News Br iefs

Calyon Financial and businesses. The clearing agreements will end Euros with maturities out to 30 years, as well Fimat Finalize Merger 12 months from the date of the notice unless as short-term overnight index swaps ending Société Générale and Calyon have signed the parties agree to a different termination on monthly International Monetary Market a final merger agreement that will bring date, ICE said. “ICE expects to fully transition start dates. together their brokerage businesses—Fimat its energy futures and OTC derivatives clear - and Calyon Financial—into a single company ing business to its ICE Clear Europe opera - that will rank among the largest futures and tions in the third quarter of 2008.” ICE also LSE Shareholders Approve options brokers in the world. The newly said it is finalizing its application to the U.K. Acquisition of Borsa Italiana formed company, Newedge, will be owned Financial Services Authority for ICE Clear The London Stock Exchange won share - equally by the two French banks and will Europe to become a “recognized clearing - holder approval for its proposed acquisition of begin operating early next year, according to house” and added that it anticipates regulatory Borsa Italiana on August 8, clearing a key hur - an August 8 press release. The company will approval in early 2008. dle to completing the transaction. Shareholders be based in Paris and will have a governance in the Italian exchange have already approved structure that “will ensure its autonomy in the deal, which is expected to close in operational functions and anticipate any con - LCH.Clearnet October, pending regulatory approval. flict arising between the shareholders,” the Seeks Clearing Links two banks said. Patrice Blanc, the chairman LCH.Clearnet Group announced on and chief executive officer of the Fimat August 9 that it has issued formal requests to ISE Shareholders Group, will be appointed chief executive Deutsche Börse and Borsa Italiana for full Approve Merger with Eurex officer of Newedge. Richard Ferina, the chair - interoperability with Eurex Clearing and Cassa Shareholders in the International man and chief executive officer of Calyon di Compensazione e Garanzia, respectively. Securities Exchange overwhelmingly voted to Financial, will be deputy chief executive offi - The request was made in accordance with a approve the proposed merger with Eurex. cer. According to data published by the code of conduct agreed last year that requires Under the terms of the merger agreement Commodity Futures Trading Commission, the European exchanges, clearinghouses, and set - announced on April 30, ISE stockholders will two FCMs ranked seven and eight in terms of tlement organizations to eliminate barriers to receive $67.50 in cash for each ISE share held. customer assets related to positions on U.S. competition. “Implementation of these links “After the transaction closes, we plan to futures markets. As a combined company, they will enable users of those markets to consoli - integrate the two businesses as promptly as rank third, with just over $12 billion in cus - date clearing of cash equities traded on four possible to deliver additional value to our tomer assets as of June 30. On a worldwide separate European markets—London Stock shareholders and customers,” said Andreas basis, the two companies estimate that they Exchange, virt-x, Deutsche Börse and Borsa Preuss, chief executive officer of Eurex. ISE handled a combined 1.3 billion futures and Italiana—at LCH.Clearnet, and deliver the and Eurex expect the transaction to close in options contracts last year. choice of central counterparty demanded by the fourth quarter, pending approval by the users in fulfilment of the code’s intentions,” Securities and Exchange Commission. LCH.Clearnet said. “In addition, extending CME and CBOT LCH.Clearnet’s clearing services to include Accelerate Integration Timetable Germany and Italy will help lower unit costs, Dubai Exchange Bids for On July 24, the CME Group announced thus giving scope for further fee reductions 25% Stake in OMX that it will accelerate the timetable for inte - across all markets.” Nasdaq’s proposed merger with OMX grating the Chicago Board of Trade and the Group could be derailed by a higher offer from Chicago Mercantile Exchange. The ex- Borse Dubai, a newly formed holding company change now aims to combine electronic CME Will Clear controlled by the Dubai government. Borse trading on a single platform in January, and Interest Rate Swaps in 2008 Dubai announced on August 9 that it is seek - to start moving all open outcry trading to a Participants in the over-the-counter ing to buy a stake in OMX at a price that is single floor in March. interest rate swaps market will be able to approximately 11% higher per share than clear certain types of transactions through what Nasdaq has offered. Borse Dubai added the CME Group clearinghouse starting in the that it already has purchased 4.9% in OMX ICE Announces Launch of first quarter of 2008, the CME announced on and has options to buy another 22.5% in U.K. Clearinghouse July 17. The exchange said it plans to offer OMX, contingent on obtaining no less than IntercontinentalExchange formally noti - swaps trading and clearing through its sub - 25% of OMX shares in aggregate. Borse Dubai fied LCH.Clearnet on July 18 that it plans to sidiary, Swapstream. The products covered by is headed by Per Larsson, the former OMX terminate the existing clearing agreements for the service will include forward-dated interest chief executive who left the Stockholm-based ICE’s energy futures and OTC derivatives rate swaps denominated in U.S. dollars and group in 2003. Since then he has been the

14 Futures Industry head of the Dubai International Financial Portfolio Margining Update ucts is limited to equities, equity options, Exchange, which is now part of Borse Dubai. The New York Stock Exchange is consid - equity futures, security futures and over-the- Nasdaq issued a response saying it remains ering whether fixed income securities should counter equity derivatives. “fully committed” to buying OMX and urging be included in the range of products that are In related news, the regulatory arm of the shareholders to take no action with respect to eligible for portfolio margining treatment. In a NYSE Group issued an information memo on the Borse Dubai offer. filing with the Securities and Exchange July 23 advising member firms on the impor - Commission, the NYSE asked for permission tance of determining the suitability of portfolio to extend the portfolio margining pilot now margining accounts by individual investors and LCH.Clearnet Repurchases underway for another year, and also said it will small institutions. The information memo out - Shares from NYSE Euronext seek to determine “whether fixed income secu - lined “certain considerations” that firms should NYSE Euronext in July received 399 mil - rities should be added to the list of eligible consider in making this determination, such as lion euros ($548 million) from LCH.Clearnet products.” Currently, the list of eligible prod - whether the prospective customer “fully under - Group as payment for the redemption of out - standing convertible preference shares and the repurchase of approximately 20 million ordi - Top 25 FCMs nary shares. LCH.Clearnet is also expected to Ranking based on customer assets on U.S. exchanges as of June 30, 2007 from reports repurchase an additional six million ordinary filed with the CFTC shares from NYSE Euronext for 61.8 million euros ($84 million) by April 2008. Following Rank FCM Customers’ Seg Required 4d(a)(2) the second repurchase, NYSE Euronext will 1 UBS Securities LLC* 14,531,334,638 retain a 5% stake in LCH.Clearnet’s outstand - 2 Goldman Sachs & Co* 13,503,534,541 ing share capital and will have the right to 3 Citigroup Global Markets Inc 9,445,354,893 appoint one director to LCH.Clearnet’s board 4 JPMorgan Futures Inc 9,031,672,515 of directors. 5 MF Global Inc 8,235,595,803 6 Merrill Lynch Pierce Fenner & Smith* 8,297,168,586 Eurex Hoping to Attract Prop 7 Calyon Financial Inc 6,399,977,841 Traders in Emerging Markets 8 FIMAT USA LLC 5,664,058,493 Eurex announced on July 18 that it will 9 Lehman Brothers Inc 4,930,403,000 begin offering a fee waiver in August for pro - 10 Morgan Stanley & Co Incorporated 4,260,388,317 prietary traders that have not previously used 11 Barclays Capital Inc 3,999,195,088 the exchange. The program will apply in emerging markets countries such as Russia, 12 Deutsche Bank Securities Inc 3,821,465,444 Brazil, South Africa, China and India. The 13 Bear Stearns Securities Corp 3,228,096,863 waiver will last for two years after the trading 14 RJ O’Brien & Associates Inc 2,020,214,293 firm has entered the program. 15 Prudential Bache Commodities LLC 1,908,560,000 16 Banc of America Securities LLC 1,654,641,341 U.S. Appeals Court Rejects 17 Sentinel Management Group Inc 1,525,191,728 Nymex Effort to Block ICE 18 Credit Suisse Securities (USA) LLC 1,391,513,095 from Using Its Settlement Prices 19 ADM Investor Services Inc 1,136,691,371 The U.S. Court of Appeals for the Second 20 BNP Paribas Commodity Futures Inc* 1,124,894,428 Circuit ruled in favor of the Intercontinental- 21 FC Stone LLC 922,105,610 Exchange in an intellectual property case with 22 HSBC Securities USA Inc 757,495,037 important implications for the futures industry. 23 Rosenthal Collins Group LLC 675,412,257 The court on August 1 handed down a deci - sion rejecting a claim by the New York 24 RBS Greenwich Capital Inc 659,138,000 Mercantile Exchange that ICE’s use of Nymex 25 Fortis Clearing Americas LLC 578,570,126 settlement prices violated copyright law, saying *All U.S. FCM customer seg funds combined. those prices do not merit copyright protection. This represents the total amount of funds that an FCM is required to segregate on behalf of customers who are trading on a U.S. designated contract market or derivatives transaction execution facility. This is the sum of all accounts that contain a net liquidating equity.

September/October 2007 15 News Briefs continued

Asia Roundup

Tocom Accelerates Trading Platform The exchange said the new policy would save money for banks by The Tokyo Commodity Exchange implemented two enhance - making it unnecessary for them to set up a separate company in ments to the performance of its trading platform on July 30. The order to become SGX clearing firms. order response time was reduced to 500 milliseconds from one sec - In a separate announcement, SGX said it is planning to dissolve ond, and the frequency of market data distribution was increased to a compensation fund set up in 1986 to cover customer losses arising one second from three seconds. The exchange said these measures from a default of a broker in its derivatives markets. The exchange were taken to improve the level of service while it develops its next said it plans to transfer the S$33 million (US$21.8 million) in the trading system. fund to its clearinghouse, and noted that a separate fund exists under Singapore law to protect retail customers from a default by a broker.

HKEx Studying Commodity Derivatives Hong Kong Exchanges and Clearing is taking expert advice on FIA-Japan Issues Report Calling for possible additions to its line of products. The exchange said on July “Urgent Action” to Strengthen Japan's 18 that it has hired McKinsey & Company to study the feasibility of Position as International Financial Center trading commodity derivatives, including energy, base metals, and Responding to a request from a special working group within agricultural products. In addition, HKEx hired Mallesons Stephen Prime Minister Shinzo Abe's Cabinet, FIA-Japan submitted a letter Jaques, with sub-consultants Climate Focus and International on July 6 outlining several recommendations for infrastructure Environmental Trading Group, to study the trading of emissions- changes, exchange modernization, and improved foreign access. The related products. The consultants are expected to complete their critical priority action steps outlined in the letter include: develop a work in about four months, the exchange said. clear strategy for the Tokyo Financial Market; eliminate the financial market “silos"; create a competitive environment; encourage interna - tional entry and remove regulatory hurdles; and establish a high level SGX Tinkers with Clearinghouse promotional Tokyo Financial Center office. Singapore Exchange is taking steps to ease the cost of doing busi - FIA-Japan has 60 members representing a cross-section of the ness with its clearinghouse. In early August, it began admitting futures industry. Its board of directors and membership are separate locally licensed banks as clearing members for its derivatives market. from the FIA.

stands the terms and procedures governing the natural gas, oil, electricity and metals. It is a LCH.Clearnet Links with portfolio margin account” and can “absorb non-clearing member of the New York Euroclear to Manage losses in excess of the necessary collateral.” Mercantile Exchange and a ring-dealing Derivatives Collateral member of the London Metal Exchange. Members of LCH.Clearnet, the London branch of the LCH.Clearnet Group, can RBS Expands pledge securities through Euroclear Bank’s tri - Commodity Trading RJO Buys Iowa Grain party collateral management service to cover Royal Bank of Scotland is expanding into R.J. O’Brien, the largest independent their margin obligations with the clearing - commodity markets. On July 9, the U.K. bank futures commission merchant based in the house. The new service, which took effect on said it had agreed to pay $1.35 billion for a U.S., announced on July 20 that it has agreed August 6, will allow member firms to optimize majority stake in the international commodity to buy Iowa Grain Company, a smaller FCM the use of collateral and reduce the cost of col - trading business of Sempra Energy, a San focused on agricultural markets. The com - lateral management, according to LCH.Clear- Diego-based energy company. The trading bined companies will be the largest guarantor net and Euroclear. The service covers company, RBS Sempra Commodities, will be of introducing brokers in the world, the two transactions for which LCH.Clearnet acts as run as a joint venture, with RBS owning 51% companies said. RJO’s move came two months central counterparty in equity and commodity and providing all growth capital, working-cap - after two private equity firms bought a major - derivatives, fixed income, and swaps. ital requirements and credit support. The com - ity stake in the Chicago-based FCM. pany is based in Stamford, Conn., and trades

16 Futures Industry