You might ask, “What happens if someone decides not to pay for the commodity as promised or if a particular farmer is unable to deliver the wheat?” This is a good question. If it were possible for people to back out of the trade without fulfilling their parts of the promises, the futures system would not work. People would lose confidence in the system, and it would not be attractive to either hedgers or speculators. Eliminating this uncertainty is the role of the clearing corporation.

Each exchange has a clearing corporation performing a critical duty: ensuring the integrity of the futures contract. Read more »

Posted: February 1st, 2008 under Futures Contracts.
Comments: 5

Perhaps no other part of the financial marketplace has received as much scrutiny as the futures market. Unlike other markets, where tangible items change hands (stock certificates, diamonds, real estate, and so on), the participants in the futures market deal in promises. A trader can buy or sell thousands of bushels of wheat or tons of soybean meal and have absolutely no intention of ever growing the commodity or taking delivery of it. In fact, fewer than 2 percent of the commodities underlying all futures contracts are ever actually delivered. Read more »

Posted: February 1st, 2008 under Commodities Futures, Futures Contracts, Futures Market, Futures Prices, Gold Futures.
Comments: 4

In Belgium, the law of December 1990 regulated in an extensive way the status of investment funds (initially covered by the law of 1957) and created two new types of investment companies: the SICAV and the SICAF. The SICAV is the société d’investissement a capital variable, while the SICAF is the société d’investissement a capital fixe.

The income that the investor receives from an investment fund is regarded as interest income but where the investment fund provides details of the underlying income distributed (for example, dividend and interest separately), each of these elements can be taxed according to its specific nature. On the contrary, the income distributed by an investment company will be qualified as dividend income and not as interest income. Read more »

Posted: February 1st, 2008 under Future Fund, Managed Futures.
Comments: 5

The term managed futures refers to investment management in which futures contracts are used as an asset class, especially for their profit potential rather than for their risk-reduction benefits. Money managers who deal in futures are formally called commodities trading advisors, or CTAs.

There is some evidence that futures as a group have low or even negative return correlation with stock and bond markets. If this is the case, it makes them excellent portfolio components. Read more »

Posted: February 1st, 2008 under Futures Contracts, Managed Futures.
Comments: 3

THE ORIGINS OF THE MANAGED FUTURES INDUSTRY

In 1949, Richard D. Donchian established what is believed to be the first managed commodity fund, Futures Inc., which was offered to the public in the US. This fund was traded until it was dissolved in the mid 1970s. Donchian was a broker at Hayden Stone and he applied a system to futures money management, based on the application of moving averages. Donchian’s initiative was not taken up by a large number of fund managers in the US and consequently managed futures funds suffered a temporary lull in their development.

The next development was that in 1965, Dunn & Hargitt became the Commodity Trading Advisers (CTA) for a managed commodity account. According to Thomas Northcote’s Major Events in the History of the Managed Futures Industry, the account was US$ 2000 and came under the direction of a non-broker CTA and traded at Lamson Brothers (now part of the Shearson Lehman Brothers Group). Says Northcote: ‘One of the more anachronistic policies of the CTA was that no women could open an account.’ The management fee was US$ 175 per year. Read more »

Posted: February 1st, 2008 under Future Fund, Future Trading, Futures Contracts, Managed Futures.
Comments: 3

Before the advent of managed futures funds in Europe, many European countries—but particularly the UK—suffered the attentions of unscrupulous and largely unregulated futures brokers. These unprofessional operators encouraged retail investors to open their own trading accounts, through which either the vicissitudes of the futures markets or the inflated nature of the brokers’ fees usually managed to ensure that the investors lost most of their money. Many of these unregulated practitioners arrived in Europe from the US, where the strict regulatory regime established by the Securities and Exchange Commission (SEC) or the CFTC had chased them out. The UK and continental Europe also managed to grow a few of their own cowboys.

Gradually, the introduction of a stronger regulatory regime across Europe and the growth of well-regulated managed futures funds — supported by their trade associations—have largely pushed the cowboys out of the forefront of the industry and out of existence, or into less well-regulated centres. Read more »

Posted: February 1st, 2008 under Future Broker, Future Fund, Future Investing, Futures Market, Managed Futures.
Comments: 6