Chicago, 4 November 2011

Today, CME Group continued to successfully transfer additional MF Global U.S. customer positions and CME Clearing-held collateral to other qualified clearing firms.  The remaining customer segregated positions are expected to be transferred by the end of the day, completing the total transfer of customer positions at CME Group exchanges in approximately 15,000 MF Global accounts and approximately $1.45 billion in associated clearing collateral, as approved by the Trustee and bankruptcy court.

Receiving commodity brokers for these transfers are responsible for notifying customers as to the new commodity broker for their accounts.

These transfers do not include any warehouse receipts, certificates or warrants, which remain part of the assets under administration by the Trustee.  Receipts/certificates and warrants not available for delivery as of November 4, 2011 due to the MF Global bankruptcy are summarized by issuing facility in the Deliverable Commodities Under Registration Report and the Warehouse and Depository Stocks reports.

For more information, please visit www.cmegroup.com/mfglobal.

CME Goes To Collateral DefCon 1: Makes Maintenance Margin Equal To Initial For... Everything!?

By Tyler Durden

Created 11/04/2011 - 21:20

[1]

Submitted by Tyler Durden [1] on 11/04/2011 21:20 -0400

• Greece [2]
• Lehman [3]
• MF Global [4]

The most important news announcement of the day was not anything to came out of Cannes  (as nothing did), nor from Greece (the merry go round farce there continues unabated). No, it was a brief paragraph distributed by the CME long after everyone had gone home, and was already on their 3rd drink. It is critical, because not only is this announcement a direct consequence of what happened with MF Global several days ago, but because also it confirms one of our biggest concerns: systemic liquidity is non-existanet. We confirmed interbank liquidity in Europe was at an all time low earlier [5]today, and can only assume the same is true for US banks. But what is very disturbing is that this is just as true at the exchange level, where it appears the aftermath of the MF collapse is just now being felt. What exactly was the announcement. Unless we are completely reading it incorrectly, it is nothing short of a margin call for tens if not hundreds of billions worth of product. Because as of close of business on November 4, today, the CME just made the maintenance margin, traditionally about 26% lower than the initial margin for specs, equal. For everything. Which means that by close of business Monday, millions of options and futures holders will be forced to deposit billions in additional capital to the CME just so they are not found to be margin deficient, and thus receive a margin call. Naturally, since it is very unlikely that this incremental amount of liquidity can be easily procured in one business day, we anticipate the issuance of hundreds of thousands of margin calls Monday, followed by forced liquidations of margin accounts across America... and the world. Just like when Lehman blew up, it took 5 days for Money Markets to break. Is this unprecedented elimination in the distinction between initial and maintenance margin the post-MF equivalent of the first domino to fall this time around?

From the CME (source [6]):

[7]

And for those asking, here is a complete breakdown of all CME products and associated margins:

London, 5 November 2011

A risk rally across all sectors has lifted commodities in the past month. However, Barlcays Capital think it unlikely that the trend will be sustained. Although growth prospects look a little stronger in the US, they are much weaker in Europe and the picture for China is "still worrying" according to Kevin Norrish, Head of commodities research. "Moreover, the European debt situation shows no sign of resolution so we are continuing to favour defensive positioning, reducing weightings in those commodities likely to suffer most from further waves of pessimism."

The main change in this month’s sector weightings is a shift to a small underweight in base metals, which were amongst some of the biggest price gainers in recent weeks as short positions predicated on a slowing global economy were closed out.

"Our other rankings are unchanged meaning that in addition to our underweight in base metals, we are running a sizeable overweight in precious metals (where financial market conditions favour continued outperformance) a small overweight in energy (where low crude oil inventories and the approach of northern hemisphere winter should limit the oil price downside) and an underweight in agriculture (where weather threats appear to be easing and recent harvest news has been relatively good, especially in grains)."

SinceBarCap's last reweighting on 7 October, the BCRI is up by 6.7%, outperforming the neutral portfolio in which weights are held constant, which is up by 6.5%. Applying the BCRI rankings to the DJUBSCI weights in order to rebalance that index results in a 1.3% outperformance in October. In the year-to-date that outperformance now stands at 2%.

Ends --

EVENT: Advisory Committee Meeting Sep. 30, 2011

• 

  Technology Advisory Subcommittee on Data Standardization Meeting

  The Commodity Futures Trading Commission (CFTC) announced that the Subcommittee on Data Standardization of the CFTC’s Technology Advisory Committee will hold its second public meeting.

  When:	Friday, September 30, 2011, 1:00 p.m.
  Where:	CFTC Conference Center, 1155 21st Street, NW, Washington, DC
  Topic:	This meeting will provide the four Subcommittee working groups comprised of qualified representatives from government, industry, academia, information technology and information systems an opportunity to publicly present interim findings on universal product and legal entity identifiers, standardization of machine-readable legal contracts, semantics, and data storage and retrieval.
  Listening Information:
  	• Call-in to a toll-free or toll-telephone line to connect to a live audio feed. Call-in participants should be prepared to provide their first name, last name and affiliation. Conference call information is listed below

 

US Toll-Free Number: (866) 844-9416
Participant Passcode/Pin: 5797467

The meeting will be open to the public on a first come , first served basis.
Registration begins at 12:45 p.m.

By Krittivas Mukherjee

NEW DELHI | Tue Sep 27, 2011 5:37am EDT

 

NEW DELHI

(Reuters) - India's commodity exchanges are poised for steady growth over the next few years after annual turnover more than quintupled to $2.5 trillion since futures trading started in 2003, but political hurdles hinder more dramatic development.  

While a bill to strengthen market oversight and free up entry of financial institutions and the launch of new products has hung fire since 2005, government moves such as bans on some agricultural futures trading have fed regulatory uncertainty.

 

"The bill is critical not only for growth but also to unshackle chains that bind the market and restrict its forward movement," said Tanushree Mazumdar, vice president at the National Commodity Exchange, India's second largest.

 

"Besides allowing trading in options and indices, it will give more teeth to the regulator."

 

But politicians worry that unbridled futures speculation will drive up food prices, particularly as double-digit inflation proves resistant to the central bank's efforts to rein it in with 12 rate hikes in the past 18 months.

A government embarrassed by a wave of public protest over a slew of corruption scandals looks unlikely to take dramatic new steps to quickly alter the picture.

"There is no political will, no one wants to take a call in the government now," said Kuljeet Kataria, head of business alliance at broker Unicon Investment Solutions, which does $125 million to $167 million worth of futures trades every day.

"You could hope for something in a couple of years when these things settle down," he said, echoing a timeline suggested by at least two government officials who asked not to be named.

TREMENDOUS POTENTIAL

Yet analysts see tremendous potential in Indian exchanges, even though they have lagged Chinese forward trading which made up 51 percent of commodity derivative volumes traded worldwide last year, the World Federation of Exchanges says.

"Globally, commodity derivatives volumes are 35 to 40 times of the physical market but in India it is just 4 times," Nirmal Bang, a leading Indian broking firm owner, wrote last month.

"We expect the Indian commodity futures market to reach at least 15 to 20 times by 2015," he added, painting a picture of dramatic growth in volume since physical commodities contribute 45 percent to Indian GDP.

India, the world's biggest buyer of bullion and the second-largest grower of wheat and rice, has 21 commodity bourses, five operating at the national level, trading in about 80 commodities ranging from gold to carbon credits, though 8 to 10 commodities make up the bulk of volumes.

Indian commodity futures volumes have grown to 112.52 trillion rupees ($2.5 trillion) in the financial year to March 2011 from 20.53 trillion in the year to March 2006. Average monthly volumes now stand at about 6 trillion rupees.

Turnover in the commodity futures markets has outstripped that of equity derivatives, growing 30 percent since 2008 against a 22 percent increase in the latter, as investors found a "store of value" in commodities in a slowing global economy.

REFORMS-DRIVEN GROWTH

But future growth will only be unlocked by reform moves, including steps to allow foreign and domestic institutional investors, banks and insurance firms to trade and open up options and index businesses.

Higher volumes will also spur consolidation of exchanges, much as in the United States. China has just three.

"Regional exchanges have already been marginalized and they won't be able to sustain themselves, they'll have a big challenge in surviving," said Anil Mishra, chief executive of the National Multi-Commodity Exchange of India, the country's third-largest, with turnover of $46 billion in the 2009/10 fiscal year.

India must also overcome infrastructure deficiencies and build an effective warehousing system for its commodity derivatives market where 1 percent to 5 percent of total trades are settled by physical delivery, traders say.

Although India is a top commodity producer and consumer, turnover on its commodity exchanges is just 5 percent of those in China -- which limit the role of foreign companies and also do not offer options -- and less than half a percent of U.S. futures trade.

Since 2003, government intervention to control key commodity prices has led to several flip-flops in forward trading policy.

The government banned futures trading in rice, wheat and two varieties of lentils in early 2007 and sugar in 2009 in its efforts to curb rising food prices. The ban on rice remains.

Such moves have proved little help in controlling inflation, bolstering trading firms' views that fears about speculation driving up prices were unfounded and freeing up the futures market could only bring stability to commodity supplies.

Also, the government is beginning to see that beyond the massive volumes, forward trading could bring price protection to farmers and their families, who make up almost 60 percent of the country's 714 million voters.

"The government can no longer ignore the fact that futures trading offers a great price discovery platform that farmers can benefit from," said D. H. Pai Panandiker, head of private think tank RPG Foundation. "Farmers can plan better when they know what price their produce is going to fetch."

(Additional reporting by Siddesh Mayenkar in MUMBAI; Editing by Clarence Fernandez)

 

 

 

 

CFTC Delays Speculative Trading Curb Vote to Oct. 18 Meeting

By Silla Brush - Sep 27, 2011

The U.S. Commodity Futures Trading Commission has delayed consideration of Dodd-Frank Act rules seeking to limit speculation in oil, natural gas and other commodities until an Oct. 18 Washington meeting, said Steve Adamske, CFTC spokesman.

The so-called position-limits rule, which already was delayed once, had been on the schedule for consideration at a meeting Oct. 4. The rule has been among the most contentious aspects of Dodd-Frank, the financial-overhaul enacted in July 2010, and has spurred more than 13,000 letters to the CFTC from supporters such as Delta Air Lines Inc. (DAL) and opponents including Barclays Capital.

“I continue to be troubled by the pace of implementing position limits as Congress has directed. These limits were supposed to be in place earlier this year,” Bart Chilton, a Democrat on the five-member commission, said in a statement. “I suggested in January that we move forward with spot month limits and limits for on-exchange trading on other and aggregate months. There is no reason we can’t do those now.”

The CFTC has canceled the Oct. 4 meeting and also delayed consideration of rules governing clearinghouses that stand between buyers and sellers of derivatives, Adamske said.

Missed Deadlines

The CFTC and Securities and Exchange Commission are leading U.S. efforts to write new derivatives regulations after largely unregulated trades helped fuel the 2008 credit crisis. The agency has proposed more than 40 rules and has begun to hold final votes on regulations. The agency has missed Dodd-Frank’s mid-July deadline to complete most rules, and Gary Gensler, CFTC chairman, said some rules will be finished in the first quarter of 2012.

The rules will govern trades conducted by JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and Cargill Inc. CME Group Inc. (CME), the world’s largest futures exchange, has criticized the agency’s proposal on position limits and said the agency doesn’t have the data necessary to impose the trading curbs.

The agency’s proposals on position limits and derivatives exchanges “often represent an overstepping of the commission’s authority” under Dodd-Frank, Terrence Duffy, executive chairman of CME, said in testimony prepared for an April 12 Senate Banking Committee hearing.

To contact the reporter on this story: Silla Brush in Washington at sbrush@bloomberg.net.