In the United States, all eyes are on the Federal Reserve (Fed). There are three big questions. When and how fast will the Fed begin tapering its asset purchases (QE exit)? Who will President Obama appoint to be the next Chair of the Fed? And finally, well into the future, when will the Fed abandon its near-zero target federal funds rate and start raising rates. A qualified answer to the QE exit question may come on September 18, when the Fed issues its press release from its FOMC (Federal Open Market Committee) meeting. Whatever tapering may be announced, though, its....
What Constitutes a Swap?
In a sense, introducing brokers act as gatekeepers to the futures and derivatives markets. Following the passage of the Dodd-Frank Act, certain OTC products which were formerly not regulated are now subject to the CFTC’s jurisdiction. Firms that deal with these products may need to be registered and the products traded may need to be cleared at an exchange. A customer may contact an introducing broker with a particular trade that it wants to make, but will probably not be concerned whether the trade is legally classified as a future, swap or forward. However, it will make a difference to....
Not a NIBA Member Yet? No Problem.
Are you planning on attending the NIBA fall conference in September, but youʼre not a member yet? No problem. You can join the Association when you register for the conference. Attendance at the event is complimentary for NIBA members. IBs and CTAs pay $150 per year. APs pay $75 per year. Also included in the IB and CTA membership is a subscription to the NIBA Journal, our online Newsletter and a listing in the online Broker Directory for the remainder of 2013. FCMs, Service Providers and others are urged to contact me directly. The NIBA membership meeting is more important....
Why Past Performance of a Conventional (60-40) Portfolio Is NOT Indicative of Future Performance: Part 2
As discussed in Part 1 of “Why Past Performance of a Conventional (60-40) Portfolio Is NOT Indicative of Future Performance”, the results of a conventional 60-40 portfolio over the last 30 years aren’t likely to repeat in the near future. Going forward, if the P/E ratio reverts to its long-term average of 16.4, corporate profits grow at their historical average of +4.70%, and dividends increase at the same rate as corporate profits (and the dividend payout ratio increases to its long-term average), stocks will appreciate at just 7.05% per year over the next decade. Here’s the arithmetic. Future returns from....
MF Global Trustee to Boost Distributions to Ex-Customers
MF Global Inc.’s former customers should get “significantly” increased distributions in coming months, and the goal is still 100 percent recoveries, the failed brokerage’s trustee said. Customers who traded on U.S. exchanges may get distributions starting in early September that would bring their percentage recoveries into “the high nineties” while customers who traded on foreign exchanges may get “in the sixties,” trustee James Giddens said in a statement today. “These further distributions are dependent on final approval of a motion by the trustee to confirm the allocation of property already received,” Giddens said. His projections assume that agreements with MF....
MF Global Agrees to Pay Customers 100% to Settle CFTC Suit
Last week, CFTC and MF Global Inc. agreed to a settlement whereby MF Global Inc. would pay restitution to its former commodity customers to bring them to a 100% return of their accounts. This restitution, which requires judicial approval, would likely involve the trustee sending out checks bringing both 4d domestic futures customers and 30.7 foreign futures customers to 100% toward the end of 2013. The trustee indicated in a consent order filed on the MF Global Inc. docket that the trustee will wait to receive a payment from the MF Global UK affiliate before requesting court authority to make....
NIBA Board of Directors Letter to Senate Committee
July 1, 2013 The Honorable Debbie Stabenow Chairwoman U.S. Senate Committee on Agriculture, Nutrition and Forestry 328A Russell Senate Office Building Washington, DC 20510 The Honorable Thad Cochran Ranking Republican Member U.S. Senate Committee On Agriculture, Nutrition and Forestry 328A Russell Senate Office Building Washington, DC 20510 Dear Chairwoman Stabenow and Ranking Member Cochran: The National Introducing Brokers Association appreciates the opportunity to submit the following comments to the Senate Agriculture Committee (Committee) with regard to issues relating to the reauthorization of the Commodity Futures Trading Commission (CFTC). The National Introducing Brokers Association (NIBA) is a non-profit membership association of....
Why Past Performance of a Conventional (60-40) Portfolio Is NOT Indicative of Future Performance
For the past 31 years , a conventionally-diversified portfolio consisting of 60% stocks and 40% bonds has provided investors with satisfying returns of +10.80% annually. This was the result of both stocks and bonds advancing strongly throughout that period. Better yet, stocks and bonds complimented each other nicely. When stocks returned +19.35% annually from the market low in 1982 to its peak in August 2000, bonds lagged somewhat (although still returning a substantial +10.34% annually). But in the period from the 2000 market peak to the 2009 market low, while stocks declined a sharp -43.51%, bonds balanced that with a....
CTAs: Trend Following is What They Do
There was an odd story in the Financial Times titled, “Quant hedge funds hit by US bonds sell-off.” It was odd in that it treated a rather obvious observation as something more ominous and didn’t seem to have an understanding of the industry they were writing about. It further identified the “quant hedge funds” as “so called CTAs.” Someone needs to inform the FT and the author Sam Jones that CTA is a term of art, a regulatory designation meaning Commodity Trading Advisor (CTA). These CTAs trade futures contracts through various strategies on behalf of customers to hopefully earn positive returns....
CFTC Issues Interpretive Letter on Regulation 1.73
Recently, the Commodity Futures Trading Commission (“CFTC”) issued an interpretive letter regarding new CFTC Regulation 1.73 and its applicability to introducing brokers (“IBs”) that enter into give up arrangements with their customers’ clearing futures commission merchants (“FCMs”). In its letter, the CFTC confirmed that the term “executing firm” in Regulation 1.73 refers to both IBs and FCMs that execute orders for customers, requiring IBs who execute give-up orders on behalf of their clients to adopt risk management procedures. Background on CFTC Regulation 1.73 By way of background, adopted in 2012 as part of the Dodd-Frank Wall Street Reform Act, Regulation....