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September 3, 2013

3 min read

Selling Commodities in an Equities Market: A Panel Discussion Preview

It’s a tough time to be a futures broker. Despite surviving the 1-2 punch of MF Global and PFG, markets have been difficult to predict and volumes haven’t fully bounced back. In managed futures, CTAs as a group have under-performed and while traditional wisdom says to invest in a manager during a draw down—it’s a tough sale even for the most experienced investor. While generally speaking, the rise of the stock market is good for our economy and a sign of a market rebound, it makes selling futures a harder proposition when low-cost, less-complex investment vehicles such as Stock Index ETFs are performing well. Combine this with the fact that generating leads is harder, more expensive, and more work than before…what’s a broker to do? I have the privilege of moderating an exciting panel discussion “Selling Commodities in an Equities Market” with some great fellow panelists including Daniel Ryba, Director...

Why Past Performance of a Conventional (60-40) Portfolio Is NOT Indicative of Future Performance: Part 2

As discussed in Part 1 of "Why Past Performance of a Conventional (60-40) Portfolio Is NOT Indicative of Future Performance", the results of a conventional 60-40 portfolio over the last 30 years aren’t likely to repeat in the near future. Going forward, if the P/E ratio reverts to its long-term average of 16.4, corporate profits grow at their historical average of +4.70%, and dividends increase at the same rate as corporate profits (and the dividend payout ratio increases to its long-term average), stocks will appreciate at just 7.05% per year over the next decade. Here’s the arithmetic. Future returns from U.S. equities To determine the likely return for the S&P 500 over the remainder of this decade we need three primary inputs: The rate of earnings growth for the companies underlying the index, The most likely P/E ratio people will pay for those earnings at year-end 2020, and The dividend...

Marketing of Commodity Trading Advisors

With expanding areas of potential client pools and capital, commodity trading advisors (“CTA”) are often looking outside of their firms to tap into these untouched resources. To accomplish this, CTAs often contract with an introducing broker (“IB”) whose sole goal is to bring the CTA new clients. This article discusses the terms of the relationship and highlights some things all parties should be aware of. In order to facilitate an efficient and beneficial relationship between a CTA and placement agent, it is highly recommended that the parameters of relationship are memorialized in writing via a “Placement Agent Agreement.” These agreements set out the general rights and obligations of either party, discuss the specific services to be rendered and the compensation for such services, and set forth the term of the relationship. Specifics of Placement Agent Agreements: Things to Keep in Mind While the specifics of each placement agent agreement will...

Why Past Performance of a Conventional (60-40) Portfolio Is NOT Indicative of Future Performance

For the past 31 years , a conventionally-diversified portfolio consisting of 60% stocks and 40% bonds has provided investors with satisfying returns of +10.80% annually. This was the result of both stocks and bonds advancing strongly throughout that period. Better yet, stocks and bonds complimented each other nicely. When stocks returned +19.35% annually from the market low in 1982 to its peak in August 2000, bonds lagged somewhat (although still returning a substantial +10.34% annually). But in the period from the 2000 market peak to the 2009 market low, while stocks declined a sharp -43.51%, bonds balanced that with a strong +61.78% rally. More recently, both stocks and bonds have advanced, with the 60-40 portfolio gaining an annualized +15.36% from the market low in March 2009 to May 31, 2013. The past 31 years was an unprecedented period for a 60-40 portfolio; one that wasn’t seen prior. In fact, as...

Ask the Experts: The 2013 USDA Prospective Plantings Report

The March 28, 2013, USDA Prospective Plantings report will have a major impact on agricultural markets, providing the first survey-based indication of the expected plantings for the 2013 season. In anticipation of this report, please join us as experts from CME Group and Thomson Reuters discuss acreage expectations and the current market outlook. When: Wednesday, March 27 2:30 p.m. CT Where: CME Group Auditorium 20 South Wacker Drive Chicago, IL 60604 -or- Attend it online! Webinar topics will include: Lanworth outlook on US 2013/2014 corn and soybean acreage 2012/2013 South American review International trade overview: exports, stocks, and demand 2013 crop weather outlook and residual effects of the drought Global long term production trends Opportunities with Weekly and Short-Dated New Crop options Speakers: Dr. Corey Cherr Product Manager, Agriculture Research Thomson Reuters Commodities Research and Forecasts Gavin Maguire Agriculture Markets Columnist Thomson Reuters Tim Andriesen Managing Director, Agricultural Products CME...

What Is Link Building and Why Is It Important?

Whether you possess a wealth of knowledge in search engine optimization (SEO) or you’ve just heard about it in passing, you probably know the phrase “link building” and how crucial it is to your website’s success. If you don’t know about link building don’t sweat it, you’re in the right place. In general terms, search engine optimization (SEO) is the process of increasing your website’s visibility in a search engine's (such as Google) un-paid ("organic") search results. Search engines such as Google have algorithms that are applied to websites in order to rank them. The higher your page rank, the higher up your site appears in search results. Page rank algorithms heavily favor sites with many inbound links, especially inbound links from other high ranking sights (like a yahoo.com or cnn.com). (Graphical display of Google Algorithm courtesy Wikipedia) A popular and effective SEO tactic is to increase the number of...

ICE Launches First Indian Rupee Futures at a U.S. Exchange on Jan 22

ICE Futures U.S. announced that it will launch a new cash-settled currency futures contract based on the Indian rupee/U.S. dollar exchange rate on Tuesday, January 22. The ICE rupee contract will be the first futures contract on the Indian currency offered by a U.S. exchange. It offers market participants the ease of doing business in a regulated futures environment for execution and clearing, alongside ICE’s suite of more than 60 currency contracts, which includes the U.S. Dollar Index. The listing of the Indian rupee contract recognizes the increasing importance and integration of India into the world economy and responds to mounting interest in exchange-traded products from institutional and professional traders and money managers, including CTAs and hedge funds. The Indian rupee has grown rapidly to become the sixteenth most traded currency in the world. With approximately $70 billion in turnover a day, this is roughly where the Korean won—then the...

Member Obligations Under NFA Bylaw 1101 with Respect to Certain IBs Afforded Temporary Registration No-Action Relief

NFA Bylaw 1101 prohibits an NFA Member from carrying an account, accepting an order or handling a transaction in commodity futures contracts for or on behalf of any non-Member of NFA that is required to be registered with the Commodity Futures Trading Commission (CFTC) as an FCM, IB, CPO, CTA or LTM. Bylaw 1101 by its terms imposes strict liability on any Member conducting customer business with a non-Member that is required to be registered. Effective October 11, 2012, the Commodity Futures Trading Commission (CFTC) afforded certain IBs temporary registration no-action relief. Specifically, the CFTC's Division of Swap Dealer and Intermediary Oversight (DSIO) stated, in part, that it would not recommend that the Commission commence an enforcement action against a person for failing to register as an IB where the person's requirement to be registered arises from the person being involved with certain Intercontinental Exchange, Inc. (ICE) and/or New York...

IIB Candidate for NFA BOD | John Alan Vassallo

Information Request Questionnaire Your Name & NFA # John Alan Vassallo 221551 How long have you personally been in the futures industry? 25 years Your 3-sentence Bio: Began working on the NYMEX floor in 1989; moved back to my home town, Dallas, TX, in 1990 to found my IB, Coquest which focuses on energy trading/hedging and managed futures. We now include an OTC brokerage company and a portion of Mega Capital, an IIB focused on managed futures. Your Disciplinary History, if any: None. Professional associations or Industry activities: I have served on the NFA Board for 10 years; NFA arbitrator; NIBA board; Preston National Bank, Dallas board 12 years; IB Advisory Committee; Episcopal School of Dallas Board, IPI (Institute for Private Investors) What do you believe is your greatest personal achievement? In partnership with my wife, our twins - now 10 years old. What do you believe is your greatest...

Coming in 2013: Swap Designated IBs

The Dodd-Frank Act of 2010 amended the definitions of FCM, IB, CPO and CTA to include "swaps." On August 13, 2012, the CFTC published final rule definitions for "swaps", "security-based swaps" and "security-based swap agreement". Therefore, any IBs that are not currently registered but are acting as an IB with respect to swaps subject to the jurisdiction of the CFTC must file to be registered with the CFTC on or before December 31, 2012, and be approved as a swap designated IB Member of NFA. In addition, any person associated with a newly registering IB that engages in activities involving swaps subject to the jurisdiction of the CFTC must register as an Associated Person (AP) and be appointed as a swap designated AP. At this time, there are no proficiency requirements for APs whose activities are limited solely to swaps. Also beginning January 1, 2013, currently registered IBs whose activities...

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