C.d. futures market growing – nytimes.com usd aed rate


Some call it a three-ring circus; others describe it as three pits currency conversion aud to usd. Both refer to trading in new futures contracts for bank certificates of deposit now under way on the New York Futures Exchange, the Chicago Board of Trade and the International Monetary Market.

The inability of bankers, securities dealers and investors to predict interest rates in recent years has created a ready market for financial futures, making it one of the fastest growing areas of the securities business.

High and volatile interest rates have caused more borrowers and lenders to use financial futures, of which contracts on certificates of deposit are the latest entry, to protect themselves from adverse changes of interest rates machine learning artificial intelligence. Indeed, the rosy outlook for financial futures has attracted competitors to the market.

The 90-day Treasury bill contracts offered by the International Monetary Market of the Chicago Mercantile Exchange is among the dominant futures available.

Others include the Chicago Board of Trade’s Treasury bond futures and Government National Mortgage Association pass-through certificates.

So far, the dominance of these contracts has not been challenged usd to aud exchange rate. But the rapid growth has attracted competition from the New York Futures Exchange, a subsidiary of the New York Stock Exchange that started business about a year ago, and the Commodity Exchange Inc., known as Comex meaning of futures and options in stock market. The big success at Comex, which does not trade in C.D. futures, has been its gold contract, which is by far the most active of its type.

At the New York Futures Exchange, officials are optimistic that they will be successful with the new C.D. futures, which in less than two months have emerged as the exchange’s most active contract eur usd historical data download. Contracts in C.D.’s

The new C.D. contracts are a promise to buy or sell, at a specific price at some specificed future time, a $1 million, three-month certificate of deposit issued by one of a select group of large American banks binary worksheet. In trading before the delivery date, contract prices drop if interest rates rise, but if rates fall, the contract prices rise exchange rate usd jpy. In case of losses, the buyer or seller of a contract must either deposit additional margin with his broker, or make an offsetting transaction to wipe out the position.

A simple hedge using C.D’s. might involve a securities dealer who wanted to buy $10 million of C.D.’s from a bank, but wanted to reduce the risk of loss should interest rates rise before he could resell the certificates pre market dow jones futures. By selling 10 C.D. contracts on an exchange, the dealer could offset losses on the C.D.’s purchased from the bank with profits on the C.D. futures contracts.

Officials at all three exchanges have high hopes for the C.D. contracts because, they claim, it fills a special need that is not satisfied by a futures contract in 90-day Treasury bills.

Treasury bill rates are often a poor guide to changes in shortterm domestic interest rates, they say, because of huge purchases or sales by foreign central banks usa today sudoku answers. Source of Funds

Certificates of deposit, which are issued by large banks to raise money for loans they make, are a more accurate measure of domestic credit conditions, it is claimed.

After languishing in the files of the Commodity Futures Trading Commission for years, the C.D. contracts emerged in rapid succession this summer aud to usd forecast 2015. The New York Futures Exchange started trading July 9, followed by the International Monetary Market of the Chicago Mercantile Exchange on July 22, and the Chicago Board of Trade on July 29.

While the Chicago exchanges dominate Treasury bill and bond futures partly because they were first to offer the product, analysts say that the New York Futures Exchange, although it offered the first C.D. contract, offers no such advantage. The other exchanges were quick to follow, and they still have a larger pool of active, experienced traders than does the New York Futures Exchange. Liquidity Credited

”Chicago will remain the leader in financial futures because we have the people who are willing to risk their money to make highly liquid and efficient markets,” said Leo Melamed, special counsel to the Chicago Merchantile Exchange.

No exchange has emerged as a winner yet, but many analysts predict that the C.D. contract will survive at only two of the exchanges. Richard Sandor, president of Conti Commodities and sometimes called ”the father of financial futures,” predicted that ”one exchange will dominate the contract, with another in a secondary role.” The experience with gold and other commodities, he said, has shown that three exchanges with the same product cannot endure.

Officials at all three exchanges agreed that, so far, there is no clear loser in the competition for a C.D. contract. Commercial Market Essential

John Blin, director of marketing at the New York Futures Exchange, explained that ”the two surviving exchanges with C.D.’s will be those that successfully attract the commercial users of C.D.’s – the dealers and ultimately the banks.” A futures market that relies too much on arbitrage against similar futures contracts, and upon traders trading with traders ”is not a long-term proposition,” he added.

Securities dealers have so far been the biggest users of the markets, but have not shown a clear favorite among the exchanges. ”It looks like the dealers are rotating their orders, testing and probing each exchange,” said Mike Kijanka, director of marketing at the International Monetary Market.

What about the banks, which are supposed to be natural users of the market because the contracts for certificates of deposit match the C.D.’s they issue? ”So far, the talk-to-ticket ratio is quite high,” commented Richard MacWilliams, senior vice-president at the Donaldson, Lufkin & Jenrette Securities Corporation. ”There are lots of people studying the market,” he said, but few have integrated C.D. futures into their asset and liability management decisions. Risk in Some Indicators

The success or failure of the exchanges will be influenced by technical variations in their contracts that are important to traders and arbitrageurs. Some analysts warn that daily trading volumes and open interest data are not reliable indicators of the success of the exchanges, since those numbers can be inflated by meaningless transactions.

In fact, at the Chicago exchanges, the published figures for estimated daily volume have exceeded the actual trading volume by as much as 40 percent, although on some days, the published volume estimates are less than the actual volume reported a day later by the clearing corporation. At the New York Futures Exchange, an on-line computer system eliminates the need for estimating volume, according to Mr. Blin.

According to analysts familiar with the three C.D. contracts, the version offered by the New York Futures Exchange has extra appeal because it includes delivery in nearby months, and not just one month every quarter as do contracts of the Chicago exchanges. The International Monetary Market has a natural advantage, they say, because it calls for delivery in the second half of the month, while the Board of Trade and the New York Futures Exchange are both competing with contracts that specify delivery in the first half of the month.