Thursday, July 23, 2009
Definition Of Forex
Wednesday, June 17, 2009
Futures
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S&P GSCI Commodity Index
Economic Weighting
The S&P GSCI™ is world-production weighted; the quantity of each commodity in the index is determined by the average quantity of production in the last five years of available data. Such weighting provides the S&P GSCI™ with significant advantages, both as an economic indicator and as a measure of investment performance.
For use as an economic indicator, the appropriate weight to assign each commodity is in proportion to the amount of that commodity flowing through the economy (i.e. the actual production or consumption of that commodity). For instance, the impact that doubling the price of corn has on inflation and on economic growth depends directly on how much corn is used (or produced) in the economy.
From the standpoint of measuring investment performance, production-weighting is not only appropriate but vital. The key to measuring investment performance in a representative fashion is to weight each asset by the amount of capital dedicated to holding that asset. In equity markets, this representative measurement of investment performance is accomplished through weighting indices by market capitalization.
For commodities, there is no direct counterpart to market capitalization. The problem is that commodities, and the related price risks, are held in a variety of ways – long futures positions, over-the-counter investments, long term fixed-price purchasing contracts, physical inventory at the producer, etc. – making a complete accounting of capital dedicated to holding commodities from the time they are produced to the time they are consumed infeasible. A simple way to achieve a close analog to true market capitalization, abstracting from differences in inventory patterns, is to note that the net long position of the economy is proportional to the quantity produced; hence, production weighting.
A Broad Spectrum of Commodities
The S&P GSCI™ contains as many commodities as possible, with the rules excluding commodities only to retain liquidity and investability in the underlying futures markets. Currently, the S&P GSCI™ contains 24 commodities from all commodity sectors: six energy products, five industrial metals, eight agricultural products, three livestock products and two precious metals.1 This broad range of constituent commodities provides the S&P GSCI™ with a high level of diversification, both across sub-sectors and within each sub-sector. This diversity minimizes the effects of highly idiosyncratic events, which have large implications for the individual commodity markets but are muted when aggregated to the level of the S&P GSCI™.
Together, the diversity of its constituent commodities and their economic weighting allow the S&P GSCI™ to respond in a stable way to world economic growth, even as the composition of global growth changes through time. When world growth is dominated by industrialized economies, the metals sector of the S&P GSCI™ generally responds more than the agricultural components. Similarly, when emerging markets dominate world growth, agricultural and petroleum-based commodities generally respond the most. Thus, for example, an index that significantly underweights agriculture would significantly underperform in a global economy with weak OECD and strong emerging markets growth, much as a stock index that only contained industrials would provide a misleading picture of a service-led economy.
As the GSCI transitioned from including Unleaded Gasoline to including RBOB Gasoline, the GSCI contained 25 commodities, 7 of which were in the energy sector. This transition period lasted from the August 2006 roll to the October 2006 roll.
Liquidity Constraints for Inclusion and Return CalculationsIndividual commodities are screened by liquidity for inclusion in the S&P GSCI™. The eligibility requirements are designed to promote cost-effective implementation and true investability. Underlying liquidity eases hedging of derivative products and investing in sub-sector or individual commodity overlays. Furthermore, liquidity in the underlying futures markets facilitates the discovery of true market prices for the components of the S&P GSCI™. S&P GSCI™ returns are calculated (discussed in detail in the following section) based on the arithmetic average of stable long positions in futures contracts. This methodology, along with the liquidity in the underlying markets, allows easy implementation of the portfolio of futures contracts that the S&P GSCI™ represents. These characteristics of the GSCI are designed to allow for efficient and relatively inexpensive arbitrage of publicly traded S&P GSCI™ related instruments such as the CME futures contract.
Components, Weights, Index Levels and Construction
Currently, 24 commodities meet the eligibility requirement for the S&P GSCI™. A list of these components and their dollar weights in the S&P GSCI™ organized by subsector, is presented in Table 1.
Table 2 contains the index values for the S&P GSCI™ and its main sub-indices. All sub-indices of the S&P GSCI™ follow the same rules regarding world production weights, methodology for rolling and other functional characteristics as disclosed in the S&P GSCI™ manual.
The S&P GSCI Reduced Energy, Light Energy and UltraLight Energy sub-indices track the performance of a rolling basket of front-month commodity futures using the same conventions as the S&P GSCI™. The S&P GSCI Reduced, Light and UltraLight Energy Indices contain all 24 commodities and differ from the benchmark S&P GSCI™ index only with regards to their lesser energy weighting. The S&P GSCI Reduced Energy Index calculation uses 1/2 of the S&P GSCI™ contract production weights for the energy components, while the S&P GSCI Light and S&P GSCI UltraLight Energy Index calculations use 1/4 and 1/8 of the S&P GSCI™ contract production weights for the energy components, respectively. Table 3 contains the index values for these two indices. S&P GSCI Reduced and S&P GSCI Light Energy Index Values
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Tables 4, 5, 6, 7 and 8 contain the dollar weights for the S&P GSCI Reduced Energy, S&P GSCI Light Energy, S&P GSCI Ultra-Light Energy, S&P GSCI Non-Energy, and S&P GSCI Agriculture & Livestock Indices respectively.
| Table 4: S&P GSCI Reduced Energy Components and Dollar Weights (%) (December 5, 2008) |
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| Table 5: S&P GSCI Light Energy Components and Dollar Weights (%) (December 5, 2008) |
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| Table 6: S&P GSCI Ultra-Light Energy Components and Dollar Weights (%) (December 5, 2008) |
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| Table 7: S&P GSCI Non- Energy Components and Dollar Weights (%) (December 5, 2008) |
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| Table 8: S&P GSCI Agriculture & Livestock Components and Dollar Weights (%) (December 5, 2008) |
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| Table 9: S&P GSCI Agriculture Components and Dollar Weights (%) (December 5, 2008) |
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| Table 10: S&P GSCI JPY Index Values (December 5, 2008) |
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S&P GSCI Agriculture JPY Index Values
| Table 11: S&P GSCI Agriculture JPY Index Values (December 5, 2008) |
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| Table 12: S&P GSCI Crude Index Values (December 5, 2008) |
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| Construction of the S&P GSCI™ |
S&P GSCI™-TR Returns as of December 5, 2008
| Table 13: S&P GSCI™ TR Returns (December 5, 2008) |
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| Table 14: S&P GSCI™ Enhanced Strategies (December 5, 2008) |
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Total Return, Excess Returns and Spot Indices
The S&P GSCI™ Total Return index measures a fully collateralized commodity futures investment that is rolled forward from the fifth to the ninth business day of each month. Currently the S&P GSCI™ includes 242 commodity nearby futures contracts. The S&P GSCI™ Total Return is significantly different than the return from buying physical commodities.
The S&P GSCI™ Spot index tracks the price of the nearby futures contracts, not returns available to investors. At the end of every business day, the S&P GSCI™ is composed of the same proportions by weight of the underlying commodities and expirations as the portfolio represented by the S&P GSCI™ Excess Returns.
Most important, the S&P GSCI™ Spot index cannot be compared directly with the S&P GSCI™ Total Return index, either conceptually or with a single mathematical operation.
On the first point, you CANNOT add T-bills to the spot return in order to draw a comparison with the S&P GSCI™ Total Return. In fact there is nothing you can do to make a direct comparison between the Spot and Total Return indices because they are measuring two very different kinds of investments.
Meanwhile, the S&P GSCI™ Excess Return measures the return from investing in nearby S&P GSCI™ futures and rolling them forward each month (on the fifth to ninth business days of each month), always keeping your investment in nearby futures. This is a leveraged futures investment. The S&P GSCI™ Excess Return (unlike the S&P Excess Return ) is NOT the return above cash. The S&P GSCI™ Excess Return cannot be compared directly to the S&P GSCI™ Total Return, either. The S&P GSCI™ Excess Return plus T-bills does not equal the S&P GSCI™ Total Return because it ignores the impact of the re-investment of T-bill collateral yield gains back into commodity futures, and gains (losses) from commodity futures back into (out of) T-bills.
As the GSCI transitioned from including Unleaded Gasoline to including RBOB Gasoline, the GSCI contained 25 commodities, 7 of which were in the energy sector. This transition period lasted from the August 2006 roll through the October 2006 roll.
Passive Portfolios
By design, the S&P GSCI™ reflects a passive portfolio of long positions in futures. However, unlike a passive equity portfolio, a passive futures portfolio requires regular transactions, for the simple reason that futures expire. Thus, the futures portfolio represented by the S&P GSCI™ is, in this way, comparable to a bond portfolio of a specific duration.
In the S&P GSCI's™ case, the maturity of choice is the nearby futures contract (i.e. the contract nearest to expiration). Futures contracts near to expiration are rolled forward (i.e. exchanged for futures contracts with the next applicable expiration date) at the beginning of their expiration months.
Many commodities, such as those in the energy and industrial metals sectors, have liquid futures contracts that expire every month. Therefore, these commodities are rolled forward every month. Other commodities, most notably agricultural and livestock products, have only a few contract months each year that trade with sufficient liquidity. Thus, these commodities, with futures that expire less frequently, roll forward less frequently than every month. Table 13 contains a listing of the expiration months included in the S&P GSCI™ in 2007.
| Table 13: Contract Months in the S&P GSCI™ in 2007 |
| Crude Oil | All | Cocoa | Mar, May, Jul, Sep, Dec |
| Brent Crude Oil | All | Cotton | Mar, May, Jul, Dec |
| Heating Oil | All | Aluminum | All |
| GasOil | All | Copper | All |
| RBOB Gasoline | All | Nickel | All |
| Natural Gas | All | Zinc | All |
| Wheat | Mar, May, Jul, Sep, Dec | Lead | All |
| Kansas Wheat | Mar, May, Jul, Sep, Dec | Lean Hogs | Feb, Apr, Jun, Jul, Aug, Oct, Dec |
| Corn | Mar, May, Jul, Sep, Dec | Live Cattle | Feb, Apr, Jun, Aug, Oct, Dec |
| Soybeans | Jan, Mar, May, Jul, Nov | Feeder Cattle | Jan, Mar, Apr, May, Aug, Sep, Oct, Nov |
| Coffee | Mar, May, Jul, Sep, Dec | Gold | Feb, Apr, Jun, Aug, Dec |
| Sugar | Mar, May, Jul, Oct | Silver | Mar, May, Jul, Sep, Dec |
Roll Period
The rolling forward of the underlying futures contracts in the excess return index portfolio occurs once each month, on the fifth through ninth business days (the roll period). As explained above, some of the underlying commodity contracts expire in the next month and thus need to be rolled forward. The simplest way to think of the process is as rolling from one basket of nearby futures (the first nearby basket) to a basket of futures contracts that are further from expiration (the second nearby basket). The S&P GSCI™ is calculated as though these rolls occur at the end of each day during the roll period at the daily settlement prices.
The portfolio is shifted from the first to the second nearby baskets at a rate of 20% per day for the five days of the roll period. Until just before the end of the fifth business day, the entire S&P GSCI™ portfolio consists of the first nearby basket of commodity futures. At the end of the fifth business day, the portfolio is adjusted so that 20% of the contracts held are in the second nearby basket (i.e. a basket of future contracts that are farther from maturity), with 80% remaining the first nearby basket.
The roll process continues on the sixth, seventh and eighth business days, with relative weights of first to second nearby baskets of 60%/40%, 40%/60% and 20%/80%. At the end of the ninth business day, the last of the old first nearby basket is exchanged, completing the roll and leaving the entire portfolio in what we have been calling the second nearby basket. At this time, this former second nearby basket becomes the new first nearby basket, and a new second nearby basket is formed (with futures maturities further in the future) for use in the next month's roll.
The last key point to be made about the roll process is to specify exactly what the 80%/20% or other relative splits between nearby baskets mean. The roll percentages refer to contracts or quantities, not value. Taking the first day of the roll as an example, just before the roll takes place at the end of the day, the S&P GSCI™ consists of the first nearby basket. That portfolio, constructed the night before and held throughout the fifth business day, has a dollar value. For the roll, that dollar value is distributed across the first and second nearby baskets such that the number of contracts or the quantity of the first nearby basket is 80% of the total and the quantity held of the second nearby basket is 20% of the total.
The dollar value held of each nearby basket can then be calculated from those quantity weights by multiplying them by the prices of the futures contracts contained in each basket. As the baskets contain futures with different maturities for some of the commodities, the prices are generally close but not exactly the same. Hence, the percentage of the portfolio value (i.e. dollar weight) held in each basket is generally close to, but not exactly equal to, the 80%/20% split specified for the quantities.
The world-production weighting of the S&P GSCI™ is accomplished by keeping the quantity weights of the individual commodities within each basket proportional to world production weights, which are averages of historical production levels and are generally updated every year.
Investing
The S&P GSCI™ has a futures contract listed on the CME, making it a truly public index that has been traded by numerous market makers for over 12 years. An investment in the S&P GSCI™ accesses the liquidity of the underlying commodity markets and offers excellent price transparency.
There are numerous ways to invest in the S&P GSCI™ Commodity Index. OTC swaps on either the Excess or Total Return indices allow investors to have direct participation in the S&P GSCI™ Excess or Total Return indicies but also have an unlimited downside. Structured notes can be used to gain exposure while limiting the downside from investing. S&P GSCI™ futures listed on the Chicago Mercantile Exchange can be rolled monthly to replicate the S&P GSCI™ index. Third-party asset managers offer products providing commodity exposure that are benchmarked to the S&P GSCI™. Certificates and warrants on the S&P GSCI™ are available, but US residents are unable to invest via this method.
Disclosures
Standard & Poor's ® and S&P ® are registered trademarks of The McGraw-Hill Companies, Inc. and S&P GSCI™ is a trademark of The McGraw-Hill Companies, Inc. and have been licensed for use by Goldman, Sachs & Co. This material is for the private information of the user, and neither Goldman Sachs nor S&P is soliciting any action based upon it. Neither Goldman Sachs nor S&P shall have any liability, contingent or otherwise, to the user or to third parties, for the quality, accuracy, timeliness, continued availability or completeness of the data nor for any special, indirect, incidental or consequential damages which may be incurred or experienced because of the use of the data made available herein, even if Goldman Sachs or S&P has been advised of the possibility of such damages. The information provided herein is not to be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. We and our affiliates, officers, directors, managing directors, and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell, the securities, or derivatives (including options) thereof, of commodities or indices mentioned herein.
Reproduction and Re-Distribution: No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without our prior written consent. Notwithstanding anything herein to the contrary, and except as required to enable compliance with applicable securities law, you (and each of your employees, representatives and other agents) may disclose to any and all persons the U.S. federal income and state tax treatment and tax structure of the transaction and all materials of any kind (including tax opinions and other tax analyses) that are provided to you relating to such tax treatment and tax structure, without Goldman Sachs or S&P imposing any limitation of any kind.
Third-Party Research and Tools
Hudson Street, a Goldman Sachs business, focuses on providing unique content and tools that can be integrated into our clients' investment processes. Hudson Street provides two different types of services to our clients: Hudson Street Services provides access to unique content and tools; Hudson Street 3RB helps clients streamline the way they procure research and execute trades.
Vantage Marketplace LLC, a wholly owned subsidiary of The Goldman Sachs Group, Inc., is a consulting service connecting clients directly with thought leaders across industries such as energy, retail and technology.
Man Group or Man Financial
Man Group plc (Man) is a leading alternative investment management business. It provides a range of funds for institutional and private investors globally. Through its principal division, Man Investments, it manages about USD 68 billion and employs around 1,800 people in 13 countries worldwide.
Man’s headquarters are at Sugar Quay in London, where it is listed on the London Stock Exchange. It also has offices in the Bahamas, Chicago, Dubai, Dublin, Guernsey, Hong Kong, Miami, Montevideo, New York, Rotterdam, Singapore, Sydney, Switzerland, Tokyo, and Toronto. It is a component of the FTSE 100 Index, with a market capitalisation of about USD 5.5 billion.
The Man Group can trace its origins back to 1783 when James Man first established a sugar broking business in the City of London. Man Group PLC is now a FTSE 100 company (EMG.L) and Man Financial is the Worlds largest Independant Futures Broker.Company Additional Information
| Services: | Full service broking - internet trading and telephone service- FX daily research - in addition to our Foreign Exchange services we can offer Futures and options, CFD's and traditional stockbroking. |
| Languages: | English, Italian |
| Trading platform: | MTrade FX |
| Commisions on Forex: | Variable |
| Bid/Ask spread on Major currencies: | 3-5 pips |
| Maximum Leverage: | 40:1 |
| Minimal Deposit for Regular Account: | $100,000 |
| Free Demo Account: | yes |
| Mini Forex Trading: | yes |
Retail forex or Swizz financial corp
In financial markets, the retail forex (retail currency trading or retail FX) market is a subset of the larger foreign exchange market. This "market has long been plagued by swindlers preying on the gullible," according to The New york Times. Whilst there may be a number of fully regulated, reputable international companies that provide a highly transparent and honest service, it's commonly thought that about 90% of all retail FX traders lose money.
It is now possible to trade cash FX, or forex (short for Foreign Exchange (FX)) or currencies around the clock with hundreds of foreign exchange brokers through trading platforms. The reason that the business is so profitable is because in many cases brokers are taking the opposite side of the trade, and therefore turning client capital directly into broker profit as the average account loses money. Some brokers provide an a matching service, charging a commission instead of taking the opposite site of the trade and "netting the spread", as it is referred to within the forex "industry".
Recently forex brokers have become increasingly regulated. Minimum capital requirements of US$20m now apply in the US, as well as stringent requirements now in Germany and the United Kingdom. Switzlerand now requires forex brokers to become a bank before conducting fx brokerage business from Switzerland.
Algorythmic or machine based formula trading has become increasingly popular in the FX market,with a number of popular packages allowing the customer to program his own studies.
The most traded of the "major" currencies is the pair known as the EUR/USD, due to its size, median volatility and relatively low "spread", referring to the difference between the bid and the ask price. This is usually measured in "pips", normally 1/100 of a full point.
According to the October 2008 issue of e-Forex Magazine, the retail FX market is seeing continued explosive growth despite and perhaps of losses in other markets like global equities in 2008.
GFX Group SA
GFX is a Forex broker based in Geneva, Switzerland. Our powerful and easy-to-use software, secure trading environment, and superior trading conditions have made GFX one of the leading Forex dealers in the world. GFX is recommended many financial websites dedicated to forex.
The GFX "GlobalTrader" software sets new standards in online trading functionality, performance, and ease of use. GlobalTrader takes only seconds to download and install, and performs flawlessly on Windows operating systems. Clients can trade 49 currency pairs, as well as gold and silver. Other advantages include instant online fills, free charts, real-time profit and equity tracking, fractional lot size capabilities, hedging capabilities, and 0.5% margin requirements.
With 35% of the world's private assets managed by financial intermediaries based in Switzerland, the country has a long established tradition as one of the world's largest financial centers. Customers are assured that GFX consistently meets the strictest standards of financial stability and proper handling of client funds. Furthermore, client funds are maintained segregated from GFX's capital, thereby offering security of funds.
GFX encourages clients to conduct as much due diligence as possible in their trading activities and in their choice of broker. We welcome client visits to our headquarters in Geneva, whether to meet our professional staff or simply see our operations first-hand.
GFX is supervised as a Financial Intermediary according to Swiss regulation with regards to anti-money laundering.
During the course of 2009 GFX plans on becoming a Swiss Bank, thereby offering its valued clients an even wider spectrum of financial products.
Regulatory Oversight
With 35% of the world's private assets managed by financial institutions based in Switzerland, the country has a long established tradition as one of the world's largest financial centers. Customers are assured that GFX consistently meets the strictest standards of financial stability and proper handling of client funds. Furthermore, client funds are maintained segregated from GFX's own assets, thereby offering security of client funds.
GFX is supervised as a Financial Intermediary according to Swiss regulation with regards to prevention of money laundering, and is audited by KPMG.
Since the enforcement of the Federal law on prevention of money laundering of the 1st of April 1998 (LBA), Swiss regulatory authorities have considerably tightened financial controls of banks and financial intermediaries obliging the latter to be affiliated with and supervised by an accredited self-regulatory organization whose objective is to comply with the due diligence obligations with respect to the prevention of money laundering. Being affiliated with Polyreg (a self-regulated organization accredited by the Swiss Federal Dept of Finance), GFX is indirectly supervised by the Federal Department of Finance in Switzerland.
GFX's activities comply with Swiss regulation applicable to Financial Intermediaries active in the forex brokerage industry.
During the course of 2009 GFX plans on becoming a Swiss Bank, thereby offering its valued clients an even wider spectrum of financial products.
Monday, June 15, 2009
Trading Software
GFX GlobalTrader software is a powerful yet easy-to-use online trading system, setting new standards in online Forex trading.
Advantages include:
Instant order execution. Orders placed on the GFX software are executed immediately online. Traders can also place stops or limits on open positions or have them pre-set on market orders.
Optimum Compatibility and performance. GlobalTrader takes only seconds to download and install and will perform flawlessly on Windows operating systems. GlobalTrader's advanced programming design minimizes the use of your system resources.
Customizable Trading Window. Add only the currencies and metals you wish to trade and view live prices for. Select from an extensive list of currency pairs and spot metals.
Fractional lot sizes. Trading on GFX's software is not confined to only 1 lot increments. Clients can also trade .5 of a lot, 1.2 lot, or any other amount.
Breadth of products. Trade currencies or metals - all from the same window and with the same outstanding trading conditions.
Real-time account and margin information. Your account balance, usable margin, and value of open positions are displayed in the trading software in real-time.
Real-time Charts, News and Quotes. GFX GlobalTrader software includes charts, news, and quotes easily accessible from the menus.
Real-time account statements available online with one click. Historical trading results and account statements are easy to understand and can be generated instantly by the client from the trading software menus.
Multiple Account Trading. Trading managers and funds can trade multiple accounts from a single window. The GlobalTrader software allows a block order to be automatically split up among multiple customer accounts as specified by the trader.
Multiple order types supported. Traders can initiate a position with a Market order, a Limit order, or a Stop order. Positions can be closed with a Stop, Limit, At-the-market, or Trailing stop order.
Hedging capability. Clients can open positions in the same currency in opposite directions, without the positions offsetting and without using additional margin.
Service and Support. GFX clients have access to 24 hour technical support, as well as 24 hour trading by telephone or chat.Safety of Customer Funds
Customers are assured that GFX consistently meets the strictest standards of financial stability and proper handling of client funds. Furthermore, client funds are maintained segregated from GFX's own assets, thereby offering security of client funds.
As of December 5 2007, GFX Group SA has maintained a minimum paid-up capital of CHF 10,000,000. This is a firm confirmation of the company’s financial stability, specifically in view of the anticipated growth in the coming year.
Audited Financial Condition by KPMG
As well as benefiting from adequate capitalization, thereby providing financial strength, GFX's accounts are audited by KPMG according to Swiss law.
Safety of Customer Funds
Customers are assured that GFX consistently meets the strictest standards of financial stability and proper handling of client funds. Furthermore, client funds are maintained segregated from GFX's own assets, thereby offering security of client funds.
As of December 5 2007, GFX Group SA has maintained a minimum paid-up capital of CHF 10,000,000. This is a firm confirmation of the company’s financial stability, specifically in view of the anticipated growth in the coming year.
Audited Financial Condition by KPMG
As well as benefiting from adequate capitalization, thereby providing financial strength, GFX's accounts are audited by KPMG according to Swiss law.
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