7/29/2019 cmefall2010low
1/64
FALL 2010 A MAGAZINE PUBLISHED BY CME GROUP
WHEN DISASTER HITS p 16 JON CORZINE GETS BACK IN THE GAME p 12
THE NEXT LEVELof INNOVATIONp 2 8
7/29/2019 cmefall2010low
2/64
UBS 2009. All rights reserved.
As the OTC markets expand into central clearing you need a partner you can trust.
With our experience, insight and established clearing services across exchanges
globally, we are well equipped to support you.
At UBS we look to understand your individual needs and build an intellectual
partnership in order to provide scalable and fexible consultative solutions;
delivering our market leading innovative services or the success o your business.
We have made signicant investment in our inrastructure and as we continue to
support our clients in every aspect o their Futures and Options business, we are
ready to guide you through the new landscape or OTC.
Contact us at [email protected]
OTC clearing
has arrived.
Talk to us aboutthe opportunities.
7/29/2019 cmefall2010low
3/64
CME GROUP MAGAZINE
CME GROUP20 South Wacker DriveChicago, IL 60606-7499312.930.1000 tel312.466.4410 [email protected]
EDITORIAL DIRECTORSAnita Liskey, William Parke
EDITORIAL ADVISORY BOARD
Tim Andriesen (Commodity Products), Kate Darcy (Market Education), James Farrell(Technology), David Garland (Corporate Communications), Elizabeth Gisch (Globex Ac-count Management), Jeremy Hughes (EMEA Corporate Communications), Dave Lerman(Hedge Fund and Broker Services), Gail Moss (Marketing Communications), Robin Ross(Interest Rate Products), Derek Sammann (Foreign Exchange Products), Allan Schoen-berg (Social Media), Michael Shore (Product Public Relations), Scot Warren (Equity IndexProducts), Meg Wright (Legal), Jaime Yeh (Product Marketing)
CME Group Magazineis published by CME Group in conjunction withNewsdesk Media Inc. and VSA Partners, Inc. All rights reserved.
NEWSDESK MEDIA INC.700 12th Street, NWSuite 700Washington, D.C. 20005202.904.2423 tel202.904.2424 faxwww.newsdeskmedia.com
Jim Kharouf, Consulting EditorMaysoon Kaibni, Vice President, Business DevelopmentMarc Young, Sales ManagerVSA PARTNERS, INC.600 West Chicago AvenueChicago, IL 60654312.427.6413 tel312.427.6534 faxwww.vsapartners.com
ART DIRECTORSAnthony Collins, Newsdesk Media Inc.Brock Conrad, VSA Partners, Inc.
DO YOU HAVE A QUESTION FOR CME GROUP MAGAZINE?E-mail us at [email protected] with your questions and comments, or to be added to or
removed from the mailing list. Further information about CME Group and its products isavailable on our website at www.cmegroup.com. Information made available on our web-site does not constitute part of this document.The Globe logo, CME Group, CME, E-mini, Globex and Ideas That Change the World aretrademarks of Chicago Mercantile Exchange Inc. The Chicago Board of Trade and CBOTare trademarks of The Board of Trade of the City of Chicago, Inc. New York MercantileExchange, NYMEX and ClearPort are registered trademarks of the New York MercantileExchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. The Dow Jones Indus-trial Average and Dow Jones Indexes are trademarks of CME Group Index Services LLC.BM&F is a trademark of the Brazilian Mercantile & Futures Exchange S.A. BOVESPA StockIndex is a duly registered trademark of BM&FBOVESPA. KOSPI is a trademark of the Ko-rea Exchange Company Republic of Korea. NASDAQ is a trademark of The Nasdaq StockMarket, Inc. (which with its afliates are the Corporations). S&P and S&P 500 are trade-marks of McGraw-Hill Companies, Inc. Case-Shiller is a trademark of Case Shiller WeissInc. Green Exchange and Green Exchange Venture are trademarks of Green ExchangeHoldings LLC., used under license.Unless otherwise indicated, references to CME Group products include references toexchange-traded products on one of its regulated exchanges (CME, CBOT, NYMEX,
COMEX). Products listed in these exchanges are subject to the rules and regulations ofthe particular exchange and the applicable rulebook should be consulted.Information on trading strategies and products is included for educational purposes onlyand does not constitute trading advice or constitute a solicitation of the purchase or saleof any futures or options or guarantee any particular trading result. The rulebook of theapplicable exchange should be consulted as the authoritative source on all current con-tract specications.
Articles herein authored by third parties are taken from sources believed to be reliable.
2010 CME Group Inc. All rights reserved.CME Group Magazine is printed on recycled paper.
Politicsisnothingifit
isnotaplacetohave
astrongvoiceonthe
thingsyoucareabout.Itisagreatplaceto
givebackifyouare
properlymotivated.
FALL 2010
Issue 19
ON THE COVERFinancial innovation is the lieblood
o the fnancial markets. Whats
coming next in an environment thatdemands increased transparency,
greater accountability and lower risk?
To read CME Group Magazineonline, as wellas view Podcasts, Webinars and more, visit
us at www.cmegroup.com/magazine.
JON CORZINE,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
MF GLOBAL HOLDINGS LTD.
7/29/2019 cmefall2010low
4/64
7/29/2019 cmefall2010low
5/64FALL 2010
20 Chinas Copper KettleMake no mistake, China still stirs the
copper market.
24 Breaking Up Is Hard to DUBS economist Paul Donovan looks at th
cold hard facts for the euro.
35 Handicapping the FedA look at short-term interest rate liquidit
the latest tool from CME Group FedWa
38 Interest Rate Outlook:Low and SlowInterest rates continue to hang at record
lows. So a hike is sure to come soon
or maybe not.
FALL
IsCONTENTS
28 The Next
Frontier
o Market
Innovation
Heres whats next on the horizon
or fnancial innovation.
8 From The TopA letter from CME Group
Executive Chairman and CEO.
12 Jon Corzine Backin the GameJon Corzine talks about politics and
his new role as MF Globals new CEO.
16 When Disaster HitsFirms and agencies are prepping
for the worst, and thats good news.
201612
7/29/2019 cmefall2010low
6/64
Ex
Experience
36
In
Insight
360
Re
Relationships
4/7
mfglobal.com
The products and services mentioned herein are available from MF Global Holdings Ltd. subsidiaries located
jurisdictions worldwide and registered with local regulatory authorities as may be required. Products and servic
may not be available in all jurisdictions. Please consult www.mfglobal.com for more information. Trading
nancial instruments may involve signicant risk of loss. Nothing contained herein should be considered as a
oer or the solicitation of an oer to sell or to buy any nancial instruments. 1 MF Global Holdings Ltd.
When the chemistry is rig
success is inevitable.
As a leading cash and derivatives broker, MF Global
transforms market risk and opportunity into our clients'
advantage. By applying the key elements of success honed
through a heritage of 225 years of market leadership, we
create targeted solutions for clients around the world. Deep
market experience, actionable insight, and productive,
long-standing relationships are the elements we combine to
deliver exceptional results.
To learn how MF Global can turn the elements of success into
your advantage, visit mfglobal.com.
Ex
Experience
36
In
Insight
360
Re
Relationships
4/7
mfglobal.com
The products and services mentioned herein are available from MF Global Holdings Ltd. subsidiaries locate
jurisdictions worldwide and registered with local regulatory authorities as may be required. Products and serv
may not be available in all jurisdictions. Please consult www.mfglobal.com for more information. Tradin
nancial instruments may involve signicant risk of loss. Nothing contained herein should be considered a
oer or the solicitation of an oer to sell or to buy any nancial instruments. 1 MF Global Holdings Ltd.
When the chemistry is rig
success is inevitable.As a leading cash and derivatives broker, MF Global
transforms market risk and opportunity into our clients'
advantage. By applying the key elements of success honed
through a heritage of 225 years of market leadership, we
create targeted solutions for clients around the world. Deep
market experience, actionable insight, and productive,
long-standing relationships are the elements we combine to
deliver exceptional results.
To learn how MF Global can turn the elements of success into
your advantage, visit mfglobal.com.
7/29/2019 cmefall2010low
7/64FALL 2010
59 Current Pulsezz In the Palm of Your Globexzz Wharton Hedge Fund Conferencezz Simplify Itzz Calgary Connectionzz Green Lightzz The Story of Innovation
62 Finding Green inUnexpected PlacesCME Groups new data center is the size
of four NFL football elds and just as green.
CONTENTS
42 State Capitalistson the Fast TrackIan Bremer looks at the hybrid capitalist
state in his new book The End of Free Markets.
46 The Algorithm of SuccessPrague-based RSJ rises to be one of
the biggest trading rms on CME Group.
51 Korea Exchange GoesInternationalKorea Exchange brings its Kospi 200
index futures global.
55 Got an Eye on YouTechnology watches traders.
42 24
Featured on cmegroup.com/magazi
Central counterparty clearing services have exist
the over-the-counter (OTC) derivatives market fonumber of years. Expanded OTC clearing will req
market participants to rethink the way they struc
and trade OTC derivatives.
7/29/2019 cmefall2010low
8/64
Craig Donohue (left) and Terry Duffy (right)
8 CME GROUP MAGAZINE
7/29/2019 cmefall2010low
9/64
TERRENCE A. DUFFY
Executive ChairmanCRAIG S. DONOHUE
Chie Executive Ofcer
FROM THE TOP
FALL 2010
Details create the big picture, but when it comes to the nancial reform legislation that President Barack
Obama signed into law this summer, many of the details remain to be seen.
The Dodd-Frank Wall Street Reform and Consumer Protection Act is the most sweeping rewrite
of U.S. nancial regulation since the 1933 Glass-Steagall Act. The new legislation is a comprehensive
banking and nancial services reform package that includes signicant changes to the oversight of
derivative markets. The Dodd-Frank Act contains numerous provisions that have an impact on how over-
the-counter (OTC) and listed derivatives are traded. More standardized OTC derivatives will trade onexchanges or other trading platforms, and will be routed through clearinghouses post-transaction. U.S
regulators will also be involved in setting capital and margin requirements for dealers and major traders
and crafting new business conduct standards and reporting requirements.
Exactly how and, to a certain extent, when this will be done has been left in the hands of the
Commodity Futures Trading Commission (CFTC) and other regulators and government agencies.
Because of that, the rule-writing process is considered to be nearly as important as the drafting of the
nancial bill itself. The bill gives regulators leeway to ll in the blanks on key areas, so agency rulemaking
will determine the nal shape of reform.
An important concern raised about nancial reform is that it could potentially stie nancial
innovation. Innovation has always been a driving force at CME Group. Our cover story for this issue
looks at some of the signicant innovations of recent years and the outlook for new ideas, concepts and
products going forward. Other subjects covered in this issue include:
MF Global chief executive ofcer Jon Corzines perspective on the evolution of nancial
markets gleaned from his 30-plus year career in nancial services and public service. The rise of state capitalism and the challenges it presents to free markets as perceived
by noted political risk consultant Ian Bremmer.
China's rapid ascendancy up the global economic ladder and the impact of its growingdemand for copper.
We hope the details you nd in this issue of CME Group Magazine will begin to give you the big
picture as we move through this next, historic stage in nancial markets.
7/29/2019 cmefall2010low
10/64
7/29/2019 cmefall2010low
11/64
7/29/2019 cmefall2010low
12/64
7/29/2019 cmefall2010low
13/64FALL2010
Back in the Gamejon corzine
jon corzine returned to the financial industry in march 2010as chairman and chie executive ofcer o MF Global
Holdings Ltd. ater spending the previous decade in public ofce. Corzine served as governor o New Jersey rom 2006 to 2010, andin the U.S. Senate rom 2001 to 2006. Prior to that, Corzine was chairman and senior partner at Goldman Sachs, where he spent
more than 20 years. CME Group Magazine sat down with Corzine to hear his thoughts about coming back to the industry, his vision
or MF Global and where todays regulatory environment will lead the frm in the coming months and years.
7/29/2019 cmefall2010low
14/64
14 CMEGROUPMAGAZINE
BACK IN THE GAME
With your long career in the nancial services in-
dustry and in politics, why did you decide to take
the chief executive ofcer position at MF Global?
This is an underdeveloped asset, not only as a
utures commission merchant (FCM) but also
as a broker-dealer and engaging in activities well
beyond what this frm has been traditionally in-volved in. Im excited about repositioning a good
ranchise into what I think is a pretty attractive
space thats been created frst by globalization
and the change in the way the general fnancial
services industry operates. Whether you do that
in the context o fnancial regulatory reorm or
Basel, Basel III or any other changes, that plays to
the core strengths o the ranchise.
You left Goldman Sachs in 1999 and served in
political ofce for a decade. What experiences do
you take from those roles?
I was honored to serve in public lie. I saw the im-
portance o the role o government in shaping the
macro- and micro-environment beore I got into
government. So I had some o the same rustra-
tions that many people have. I had a lot o views
about the direction, not just on fnancial and eco-
nomic activities, but also in education and other
areas. Politics is nothing i it is not a place to have
a strong voice on the things you care about. It is a
great place to give back i you are properly moti-
vated. The execution is ocused on the people you
serve, as opposed to serving yoursel.
Financial reform was just completed. What impactdo you see it having on the derivatives and broker-
age space?
First, it is a positive or the economy. Maybe the
most important piece is the central oversight
board or all aspects o the U.S. fnancial system.
Even with the chair o that oversight board be-
ing the Secretary o the Treasury, most o the
real work will be done by sta o the Federal
Reserve. Thats good because in a time o crisis,
our fnancial system will have the immediate
levers o the Fed. And they have the ability to
understand the system signifcantly better than
all o the regulatory agencies did beore because
they can identiy signifcantly risky institutions.Having clearinghouses, variation margin, sys-
tematic recognition o the existence o risk and
how it is managed, really needs to be part o the
fnancial system. Sometimes there needs to be
position limits placed on participants based on
their capital. The derivatives part o the legisla-
tion is great or the system because it will bring
more capital in and make it less risky. Then peo-
ple will invest more and the economy will grow.
So does that leave MF Global in a good position, be-
cause youre of course a large clearing member rm?
We have the knowledge and expertise to deal with
exchange traded and cleared products that should
give us an edge. On the other hand, the price o
entry may be so high in some areas that places
like MF Global will be challenged. So we willhave to work with the dominant clearing players
in some other ormat to meet the requirements
o the system, but not be precluded rom them.
There is a lot o work yet, to make sure the system
is not exclusionary.
It is still just a few months since you took the reins
at MF Global, but what can you tell us of the plans
going forward?
There are a lot o good people working here.
There is a lot o know-how. That provides a solid
ramework to build upon. We have a very signif-
cant client group with a very good deposit base.
We know some markets really well such as metals
and energies. Were one o the premier FCMs in
India. There are niches o extraordinary strength.
Were moving along in other core businesses such
as equities and fxed income and have a strong
oreign exchange business. We recently conduct-
ed a stocking oering to signifcantly improve our
equity position. We refnanced our liquidity acil-
ity. Weve done a lot o things I think will lead us
to a great position going orward.
One o our problems has been that we have not
been a principal risk taker to acilitate our clients
in listed markets. That will change and provides a
very strong means to expand our relationship withclients and can be done without turning into a pro-
prietary trading shop, or one with excessive risk.
And on that score, fnancial regulation is
also important. The deleveraging o the system,
changes to the regulatory systems, means a great-
er opportunity to access clients who want risk
intermediation but now wont have access at
those same kinds o leverage elements with some
o the existing participants. I dont think there
will be any less demand or risk intermediation.
That demand will ow to other aspiring institu-
tions, and we intend to be one o them.
The brokerage business, especially non-bankbrokers, has been hurt by the low interest rate
environment over the past year or two. How can
MF Global navigate that environment?
First, i you limit yoursel to brokerage alone,
that clearly is a challenge. But we dont intend
any longer to be just a pure brokerage frm. We
want to be a broker-dealer and perhaps expand
into advisory and/or portolio management ser-
vices over time. So i you are strictly lim
commissions, you will be limited. Itll
when interest rates rise, rom the sta
that our customers will want more inte
tion in a rising interest rate environm
that also comes with risks on the princip
There are some who believe that nanc
neering such as collateralized debt ob
(CDOs) and credit default swaps (CDS)
U.S. and global economy in peril. Financia
is designed in part to police some of these
cally new products. Will we still see na
novation in this new regulatory environm
Absolutely. People are working on reftti
ritization so it will have greater transpare
simplicity. It will be dierent but once t
are set, people will work creatively with
constraints. I think change begets innova
Todays markets are more global and interc
than ever. MF Global is truly a global rm
regulation be administered on a global bas
Yes, in an ideal world. But theres a l
cooperation among governments and
tors today with common accounting st
and common bank capital charges. Im s
once other countries take on the challe
president and Congress just completed,
get some matching up o the systems on
basis because people understand that re
arbitrage was as much a part o fnanc
as CDOs and CDSs. I there are gaps, it cthe whole system.
What does the global derivatives landsc
like to you now and going forward?
Youre going to have a globally integrated
It wont be perect. Youll have a greater
tion that there is a high degree o rela
between all asset classes that gets ree
exchanges. And there will be a greater div
tion o risk and intermediation. And that
to leave room or new entrants, or new p
various parts o the marketplace. Certain
mid-sized broker-dealer/investment banthere is plenty o room to grow and Im
about it.
7/29/2019 cmefall2010low
15/64
Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking afliates of
Leveraging every facet of global commodities.
Understanding and insight into the multiaceted global commodities markets is a critical
advantage. Our commodities team leverages this insight to customize client solutions across
a wide array o products including structuring, trading and marketing o metals, crude oil,
refned products, natural gas, coal, power, emissions, commodity indices, structured notes,
wet and dry reight and weather products. Whatever your challenges, we deliver a perspective
that can help you shine in any market.
Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking afliates of Bank of America Corporation (Investment Banking Afliate
the United States, Banc of America Securities L LC and Merrill Lynch, Pierce, Fenner & Sm ith Incorporated, which are both registered broker-dealers and members of FINRA and SIPC, and, in other jurisdictions, locally registered entities. Investment pr
Investment Banking Afliates: Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed. 2010 Bank of America Corporation.
7/29/2019 cmefall2010low
16/64
16 CMEGROUPMAGAZINE
7/29/2019 cmefall2010low
17/64FALL2010
Unexpected events can wreak havoc on bus
operations, but the difference between a m
disruption and a disaster can come down to
preparation and ability to deal with surprise
7/29/2019 cmefall2010low
18/64
18 CMEGROUPMAGAZINE
Testingand varyingo testingscenariosis the
numberonelessonlearnedrompastdisasters,
says JohnRapa, president and chie executive
ofceroTellesenandCompany,afnancialser-
vicesmanagementconsultingfrm.Asignifcant
businessdisruptionoracrisisisabadwaytofnd
outyourplandoesnotwork.
Rapasaysnotonlyhastestingoprimaryand
backupsystemsbecomestandard,butpotential
businesspartnersandregulatorsaredoingmore
rigorousanalysisthatmaybeshared.Groupssuch
astheFutures IndustryAssociation (FIA),where
Rapaservesaschairmanothebusinesscontinu-
itycommittee,haveoeredcommontestingdates
or theindustryto test resiliency and prepared-
ness.TheFIAandSecuritiesIndustryandFinan-
cialMarketsAssociationhave commonindustry
disasterrecoverytestssetorOct.23,2010.
Rapasaysthecoreobusinesscontinuity
planning identifes what businesses, systems
orprocessesareconsideredcriticalto theindi-
vidualcompany.Fromthereabusinesscontinuity
strategyisormedthatcancovereverythingrom
technologyintheworkplacetothedeathothe
chieexecutiveofcer.
KennethWolverton, vicepresident o data
center operationsatCyrusOne,whichoperates
corporateco-locationacilitiesinHouston,Dallas
andAustin,says businesscontinuity previously
wasocusedonthetechnologyside,butnowthe
peoplesideisreceivingattention.
ItsnotjusthowcanIbackupdata,buthow
can I takepeople tothenew location, dothey
haveplacesto shower,placestosleep iitsan
extendedtime,Wolvertonsays.
WHEREVER YOU AREOnegrowingtrendisal-lowingandenablingemployeestoworkrom
homeincasesoemergency.Technology
hasalloweddesktopvirtualizationwhereemployeescanaccesstheirworkcomputer
romhomeoranotherremotelocationto
becomeaviablealternative.TheH1N1u
outbreakunderscoredtheneedtoplan
businessoperationswhenemployeeswould
beunabletoenterbuildingsbutaccessto
systemswasstillpossible.
The H1N1 u pandemic also underscored
how important communication is between
businesses and the government. Groups like
ChicagoFIRST and the Financial Services Sec-
torCoordinatingCouncil (FSSCC), areprivate-
public partnerships that work on a regional
and national level to help members with best
practices. These partnerships are unique as
theybringtogetherfrmsandorganizationsthat
mightnormallybecompetitors.
Brian Tishuk, executive director or Chica-
goFIRST,saysoneresultocollaborationsbetween
frmsandthelocalgovernmentistheChicagoCriti-
calInrastructureResilienceTaskForce.Launched
inApril,thetaskorceaddressesevacuationplans,
credentialing and inormation sharing between
publicandprivate,andprivateandprivategroups.
Its teamingup toknowwhatthe govern-
mentsplansareinanemergencyandhowfrms
canbepartothesolution,Tishuksays.
ShawnJohnson,chairoFSSCC,sayssuch
private-public partnerships help coordinate re-
sourcesduringacrisisonsomeothemostprac-
tical matters such as simply identiying where
citizens can withdraw cash. During the Texas
hurricanes last year, FSSCC and the Financial
ServicesInormationSharingandAnalysisCen-
ter monitored ATM transactions to see what
areashadpowerandwhichATMswereable to
dispensemoneytogetundsdistributed.
OneconcernabouteventsliketheH1N1pan-
demicisthatInternetaccessinareasoutsidea
businessdistrictcanbelessthanrobust.Therearegenerallyewerfberopticlinesinresidential
areaswheresomeonetelecommutingcouldbe
competingorbandwidthwithaneighbordown-
loading amovie. That canslowdown Internet
access andbecomean issuei telecommuting
workers have to share bandwidth with non-
businessusersduringanemergency.
You cantperormcriticalbusinessopera-
tionsiyourenotrealtime,Tishuksays.
ChicagoFIRST advocatespriority b
accessortheInternetincasesonatio
sis. There already are priorities or tel
and wireless access, but such priorit
neededortheInternet.Rulesontheto
needtobeworkedoutbetweentheDepa
o Homeland Security and the Federa
municationsCommission.Butthatisye
reconciledwiththecurrentideaonetn
ity which provides everyone equal actheInternet.
Yesthereshouldbenetneutrality,
says.Inthecaseocyberattacks,there
siretohaveakillswitchtotheInternet.
plywantapriorityswitchduringemergen
FINDING SECURITYBecausetheInternebecomesuchapartoeverydaylie,cy
securityhasbecomeagreaterpartor
iencyprograms,expertssay.Whetheri
simpleasaphishingscamtosomeon
ingtoshutdownsystems,cyberthreat
becomemuchmorevisible.
JohnsonsaysFSSCChaslookedatt
romcyberspaceandisworkingtoimprov
ligencesharingwiththeederalgovernme
FSSCCstudyhighlightedthethreatrom
seacommunication cables to the intern
fnancialsystem.Theorganizationhasal
askedorinputonabillsponsoredbyU.S
torJoeLiebermancalledProtectingCybe
asaNationalAssetActo2010,whicho
onhowitwouldaectfnance.Thisbillsu
establishing a directoro cyber security
private-public partnershipto setnationa
securityprioritiesanddeenses.
Thepooreconomycouldcausesom
nesstolookwarilyatcosts,Wolvertonsa
soarthatdoesnotseemtobe theca
moreproactivefrmstelltheirinvestorsth
haveinrastructureinplacetoavoidasig
businessdisruptionduringacrisisordisa
Yes,GodzillamightnotriseromLak
igan,butwhowouldhavethoughtplane
yintobuildings?Rapasays.Peoplemaneverwillhappen,butneverisalongtime.
Another intangible asset that is a
businesscontinuityplans:imageandrep
The BP oil spill is the most prominent
exampleonotbeingproperlyprepareda
cautionarytaleorcompanies.
WhatsthePRloss,especiallyiyour
liccompany?Wolvertonasks.Thepublic
asking,whydidntyouhavethatputinpla
The past decade has offered its share of unforeseen events 9/11, the
H1N1 flu pandemic, the Northeast blackout of 2003 in the United States,
Hurricane Katrina in 2005 all of which tested the resiliency of business
operations. Smart companies used lessons from these events to build
business continuity plans for use when emergencies strike. These plans
focus on critical needs to return to as normal a business pace as possible.
Proactive companies then review and test those plans to make sure theyare operable when needed. The financial services industry is no exception.
You cant perform critical businessoperations if youre not real time.BRIAN TISHUK, executive director, ChicagoFIRST
7/29/2019 cmefall2010low
19/64
Newedge refers to Newedge Group and all of its worldwide branches and subsidiaries. Only Newedge USA, LLC is a member of FINRA and SIPC (SIPC only pertains to securities-related transactions an
Not all products or services are available from all Newedge organizations or personnel and restrictions may apply. Consult your local oce for further details.
As an impartial multi-asset broker, were focused on your success. Solid and reliable,
we combine powerful liquidity capabilities with leading-edge technologies and a spirit
of partnership that extends across more than 20 nancial centers worldwide.
EXECUTION CLEARING PRIME BROKERAGE
Every winner needs
a trusted partner.
7/29/2019 cmefall2010low
20/64
CHINASCOPPERKETTLE
20 CMEGROUPMAGAZINE
7/29/2019 cmefall2010low
21/64FALL2010
Intheworld ofbasemetals,Chinais theel-ephantintheroom,saysDavidThurtell,aCiti-groupmetalsstrategist inLondon.Thereisno
escapingthecountrysdemandforcopperanditcannotbeignoredanymorethanChinasrapid
ascendancyuptheglobaleconomicladder.China has eclipsed theUnitedStates as
theworldslargestconsumerofenergy.Soon,italsowill supplant theUnitedStatesas thetopmanufacturer,accordingtoprojectionsby
IHSGlobalInsight,aneconomicsconsultancy.
Whileit isnotthe onlygame intown intermsofcopperdemand,Chinaisbyfarthebiggestandmostimportant.Chinaimporteda record3.2millionmetrictonsofcopperin
2009,up119percentfromthepreviousyear.Since 2000,Chinas copper demand hasal-
mosttripled.NicholasSnowdon,commoditiesanalystforBarclaysCapital,estimatesChina
currently consumes about38percentoftheworldsrenedcopper.
ThoseprocessesarefarmorelimdevelopedeconomiesthanincountrieasChinaandIndia,Snowdonsays.
HOME GOODS
Inthesummerof2010,concernssurfacBeijing,afterreapingaricheconomich
froma$586billionscalstimulus,wasingthebrakestocoolitswhite-hotecoGrossimportguresforcopperfellin
328,230metrictons,downfrom396,71
rictonsinMayandwelloffthe477,220tonsimportedinJune2009.
CatherineVirga,seniorbasemetalsaatCPMGroup,acommoditiesresearc
says the June numbers were lowewewere expecting.But the real que
whetherthedownwardtrendwouldcoVirgadoesnotthinkso.
WhatwereseeinginChinaisresefforts,shesays.Thisisnotatypical
Thatscoming froma levelof below10percentinthe1980s,Snowdonsays,addingthat amove toward 40percent oreven be-
yondisnotoutofthequestionoverthenextfewyears.
Thefuturebodeswellfortheseeminglysymbiotic relationship between China and
copper,eventhoughtheInternationalCopperStudyGroupestimatesa13percentdropinthecountrysdemandforcopperin2010.Ris-
inglivingstandardsintheworldsmostpopu-
lousnationChinaspopulationisforecastedtoincrease from1.3billionthisyear to1.43billionby2020 meansmoreautomobiles,electricitygenerationandpowerlines,hous-
ing,airconditionersandinfrastructure,someof the copper-rich comforts to which the
Westhasgrownaccustomedfordecades.Inshort,agooddealofChinascopperdemand
isrelatedtoresidentialconstructionandin-frastructureexpansion.
7/29/2019 cmefall2010low
22/64
CHINAS COPPER
22 CMEGROUPMAGAZINE
coppermarket.Wehave seenmany periodsofrestockinginChina.Itdependsonhowyou
calculatedemand,whetheryouadjustforre-stockinginventories.Itscomplicated,whichis
whyestimatesvarysomuch.InJune,particularlythelatterpartofthe
month,Weve seen demand from Asia thatwasat-lining,movingtowardverylowlevels,Virgasays.Thenitstartedtoriseandinlate
Juneitpickedupkindof,withforce.Copper stockpiles usually rise in the
summerwith the traditional lull in NorthernHemisphere manufacturing. Through mid-
July,though,stockpilesdeclined,accordingtoThurtell. And prices reected the change.Copper futures for September delivery at
CMEGroupwerejustabove$3.00apoundinmid-summer,comparedwith$3.60inApril.At
theLondonMetalExchange,copperforthree-monthdeliverywasaround$6,600ametricton.
InApril,copperhadirtedwith$8,000aton.
SUPER-CYCLE ME
Just a few yearsago, copper circlesbuzzedwithspeculationthat themetalwasentering
acommoditysuper-cycle,meaningapriceof$8,500 per metric ton that could bemain-
tainedforaprolongedperiodoftime.Muchofthattalkwasmutedbythe2008globaleco-nomiccrisis,particularlyintheUnitedStates
andEurope.
Snowdoncontendsthemarkethasbeenoverlyconcernedabouteconomicuncertain-ties recently, whether thats the Europeanscalissuesortheeffectsofpolicytightening
takingplaceinChina.Oureconomistsforecastshaveheldrm
totheviewthattheglobaleconomicrecoverywillbesustained,andasaresultwebelievethe
markethasoverreactedtotheseconcerns,hesays,addingthatChinaanditsfuturegrowth
projectedbythe InternationalCopperGrouptoincreaseby6.7percent,with
ityutilizationratesseenimprovingfrompercentin2009to84percentin2010.A
growthof only 2.9percent is envisio2011becauseofdeferralsanddelaysi
projectspromptedbytheeconomiccrisThe entire industrialization proc
China should continue to support su
globaldemandgrowthincopper.ElectriinChinawillcontinuetosupportrobust
incopperdemand,saysSnowdon.Yogreater emphasis on electric vehicl
thatslikelytosupportcopperusageastherewillbehighercoppercontentinevehiclesthanintraditionalcarsandtru
Chinaandcopper,sumsupThurtebullishmetalsstoryanditwillremainth
forsomeyears.OnceChinashaditsdIndiasturn.
pathhavecertainlycreatedanewdynamictocommoditymarkets.
Sowherearecopperpricesheadedoverthenextsixmonthstoayear?Mostlikelyup-
ward,analystsagree,althoughtheirforecastsdiffersomewhat.
Wethinkcopperisgoingtoholdatthe$6,000metric ton mark and maybe go ashighas$7,500nextyear,saysThurtell,who
admitsheisnotasbullishassomewhosaytheprice couldclimbas high asthe super-
cycleprice.Healsobelievestherewillbesig-nicantproducersellingoncecopperheads
backabove$7,500.Virgapointsout thatprice forecasts for
thethirdquarterof2010havecopperaverag-
ingabout$6,830permetricton.Inthefourthquarter, CPM is forecasting a little more
strengthascoppermovesintodeeperdecitconditions, in terms of production and de-
mand,soitwillbe$6,900.Given the copper balance for 2010 and
2011, currentprice levels in themid-$6,000
rangewillbeseenas abargainin ourview,says Snowdon. We expect market funda-
mentalsto tightenoverthenext 18months.Barclaysforecastfor2012callsforcopperto
average$8,500ametric ton, sowe expectrecordpricelevelsessentiallyoverthattime.
CHINA THE DRIVER
Chinaisexpectedtobethemainenginedriv-ingthatpricesurge.
Analysts say that will happen becauseChina, while a copper producer, depends
heavily on imports. Production, meanwhile,isbarelykeepingpacewithdemand.Andfew
newmineprojectsarescheduledtocomeonlineinthenextcoupleofyears.Soafterbeing
limitedbyoperationalconstraintsandtempo-rarycutsin2009,mineproductionin2010is
CME Copper Volume forJan-Jun 2009 and Jan-Jun 2010
Electronic Volume Pit Volume
Jan-09
Jan-10
Feb-09
Feb-10
Mar-09
Mar-10
Apr-09
A
1 0
May-09
Jun-09
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
7/29/2019 cmefall2010low
23/64
www.globalrisk.com
Phone: +1 (312) 588-1300
Email: [email protected]
Bringtransparency
to your riskFirmRisk is the industrys leading
real-time market risk management
system. Tight integration with your
multiple data sources lets you
consolidate and transform raw data
into valuable, actionable risk
information on a single screen. Our
rich set of risk management tools let
you monitor and report risk, model
volatility, test market scenarios and
generate risk alerts for the firm as
well as for customers.
FirmRisk is a scalable solution for
large and small institutions. Contact
GlobalRisk to find out more about
FirmRisk and how you can benefit
from our nearly 20 years of risk
management expertise!
7/29/2019 cmefall2010low
24/64
24 CMEGROUPMAGAZINE
7/29/2019 cmefall2010low
25/64FALL2010
WHAT IS THE MATTER WITH THE EURO?
In 2010 we have seen the single currency fall in value,
bond spreads widen out and extraordinary measures estab-lished to aid Greece and potentially other sovereign states.The irrevocable monetary union that was established bythe Treaty of Maastricht has even had some commentatorssuggest that it might be time to revoke membership forsome of the participants.
In fact, much of what we see this year is the symp-tom of the disease, not the cause. The Greek scal woes,the volatility of nancial markets and the divergence ofgrowth are all in response to a single underlying problem the euro does not work.
THREE CRITICAL ELEMENTS
Three basic criteria were necessary to make the euro aneconomic success. First, there had to be a political desire
to participate. That was the easiest hurdle to membershipas most countries wished to join (the exceptions wereDenmark and the United Kingdom).
The second criterion was a reasonable balance sheet.Government debt and decit levels had to be at manage-able levels. Levels were actually spelled out in the Treaty ofMaastricht a maximum 3 percent gross domestic product(GDP) decit, and a maximum 60 percent GDP debt level.However, these were arbitrary and glossed over.
The most critical criterion for a successful euro wasthat the participants had to have economies that were fairly
similar in their structure and growth patterns. In a currencyunion, the components share a single interest rate and asingle exchange rate. Setting an appropriate single interestrate to be shared by one country or region that is growing at3 percent a year, and another that is growing at -3 percent ayear is pretty much impossible. The real economies need toconverge and stay converged. On this basis, the euro couldprobably have comprised six economies Germany, France,Austria, Netherlands, Luxembourg and, with some gener-osity as to debt criteria, Belgium. Beyond that, the euro isdoomed to fail economically.
So, if the monetary union does not work, does thatmean it is about to fragment? Absolutely not. The issuewith the euro and indeed any monetary union, is that evenif it is inadvisable to join, it is even more inadvisable to
leave once one is inside.
SEVERANCE COSTS
The costs of departure are huge. A weak economy thatleaves would almost certainly default on the nationaldebt. The debt is denominated in euros, of course. Leavingwould mean that the exiting country has a new nationalcurrency the nuova lira, or the new drachma or the nou-velle franc. With no tax revenue in euros, it is almost im-
The Treaty of Maastricht, signed in 1992, brought the birth of the euro in 1999.
The currency has been a success in the view of many but the nancial crisis has exposed
cracks in the currency as certain European countries saw their economies spiral
downward faster than others. Now UBS economist Paul Donovan takes a provocative look
at the pluses and minuses for the worlds second largest reserve currency.
7/29/2019 cmefall2010low
26/64
w w w . P l a t t s H a s T h e D a t a . c o m
Regardless of commodity or region, the leading provider of energy and metals
market information has the data you need. Trust Platts to energize your business
and power your decisions.
ALL THE DATA YOU NEED
s h i p p i n g
p e t r o c h e m i c a l s
r e n e w a b l e s
c o ao i l n a t u r a l g a s
m e t ae l e c t r i c p o w e r
Fuel your decisions with all the data
coming out of the energy markets.
7/29/2019 cmefall2010low
27/64
Paul Donovan is managing director and deputy head of global economics at
UBS. He is responsible for formulating and presenting the UBS Investment
Research global economic view, drawing on the banks world-wide resources.
FALL2010
possible to pay even a part of the national debt. However,countries can default or restructure debt within the euro.Indeed, there is a distinct possibility that at least one weakeconomy will restructure in the next few years.
What makes a euro exit even worse is that the corpo-
rate sector will in all probability have to default. Corpora-tions will have euro liabilities to overseas banks, or in theform of bond issues. Their domestic revenue streams arenow in the new national currency. A default event, and thesubsequent banishment from international capital mar-kets, seems inevitable.
The default story is bad enough, but it does not stopthere. The domestic banking system is likely to be de-bauched in advance of any euro exit. Depositors who fearthat a country may exit the euro are likely to turn up attheir banks in advance of the exit, clutching large suitcasesand demanding that the contents of their bank accounts behanded over in euro notes. In short, a run on the bankingsystem precedes the departure from the monetary union.
Finally, departure from the euro almost inevitablymeans departure from the European Union (EU). Certain-ly, that is the conclusion of the European Central Banks(ECB) legal advice. Trade ties with all an economys keytrading partners are broken. Any attempt by the exitingcountry to devalue the new currency will be met with tar-iffs from the remaining EU members. (Tariffs cannot, ofcourse, be applied within the EU as it is all effectively in-terstate commerce.)
So, a euro exit means sovereign default, corporate de-fault, a major negative growth shock, a debauched bank-ing system, exit from the EU, tariffs against ones exportsto eurozone countries and the ending of most major traderelations. Considering that, major civil unrest has to bethought likely as well but that is perhaps left to one side
in the analysis; it would not do to be too pessimistic.The euro does not work, but departure seems unlike-ly given the horric consequences. Does this mean thatthe euro area is condemned to a dire economic future?Not necessarily.
THE RIGHT ROAD
There are three routes to making the euro work routesfollowed by the United States in the 1930s after the ef-fective collapse of the U.S. monetary union in 1933. Therst is labor exibility or pay restraint. If areas with highunemployment restrain wages they eventually becomemore competitive and balance is restored to the monetaryunion. This has happened in parts of the eurozone, but itis unlikely to be a universal solution. Germany and other
north European states may pursue this. There is little evi-dence of the southern European states embarking on sucha course of action. France, in this context, should probablybe classied as a southern European state.
If labor exibility does not apply, there is always la-bor mobility as a second option. Unemployed workersmove in search of jobs. Europe, sadly, has no John Stein-beck to urge the process on. Workers are not movingacross national boundaries.
The third option remains and this is the path thatEurope is tentatively embarking upon. Europe, like theUnited States 80 years ago, needs a scal union if it is tomake its monetary union more effective. That does notmean that weak governments are subsidized, but ratherthat weak economies receive a stimulus they do not haveto pay for, and strong economies are restrained. Thismakes the economy more homogenous and a single mon-etary policy more effective. The U.S. scal union does notmean the government of California receives direct assis-tance from the taxpayers of New York, for instance butit does mean that the citizens of California receive welfarebenets funded in part by the federal tax receipts fromNew York residents.
Can Europe do this? Probably. Fiscal confederation isthe way to think about it a simple redistribution mecha-nism without a strong central government. It will requiremore integration, however. This is where the difcultycomes in. Europe has achieved a great deal of integration
over the past half century but most of it has come out ofa crisis. The current crisis provoked further integrationsuch as the various bail-outs. For Europe to get to a scalconfederation, it would likely require a series of additionalcrises. Europe can solve its dysfunctional monetary union,but it will take time, ve years or more. The current crisisis just the rst in a series over that period.
Practically, what does this mean? The periodic crisesof Europe are likely to keep downward pressure on theeuro. Growth implications suggest the ECB will keep inter-est rates lower for some time. More signicantly, perhaps,it means that the international condence in the existenceof the euro will remain weak. The ongoing debt problemsof southern Europe keep the structural aws of the euroat the forefront of investors minds. Constant reminders
of the fault lines in the euro will be an effective deterrentfor euro appreciation. This is not to say the U.S. dollar is agood currency in the coming years the problems of thedollar make it a bad currency. The problems of the euromake it a worse currency, however.
1.20
1.25
1.30
1.35
1.40
1.45
1.50
Jun0
9
Jul0
9
Aug-09
Sep-09
Oct-0
9
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Jun-10
EUR/USD FUTURE PRICES (USD per EUR)
7/29/2019 cmefall2010low
28/64
7/29/2019 cmefall2010low
29/64
THE NEXT LEVELof INNOVATION
Financial innovations of the past 30 years, such as collateralized debt obligations, are getting much
of the blame for the current economic downturn. But in a globalized world with rapidly developing
technology, the need for new forms of nance and commerce continues. Here is what is on the horizon
in an environment that demands increased transparency, greater accountability and lower risk.
FALL2010
7/29/2019 cmefall2010low
30/64
7/29/2019 cmefall2010low
31/64FALL2010
IDEAS THAT CHANGE THE
The reality is that our globalized, highly developed world is dependent on
a cornucopia o fnancial instruments, many o them invented in the last
generation. Even some o todays most vilifed instruments, such as credit
deault swaps, continue to serve a key unction in acilitating the movement
o wealth and minimizing risk.
In act, the development and launch o new fnancial instruments is accel-
erating, according to a recent CME Group report New Product Success in
Futures Industry. CME Group more than doubled the number o new utures
instruments it introduced last year, rom 82 in 2008 to 188 in 2009. In the
same period, Eurex more than tripled its new utures products, rom 7 to 22.However, the acceptance o new instruments, as measured by new product
volumes, has generally slumped in 2009, ater a peak in 2008, the report notes.
The marketplace is a little hesitant to embrace new rontiers, says Julie
Winkler, CME Groups managing director o research and product develop-
ment, which developed the report. I think were going to move in a more
lateral direction or a while as the backlash rom credit deault swaps and the
bailouts settles in to the broader fnancial community.
FINDING ROOTS Resistance to new fnancial products also has deeper roots,
according to Harvard University economist and Nobel laureate Robert Mer-
ton. Speaking at CME Groups Global Financial Leadership Conerence last
year, Merton observed, There is a undamental mismatch between fnancial
innovation and the necessary inrastructure to support it. He also cited a
systematic bias against the new versus the old.
To create a riendlier environment or product development, Merton sug-gested that regulators require air value accounting or the purpose o trans-
parency. He also recommended an idea frst proposed by Andrew Lo, director
o the M.I.T. Laboratory or Financial Engineering the creation o an agency
o orensic-style analysts to investigate major events and fnancial ailures.
Both o these recommendations appear to have been incorporated to some
extent in the Dodd-Frank Wall Street Reorm and Consumer Protection Act,
which was signed into law July 19, 2010. The requirement that most deriva-
tives must be traded on public exchanges will establish air value accounting
or a whole new category o investments by setting daily market prices. And
although no investigative units have been established by the Dodd-Fra
a new Council o Inspectors General on Financial Oversight could w
ollowing major trails o oul play.
So what would successul fnancial innovation look like in the pos
sionary, Dodd-Frank era?
THRILLS AND TRILLS Yale University economics proessor Robert Shil
gested a number o orward-looking ideas in his article, Crisis and
tion, published in the spring 2010 issue o The Journal of Portfolio M
ment. Among his suggestions:Regulatory hybrid securities Developed by the Squam Lake Working G
periodic gathering o academics, these issues o bank debt would con
equity or troubled banks in the ace o extreme systemic crisis, thus
ing banks with new capital the result o not having to pay interest
bonds and averting government bailouts.
Continuous workout mortgages Proposed by Shiller in his book Subpr
lution, these mortgages would reduce a homeowners principal in th
o a wide-ranging decline in housing prices.
Trills Developed by Shiller and Stanord University economics pr
Mark Kamstra, the trill would be a share o a sovereign government
domestic product (GDP), which the government would sell as equiti
trill would pay a dividend equal to one trillionth o the nations curre
GDP and would be priced by the market.
Shiller is widely known or spearheading eorts to develop utures
tions markets or single-amily residences. He has worked with CME Gestablish market listings and he developed the S&P/Case-Shiller Hom
Indices with economists Karl Case and Allan Weiss.
Gary DeWaal, group general counsel or Newedge, one o worlds
utures commission merchants and a leading multi-asset broker, see
mand or commodity-linked deposit instruments in the near term.
I would think by this point investors would be tired o their zero-per
turns in their money market accounts and their savings accounts, DeWa
So i you can get a certifcate o deposit rom a bank with a gold-linked
that has a oor and other protections, I think there would be a market o
7/29/2019 cmefall2010low
32/64
7/29/2019 cmefall2010low
33/64
7/29/2019 cmefall2010low
34/64
We know what makes your business tick. And we know how to give you
the customized solutions you need to compete. With CitiFX Pro, youll have
access to the same exible pricing and institutional-level liquidity that large
institutions have.
CitiFX Pro gives you:
Flexible pricing model highly competitive, transparent spreads
Institutional-level liquidity in 130+ pairs
Account opening usually within 72 hours of applying
FIX API, Prime Broker give up trades and MetaTrader
A personal Citi representative available round-the-clock
Citibank accounts held in the US are FDIC-insured up to $250,000 per account holder through December 31, 2013. Current regulations state that insurance coverage will revert to the level per account holder off
at the time whi ch is currently $100,000. Accounts in any currency held outside the US, including EUR, GBP, JPY and HKD, are not FDICinsured.
Are you a small hedge fund trading forex?
Get institutional-grade pricing with CitiFX Pro.
18773977670 (USA)
85225012382 (Asia)
0800-561-933 (Switzerland)
Go to:
www.citifxpro.com/cme
Email:
Talk to a CitiFX ProRepresentative
Also available for individual traders.
Im ready for institutional-grade pricing.
And so are my clients.
Qualied clients get free terminal access
when they sign up with CitiFX Pro.
7/29/2019 cmefall2010low
35/64FALL 2010
7/29/2019 cmefall2010low
36/64
36 CME GROUP MAGAZINE
PRODUCT FOCUS
CME Group Federal Funds futures have
become a favorite product of market
participants wishing to hedge interest
rate risk or get a read on near-term intere
rate expectations.
Earlier this year, CME Group launched
a new FedWatch tool that calculates th
rate expectations priced into any given
Funds futures contract.
A price quote in CME Group Fed Funfutures is 100 minus the average daily
eective Fed Funds rate for the delive
month. The FedWatch tool, introduced
ahead of the April 28, 2010, Federal Op
Market Committee meeting, performs
calculation and updates every 10 minu
Until October 1988, the specic sourc
of changes in short-term interest rate
forecasts were dicult to identify beca
nancial market forecasters relied on th
yields on short-term Treasury securities
their benchmark. Although changes in sterm rates were aected by anticipated
Federal Reserve policy actions, interest
movements were also impacted by chan
in expected ination, Treasury refundin
plans and other variables.
What happened in 1988 to change th
The 30-day Fed Funds futures bega
trading. It was in the 10 years that follo
that the contracts really started to bec
widely used by market participants as
hedging tool and to get a read on near-
interest rate expectations.However, interest in the calculation
has again grown due to continued
economic uncertainty and the FedWat
tool was born. The FedWatch tool is
available at http://www.cmegroup.com/
trading/interest-rates/fed-funds.html
Liquidity measures tend to focus on width
and depth of market. Market width may be
quoted in ticks or in dollars for orders of a
given quantity and market depth may be
measured in contracts at different levels in
the limit order book.
CME Group research shows liquidity in
interest rates was down slightly in the second
quarter of 2010 from very strong levels in the
previous quarter of 2010. The change was
attributed to the increase in volatility across
many market classes during the second quar-
ter as a result of the European debt crisis and
concerns that a double-dip recession may
be approaching.
Helping support liquidity in CME Group
interest rate products were market maker
programs implemented by the exchange, as
well as new technology that allows for elec-
tronic trade of complex options trades and
spreading. These programs were put into
play between 2005 and 2008.
Thomas di Galoma, head of U.S. rates
trading at Guggenheim Partners LLC, con-
tends that there will likely be some pressure
in front rate products going forward. Because
they have been low for so long, the market will
likely see a signicant attening of the yield
curve. He foresees a deationary environ-ment continuing through 2011 in the United
States and believes the Japanese investor
base is keen on the same deationary theme,
as they have seen similar trends in Japan over
the last 10 to 12 years.
When Federal Reserve Chairman Ben
Bernanke testied before the Senate Banking,
Housing and Urban Affairs Committee on July
21, 2010, he told senators that the economic
outlook was unusually uncertain, sending
shock waves through the equity market.
Many institutional investors currently
believe the Federal Reserve will raise interest
rates during the second or third quarter of
2011. The futures markets also reect those
sentiments. As of late July 2010, CME Group
Fed Funds futures were pricing in about a
76 percent chance of a 25 basis point hike
sometime before July 2011.
Mary Sirois, a market maker in CME
Groups Fed Funds futures, expects that
when the Federal Reserve begins to move,
trading will become active in a number of
contract prices. CME Group data showed
that as of June 2010, the majority of liquidity
in Fed Funds Futures could be found in the
near-term months: June 2010, July 2010 and
August 2010.
When the Feds moving, were rocking
too, says Sirois.
It is all relative though. CME Group re-
search shows that in the bigger picture, trad-
ing has been strong in short-term interest
rate products. Volume in CME Groups bench-
mark Eurodollar complex was up 39 percent
through the end of May compared to the
same period in 2009. And in the 30-Day Fed
Funds complex futures were up 80 percent
with options up an impressive 195 percent.
While a zero-interest-rate
monetary policy may have
helped to get the economy back
to its eet, it let the short-term
interest rate market fat on itsback. Then in February 2010,
Federal Reserve Chairman Ben
Bernanke announced plans to
exit this strategy. Other actors,
including the implementation
o market maker programs and
new technology, have served
to support interest in CME Group
Eurodollar utures and Federal
Funds utures products.
FEDWATCH TOOL FOR IR TOOLBOX
Fed Funds Futures Liquidity Top of the Book Liquidity by Contract Month
Fed Funds Futures Average Size of Best Bid/Ask,Globex RTH June 1-30, 2010
2,500
3,000
1,500
2,000
1,000
500
0 Jun10
Jul10
Aug10
Sep10
Oct10
Nov10
Dec10
Jan11
Feb11
Mar11
Apr11
May11
Jun11
7/29/2019 cmefall2010low
37/64
7/29/2019 cmefall2010low
38/64
38 CMEGROUPMAGAZINE
7/29/2019 cmefall2010low
39/64
7/29/2019 cmefall2010low
40/64
40 CMEGROUPMAGAZINE
GLOBAL INSIGHT
Onesignthatthispathcouldbechanging,Beltonpointsout,isijoblessclaimsalltothelow400,000rangeintandemwithjobcreationrisingto200,000to300,000amonth.Otherwise,heanticipateslittle
FederalReserverateactionbeoretheourthquarter.Osomeconcernis thathighconsumerindebtednessmay con-
tinuetocapspendingevenasjoblessnessimproves.Household debt toincome isnow about 110 percent, up rom
less than 80 percent at the beginning o last decade, Brien says.Consumercreditmonthatermonthhasbeendecliningalso,showingade-leveragingratherthanadesiretoincreasethedebtload.
Taking that into account with unemployment and other ac-torsmeansitistoosoontospeculatewhentheFederalReservemay
raiserates,hecontends.KeepingacaponinterestratesiswhatBrientermsaighttoquantity.Whileederaldebtissuanceisrunningata$1.5trillionannualizedrate,adeclineinmortgage-backedsecuritycre-
ation,commercialpaperandconsumerdebt-backedproductsmeansthatinstitutionalbuyersodebthavehadtoturnincreasinglytothe
U.S.Treasurymarket,keeping ederaldebt priceshigh, and in turn,interestratepressurelow.
Eveninsuchanenvironment,othersseetentativesignsogrowthandpotential rate pressure.Michael Pond, director andinterest ratestrategistatBarclaysCapital,allsonthebullishside.
Iconsumershavemoremoneyintheirpockettheyarelikelytospend,Pondsays.With theboostin GDProminventories likelyto
adegoingorward,youreallyneedconsumerspendingtotakeover.
Contrary to some predictions that the trauma o the crisis andtightercreditwouldspurhighsavingslevels,Pondbelievesspending
willcomeasterthanexpectedithelabororcestrengthens.One o the biggest actors that drives the savings decision is
interestrates,hesays,addingthatwhenconsumers lasthada high
rate osavings, in theearly 1980s, rates ranged rom 12percentto20.5percent,aworldapartromtodaysenvironmentowhatiseec-
tivelyzero,Pondargues.Addingto expectationso improvedspendingandpricingpower
are indications through private surveys like REIS Inc. that rent andequivalents,whichmakeupabout40percentothe coreconsumerpriceindex,havebeenrisingevenasederaldatasaystheyarenot.
Pondsaystheederalsurveylagsrealityon rentsandequivalentsby
threetosixmonths.Still,Pondisnotpredictingaswitreturnohigherrates.Byyears
end,heseesthe10-yearU.S.Treasurynotesshitingintoahigherinter-estraterange,butwithlittlechanceoFederalReserveactiononrates
themselves.Evenistrongergrowthemerges,PondandothersbelievetheFederalReservewillseektoavoidrepeatingtheJapanesestaga-
tionerrorsoraisingratestoosooninrecovery.TheFedviewsinationasymmetrically,heexplains.Theytendto
beverypatientwheninationisabovetheirtargetandveryaggressivewheninationisrunningbelowtheirtarget.
NOT SO GREAT BRITAIN
AsintheUnitedStates,unemploymentisatopindicatorbeingwain theUnitedKingdom.While thecountrysGDPgrowth at a
0.5percenthaslaggedbehindtheUnitedStates,it comparestherestoEurope,saysPhilTyson,headostrategyorintere
productsatMFGlobal,U.K.Unortunately,theUnitedKingdommtakeaturnortheworsebeoreitgetsbetterasthemassiv
squeezethemostsevereintheG-7startstokickin,hewarnPublicsectorjobcutswillensurethatunemploymentstar
ingagainwhich willmaintainsignifcant downward pressure
growth,Tysonsays.AddingtotheconcernsovertheU.K.recoveryistheactth
sumer indebtedness, at $2.3 trillion (1.1 trillion), exceeds wnationproducesinayear,meaningthereisunlikelytobeaburdividualspendingtoinuselieintotheeconomy.Overall,there
benomonetarytighteningasGDPgrowthwillbeheldto1percenpercentor2010and2011.MorelikelytocomeromtheBankoEng
beratecutstotryfrmingtheBritisheconomysunsteadylegs,Tyso
AILING EUROPE
AddingtotheUnitedKingdomswoesistheactthataalteringzonerecoverywillaectU.K.exports,pressuringbusinessesther
more.FortheEuropeanUnionitsel,whilejoblessnessandconspendingare actorsin predicting rates,thereremainmoret
someconcernsoverthehealthoEuropesfnancialinstitutions
Recentindustrialdatahasgiventheimpressionthatrecoversectorremainsontrack,Tysonsays.Thedata,however,maskg
divergencieswithintheregionasawholewhereperipheralecoarestilllaggingbadlybehind.
Strongexporters,likeGermany,shouldbeneftromaweake
Butother, less robustEuropean economies will fndanyexporhammereddownbystrictausteritymeasures,theeectsowhicha
startingtobeseeninbusinessandconsumeractivity.FortheEurUnionasawhole,thismeansinationwillhoverclosetozeroort
seeableuturewhiletheEuropeanCentralBankcontinuestotryandglewithserioussovereignriskandbankingconcernswhileavoidiveryrealriskoslippingbackintorecession.Atbest,lookortheEur
topostGDPgrowtho1percentin2010whileweakeningagainne
Tysonpredicts.Theoverallglobalweaknessurtherincreasesthelikthatrateswillremainloworsometime,saysJPMorgansBelton.
AgoodruleothumbisthatwhateveryoulostinGDPduricession,thefrstyearoutGDPgrowstwicethat.
Thathasnothappenedinanyothemajoreconomiesthwiththegrowthperhapsone-thirdowhatwouldhavebeenexp
heexplains.Thereistrend-likegrowth,butitisnotenoughtoremovet
nomicslack,Beltonsays.Andthat,itappears,willsupportlowratesorsometime.
If consumers have more money in their pocket they are likely to spend
With the boost in GDP from inventories likely to fade going forward,
you really need consumer spending to take over.
Michael Pond, BarclaysCapital
7/29/2019 cmefall2010low
41/64
7/29/2019 cmefall2010low
42/64
42 CMEGROUPMAGAZINE
7/29/2019 cmefall2010low
43/64FALL2010
7/29/2019 cmefall2010low
44/64
44 CMEGROUPMAGAZINE
GUEST COLUMN
WHAT IS STATE CAPITALISM?
Statecapitalism isa system inwhich thestate dominates markets, primarily forpolitical gain. But the division betweenstate-capitalist and free-market countriesisnotalwaysclear.Thereisnoironcurtainseparatingthetwosidesneatlyintooppos-ingcamps.EverycountryonEarthfeaturesbothdirectgovernmentinvolvementinreg-ulatingeconomicactivityandsomemarketexchange that exists beyond the statesreach. No countrys economy is eitherpurelystatecapitalistorpurelyfree-marketdriven,andthedegreeofgovernmentinter-ventionwithineachcountryuctuatesovertime.Thatsaid,therearecrucialdifferencesamongcountriesinhowtheirgovernmentsregulate commercial activity and in theirpowertoextendtheirinuence.
The illustration above will help put
state capitalism in context. It representswhat we might call the entire marketspectrum.Ateachendaretheideologicalextremesofastatesroleinaneconomy.Onthefarleftisutopiancommunism,withabsolutelyno free-market activity. It is agameinwhichtherefereeshaveabsolutecontrol ofevery playerseverymove.Theextremehasnever existed,because eveninthemosttightlycontrolledstate,blackmarketsgeneratesupplytomeetdemand.On the farright isutopian libertarianism,whichsomecallanarcho-capitalism.Atthisextreme,thereisnogovernmentandnootherauthoritythatcanmanage,regulate
orinterfereinanywaywiththeoperationofmarkets.Itisagamewithnoreferee.
THE STATE-CAPITALIST CAMP
There are two fundamental differencesbetweenfree-marketandstatecapitalism.First,policymakersdonotembracestatecapitalismasatemporaryseriesofstepsmeanttorebuildashatteredeconomyortojump-startaneconomyoutofrecession.
It is a strategic long-term policy cSecond,statecapitalistsseemarkemarilyasatoolthatservesnationaests,oratleastthoseoftherulingerather than as an engine for oppofor the individual. State capitalistmarketstoextendtheirownpoliticeconomic leverage both within sandontheinternationalstage.
Statecapitalismisnotanideolonot simply communism byanotheroranupdatedformofcentral planembraces capitalism,but for itsowpose.Manyofitspractitionerscamewithinauthoritarianpoliticalandecosystems, where governance is theriskmanagement.Insuchasystem,is an all-or-nothing proposition, anoutcomes of all the various politiceconomic gamesthey play candete
theirverysurvival.Facedwithsuchaitisbesttocontrolboththerefereeastrongestplayers.
Thereisnosinglemodelofstatecism, though its leading practitionersawell-developedsenseofriskaversionoaccidentthatthe twomost interally inuential ofthemareChinaansia,countriesthathave onlyrecentlcommunismandembracedmarkets.chaoslongpredatescommunism inand a tradition of secrecy and centcontrolhasshapedRussianpoliticalcenturies.Itislittlewonder,then,thatgovernments inBeijingandMoscow
decidetowelcometheincreasinglyfrofideas,information,people,money,and services from beyond their bthey would try their best to controprocesses andtocarefullymicromtherisks theycreate.This organicreshipbetweenstatecapitalismandautisalsovisiblewithintheArabmonarcthe Persian Gulf, where personal, pand commercial interests are tightly
State capitalism
is not an ideology.It is not simply
communism by
another name
or an updated orm
o central planning.
It embraces
capitalism, but or
its own purpose.
7/29/2019 cmefall2010low
45/64
Even i state capitalism
is not around a century
rom now, the fnancial crisisand the global recession
have ensured that it will
enjoy many more years o
robust health.
FALL2010
wovenwithinroyalfamilies.Itisalsovisibleinenergy-richauthoritarianstateslikeIran,Venezuelaandothers.
THE CHALLENGE
Thoughstatecapitalismschallengetofree
marketswillnotgeneratethedramaoftheBerlinairliftor theCubanmissilecrisis, itcancompromisea countrys security andthe future of the global economy. Withmercantilism a thing ofthe past,fewnowdoubt that commerce can generate newwealthandexpandmorethanoneeconomyatatime.TheendoftheColdWarandthegrowth of emerging-market states likeChina,India,Russia,Brazilandothershavecreated new opportunities for preciselythat kindof mutually protableexchange.Thewillingnessofpoliticians ina growingnumberofdevelopingstatestogambleongreater openness to foreigntrade and in-vestmenthasbroughthundredsofmillionsofnewplayersintotheglobaleconomy.
TheWesternnancialcrisisandglobalrecession have left champions of free-market capitalism facing an increasinglyskepticalinternationalaudience.Countrieslike state-capitalistChina (andthosewitha relatively smaller stake in internationaltrade, like India and Egypt) have taken amuch less severe hit from the slowdownthan free-market powers in America andEurope.Withtheriseoftherest,theseandother developingstateshavecut intoU.S.political,economicandculturalhegemony
overthepastseveralyears,andWashingtonhasseenitsgreat-poweradvantagesbegintoshrink,atleastonarelativebasis.
Ifalltheseemergingpowersembracefree-market capitalism, America mightstill hold a somewhat smaller piece of amuch bigger pie.The risk for theUnitedStatesandforfree-marketdemocraciesgenerally is that distortions createdbystatecapitalismwillensurethatthepieis
notexpanding quickly enough toaccom-modateallthenewmouthsitwillsoonbeexpected to feed. That will threaten notjust standards of living, but eventuallyperhaps thesecurity of theworlds free-marketdemocracies.
Evenifstatecapitalismisnotaroundacentury from now, thenancial crisis andthe global recessionhave ensured that itwillenjoymanymoreyearsofrobusthealth.
American-style free-market capitalismand the idea of globalization have takenplentyofblameforthemeltdown.Develop-
ingstatesthatopenedthemselvestotradeand foreign investment took an especiallytoughhit,whilethoselikeIndia,PolandandEgypt that are less dependent on cross-
bordernancialowsweatheredthestormwithfewerlastingproblems.Outside of these exceptions, interna-
tional investment in the developing worldhas slowed considerably during the crisis.In2008,emergingmarketstookin$461bil-lioninnetpositivecapitalinows.Asofthiswriting,2009 gureswere expectedto fallto$165billion.AFebruary2009WorldBankreport estimated that 53million people in
Free-market
economies
Command
economies
Utopian
communism
Utopian
libertarianism
MARKET SPECTRUM
State capitalism Free-market capitalism
emerging-marketcountrieswouldslidinto poverty over the course of thaTradebarriershaverisen,protectioniintensied,andlargenumbersofimmworkershavereturnedtotheirhometries.Meanwhile,statecapitalists,par
lyinChina,continuedtoinvest.In200example,nationaloilandgascompanemerging-market-based sovereignfundsaccountedforarecord15percglobalmergers and acquisitionsandthe10largestassetdeals.
ThereismorethanonemodelomarketcapitalismandAmericansaropeansoftenargueovertherelativeoftheirownversions.TheU.S./Anglomodel grew frommistrust of any sthatgivesgovernmenttoomuchpowEuropean social-democratic modelmoreonthestateasguardianoftheof the individual. Relatively speakfavorssafeguardsforworkersoverptions for employers.Thiscan slow gratesovertime,butitprovidesawidcialsafetynetwhenthingsgowrong.
Different as they are, the twomshare a core assumption: that thepsector,notthestate,mustbethepengineofeconomicexpansionif grotobestrongandsustainable.Yettheence between freemarket capitalisstatecapitalismisafundamentalonformer recognizes that governmenhelpenablegrowth,whilethelatterathatgovernment-managedgrowthc
therempowergovernment.For all the reasons outlined,capitalism limits the global free msystemsproductivepotential.Thatit is important that thosewho belfree-market capitalism continue toticewhattheypreach.
7/29/2019 cmefall2010low
46/64
KAREL JANECEK
Chie Executive Of
46 CMEGROUPMAGAZINE
7/29/2019 cmefall2010low
47/64FALL2010
7/29/2019 cmefall2010low
48/64
Founded in 1994 by Karel Janecek, RSJ was launched as a small stock trad-
ing operation in Plze, Czech Republic, a town better known or its beer.
By 2000, the frm was based in Prague and began trading utures in Europe,
and in 2004 making markets. In 2008, Janeceks relatively small group be-
came a market maker at CME Group in Eurodollar utures and the E-mini
S&P 500 index utures.
Today the frm is the largest proprietary trading frm in the Czech Re-
public and ranks third among CME Group market participants in terms o
volume traded on the exchange. It also is among the top three in Eurodollar
utures volume. Over the past year, RSJ reported that its trading volumeon CME Group had more than doubled, rom 11.7 million contracts in the
third quarter 2009, to 26.9 million contracts in the second quarter 2010.
We started trading in the derivatives markets, doing carry trades on the
yield curve through short-term interest rates on a trading program I cre-
ated, says Janecek, who also serves on the aculty o Charles University in
Prague, where he teaches a graduate-level course in fnancial mathematics.
The system is still working today.
In an example o how global fnancial markets have evolved in recent
years, RSJs story illustrates just how a conuence o technology, inra-
structure and talent is shaping the utures industry. In 2001 and 2002, RSJ
perormed its trading manually on other markets. But that was when elec-
tronic trading was still in its relative inancy.
We were lucky. Today, wed be quickly out o business, Janecek says. Then
we began to develop sotware or automated trading or market making.
RSJ adapted to the new high-speed markets and, in 2007, it became a ull-
equity member o CME and began making markets in Eurodollar utures the
ollowing year. The designation gave the frm better access to CME Group
products and opened the door to trade much more volume.
Andrew Chart, head o the proessional trading group business in Europe
and the Middle East at Newedge Group in London, says frms like RSJ have
been brought into the mainstream derivatives space, as opposed to remain-
ing in their own domestic markets, by the continuous upgrades to trading
engines and networks by exchanges, as well as the ongoing telecommunica-
tions inrastructure improvements within some o these countries.
Years ago, frms in that region werent well known, werent well regulated
and it was also difcult or them to get credit lines and be onboard with West-
ern institutions, says Chart, who has been working in Central and Eastern Eu-
ropean regions or Newedge or 11 years. Thats changed, and the more global
the business has become, the more recognized these frms have become.Chart adds that the technology improvements and incentive programs
or proprietary trading frms and hedge unds by CME Group have also
played a large part in bringing in frms like RSJ.
When we speak about Eastern Europe, telecommunications and tech-
nology are ever-evolving, Chart says. And that makes the markets more
accessible as telecoms improved. But or frms in the region, its been an
evolution, not a revolution.
FINDING TALENT
RSJs trading models are all mathematically-based and developed in-hous
The frm outsources a air bit o its operations to stay lean and ocused o
trading and making markets. Janecek says the talent pool is deep in th
Czech Republic, where virtually all o its mathematicians, programmer
and traders who monitor the markets, come rom. Most o his 44 sta
members have masters degrees or doctorates in mathematics, physics or i
computer programming.
Very important skills sets or us are frst mathematicians, developers an
programmers who understand mathematics, Janecek says. Almost all o thpeople we hire are recent graduates rom college, so we dont actually nee
experienced traders. We need people to learn the way our systems work.
RSJ sees no need to open ofces in other locations around the world. In
stead the frm uses co-location services in Chicago, London and Frankur
Despite its singular ocus on algorithmic trading, Janecek says that spee
is not the main element to its trading philosophy. Instead, the frms fr
priority is on building trading models that fnd various opportunities th
are not obvious within the markets they trade.
Technology is important and we dont want to be too slow, Janecek say
But it is not so important that we have to be frst in line, or the astest, becau
our trading is based on very complicated modeling. What is most importan
then is the modeling, and then using the technology such as co-location.
Janecek says speed has been more important in the stock market whe
multiple exchanges compete or volume on the same listings. But in u
tures, where contracts are oten exclusive to that exchange, strategy is kealong with solid risk management methods.
Historically, what helped us get where we are and our biggest competitiv
advantage, was very well done risk management, Janecek says. We trad
intra-day. And at each moment, all our systems know what our risk is. An
they know how to behave accordingly, based on current open positions.
RSJ does not plan to stand pat with its operations or its ocus on fnanci
markets. The frm is looking to add commodity markets as well, with a
early ocus on energies. It is also looking at Asian markets and is conside
ing a push into equity markets in a ew years.
As RSJ continues to look at the global market, Prague looks like a pret
good base to continue working rom.
The level o talent is similar everywhere, Janecek says. And we do hav
very talented, high quality people here.
Newedges Chart says that RSJ serves as a good example o the potentiaor the Central and Eastern European region.
When people read and hear about RSJ and the successes they hav
had, its an advertisement to other smart intellects who might want t
write their own algorithm, Chart says. There are going to be local peo
ple who are born and educated within Central and Eastern Europe, wh
will look toward these frms like RSJ, who act as their leaders or beacon
to ollow.
48 CMEGROUPMAGAZINE
CUSTOMER CONNECTIONS
7/29/2019 cmefall2010low
49/64
www.dubaimerc.com
Time to settlesome differences
Bringing fair and transparent energy trading
to the Middle East and beyond
7/29/2019 cmefall2010low
50/64
7/29/2019 cmefall2010low
51/64
7/29/2019 cmefall2010low
52/64
52 CME GROUP MAGAZINE
PARTNER TIES
The KOSPI 200 index contracts are not just any derivatives in Korea,
they are a cultural phenomenon.
Few products combine widespread retail liquidity with institu-
tional interest to such a successful extent. Korea Exchanges (KRX)
KOSPI 200 futures contract was among the leading stock index futures
contracts in the world in 2009 with a total volume of more than
87 million contracts traded, up 28 percent from a year earlier, accordingto Futures Industry Association gures.
Its counterpart, the KOSPI 200 option, has been the most actively
traded derivatives product in the world for years. Together, the KOSPI 200
contracts are among the most dynamic index futures and options con-
tracts in the industry, something that Koreans are rightfully mindful of.
The KOSPI 200 index was rst published by the then Korea Stock
Exchange in 1994. Kospi futures was launched in 1996 with options the
following year. The index is indicative of the top 200 stocks at KRX.
The product is like cultural heritage, which Koreans should be proud
of, says Kevin Lee, managing director of Newedges Korean business.
This success comes from an exchange that has been in exis-
tence for just ve years. KRX was formed in January 2005 by the
consolidation of the Korea Stock Exchange, Korea Futures Exchange
and Korean Securities Dealers Automated Quotations. In 2010,
Sun-Bong Kim, the former president of Kiwoom Securities, became
KRXs chairman and chief executive ofcer.
Headquartered in Busan, KRX is the worlds largest exchange,
based on 2009 volume. Its business is split about 50/50, listed deriva-
tives versus equities. KRXs success reects a regional trend in which
Asian listed derivatives volume grew nearly 25 percent in 2009 while
volume at European and North American exchanges fell.
The KOSPI 200 is far from KRXs only success story. The exchange
also has thriving markets for currency futures, Korean Treasury bond
futures as well as single-stock futures.
The KOSPI 200 products have been growing since the futures
contract was rst launched by the Korea Stock Exchange in 1996,
followed in 1997 by the options product. In recent years, the exchange
has been working with a variety of Asian and global exchanges such as
CME Group on technology, products and distribution networks.
Average monthly trading volume for the KOSPI 200 futures in the rst
half of 2010 totaled well over 7 million contracts (see chart). Given the
larger size of the futures contract, that equates to nearly 40 million
KOSPI 200 options in cash value.
MARKET ACCESS
The KOSPI 200 success story is often painted as one driven by an
unusual level of retail interest and indeed retail clearly has a big part
to play. KRX gures show about 30 percent of total volume in KOSPI
200 futures contracts comes from retail market participants with the
options-specic market share likely to be somewhat higher.
But KRX would like to see more international trading from insti-
tutional players. Last year, KRX says that offshore rms represented
more than 33 percent of trading volume in the KOSPI 200 f
and options. Analysts say there are compelling reasons for w
that exposure. Seok Yun, head of research at the Korean opera
Credit Suisse, expects corporate protability to remain high a
market to remain strong well into 2011.
The U.S. economy continues to steadily improve and com
prices have been stable, which historically have turned out to be ke
factors for South Korean exporters, Yun says.
To attract more international participation, KRX partnere
CME Group to offer KOSPI 200 futures, after Korean hours, on th
Globex electronic trading platform. Launched in November 2009, e
KRX clearing members are able to access after-hours CME Globeing in the contract via the Korean exchanges Unied System for
Trading. The partnership now provides a global distribution netw
the KOSPI 200 futures as well as virtual 24-hour access to the co
CME Group and KRX are also planning to add a two-way
routing system, subject to regulatory approvals. A similar agre
between CME Group and BM&FBOVESPA helped boost intern
volume on the Brazilian market substantially and today accou
more than 25 percent of trading on its stock index futures.
In July 2010, Credit Suisse and Merrill Lynch began offer
cess to after-hours KOSPI 200 futures on CME Globex while
Newedge Group, joined them in August. Another ve Korean rm
rently offer or are planning to offer access to CME Globex to custo
TAX ISSUES
However, the future is not cloudless for the Korean futures and obusiness. Following a proposal from the ruling Grand National P
August 2009, legislators have agreed to impose a tax on deriv
including futures and options, from 2013 with the basic rate to
at 0.01 percent. While the bill still requires approval from the N
Assemblys Legislation and Judiciary Committee before taking
traders are concerned.
Slapping a tax on futures and options trading would in
costs, forcing many investors to leave the market and driving
trading volume, argues Lee.
1
2
3
4
5
6
7
8
9
10
J
an07
A
pr07
Jul07
O
ct07
J
an08
A
pr08
Jul08
O
ct08
J
an09
A
pr09
Jul09
O
ct09
J
an10
The exchange also has thriving
markets for currency futures, Korean
Treasury bond futures as well
as single-stock futures
KOSPI 200 INDEX MONTHLY VOLUME
IN MILLIONS OF CONTRACTS TRADED
7/29/2019 cmefall2010low
53/64
7/29/2019 cmefall2010low
54/64
7/29/2019 cmefall2010low
55/64
7/29/2019 cmefall2010low
56/64
7/29/2019 cmefall2010low
57/64
7/29/2019 cmefall2010low
58/64
7/29/2019 cmefall2010low
59/64
7/29/2019 cmefall2010low
60/64
CURRENT PULSE
60 CME GROUP MAGAZINE
The Story of InnovationThe story of CME Group is now on dis
the CME Group headquarters on the ex
oor corridor, waiting area and conf
rooms. The historical exhibit depicts t
lective experience of predecessor instit
The exhibit illustrates the role
Group has played in the growth of
commerce, innovation, technology a
global economy for more than a centu
it displays the people and products in
with this story using the companys ex
archives. Brochures illustrating the e
imagery and story are also available
public visitor center.
Green LightGreen Exchange LLC, received regulatory approval as stand-alone market in July 20
Contracts on emissions allowances and credits in CO2, NO
X, and SO
2will be transferred
the Green Exchange but will continue to be listed for trading and clearing by NYMEX u
the process is complete. Throughout the transfer process, the Green Exchange will c
tinue to develop additional products for launch