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   Strategies & Market TrendsThe Final Frontier - Online Remote Trading


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To: TFF who started this subject2/14/2001 11:15:18 PM
From: TFF
   of 12617
 
Enron Online

enrononline.com

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To: TFF who wrote (8749)2/15/2001 12:03:12 AM
From: Jon Tara
   of 12617
 
Oh, cool We can trade "weather" now. Heck, that beats Presidential Elections all to heck.

More seriously, is this practical for an individual trader? What kind of capital does it take to trade these contracts? (And is it even possible?)

One of the really annoying things about the California energy situation is that they set-up a rigged market. You had to be either a producer or a consumer to trade electrnicity at CAL-PX. There was no opportunity for speculators to enter the market. I suppose they must have somehow thought that by limiting participation to producers and consumers that they were somehow "protecting" the public from manipulation. I think that, in fact, this structure INVITED manipulation, and had speculators been allowed into the market, we would never have had the disasterous results that ensued.

BTW, just read an article (Economist? Not sure where I saw it) claiming that California actually has MORE reserve generating capacity than most other states. Yes, we haven't been building new plants, but we had so much excess capacity that we didn't need to. The article said that it's all been basically a put-up, with plants being taken off-line to create an artificial shortage.

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To: Jon Tara who wrote (8750)2/15/2001 12:18:54 AM
From: LPS5
   of 12617
 
I met with someone a few months back who explained to me that, for the retail end of the market, weather contracts could be used to hedge against the risk of financial loss to holders of an outdoor wedding - for example - in the event of rain (which might lead to losing deposits, damage to rented tuxes, etc). Or, for those in those "big square states" out west, losses due to tornados and such could be hedged against...to some extent.

I wonder what the insurance/reinsurance industries will do to address the potent threat that such contracts present (if indeed they prove threatening). Possibly issue their own contracts or address the new market with OTC weather derivatives along the lines of swaps, etc.?

LPS5

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To: Jon Tara who wrote (8750)2/15/2001 8:44:29 AM
From: TFF
   of 12617
 
Futures have amazingly low performance bond rates. But more importantly the quick pace of change is making futures far more attract than stocks for short term trading. Some things happening include:

Demutualization of futures exchanges

creation of electronic markets (globex, a/c/e, etc)

Proliferation of direct access platforms(ISVs')

Simplified execution.

High volume/highly volatile contracts.

rapidly falling commission rates

creation of many new contracts such as individual stocks, stock sectors, indices, etc.

Should make for interesting times ahead.

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To: TFF who wrote (8752)2/15/2001 12:58:38 PM
From: Jon Tara
   of 12617
 
What is a low performance bond rate? Is this something you get from one of those guys with all-night offices across from the court house? :)

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To: Jon Tara who wrote (8753)2/15/2001 1:23:26 PM
From: TFF
   of 12617
 
LOL . No performance bond rates are the semi-equivalent to margin on stocks: Here are the requirements for the CME for example:

CME Performance Bond Rates
cme.com

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To: LPS5 who wrote (8751)2/15/2001 7:41:58 PM
From: OX
   of 12617
 
I'm aware of the xDD contracts that have been trading at the CME for awhile
(what is it a year or 2 now--time flies),
but do you know where the "rain" contracts are trading?

I looked over the enron site and it alludes to them, but only mentions the xDD contracts
in any detail. perhaps enron have their own products (??)

fascinating stuff

TIA

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To: OX who wrote (8755)2/15/2001 7:50:58 PM
From: LPS5
   of 12617
 
OX,

Sorry, no idea. They might be pending or even conceptual at this point, but a derivatives salesperson explaining the institutional applications to me recently gave the wedding example when I asked, out of curiosity, if there were retail applications as well.

I'll post any other qualitative information that I come across -

LPS5

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To: LPS5 who wrote (8756)2/15/2001 9:45:40 PM
From: OX
   of 12617
 
tx for your reply <e>

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To: TFF who started this subject2/16/2001 7:34:09 AM
From: supertip
   of 12617
 
Amid Weak Trading, Schwab May Miss 1st-Quarter Estimates
By STACY FORSTER
WSJ.COM

Charles Schwab Corp., with its stock-trading activity declining in January and worsening in February, said Thursday that it might have trouble meeting Wall Street's expectations for the current quarter.

The leading online brokerage firm reported average daily volume for January was 222,200 trades, down 5% from December and down 26% from a year earlier.

And trading figures so far in February are even weaker. Schwab said average daily trades have slipped 18% to about 182,000 in the current month.

Christopher Dodds, Schwab's chief financial officer, said it is too early in the first quarter to give specific guidance, but with trading volume softening more than expected, Schwab might have difficulty meeting its earnings estimates.

"In this type of trading environment, I would be of the mind that achieving the current consensus will be difficult," Mr. Dodds said.

Schwab's report prompted Richard Repetto, an electronic-brokerage analyst for Putnam Lovell in New York, to lower his estimates by one cent. He now expects the company to post a profit of 13 cents for the quarter.

Mr. Repetto said he had expected trading activity by Schwab customers to increase by about 10% in January and 5% in February and March. Because the company's revenue largely depends on commission revenue -- it accounted for 37% of total revenue in the quarter ending Dec. 31 -- Mr. Repetto said Schwab's difficulty in meeting those targets would affect its bottom line.

Analysts had expected Schwab to report a profit of 15 cents a share for the first quarter ending in March, down 35% from 23 cents a share in the year-earlier period, according to First Call/Thomson Financial. The firm earned 11 cents a share for the fourth quarter ending Dec. 31.

Earlier this month, Datek Online Brokerage, a unit of closely held Datek Online Holdings Corp., said its daily trades in January were up 5% to 117,695 from December and Ameritrade Holding Corp. reported average daily trading activity was up 14% from December to 131,000.

But Datek also indicated this week it is averaging fewer than 100,000 trades per day so far this month, down 15% from January.

In reporting its earnings Wednesday, TD Waterhouse Group Inc. said its average daily trading volume for January was down about 6% from December. Like Schwab, TD Waterhouse caters more to buy-and-hold investors.

Account growth at Schwab remained on target, however. Schwab reported opening 100,000 new accounts with $12.5 billion in assets.

Online brokerage firms have been hit by the lackluster market, which has left more casual investors on the sidelines, hoping they can wait out the downturn.

But early figures from February show that despite the interest-rate cut last month and Federal Reserve Chairman Alan Greenspan's comments Tuesday, when he played down the risk of a recession, there is little to entice investors to enter the market.

In recent weeks, Schwab has taken a number of cost-control measures to weather the market conditions, including instituting a hiring freeze, reducing the salaries of top executives and asking employees to take unpaid furloughs.

The company said Thursday it remains focused on managing its expenses, and added the measures have produced savings for the firm. For example, it said the hiring restrictions have resulted in a decline in full-time employees, down 500 to 25,800 at the end of January.

Mr. Dodds said the company continues to evaluate its spending, with advertising and brand-development investments now on the table.

"We'll be looking at all those things while balancing the importance of innovation and enhancing our long term competitiveness," he said.

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