Description
The PPT highlighting Speculation in Financial Futures Market.
SPECULATION IN THE FINANCIAL FUTURES MARKET
Case Facts
?
?
Illustrates the risk and returns faced by speculators in Futures markets. John Park
?A
27 year old speculator ? Member of GLH derivatives ? A local trader ? A bund specialist ? One of the heaviest players amongst the locals at Griffin
Case facts - contd
?
Griffin
?A
clearing house ? A member of Liffe(London International Financial Futures and Options Exchange Member) ? Not a Eurex clearing member ? Operated a omnibus account for all the locals who traded through Griffin ? Griffin had permitted John Park to trade up to 1000 lots a day on a margin of £1 million.
John Park’s transaction
?
? ?
John executed his trades through Tullett and Tokyo He traded on Eurex exchange Hence the clearing was routed to Griffin via Eurex general clearing member ICS Mees Pierson
The Plot
?
Influence the exchange by holding an extremely large position
? Buy
Bund Futures in a falling market ? Halt the fall ? Force the prices up ? Sell at a profit
The Outcome
?
?
? ? ? ? ?
The market kept on falling A major player sold as fast as Park bought John Park was trapped Market fell sharply when the News broke Park lost 6.25 million Pound Griffin ceased trading immediately Locals lost due to omnibus account
Hedgers and Speculators
Risks and rewards In Futures Market
Why John Park failed
?
? ? ? ? ?
Non compliance to regulatory framework by parties involved. Undisciplined trading by John. Non occurrence of the expected events. Failure of assumptions. Resistance from another speculator. Inability to offload huge positions.
How to do it
?
Defining the risk limit and strict adherence.
?
Outguessing market will not always work.
?
Diversification helps.
Euro futures instead of Bund futures
?
?
?
?
High volume in Euro market- ensuring no speculation scope by manipulating the market moments. No one of size of John Park will try to capture the moments of the Euro market. Procedural and regulatory framework different for Euro market. No scope of cheating on grounds of time delay and non disclosure of position .
doc_167784180.pptx
The PPT highlighting Speculation in Financial Futures Market.
SPECULATION IN THE FINANCIAL FUTURES MARKET
Case Facts
?
?
Illustrates the risk and returns faced by speculators in Futures markets. John Park
?A
27 year old speculator ? Member of GLH derivatives ? A local trader ? A bund specialist ? One of the heaviest players amongst the locals at Griffin
Case facts - contd
?
Griffin
?A
clearing house ? A member of Liffe(London International Financial Futures and Options Exchange Member) ? Not a Eurex clearing member ? Operated a omnibus account for all the locals who traded through Griffin ? Griffin had permitted John Park to trade up to 1000 lots a day on a margin of £1 million.
John Park’s transaction
?
? ?
John executed his trades through Tullett and Tokyo He traded on Eurex exchange Hence the clearing was routed to Griffin via Eurex general clearing member ICS Mees Pierson
The Plot
?
Influence the exchange by holding an extremely large position
? Buy
Bund Futures in a falling market ? Halt the fall ? Force the prices up ? Sell at a profit
The Outcome
?
?
? ? ? ? ?
The market kept on falling A major player sold as fast as Park bought John Park was trapped Market fell sharply when the News broke Park lost 6.25 million Pound Griffin ceased trading immediately Locals lost due to omnibus account
Hedgers and Speculators
Risks and rewards In Futures Market
Why John Park failed
?
? ? ? ? ?
Non compliance to regulatory framework by parties involved. Undisciplined trading by John. Non occurrence of the expected events. Failure of assumptions. Resistance from another speculator. Inability to offload huge positions.
How to do it
?
Defining the risk limit and strict adherence.
?
Outguessing market will not always work.
?
Diversification helps.
Euro futures instead of Bund futures
?
?
?
?
High volume in Euro market- ensuring no speculation scope by manipulating the market moments. No one of size of John Park will try to capture the moments of the Euro market. Procedural and regulatory framework different for Euro market. No scope of cheating on grounds of time delay and non disclosure of position .
doc_167784180.pptx