transparency and market integrity.” A few years ago, a study by CFTC economists found no correlation between speculation in energy and volatility and or higher prices. At the Senate hearing last week, Lukken said the CFTC found no evidence that speculators were responsible for driving up the price of oil.

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