CFTC: EU leverage ratio pulls options business from US banks | Mexico's new president may lack clout to alter energy policy | ESMA seeks penalty delay for pension funds' margin rules
July 12, 2018
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Regulatory & Compliance
CFTC: EU leverage ratio pulls options business from US banks
Options clearing has shifted significantly from US banks to EU peers as a result of Basel III leverage rules, according to a study by the Commodity Futures Trading Commission. A lower leverage ratio for EU banks has increased their market share of E-mini futures options positions to 47.9% from 38.7% before Basel III, the study says.
Futures & Options World (subscription required) (7/9) 
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Mexico's new president may lack clout to alter energy policy
Mexico's president-elect, Andes Manuel Lopez Obrador, has pledged to overhaul the nation's energy policies, but despite a resounding electoral victory, it's unclear whether he will have sufficient support to do so. The opposition appears to have enough seats in congress to block any constitutional reforms if, as history suggests, they vote strictly along party lines.
Argus Media (7/9) 
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ESMA seeks penalty delay for pension funds' margin rules
Facing an Aug. 17 expiration of an exemption, the European Securities and Markets Authority has urged EU states to postpone possible penalties for pension funds for not meeting variation-margin requirements when clearing over-the-counter derivatives.
Pensions & Investments (free access for SmartBrief readers) (7/3),  The Trade (UK) (7/3),  Global Investor (subscription required) (7/5) 
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Regional banks want capital plan based on stress test revised
The Federal Reserve has received a request from nine regional banks to change a proposal to base capital requirements on stress test results. The banks say the central bank should reconsider the proposal in light of relaxation of the Dodd-Frank Act for small and midsize banks.
MLex (subscription required) (7/12) 
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Hot Topics
This Week in Commodities
LNG futures contract to debut from CME, Cheniere Energy
CME Group is partnering with Cheniere Energy's Sabine Pass liquefied natural gas export terminal to develop an LNG futures contract, after market participants "expressed a desire to have a physically delivered LNG contract that can help them manage price risks," says Peter Keavey of CME. No launch date has been set, but University of Houston professor Craig Pirrong surmises "there will be robust derivatives markets in LNG" in five years.
Reuters (7/10),  The Wall Street Journal (tiered subscription model) (7/10),  Houston Chronicle (tiered subscription model) (7/10) 
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Ag sentiment improves but outlook uncertain
Despite considerable price slippage for agricultural commodities in June, the Purdue University/CME Group Ag Economy Barometer registered slightly improved sentiment based on economic conditions. "However, it was clear from survey responses that uncertainty regarding the agricultural outlook increased considerably," said James Mintert, the barometer's principal investigator.
Financial Regulation News (7/6) 
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US-Chinese trade dispute likely to hit commodities
China's retaliatory tariffs against the US are expected to hit US agricultural and energy commodities. The price of West Texas Intermediate crude could decline, experts say, but liquefied natural gas appears safe for now.
Nikkei Asian Review (Japan) (tiered subscription model) (7/8),  The Wall Street Journal (tiered subscription model) (7/8) 
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US oil may find a home in India amid US-China trade war
India could become a major destination for US crude as the US-China trade war will likely force Chinese refiners to reduce their dependence on US oil, according to Morningstar Director of Research for Commodities and Energy Sandy Fielden. US crude exports to India reached 4.7 million barrels in May.
BloombergQuint (India) (7/9) 
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Black Sea grain might be winner in US-Chinese dispute
The US-Chinese trade dispute is set to increase wheat, corn and soybean exports from the Black Sea region to China to make up for reliance on buying from the US. "Black Sea countries, mainly Russia, may intensify their soybean shipments to China in case of any US deliveries' disruption," Thomson Reuters analyst Svetlana Malysh says.
Reuters (7/10),  Reuters (7/10) 
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Cobalt, lithium price surges may be headed for a correction
Severe oversupplies and an uncertainty about future battery technologies might mean the price of lithium and cobalt could plunge, some experts say. Some investors say, however, that the classic supply-and-demand issues will mean an opportunity for investors.
South China Morning Post (Hong Kong)/Bloomberg (7/9) 
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USDA report switch to favor speediest traders
The Department of Agriculture has decided to bypass traditional media and begin posting its reports directly online. The move is expected to give the speediest algorithm-driven parties on Wall Street a significant leg up in trading.
Bloomberg (tiered subscription model) (7/12) 
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ICAP Energy founder discusses state of commodities
Retiring ICAP Energy founder Paul Newman says not all commodity trading will switch from over the counter to exchanges, despite regulations encouraging the move. "The regulatory drive to move markets towards exchanges has created contracts that look like futures but aren't," Newman says.
Risk (subscription required) (7/9) 
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US energy boom has its boundaries
US energy output is booming, but the long-touted goal of energy independence will remain elusive as major foreign suppliers continue to command the global spigot.
Financial Times (subscription required) (7/5) 
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US shale may see more M&A
A BHP plan to divest itself of billions of dollars in US assets may mark only the biggest round of mergers and acquisitions in the country's shale sector this year as that activity is expected to increase in response to rising investor activism. This would amount to a departure from the current climate of capital prudence and a change from last year's considerable appetite for risk.
Argus Media (7/9) 
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Commodity traders wake up to IT
Commodity traders are turning to algorithms, machine learning and artificial intelligence to make better sense of data and to improve trade decision-making to remain competitive.
Financial Times (subscription required) (7/9) 
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CME Group Insights
US soybeans in front line of trade war
The US may or may not be able to come out ahead in manufacturing in the current trade war, but agriculture is certain to suffer, write CME Group's Patricia Mosley, Natalie Denby and Bluford Putnam. Also, soybeans are likely to be targeted more than corn.
CME Group (7/11) 
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If there is no struggle, there is no progress. Those who profess to favor freedom and yet depreciate agitation are men who want crops without plowing up the ground.
Frederick Douglass,
orator, writer and abolitionist
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