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Opalesque Futures Intelligence

News Briefs: Trend follower gains, CTA at SEC, high frequency trading, new quantitative index and more

Tuesday, September 29, 2009

Trend Followers Gain in August

Manages futures was up in August but returned less than hedge funds as whole—0.92% vs. 1.53% according to the Credit Suisse/Tremont index.

Five of BarclayHedge’s eight managed futures indices were profitable for the month. Some of these benchmarks, including the agricultural traders’ index, is positive year-to-date, while others remain in the red despite the recent gains. Certain large funds, including Winton Capital, have pared their loss for the year.

Some trend followers had a great August. For instance, Dunn’s Insurance Dedicated Futures Fund, a multi-advisor pool which allocates its assets to five systematic trading programs, made 5.33% for the month. This vehicle returned 73% in 2008. (An interview with Bill Dunn is in the May 5, 2009, Opalesque Futures Intelligence: Source)

Former CTA to Advise SEC

The US Securities and Exchange Commission named Gregg Berman a senior policy advisor in its new Division of Risk, Strategy and Financial Innovation. Previously he was at RiskMetrics Group, where he recently headed the global risk business. Before that he co-managed multi-asset hedge funds at New York-based ED&F Man.

Mr. Berman’s hedge fund career started in 1993 as researcher for Mint Investment Management Corp., at one time a $1billion commodity trading advisor. Earlier he conducted research in experimental nuclear physics.

“I much look forward to using an interdisciplinary approach, one involving economics, finance, and law, in a way that fairly addresses the needs of Main Street as well as Wall Street,” he said, regarding his SEC appointment.

High-Frequency Trading to Spread

Even as the SEC moved to ban flash trades, the future of high-frequency trading looks bright, according to a new study from Tabb Group. Authors Larry Tabb, Robert Iati and Adam Sussman say high-frequency trading, already present in more liquid contracts and instruments such as equity options, futures and FX, will become as dominant in global markets and other asset classes as it has become in US equities.

While the exact share of high frequency volume is uncertain, no one disputes its dominance or importance to the equity market, they say. The trend is driven by low commission rates, small contract sizes, increasing number of market participants and in particular inexpensive and fast networking and connectivity.

High-frequency traders can capitalize on inefficiencies that eluded traditional traders and this advantage will only become larger, the Tabb report suggests.

Barclays Capital Offers Quant Index

Barclays Capital’s new Aristo Index combines quantitative strategies in equities and commodities . It blends three separate quantitative investment indices through an algorithm that determines the allocation based on an optimal risk/return profile. Jose Mazoy of Barclays says the index is transparent, rule based and tradable.

Gensler Claims Carbon Trading Role

“I believe that the CFTC is best equipped to regulate the larger carbon trading markets that would be created as a result of cap-and-trade legislation,” says Commodity Futures Trading Commission chairman Gary Gensler, following up on his predecessors’ push to become the regulator of these developing markets.

He pointed out that the Commission already oversees trading and clearing of futures and options contracts based on sulfur dioxide, nitrogen oxide and carbon dioxide allowances and offsets listed on the New York Mercantile Exchange and the Chicago Climate Futures Exchange.

During the same speech to a meeting of the CFTC Energy and Environmental Markets Advisory Committee, Mr. Gensler emphasized the regulation of energy markets. “The top seven energy contracts that we regulate have a notional value of nearly $700 billion. It is essential that this agency continues to police the energy markets for fraud, manipulation and other abuses by promoting market integrity and enhancing transparency,” he said.

The CFTC is in a turf battled with the SEC about regulatory authority over various markets. There were proposals earlier this year that the two agencies should be merged, but that appears unlikely now.

This article was published in Opalesque Futures Intelligence.
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