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Category Archives: Commentary

Commentary from the John Lothian News staff and guests editors.

Scoring Tuesday’s CFTC Open Meeting Standard

Doug Ashburn

Normally, one would not list CFTC meetings among top choices in televisual entertainment, but yesterday’s open meeting was a relatively raucous affair. The final rules on position limits, which required the cancellation of two prior meetings in order to give the commission extra time to hammer out the specifics, squeaked by on the narrowest of margins, clearly the result of some last-minute “horse-trading” back stage. A final rule covering derivative clearing organizations (DCOs), which also passed 3-2, was equally contentious. Additionally, the commission voted to extend the effective date for certain Dodd-Frank provisions until July 16, 2012. Commissioner Chilton quoted “Huggy Bear” from Starsky & Hutch. And,…

Occupy Movement is a Viral Social Media Phenomenon Standard

John Lothian

Last week I gave a speech at the Chicago Federal Reserve to the publications groups from the various Reserve Banks around the country. The speech was held in the LaSalle Room on the 3rd floor of the Chicago Fed Conference Center. The room faced LaSalle Street and I could hear the Occupy Chicago protestors behind me as I spoke. In my opening remarks I noted that the Occupy Chicago movement was using some of the oldest communications techniques around, including banging drums, playing horns and marching up and down.  I also noted that a quick look on the web showed…

Commentary: SPXpm Options Launch on C2 Standard

Sarah Rudolph

Today is the long-awaited launch of the new SPXpm options on C2, the all-electronic second options exchange created by the CBOE.  The contracts are similar to the CBOE’s benchmark S&P 500 Index options, except that they are electronically traded, are cash-settled, and have a p.m. settlement and European-style expiration. Until today, SPX options were principally traded only on the CBOE floor, and many in the industry saw this launch as C2’s raison d’être. The CBOE is hoping to broaden its customer base with the contracts, which they hope will attract more retail traders.  The contracts are designed to compete with…

Setting Things Straight Standard

John Lothian

I was amused by Senator Bernie Sanders disclosing confidential information about market participants of the 2008 energy market. Even though this information was confidential and restricted by criminal law from being disclosed by anyone at the U.S. Commodity Futures Trading Commission, there were no rules against Congressional disclosure. Right or wrong, Senator Sanders found a legal loophole and used it. If you underestimated your political risk, that is your fault. We are in a time of increased political risk. In this newsletter, we have long focused on non-price oriented risks. That includes political risk. Headline grabbing political risk is the…

The Chicago Way Standard

John Lothian

In Chicago we don’t believe in short selling bans.  If you want to go short, you just walk into the trading pit and put your hands up in the air facing out and yell “SELL 4 at 6,” or something like that.  If you want to sell some futures electronically, you just hit sell on your screen, or lean on the keyboard in the right way.  Or is it the wrong way? We believe short selling is an important part of the market price discovery process.  As I repeat all too often, futures are abut two things: price discovery and risk transfer. …

Paying off the Debt Standard

John Lothian

One of the sound bites that I hear, including from people like the caustic ex-patriot Jim Rogers, is that the US will never be able to pay off its debt. They never should pay it all off. It would be nice for them to be able to get back to the place where they are not creating more or as much debt, but first things first. The debt of the United States, backed by the taxing powers of the strongest economy in the world, is something that has been around since the start of the republic. It is something that…

Rolling Over Debt Standard

John Lothian

Alexander Hamilton must have rolled over in his grave on Friday when Standard & Poor’s downgraded the credit rating of the U.S., the very thing Hamilton worked to turn from below junk to AAA before there were bond ratings. As the first U.S. Secretary of the Treasury, Hamilton was involved in the first grand deal surrounding U.S. debt and the assumption of debt from the states, creating the U.S. Treasury market that became the international standard it still is today. In order to get that deal done, Hamilton had to agree to move the capitol of the U.S. from New York…

Too Big To Fail Standard

John Lothian

The debate in Washington, DC about raising the debt limit has the potential to change the way the world looks at risk.  While there are all kinds of risk, one bedrock of an assumption has been that US government T-Bills are a risk free investment.  You will always get your money back, even if as a last resort the government has to print it to give it to you.  The US government will never default on its debt, is the belief and promise. Most importantly, US T-Bills and other US government debt are backed by the full faith and credit…

Response to 12 U.S. Senators Letter to CFTC Chairman Gary Gensler Suggesting Higher Margins Standard

John Lothian

(Recently 12 Senators wrote to CFTC Chairman Gary Gensler urging him to apply higher margins to the energy markets to “restore integrity.” Here is my response:) Dear Senators: I applaud your concern about the impact of rising oil prices on American consumers.  No one likes paying more for something than they think it is worth. Your letter to CFTC Chairman Gensler suggests you have the answer for the higher prices we are currently experiencing.  Your answer seems to be to facilitate less buying by speculators through imposing higher margin requirements for speculative trades.  While that could have the short-term effect you desire…