"THE MARKET... consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Alexander Elder

Friday, June 6, 2008

Famine Futures

Global Food Insecurity

see: RGE
"If there is a persistent source of return at this stage in the commodity bull, it is likely now being paid by consumers (society) in the form of inflation.

For this, the U.S. Treasury is not without blame.

And what if it is a zero-sum game? How do you know if/when you are not the greater fool? Wall Street has a bad habit of taking retail for the sucker."
see: The Commodity Conundrum: Securitization and Systemic Concerns (Part II)

"We’ve been here before… Economic problems related to OTC derivatives first occurred n 1994 which included the bankruptcy of Orange County, in 1998 with the collapse of Long-Term Capital Management, then during the California electricity crisis of 2000 and 2001 due to market manipulation by Enron, and most recently the credit crisis as a result of mortgage securitization repackaged into complex derivatives."

"Unfortunately, futures markets are often painted with the same paintbrush, even though current problems in commodity markets are directly related to loopholes “inserted at the behest of Enron and other large energy traders into the Commodity Futures Modernization Act of 2000 [CFMA] in the waning hours of the 106th Congress.” This law exempted from CFTC oversight the trading of commodities in “synthetic” futures via OTC electronic exchanges—an institutionalized redux of early 1900s bucket shops."
see: The Commodity Conundrum: Securitization and Systemic Concerns (Part III)

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What is a Bucket Shop?

"Bucket Shop is a specifically defined term under the criminal law of many states in the United States which make it a crime to operate a bucket shop. [2] Typically the criminal law definition refers to an operation in which the customer is sold what is supposed to be a derivative interest in a security or commodity future, but there is no transaction made on any exchange. The transaction goes 'in the bucket' and is never executed. Without an actual underlying transaction, the customer is betting against the bucket shop operator, not participating in the market."
see: Wikipedia

The SEC believes that "internalization" is somehow different, and this affects ALL of your online trading, no matter what you are trading. Trades that are executed outside of the exchange, never reaching the main market, effectively hide data from technical analysis, and skew pricing.
see: Not a bucket?

"... internalization hurts retail customers and market quality"

see: EconPapers

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