swiss derivatives review

SWISS DERIVATIVES Editorial Dear Members of SFOA, colleagues and friends,

ISSUE 60 — MAY 2015

Official publication of the Swiss Futures and Options Association - SFOA

Contents

Focus 2-3

Traders battle over MiFID II 2

Events 4

Interview 5-8

Norman Hay, veteran trader

and former CEO of Cargill 5

Hedging 9-12

Oil trade and freight

hedging process flows 9

Letter from America 13-16

Greece: Down and

probably out 13

SIX Exchange Regulation at

Burgenstock

SIX Exchange Regulation, an au-

tonomous division within SIX, will

sponsor again the lunch of the

International Regulators Meeting

on Wed, 23 September 2015.

“SFOA’s international Burgen-

stock conference has been a

landmark get together for the

international derivatives ex-

change world for more than 30

years. We are looking forward to

continuing our longstanding rela-

tionship with SFOA at this im-

portant forum,” said Rodolfo

Straub, Head SIX Exchange Reg-

ulation.

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Exempt or not?

Capital requirements

Position limits

Traders battle over MiFID II

Commodity traders fear the new MiFID II rules, which could bring heavy regulation to their industry. Many

think this heavy-handed and unfair given their performance during the financial crisis. After Trafigura in

March and BP in April, Shell is now asking for exemptions for the industry. At the same time, ESMA has

decided to postpone publication, making the industry even more uncertain.

Swiss Derivatives Review — Issue 60

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What will the future hold?


Bürgenstock36th

The international forum for commodities and derivativesGENEVA, 22/23/24 September 2015

Meeting

+41 22 860 2103

Welcome to Bürgenstock 2015!

The ) is

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Swiss Derivatives Review: Many commodity prices

have tumbled. One would expect this move to be

good for traders. Has it been the case?

In the Commodities special edition from the Swiss

Newspaper l’AGEFI there is a graph comparing the

very low margins of trading companies respective

to non-trading companies. Is this linked to the low

volatility on markets?

So commodity merchants trade on time?

Do you believe that trading companies have be-

come too big to fail?

Interview with Norman Hay Veteran trader and former CEO of Cargill Norman Hay, former CEO of Cargill International, retired last year from commodity trading. He worked for

38 years for Cargill, the biggest private company in the United States. In Switzerland, where Cargill em-

ploys about 1,000 staff, he has lived for twenty years: once from 1985 to 1995 and now since 2005.


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How did this work out in times of crises?

But are regulators and government not trying to

structure what markets should do, that is not to do

away with risk but to make sure the people who

take the risk can bear it?

With regard to too big to fail, does your assessment

not change in view of the tendency of commodity

merchants to invest in and own infrastructure?

Talking about the role of governments in markets,

what did you think about the SNB decision with re-

gard to the Swiss Franc?

Norman Hay

Retired President and

CEO of Cargill Internation-

al SA in Geneva Switzer-

land, Norman Hay has

spent a 38 year career in

the trading and shipping

of global commodities.

Furthermore, Norman has

served for 6 years as

board member of the

Swiss/American Chamber of Commerce and was a

founder member and Vice President of the Geneva

Trading and Shipping Association.


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At the Burgenstock conference

three years ago, a participant explained that the

SNB’s decision had wrecked his risk management.

The responsibility of international companies

abroad is a hot topic. How will commodity mer-

chants view this debate?

Since October, the STSA regroups the traders asso-

ciations from Geneva, Zug and Lugano. Were you

part of this effort and what do you think about it?

In Switzerland, many are worried about how the

business environment is evolving because of open

issues on important subjects such as immigration

or tax reform. Are you also one of them?


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So you do not share the concerns on the current

reforms being dangerous for the business environ-

ment?

You mentioned the advantages of neutrality. Is

there a value for a trading company to be located in

Switzerland with regard to sanctions?

Can you talk about EtherSec, your company based

in London?


9

Oil trade and freight hedging process flows

Wet freight hedging

Contrarily to what is widely depicted in the media, oil trading is an ultra-low margin and high-risk activity.

In this article we will seek to disentangle and clarify the hedging commonly used in the oil and wet freight

markets. H

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g


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Oil hedging

Wet freight


11

Crude pricing

H

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Crude oil tanker MT Iran Nesa crossing the Suez Canal 7

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Simon Jacques

Simon Jacques is a

commodity transpor-

tation specialist, he

consults full-time

with hedge, traffic

and logistics desks

in commodity trading

and end-user firms.

Contact: 1-226-348-5610

http://jacquessimon506.wordpress.com

https://jacquessimon506.wordpress.com/2015/03/02/10096/

http://jacquessimon506.wordpress.com

Greece: Down and probably out

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Based on the monetary approach Professor Steve Hanke paints a bleak picture of the Greek economy: The

money supply and GDP are shrinking and Greece’s banking system is on the verge of being forced to shut

down. Another Greek debt default is just around the corner.

Greece Money Supply (M3)


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Total assets for the four largest Greek banks Texas Ratios for the four largest Greek banks

George W. Bush

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Stock prices for the four largest Greek banks

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Steve H. Hanke

Steve H. Hanke is Pro-

fessor of Applied Eco-

nomics at the Johns

Hopkins University in

Baltimore, MD. He is

also a Senior Fellow

and Director of the

Troubled Currencies

Project at the Cato In-

stitute in Washington,

D.C.

You can follow him on Twitter: @Steve_Hanke

Official publication of the Swiss Futures and Options Association - SFOA

Swiss Derivatives Review

Issue 60 - May 2015

Official Publication of Publisher

SFOA - Swiss Futures and Weber-Thedy AG

Options Association Strategic Communication

18b rue du Gothard Zeltweg 25

P.O. Box 325 P.O. Box 1065

CH-1225 Chêne-Bourg CH-8032 Zurich

Phone +41 22 860 21 03 Phone +41 44 266 15 80

www.sfoa.org www.weber-thedy.com

Important Legal Information

The views and opinions expressed in the Swiss Derivatives

Review are those of the authors and do not necessarily re-

flect official policy or position of the SFOA. The views and

opinions expressed in the Swiss Derivatives Review do not

constitute investment advice. All content in the Swiss Deriv-

atives Review has been prepared solely for informational

purposes, and is never an offer to buy or sell or a solicitation

of an offer to buy or sell any security, product, service or

investment. All rights reserved.

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