WORLD BUSINESS BRIEFING | ASIA

Pakistan: Protests at Exchange

By BLOOMBERG NEWS

The police surrounded Pakistan’s biggest stock exchange to thwart violence by investors demanding a trading halt as price curbs imposed after the biggest slump in a decade locked up their money. “There are no longer any small investors left in the stock market, they have all been destroyed,” said Kausar Qaimkhani, chairman of the Small Investors Association, leading a group of about 50 shareholders outside the Karachi Stock Exchange. “The market should be closed till funds are arranged.” Board members of the exchange are deciding whether to extend six-week-old rules that prevented stocks from falling below their Aug. 27 closing prices after rejecting calls from brokers to shut the market. The benchmark Karachi Stock Exchange 100 index rose 2.89, or 0.03 percent, to 9,184.24 at the 2:15 p.m. local time close.

Gulf stocks surge for second straight day

9 hours ago

KUWAIT CITY (AFP) — Stocks in the Arab world raced higher on Tuesday for a second straight day, bolstered by government action to shore up the banking sector and by a spectacular global market rally.

Several Middle East markets put on seven percent or more, with Dubai and Doha leading the way in the oil-rich Gulf with gains of some 10 percent.

The Saudi bourse, the largest in the Arab world, finished up 7.29 percent after rising 9.2 percent in early trading, a day after it rebounded 9.5 percent. It shed 23 percent last week.

The Saudi Tadawul All-Shares Index closed on 6,828.96 points after soaring close to the key 7,000-point mark. It is still down 38.1 percent on the year.

The TASI was supported by the petrochemicals and banking sectors which both rose 7.5 percent. Only three firms dropped while 122 increased.

The bourse in Dubai closed up 10.76 percent, its biggest single-day rise ever, at 3,703.34 points. It was bolstered by the market leader, property giant Emaar, which surged 15 percent for the second day in a row.

Dubai Financial Market Index has already recouped most of the losses it made last week when it shed 26.7 percent. Its whole property sector rose the maximum 15 percent permitted by the market on both of the past two days.

The other United Arab Emirates bourse, the Abu Dhabi Securities Exchange, rose 7.5 percent to 3,602.45 points. It too was boosted by property shares, which rose almost 10 percent.

Tuesday's surge came after the UAE said it had made another 19 billion dollars available to local banks, the latest measure to combat liquidity problems arising from the global financial crisis.

The move brings to 32.6 billion dollars the total amount being offered by the UAE monetary authorities to meet the needs of local banks.

The markets surge "is certainly the direct result of government intervention. This has greatly lifted investor confidence," said the head of the Saudi Al-Dakkak Economic Studies House, Ali al-Dakkak.

"Prices of stocks in most Gulf states also reached low levels that encouraged investors to buy," he told AFP.

The UAE is not the only Gulf government to announce measures to shore up the financial system in recent days.

Saudi Arabia, Kuwait and Bahrain have slashed interest rates, pledged tens of billions of dollars of liquidity to domestic banks and eased lending restrictions.

Bucking Tuesday's rebound, the second largest Arab bourse, the Kuwait Stock Exchange, closed down 0.26 percent at 11,795.70 points despite opening higher. It was apparently reacting to only modest nine-month results announced by some banks.

It was the only Gulf market to drop on Monday, when all other bourses in the region bounced back sharply after last week's dramatic falls.

In Egypt, the CASE-30 stock index closed the day up 6.3 percent at 6,138. The most heavily traded stock, Orascom Construction Industries, rose 8.88 percent.

The index had lost more than half its value in six months since hitting a high of 12,000 points in May.

The Doha Securities Market closed up almost 10 percent at 8,377.36 after the Qatar Investment Authority, the emirate's sovereign wealth fund, decided to buy between 10 percent and 20 percent of bank shares.

In Oman, the Muscat Securities Market finished up 8.4 percent at 7,717.43 points, while the Bahrain Stock Exchange closed up 1.4 percent.

In the past two days, the seven stock markets in the Gulf have increased their value by more than 100 billion dollars to around 870 billion dollars, after shedding around 200 billion dollars in the past week.

UPDATE 1-Toronto stock index surges out of gate

Tue Oct 14, 2008 10:32am EDT

* Investors cheer U.S. plan to plow $250 bln into banks

* Index races 1,600 points higher, biggest one-day gain

* Financials, oil and gas groups lead (Adds details)

TORONTO, Oct 14 (Reuters) - The Toronto Stock Exchange's main index made its biggest intraday gain ever at the start of trading on Tuesday as the market played catch-up with Monday's monster surge on Wall Street and welcomed a U.S. plan to inject $250 billion into its banks.

Canadian markets were closed on Monday for Thanksgiving Day.

Shortly after 9:45 a.m. (1345 GMT), the S&P/TSX composite index.GSPTSE was up 1,169.50 points, or 12.90 percent, at 10,234.66. All 10 sectors were higher. Right after the open the index was up a record-breaking 18 percent.

The big jump in the Toronto index came on the heels of big gains on world stock markets on Monday and continuing strength on Tuesday as investor jitters about the stability of the financial system eased.

The U.S. plan to plow $250 billion into its banks, following similar measures in Europe, is designed to get them lending to each other again. [ID:nTRS000084]

Financials led the Toronto rally, up 16.5 percent. Toronto-Dominion Bank (TD.TO: Quote, Profile, Research, Stock Buzz) jumped 18 percent to C$61.54, while Manulife Financial (MFC.TO: Quote, Profile, Research, Stock Buzz) soared 22 percent to C$32.52.

The U.S. plan broadly boosted sentiment in commodities as well, with the energy sector up 18 percent.

Imperial Oil (IMO.TO: Quote, Profile, Research, Stock Buzz) rose 28.5 percent to C$40.18, while Petro-Canada (PCA.TO: Quote, Profile, Research,Stock Buzz) gained about 25 percent to C$29.45.

($1=$1.15 Canadian) (Reporting by Ka Yan Ng; Editing by Peter Galloway)

Joyful day on Oslo stock exchange

The day has turned out to be one of the best in the history of the Oslo stock exchange, after the rescue deal and oil-price pulled it up.

Publisert 14.10.2008 15:17 - Oppdatert 14.10.2008 15:17

The beginning of a new week on the Oslo stock exchange was, with few exceptions positive. A G7-meeting about the rescue deal, along with a rise in the oil-price helped to lift stock markets throughout Europe.

Monday began with a solid rise in Asia, where the regional index, MSCI Asia Pacific rose by 4.2 per cent. The optimism began as finance ministers in the G7 countries guaranteed that they would take necessary steps to resolve the financial crisis.

Europe followed suit in grand tempo.

London’s FTSE rose by a solid 7.75 per cent. Germany’s DAX-index rose by as much as 10.79 per cent. The Paris CAC40-index leapt 9.02 per cent.

As an extra bonus, the price of oil rose on the Oslo stock market, and the main index didn’t stop before it reached 254.2 points. This was a rise today of 6.04 per cent.

Last week was one of the worst of all times for the Oslo stock market. The fall ended at 21.90 per cent, and since the New Year, Oslo stock market has more than halved.

Price of oil

The raw material market also got moving. The rescue deals that were made known on Sunday and Monday have caused investors to again put their money in raw materials. It is even so not enough to prevent the super-optimists from becoming negative.

Goldman Sachs predicts that the price of oil will lay at 70 dollars a barrel by the New Year. This is a clear devaluation on the original estimate of 115 dollars a barrel. When it comes to prices for 2009, they have also made drastic cuts. Next year, they envisage an average price of 86 dollars a barrel, which involves an estimated cut of a third.

When Oslo stock exchange closed, the November contracts for North Sea oil lay at 75.72 dollars a barrel, a clear rise following Friday’s bottom notation of 73.30 dollars a barrel.

StatoilHydro wrote by 3.99 per cent during Monday trade to 114.60 per share. The oil company, Questerre leaps as much28.35 per cent to 8.15 kroner.

Losers

Among those who were the exception to the day’s upswing were the seismic company, Petroleum Geo-Service and the finance concern, Storebrand.

The PGS stock performance fell 4.43 per cent to 44.20 kroner. This is following Goldman Sachs’s devaluation recommendation. The stock exchange has changed its opinion and recommends the sale of the share, whereas they have previously had a neutral attitude to the company.

Low volume

As in recent days, the volume was again low on the Oslo stock exchange, with a turnover of 7.02 billion kroner in total.

StatoilHydro had the greatest turnover and amounted to 23 per cent of the day’s trade volume when shares for a total of 1.67 billion kroner changed hands in the oil company.

FOREX-Euro, sterling jump as Europe govts rescue banks

FOREX-Euro, sterling jump as Europe govts rescue banks
Mon Oct 13, 2008 7:39am EDT
* Euro pushes up after European govts agree to rescue banks
* Sterling also rallies as UK govt details bank bailout plan
* Stocks surge, panic selling arrested
* UK's Brown calls for remake of Bretton Woods pact
(Changes byline, releads, adds comment, updates throughout)
By Veronica Brown
LONDON, Oct 13 (Reuters) - The euro shot up on Monday, pulling away from a 1-1/2-year low against the dollar as a pledge by European governments to rescue banks from collapse plugged a deluge of selling in the single European currency.
Sterling also gained traction after the British government said three of the nation's biggest banks would take $64 billion in official funds to boost their capital [nLD69629].
According to a draft bill seen by Reuters on Monday, a rescue package for Germany's financial sector includes a fund to provide up 400 billion euros in guarantees for banks. Details of the plan were due at 1300 GMT [nLD220275].
The French government would create a $55 billion fund to take stakes in its banks, media reports said, as markets awaited the release of details for other European governments' respective bailout plans.
European shares were boosted, climbing more than 6 percent in early trade and maintaining most of the gain through the morning.
"The biggest change from today relative to last week is the fact that euro zone officials seem to have come up with a template plan from which national governments can pick and choose and implement where they see necessary," said Derek Halpenny, European Head of Global Currency Research at BTM-UFJ in London.
"We're certainly getting a greater shift towards the template used by the British government, which seems at the moment to be the best plan in town and the one investors are warming most to," he added.
In exchange for the UK government's fund injections, Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz), HBOS (HBOS.L: Quote,Profile, Research, Stock Buzz), and Lloyds TSB (LLOY.L: Quote, Profile,Research, Stock Buzz) would be required to lend to homeowners and small businesses at rates seen in 2007.
In addition, institutions would also have to limit executive pay and accept government input on new board appointments [nLD167263].
British Prime Minister Gordon Brown called for world leaders to come together to remake the Bretton Woods agreement to tackle a 21st century globalised financial system.
The Bretton Woods conference in 1944 helped draw up the post-war financial order and established the International Monetary Fund (IMF) and the World Bank.
The euro spiked as high as $1.3671 , according to Reuters data. Bourses in Tokyo and New York bond markets were closed for respective national holidays.
By 1122 GMT, the single currency had pared early gains but was still up 1.3 percent on the day at $1.3577, having hit a low as $1.3257 on Friday, its weakest since March 2007.
The euro also climbed against the yen, and was last up 1.1 percent at 136.53 yen and recovering from a tumble last week that took it to levels last seen in mid-2005.
Sterling jumped as high as $1.7278, pulling away from a five-year low around $1.68 hit on Friday.
The yen was sold broadly as investors cut long positions built up in the Japanese currency as part of trades to reverse carry trades that had used cheap, low-yielding yen funds to buy higher-yielding currencies.
Despite the dollar's losses against the euro, the U.S. currency recovered from early losses against the yen to trade at 100.49 yen, off a session low of 99.58 according to Reuters data.
JITTERS REMAIN
European shares were last trading 5-1/2 percent higher, with sentiment bolstered by the bank rescue packages after a drop of more than 20 percent last week.
Leaders from Group of Seven industrialised nations at the weekend set out a plan of action to deal with the ongoing meltdown in the banking sector.
The United States said it would take stakes in banks in a first such move since the Great Depression, and Australia said it would guarantee deposits in its banks. [ID:nCRISIS]
While the flurry of initiatives to contain the worst financial crisis since the 1930s may have stemmed waves of selling for now, analysts were uncertain whether the improving mood would last very long.
"With risk perception hitting yet another record high last week...it may take longer until investors' confidence is restored to its pre-crisis levels," Dresdner Kleinwort strategists said in a note to clients.
"New triggers of risk aversion like real sector defaults should abound as global economy heads into a recession going forward. Markets thus should remain jittery in the coming months," they added. (Reporting by Veronica Brown; Editing by Chris Pizzey)

RPT-FOREX-Yen falls, Aussie surges as bank rescues take shape

RPT-FOREX-Yen falls, Aussie surges as bank rescues take shape
Sun Oct 12, 2008 9:10pm EDT
(Repeats to additional subscribers)
By Eric Burroughs
TOKYO, Oct 13 (Reuters) - The yen slid against higher-yielding currencies on Monday while the Australian dollar surged as leaders from Europe to the United States rushed out plans to shore up banks and stem the panic gripping investors.
After stock markets around the world suffered their worst ever weekly losses last week, leaders from Group of Seven rich nations set out a plan of action to stem the crisis and European leaders agreed to inject public funds into the banking system if necessary. [ID:nLC713950]
The United States said it would take stakes in banks in a first such move since the Great Depression, while Britain was set to pump more than 40 billion pounds into its four biggest banks. [ID:nCRISIS] The flurry of initiatives to stem the worst financial crisis since the 1930s increased investor appetite for risk, though analysts were uncertain whether the improving mood would last very long.
"What is clear is that global policymakers are not going to stand idly by as the global financial system implodes," said Sue Trinh, senior currency strategist at RBC Capital Markets, in a note to clients.
In Asia, Australian and South Korean equities jumped 3-6 percent and U.S. stock futures SPc1 also rose, pointing to a sharp rally.
Reviving the lending between banks, the lifeblood of the global financial system, was at the heart of the rescue plans after the default of Lehman Brothers caused many financial institutions to stop dealing with each other.
Trading activity was subdued due to a national holiday in Japan and with U.S. bond markets closed for the Columbus Day holiday. U.S. stock markets will be open, however.
Weeks of severe market volatility have also made investors and hedge funds shy away from trading, making day-to-day moves even more extreme than usual.
The dollar slipped, giving up some of its gains scored in the past few weeks as U.S. investors repatriated funds and as banks around the world scrambled to acquire the dollar funding they needed on the open market.
The euro rose 1.2 percent from late U.S. trade to $1.3573 , recovering from a 1-½ year low of $1.3258 struck on Friday.
The single currency jumped 1.4 percent to 136.92 yen , up from a three-year low of 132.15 hit on Friday as well.
The dollar was little changed at 100.70 yen with most of the big moves concentrated in currencies that have suffered the most during the broad market sell-off of the past few weeks.
The Australian dollar gained 5.4 percent to $0.6774 after hitting a 5-½ year low of $0.6330 on Friday and plunging about 20 percent in the past two weeks.
Against the yen, the Aussie was up 5.4 percent to 68.20 yen after having collapsed more than 22 percent in the past two weeks to a six-year low near 63 yen. (Editing by Tomasz Janowski)

FOREX: Ringgit Ends Higher Against U.S. Dollar

FOREX: Ringgit Ends Higher Against U.S. Dollar


KUALA LUMPUR, Oct 13 (Bernama) -- The ringgit ended higher against the US dollar Monday in line with gains by other Asian currencies, dealers said.At 5pm, the ringgit traded higher at 3.4930/4970 compared with last Friday's closing of 3.5115/5145.Dealers said Asian currencies were buoyed by the rising stock market after an announcement by the Group of Seven (G7), that it would inject public funds into the banking system if necessary, to tackle the global financial crisis."The market reacted positively to the G7 announcement to contain the financial crisis.This spurred buying interest in the local market," a dealer said.In late trading today, the local currency traded mixed against other major currencies.It depreciated against the Singapore dollar at 2.3783/3837 from 2.3744/3785 last Friday while being firmer against the Japanese yen at 3.4704/4774 from 3.5391/5428 previously.The ringgit was stronger against the euro at 4.7616/7698 from 4.7809/7860 last Friday while it was lower against the British pound at 5.9947/6.0050 from 5.9481/9550 previously.

Review of Markets for the week

Review of Markets for the week
24 Aug, 2008, 0000 hrs IST, ET Bureau

Markets in bear grip, Sensex dips 323 pts

The Bombay Stock Exchange bellwether Sensex extended its weekly losses as the US mortgage crisis re-emerged exerting pressure on global markets in the week under review. The BSE 30-share sensitive index moved widely in a range of 14,824.92 and 14,136.86 before ending the week at 14,401.49, netting a fall of 322.69 points or 2.19 per cent from the previous weekend’s close.In the absence of domestic trigger, the markets were largely influenced by global developments, including a gradual upward movements in crude oil prices, besides sustained capital outflows from the Indian equity.

Similarly, the 50-share Nifty of the National Stock Exchange tumbled by 103.25 points, or 2.33 per cent, to close at 4,327.45 from its last week-end’s close.Analysts said, the domestic bourses came under pressure as global markets were hit during the week by fresh concerns about the mortgage crisis that re-emerged after speculation of a need to bailout two largest US home finance groups — Freddie Mac and Fennie Mae.On the domestic front, they said, a fresh rise in inflation and crude oil prices caused concerns that the Reserve Bank may initiate further monetary measures to contain inflationary pressure.

Inflation ascended to 12.63 per cent, while global crude oil prices surged past the $121 a barrel level on Friday. Foreign institutional investors too were net sellers in the week, particularly after SEBI’s decision of not changing the curbs imposed on Participatory Notes in its meeting in the preceding week.Heavyweights like the largest public sector bank SBI plunged 7.68%, Satyam Computer 6.19%, Grasim 6.19%, NTPC 6.11%, ICICI Bank 4.27%, ONGC 4.74% and Reliance Communications 4.28%.The broader BSE-100 Index dropped sharply by 189.87 points, or 2.46% to end at 7,524.31 from last weekend’s close of 7,714.28.

The BSE-200 Index and the Dollex-200 were also quoted lower at 1,761.45 and 674.79 at the weekend compared to their last weekend’s close of 1,804.57 and 700.82, respectively.On the NSE, the S&P CNX Defty finished lower by 128.50 points or 3.59% at 3,451.40 and the CNX Nifty Junior concluded the week at 6,956.50, a loss of 217.10 points or 3.03%.Among the sectoral indices, the BSE Realty Index was the biggest loser with a fall of 218.80 points or 4.24%, followed by the BSE PSU Index, which lost 275.91 points or 3.95%. The Bankex also tumbled by 247.20 points or 3.58%.

AMR hires Merrill to sell up to $300M in stock

FORT WORTH, Texas

American Airlines parent AMR Corp. said Friday it has hired Merrill Lynch & Co. to sell up to $300 million in stock.

The sale of stock "from time to time" will be made at market prices on the New York Stock Exchange, AMR said in a filing with the Securities and Exchange Commission.

At Friday's closing price, AMR stock had a market value of about $2.6 billion.

The shares rose 84 cents, or 8.7 percent to $10.52, in regular trading before the sales agreement was disclosed, as airline stocks benefited from a drop in oil prices. In extended trading, they fell 3 cents, to $10.49.

Fort Worth-based AMR previously filed a shelf-registration statement to sell the shares with the SEC in 2006.

Review of Markets for the week

Review of Markets for the week 24 Aug, 2008, 0000 hrs IST, ET Bureau

Markets in bear grip, Sensex dips 323 pts The Bombay Stock Exchange bellwether Sensex extended its weekly losses as the US mortgage crisis re-emerged exerting pressure on global markets in the week under review. The BSE 30-share sensitive index moved widely in a range of 14,824.92 and 14,136.86 before ending the week at 14,401.49, netting a fall of 322.69 points or 2.19 per cent from the previous weekend’s close.In the absence of domestic trigger, the markets were largely influenced by global developments, including a gradual upward movements in crude oil prices, besides sustained capital outflows from the Indian equity. Similarly, the 50-share Nifty of the National Stock Exchange tumbled by 103.25 points, or 2.33 per cent, to close at 4,327.45 from its last week-end’s close.Analysts said, the domestic bourses came under pressure as global markets were hit during the week by fresh concerns about the mortgage crisis that re-emerged after speculation of a need to bailout two largest US home finance groups — Freddie Mac and Fennie Mae.On the domestic front, they said, a fresh rise in inflation and crude oil prices caused concerns that the Reserve Bank may initiate further monetary measures to contain inflationary pressure. Inflation ascended to 12.63 per cent, while global crude oil prices surged past the $121 a barrel level on Friday. Foreign institutional investors too were net sellers in the week, particularly after SEBI’s decision of not changing the curbs imposed on Participatory Notes in its meeting in the preceding week.Heavyweights like the largest public sector bank SBI plunged 7.68%, Satyam Computer 6.19%, Grasim 6.19%, NTPC 6.11%, ICICI Bank 4.27%, ONGC 4.74% and Reliance Communications 4.28%.The broader BSE-100 Index dropped sharply by 189.87 points, or 2.46% to end at 7,524.31 from last weekend’s close of 7,714.28. The BSE-200 Index and the Dollex-200 were also quoted lower at 1,761.45 and 674.79 at the weekend compared to their last weekend’s close of 1,804.57 and 700.82, respectively.On the NSE, the S&P CNX Defty finished lower by 128.50 points or 3.59% at 3,451.40 and the CNX Nifty Junior concluded the week at 6,956.50, a loss of 217.10 points or 3.03%.Among the sectoral indices, the BSE Realty Index was the biggest loser with a fall of 218.80 points or 4.24%, followed by the BSE PSU Index, which lost 275.91 points or 3.95%. The Bankex also tumbled by 247.20 points or 3.58%.

Getting The Best Results With Your Forex Course

Getting The Best Results With Your Forex Course

Forex Course

A course on forex trade helps the individual investors understand the market and perform well in earning profit. The course includes systematic analysis of the data pertaining to the trade in the past and the vital indicators in the area of GDP, production etc, pertaining to the country. This technical and fundamental analysis gives the investor a fair sight about the market, depending on which, strategies can be formed for making money out of the market. As a part of the course, the trader is exposed to online forex trading, which gives tremendous confidence to the retailer.

Online Forex Trading

Normally, Forex trading by retail traders is done through brokers. The brokers pprovide access to the purchase and sale of the currencies as per the request. With the advent of modern communication equipments and computer peripherals today you can enter the market from the comfort of your home. A large part of what has created this access is made possible through recent developments cleaning upholstery cleaning technology. Forex trade is a 24 hour market, with one country or the other in the world participating in the trade. The online market is a spot market in the sense it settles instantly. Us dollar (USD), European Euro(Euro), Japanese Yen (JPY), Swiss Franc (CHF),UK Pound (GBP), Canadian Dollar (CAD) and Australian Dollar (AUS) are the frequently traded currencies in online forex trading.

In every transaction two currencies are involved, one is bought and the other is sold. There are many online Forex websites, which should be understood before actually doing online trading. Unlike conventional trading, online trading does not require the carpet rug amp; upholstery cleaners assistance of brokers. What a broker would be doing otherwise by receiving and placing/executing the orders, the system will do automatically and istantly in online forex trading. At the click of the mouse, the transaction is completed/executed. The online trading system is very fast and reliable.

Cross Currency

Cross currency is a currency pair in which the two currencies are not USD. In other words, the two currencies are currencies other than USD. The cross currency is more liable for fluctuation because actually in cross currency transactions, the purchase currency and the selling sheet metal fabrication are converted in to USD first and then the trade is completed. So, knowledge about cross currency transactions will enable a Forex trader to profit even when the U.S. Dollar pairs are not trending. Similarly, one should be aware of the base currency (the first currency in a currency pair), which helps take vital decisions.

Online Forex trading is a relatively new development that provides conveneint access to traders worldwide. With wireless internet access traders can now execute their trades from virtuall anywhere in the world and enjoy a lifestyle of freedom and mobility.

Use forex reserves to create sovereign wealth funds

Use forex reserves to create sovereign wealth funds
23 Aug, 2008, 1438 hrs IST,Ashok Khemka,

The foreign reserves holdings of oil and some emerging economies including the BRIC countries are reaching stratospheric levels. This external surplus is largely a result of the run-up of the oil and commodity prices. Should these nations be complacent with their high levels of forex holdings or should they worry about the opportunity costs of holding high levels of foreign reserves? This savings glut of oil and emerging economies has been largely channelled to the US, cheaply financing its large current account imbalance. The US current account deficit is estimated to absorb about 75% of the global external surpluses. Increasing liquidity of the oil and newly industrialised economies are being funnelled into financial instruments issued by advanced countries yielding negative real rates of return.

Holding adequate levels of foreign reserves is essential to meet the liquidity on account of imports and external debt service. Holding of foreign reserves balance in cash or low-yielding liquid instruments such as the US Fed securities is akin to holding cash and bank balance in current accounts by the corporate/household sector to meet the necessary liquidity in carrying out day-to-day transactions. But there is a trade off involved with increasing returns when funds are locked up in higher yielding but longer-term instruments.

India's foreign reserves holdings has been around $300 billion for quite some time, forming almost 35% of our national GDP. The surge in reserves causes a mismatch between the opportunity costs of holding the reserves with macro-economic adjustment costs incurred when they fall short. There are several global benchmarks to determine the optimal level of foreign reserves holdings providing adequate liquidity for current account transactions such as imports and debt servicing. One rule of thumb is based on imports. It predicts that reserves should be enough to cover three months of imports.

The current level of foreign reserves holdings in India covers 15 months of imports, making current foreign reserves holdings overvalued by five times. Another oft-used benchmark is the Guidotti-Greenspan rule. As per this rule, the reserves should be enough to cover the short-term debt, that is, the ratio of average reserves holdings to short-term debt payable during the year should be one. This ratio of reserves to short-term debt for India is seven as on end March, 2008. The reserves holding by this measure is seven times more than the requirement. The average reserves to GDP ratio is 35% in India as compared to 10% on average in advanced countries. All this means that our reserves are too high for comfort.

The bulk of our reserves are invested in US Fed securities. The interest rates in both US and euro areas have yielded negative real rates of return of between 2% and 3% in the last 4-5 years. At this negative real yield on investments in US government securities, India's loss on its foreign reserves holdings is anything between $6 billion and $9 billion per annum at current reserves level. This is the high cost paid by the country for maintaining excessive liquidity, besides the opportunity costs foregone by not investing in longer maturing, higher yielding bonds and equities. By either measure of present level of short-term foreign debt of $44 billion or three-months import cover of $60 billion, a reserve level of $80 billion should provide comfortable liquidity. This reserve level is also 10% of GDP, the level maintained by most advanced countries. Thus by all measures, our foreign reserves holdings are over-liquid by $200-220 billion. A part of the excess reserves holdings can be gainfully employed by the RBI to intervene in the forex market to restore the value of a grossly undervalued rupee.

By the approximate measure of McIndex Purchasing Power Parity (equivalent price of a McDonald's hamburger across countries), the Indian rupee is undervalued by 30-40%. A correctly valued rupee would reduce the import bill on oil and other commodities, sobering the spiralling inflationary effect due to over-valued imports on domestic prices. Central bank intervention in the forex markets by offloading a part of its current reserves holdings would help in sucking out excessive monetary liquidity in the domestic economy. The actual growth rate in broad money supply is in excess of 20% and exceeds the targeted growth rate by almost 6-7%.

The balance of available foreign reserves holdings ought to be gainfully deployed in foreign assets which maximise returns. The imperative of earning higher and market-based returns on foreign assets should not be lost track of. India is experiencing global financial integration with its gross foreign assets and liabilities exceeding 60% of GDP. Assets held by sovereigns currently stand at $7 trillion in international reserves of which sovereign wealth funds constitute between $2-3 trillion. (See the accompanying table for the major global sovereign wealth funds).

The US has enjoyed much better performance on foreign assets than other countries. The sum total of capital gains and income yields on US foreign assets during the period 2001-06 has been as high as 12-15% while the return on its foreign liabilities is only 5-6%, giving US a net return of 7-8% on its foreign portfolio. To appreciate the returns on FII investments in India, consider the following data as on end 2007. As per SEBI records, while the cumulative purchases by FIIs were to the tune of $501.75 billion, cumulative sales amounted to $435.41 billion and net purchases were worth $66.33 billion. The market value was $255.4 billion. A rough calculation shows that the returns on average on the FII investments in India yielded a fabulous cumulative annual rate of 351 5% on average till end 2007.

A substantial part of the current foreign reserves holdings could thus be set aside to create a sovereign wealth fund run by global professional managers rewarded with performance-based salaries and independent of bureaucratic and political meddling. It is not wise - when you permit foreign capital, which earns high returns in the domestic equity and commodity markets - to constrain the foreign capital held domestically from exploring higher returns in high yielding equities, corporate bonds and commodities markets abroad. But this calls for a paradigmatic shift in thinking - freedom from a licence raj constraining domestic capital from freely flowing in and out. We have to overcome the present mindset and show more faith and respect for the Indian talent and entrepreneurial spirit.

(The author is an IAS officer. Views are personal.)

Forex Trading Strategy: Japanese Yen

Forex Trading Strategy: Japanese Yen

Global Forex Trading, Global Forex Trading

Published 08/23/2008 - 9:08 a.m.

Yen rallies in currency tradingForex trading strategy should consider that the Japanese yen is on the rise right now. The yen is rallying in currency trading on the FX market as risk aversion sets in. Most of the worries have to do with the U.S. financial markets. Concerns stemming from the financial sector are creating a situation in which investors are concerened about taking risks. This means that the yen carry trade is unwinding. The Guardian reports on forex trading strategy and the Japanese yen: "There is some jitteriness in financial markets and in equity markets ... and that tends to mean the yen is a bit better supported against some of the more risky currencies," said Phyllis Papadavid, currency strategist at Societe Generale in London. "Especially with some of the stories surrounding U.S. banks ... there is that sense of risk aversion seeping into the markets." See Also Japanese Yen in Currency Trading Forex trading strategy for a variety of currencies

Forex reserves down by $3.8 billion

Forex reserves down by $3.8 billion
22 Aug, 2008, 2221 hrs IST, PTI

MUMBAI: Declining foreign currency assets (FCAs) caused a further fall in India's foreign exchange reserves for the fifth consecutive week, pulling it down below the USD 300-billion mark.

Reserves dropped by another USD 3.8 billion to USD 296.210 for the week ended August 15 from USD 300.01 billion in the previous week, the Reserve Bank said in its weekly report today.

During the period under review, the FCAs fell by USD 3.785 billion to USD 285.975 billion from USD 289.760 billion in the previous week, RBI said.

FCAs expressed in US dollar terms include the effect of appreciation or depreciation of non-US currencies such as Euro, Sterling and Yen held in reserves.

The gold reserves remained static at USD 9.735 billion during the period while the special drawing rights sharply declined to USD 4 million, the apex bank said.

India's reserve position in the International Monetary Fund (IMF) dipped by USD 8 million to USD 496 million from USD 504 million in the previous week, RBI said.

FOREX-Plunging oil, gloomy British data fuel dollar rally

Fri Aug 22, 2008 4:07pm EDT

(ADVISORY: Please note that there is reduced FX coverage in Europe on Monday owing to a public holiday in the UK. Full European coverage will resume on Tuesday.)

* Dollar rallies, UK GDP backs slower global growth view

* Crude prices drop more than $6, cheering stocks

* Bernanke says dollar stability to slow inflation (Adds details, updates prices, changes byline)

By Lucia Mutikani

NEW YORK, Aug 22 (Reuters) - The dollar surged on Friday, recovering from the previous day's losses, as gloomy British growth data backed views of a slowing global economy and raised prospects of interest rate cuts outside the United States.

A $6.59 drop in U.S. crude oil prices to below $115 per barrel, which contributed to a rally on Wall Street, and comments by influential investor Warren Buffett that he has no bets against the dollar also added to the U.S. currency's upward momentum.

"UK GDP data weighed on the pound and sequentially on the euro, the Aussie dollar and the Kiwi dollar, which are the central banks looked at as potentially cutting interest rates," said David Watt, senior currency strategist at RBC Capital Markets in Toronto.

Data showed the British economy stalled on the second quarter, suggesting a recession might be looming, and added to an overall bleak picture of a slowing European economy. It raised the possibility of European Central Bank and Bank of England monetary easing.

The euro dropped to a session low of $1.4760, edging toward a six-month low hit earlier this week at $1.4631, according to Reuters data. It was last trading at $1.4772, down 0.9 percent.

Despite Friday's losses, the euro was on track for its best weekly gain against the dollar since mid-July.

The dollar jumped 1.5 percent to 110.03 yen , while sterling slumped 1.5 percent to 1.8508 against the greenback . The dollar was on pace for its best one-day gain against the yen in more than two months at current prices.

The gains hoisted the dollar index to an intraday peak of 76.866 .DXY, not far from its 2008 peak at 77.413 hit early this week. The index, which measures the dollar's value against a basket of six currencies, was last up 1.0 percent at 76.789.

DOLLAR IN RECOVERY MODE

The dollar briefly trimmed gains against the euro in a knee-jerk reaction to Federal Reserve Chairman Ben Bernanke's comments that a stable dollar and falling commodities should help slow inflation this year and next. For details, see [ID:nN22434443].

Bernanke's remarks at an annual Fed symposium in Jackson Hole, Wyoming, prompted analysts to reduce expectations of a U.S. interest rate increase this year, which could diminish the dollar's appeal to investors.

But analysts said even without an interest rate hike this year, the dollar would probably continue to recover.

"In talking about the headwinds to the U.S. economy and then indicating how they had cut interest rates so aggressively ... the Fed feels it has done a lot of work," said RBC Capital Markets' Watt.

"If you contrast that with what is going on with UK GDP numbers and how much work that still has to be done by a number of the other central banks, it just entrenches the positive U.S. dollar view," Watt said.

The dollar has soared this month as dealers have unwound trades that bet on the global economy weathering the U.S. downturn and the credit crisis. Investors, as a result, sold the euro, British pound, Australian dollar and commodities.

Analysts said the dollar remained on track for a medium-term recovery after a seven-year downtrend.

Persistent problems at U.S. mortgage finance companies Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz), and speculation over the future ofinvestment bank Lehman Brothers (LEH.N: Quote, Profile, Research, Stock Buzz) could make the road to recovery a bit bumpy, they warned.

"In the current environment of financial market instability, traders needed Bernanke to reassure them that they will take care of the financials first and worry about inflation later, which was exactly what Bernanke delivered," said Kathy Lien, director of currency research at GFT Forex in New York.

"However don't be mistaken, the Fed is still looking to raise interest rates in 2009," Lien wrote in a note.

The Australian dollar dived 1.6 percent to US$0.8665 , while the Kiwi dollar tumbled 1.8 percent to US$0.7086 . (Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Jonathan Oatis)

Forex reserves dip below $300 bn

Forex reserves dip below $300 bn

Bs Reporter / Mumbai August 23, 2008, 2:23 IST

After six months, India’s foreign exchange (forex) reserves have dropped below the $300-billion mark.

During the week ended August 15, forex reserves fell by $3.8 billion to $296.21 billion mainly on account of an appreciation of the dollar against other currencies. Foreign exchange reserves went above the $300-billion mark in February this year and touched an all-time high of $316.17 billion in the week ended May 23.

Reserves have, however, declined for the last six weeks. Even during the previous week, foreign exchange reserves fell by $5.6 billion and the decrease was attributed to selling by foreign institutional investors due to volatility in the Indian stock markets.

The latest figures from the Reserve Bank of India (RBI) showed that the country’s foreign currency assets declined by $3.7 billion to $285.98 billion.

Global Forex Trading, Global Forex Trading

Forex Trading Strategy: Japanese Yen

Global Forex Trading, Global Forex Trading

Published 08/23/2008 - 9:08 a.m.

Yen rallies in currency tradingForex trading strategy should consider that the Japanese yen is on the rise right now. The yen is rallying in currency trading on the FX market as risk aversion sets in. Most of the worries have to do with the U.S. financial markets. Concerns stemming from the financial sector are creating a situation in which investors are concerened about taking risks. This means that the yen carry trade is unwinding. The Guardian reports on forex trading strategy and the Japanese yen: "There is some jitteriness in financial markets and in equity markets ... and that tends to mean the yen is a bit better supported against some of the more risky currencies," said Phyllis Papadavid, currency strategist at Societe Generale in London. "Especially with some of the stories surrounding U.S. banks ... there is that sense of risk aversion seeping into the markets." See Also Japanese Yen in Currency Trading Forex trading strategy for a variety of currencies

Nuthri Al Hayaah - Enriching Life: Visual stock exchange

http://newsstockexchange.blogspot.com/

http://newsstockexchange.blogspot.com/
http://newsstockexchange.blogspot.com/

http://newsstockexchange.blogspot.com

CGA Mining Limited - Announcement to the Australian Securities Exchange and Toronto Stock Exchange - SAG Mill arrives at site - Masbate Gold Project

Attention Business Editors:

CGA Mining Limited - Announcement to the Australian Securities Exchange and Toronto Stock Exchange - SAG Mill arrives at site - Masbate Gold Project

    /NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR RELEASE TO US NEWS
   WIRE SERVICES/

   PERTH, Western Australia, Aug. 18 /CNW/ - Further to our SAG Mill update
announcement dated 25 July 2008, the SAG Mill has now successfully arrived at
the Masbate project site. Following an extensive refurbishment program the SAG
Mill was transported overland from Weir's workshop in Edmonton, Canada to
Seattle, and from there by ocean going vessel to Manila, and finally to the
Masbate Project site by barge.
   The SAG Mill (32' diameter x 14' long with twin 4,000 HP drives) has now
been handed over to Leighton, and the assembly and installation of the SAG and
Ball Mills which also have been completely refurbished and arrived on site
during the last month, will commence this week. To view images from the
Masbate Gold Project please visit http://files.newswire.ca/578/CGAmill.doc.

   ABOUT CGA MINING LIMITED

   CGA is listed on the Toronto Stock Exchange and Australian Securities
Exchange. The Masbate Gold Project in the Philippines is currently under
construction. First gold is forecast to be produced in the first quarter of
2009. The project has a total indicated resource base of 4.55M ounces, total
inferred resource base of 3.22M ounces and is currently forecast to produce
over 200,000 ounces per annum. The 4Mt pa plant is under construction by
Leighton Contractors Asia Limited ("Leighton"). CGA is completing a scoping
study for the expansion of the plant throughput at Masbate. The mining
contract for the Masbate Gold Project has been awarded to Leighton, the
largest mining contractor in the world. A 30,000m drilling program (10,000m of
which has already been completed) is currently underway at Masbate. CGA is
completing a Feasibility Study into the Mkushi Copper Project in Zambia, which
is due for completion in December 2008. The Company is also currently
undertaking a 10,000m drilling program at Segilola, regarded as Nigeria's most
advanced gold property. CGA has a disciplined acquisition program focused on
acquiring new gold projects with a substantial initial resource with the
capacity to grow materially and where the development and operational
experience of CGA can be applied to enhance shareholder value.

   NATIONAL INSTRUMENT 43-101 AND JORC COMPLIANCE

   Mr Geoff.G.Jones, F.Aus.I.M.M.CP Mng, CGA's general manager, technical,
is acting as the Qualified Person in compliance with NI 43-101 and JORC
reporting requirements with respect to this announcement. He has prepared and
or supervised the preparation of the scientific or technical information in
this announcement and confirms compliance with NI43-101 and JORC requirements.
   Further information relating to the Masbate Project is included in the
technical report entitled Technical Report on the Mineral Resources of the
Masbate Deposit, Masbate Province, Republic of the Philippines for CGA Mining
Limited prepared by Mining Associates Pty Ltd and available on SEDAR at
www.sedar.com, lodged 8 July 2008.
   Andrew James Vigar of Mining Associates Pty Ltd, a qualified person, has
verified the resource statement for the Masbate Project as disclosed in this
announcement, including sampling, analytical and test data underlying the
estimate. Verification of the data included numerous site visits, database
validation of historical drill results and review of sampling and assaying
protocols. The qualified person was satisfied with the verification process.

   CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

   This announcement includes certain "forward-looking statements" within
the meaning of Canadian securities legislation. All statements, other than
statements of historical fact, included herein including, without limitation,
statements regarding anticipated dates for construction and production, and
other milestones related to the Masbate Gold Project and other projects;
estimates of capital and operating costs, recovery rates, production estimates
and estimated economic return; and CGA's future operating or financial
performance, are forward-looking statements. Information concerning mineral
reserve and resource estimates including statements regarding the conversion
of inferred resources to reserves also may be deemed to be forward-looking
statements in that it reflects a prediction of the mineralization that would
be encountered if a mineral deposit were developed and mined. Forward-looking
statements involve various risks and uncertainties and are based on certain
factors and assumptions. There can be no assurance that such statements will
prove to be accurate, and actual results and future events could differ
materially from those anticipated in such statements. Important factors that
could cause actual results to differ materially from CGA's expectations
include uncertainties related to fluctuations in gold and other commodity
prices and currency exchange rates; uncertainties relating to interpretation
of drill results and the geology, continuity and grade of mineral deposits;
uncertainty of estimates of capital and operating costs, recovery rates,
production estimates and estimated economic return; the need for cooperation
of government agencies in the development of the Masbate Gold Project; the
need to obtain additional financing to develop the Masbate Gold Project; the
possibility of delay in development programs or in construction projects and
uncertainty of meeting anticipated program milestones for the Masbate Gold
Project; and other risks and uncertainties disclosed under the heading
"Caution Regarding Forward-Looking Statements" in CGA's Annual Information
Form for the year ended 30 June 2007 filed with the Canadian securities
regulatory authorities on the SEDAR website at www.sedar.com.

UPDATE 1-Fairborne Energy shares rise on Alberta gas find

Mon Aug 18, 2008 9:12pm BST

(Adds closing share price.)

CALGARY, Alberta, Aug 18 (Reuters) - Fairborne Energy Ltd (FEL.TO: Quote, Profile, Research) shares rose 14 percent on Monday after the company detailed a prolific natural gas discovery in Alberta.

Shares of the junior oil and gas producer climbed C$1.42 to C$11.61 on the Toronto Stock Exchange. Volume was 1.87 million shares, more almost four times the 90-day average.

The shares have risen 62 percent over the past 12 months, against an 11 percent gain for the exchange's main energy index for the same period.

Fairborne said a horizontal well drilled at its Harlech property in Alberta produced up to 13 million cubic feet of gas per day while being tested and would be tied into infrastructure by the end of September.

The company said the well's production rate was more than 10 times greater than the norm for vertical wells drilled into the same geological formation.

A horizontal well runs laterally through a formation, while a vertical well taps just one small area.

Fairborne produced 59.5 million cubic feet of gas a day during the second quarter, as well as 3,116 barrels of oil and natural gas liquids a day.

($1=$1.06 Canadian) (Reporting by Scott Haggett; editing by Rob Wilson)

Musharraf’s resignation celebrated by Karachi Stock Exchange - Value of Rupee up

2008-08-18 17:38:30 (GMT) (Caymanmama.com - Pakistan News News)

Karachi, Pakistan (CaymanMama.com) — The Karachi Stock Exchange reacted with a surge in trading activity upon the news of the resignation of President Pervaiz Musharraf which pushed the KSE-100 index to 10, 700 points registering a gain of 450 points. The rupee value also appreciated by Rs.1.40 against the US dollar.

Investors and member of the Karachi Stock Exchange welcomed the resignation by the President and said that Musharraf’s move will end the hostile political atmosphere bringing some stability to the business and political air of the country.

The members of the Karachi Stock Exchange expressed their views by saying that now the democratic institutions will get a chance to thrive and function properly.

The immediate response from the Karachi Stock Exchange and the business community is heartening, but it is yet to be seen what direction this political turmoil will take. The ruling coalition’s task now, after the President’s resignation will be to reinstate the judiciary, whether the co-chairman of the ruling Pakistan Peoples Party will stand by its commitment and reinstate the deposed judges or take a U turn as per the past precedents.

If the deposed judiciary is not reinstated within 3 days as per the last contract between the coalition partners, Pakistan will be set to face yet another political crises.

Musharraf’s resignation celebrated by Karachi Stock Exchange - Value of Rupee up

2008-08-18 17:38:30 (GMT) (Caymanmama.com - Pakistan News News)

Karachi, Pakistan (CaymanMama.com) — The Karachi Stock Exchange reacted with a surge in trading activity upon the news of the resignation of President Pervaiz Musharraf which pushed the KSE-100 index to 10, 700 points registering a gain of 450 points. The rupee value also appreciated by Rs.1.40 against the US dollar.

Investors and member of the Karachi Stock Exchange welcomed the resignation by the President and said that Musharraf’s move will end the hostile political atmosphere bringing some stability to the business and political air of the country.

The members of the Karachi Stock Exchange expressed their views by saying that now the democratic institutions will get a chance to thrive and function properly.

The immediate response from the Karachi Stock Exchange and the business community is heartening, but it is yet to be seen what direction this political turmoil will take. The ruling coalition’s task now, after the President’s resignation will be to reinstate the judiciary, whether the co-chairman of the ruling Pakistan Peoples Party will stand by its commitment and reinstate the deposed judges or take a U turn as per the past precedents.

If the deposed judiciary is not reinstated within 3 days as per the last contract between the coalition partners, Pakistan will be set to face yet another political crises.

BATS receives SEC exchange approval

BATS receives SEC exchange approval

By Anuj Gangahar in New York

Published: August 18 2008 19:33 | Last updated: August 18 2008 19:33

BATS Trading, the upstart Kansas-based equity trading platform, received approval from the US Securities and Exchange Commission on Monday to operate as a registered national securities exchange, adding to mounting competition in the stock exchange sector.

BATS has been taking market share from the New York Stock Exchange and Nasdaq Stock Market, the two largest US exchanges, since its inception two and a half years ago, although critics said this is because the prices it charges customers to trade on it are unsustainably low.

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The transition into an exchange, from the firm’s current status as an electronic communications network, is expected to take about 60 days. It filed for exchange status in November last year.

Joe Ratterman, chief executive of BATS, said: “As we have stressed repeatedly, our motivation to become an exchange has come from our desire to participate directly in the national market system and compete on a level playing field with our primary competitors, Nasdaq and the NYSE.”

“We realise there is a lot of hard work ahead of us as we take on added regulatory responsibility,” he said.

BATS averaged matched market share of 10.1 per cent of US equities per day in July.

Earlier this year, the trading network crossed the 1bn volume mark for one day of trading for the first time.

Last year, BATS unveiled a lower tariff for trading shares in which it, in effect, gave money to customers in exchange for their business. The move saw trading volumes more than double to over 200m shares a day.

BATS is backed by an ownership group including affiliates of Citigroup, Credit Suisse, Deutsche Bank, GETCO, JPMorgan, Lehman Brothers, Lime Brokerage, Morgan Stanley, Merrill Lynch, Tradebot, a software developer, and Wedbush, an investment bank.

BATS is preparing for the November launch of a European offering, which will compete head-on with the London Stock Exchange, initially trading in UK stocks, with continental European stocks coming later.

BATS’s European launch will come after the launch of two rival platforms - Turquoise and a “pan-European market” backed by Nasdaq OMX, the US exchange operator.

All three will provide added competition for incumbent exchanges in Europe, which have already seen the emergence of Chi-X, another investment bank-backed equities platform.

Tokyo stocks close 1% higher

Tokyo stocks close 1% higher

TOKYO, Aug. 18 (Xinhua) -- Tokyo stocks closed higher Monday. The 225-issue Nikkei Stock Average gained 146.04 points, or 1.12 percent, to 13,165.45 from Friday. The broader Topix index of all First Section issues on the Tokyo Stock Exchange expanded 16.44 points, or 1.32 percent, to 1,263.75. Value leader Mizuho Financial Group jumped 11,000 yen, or more than 2 percent, to 477,000 yen while volume leader Sumitomo Metal Industries went up 33 yen, or more than 7 percent, to 481 yen. On the First Section, advancing issues outnumbered declining ones 1,308 to 343, with 66 others remaining unchanged. Trading volume on the main section dropped to 1,687.36 million shares from 1,785.04 million Friday. The TSE's Second Section index rose 2.81 points, or 0.11 percent, to 2,594.90 on a volume of 28.65 million shares. On the Osaka Securities Exchange, the near-term September Nikkei 225 index futures contract increased 140 points to 13,170.

Nymex Investors Approve CME's $8.3 Billion Takeover (Update1)

Nymex Investors Approve CME's $8.3 Billion Takeover (Update1)

By Edgar Ortega and Elizabeth Hester

Aug. 18 (Bloomberg) -- Nymex Holdings Inc. shareholders voted to approve CME Group Inc.'s $8.3 billion takeover offer, completing a transaction that may stem CME Group's 51 percent slide on the New York Stock Exchange this year.

A majority of CME and Nymex investors voted for the deal today in New York and Chicago, the companies said in a news release. The transaction cements CME Group's status as the world's largest derivatives market. About 650 of 816 Nymex members voted to approve the deal, Nymex Chairman Richard Schaeffer said on a conference call.

CME Group Chief Executive Officer Craig Donohue and Chairman Terry Duffy met with shareholders in the past two weeks to shore up support after some Nymex members said they would reject the offer. Donohue, 42, sweetened the offer twice, and last week two chief opponents dropped their complaints.

``In the exchange landscape of the future, there will be three to four big companies, global with different types of products,'' said Michael Henry, senior executive in the capital markets group at consulting firm Accenture. ``CME wants to be one of those companies. It's defending it's home turf by acquiring U.S.-based derivatives exchanges, but it still needs to make that move and show that it can act globally.''

The deal is expected to close Aug. 22.

Largest Transaction

CME Group, which tops No. 2 Eurex AG among derivatives exchanges, trades everything from futures on corn and U.S. Treasury debt to benchmark contracts for oil and natural gas. The transaction is the largest this year among exchanges, which are racing to meet investor demand for lower-cost electronic trading. More than $62 billion in acquisitions have been announced or completed since the start of 2007, according to Bloomberg data.

Prospects for the deal improved Aug. 14, when two Nymex members, Robert Sahn and Gary Glass, reversed their opposition and urged members to vote in favor. They campaigned to negotiate better terms. A majority of shareholders and at least 75 percent of Nymex's 816 members needed to approve the deal. Nymex said about 80 percent of members voted in favor.

The slump in CME Group shares this year cut $3.35 billion from the acquisition value since it was announced Jan. 28. The stock dropped $21.03, or 5.9 percent, to $336.64 in composite trading in New York today. Nymex fell $2.16 to $79.95.

Under the proposal, CME offered $36 in cash and 0.1323 of its shares for each Nymex share. The Nymex members, who hold Class A shares and have the right to trade at the exchange, will also get $750,000 in cash. The original proposal offered $612,000. CME said the transaction is valued at $8.3 billion.

Special Dividend

Approval paves the way for CME Group to proceed with a special dividend of about $350 million and a plan to repurchase as much as $1.1 billion of its shares.

The deal may help boost shares of the combined company as executives wring out expenses and use their dominance of exchange-listed derivatives to enter new businesses. CME may be able to eliminate as much as $100 million in costs, instead of the company's forecast of $60 million, said Justin Lumiere, a merger arbitrage analyst at brokerage ICAP in New York.

CME also gets Nymex's business clearing over-the-counter futures in the energy market. Together the companies will guarantee about 98 percent of the exchange-listed futures that change hands in the U.S., and will seek to expand to other assets such as the credit-default swap market that now trade privately among banks.

``They're going to have the strongest clearinghouse in the world and that's going to help them penetrate the over-the- counter market,'' said Diego Perfumo, who follows exchanges at Equity Research Desk in Greenwich, Connecticut. ``If you're strong, you have better chances in entering the over-the-counter market, especially now with concerns around counterparty risk.''

BATS Exchange Gains SEC's Approval

Big Board, Nasdaq
Face Competition
From Upstart Firm

By SERENA NG and AARON LUCCHETTI
August 19, 2008

BATS Trading Inc. received approval from the Securities and Exchange Commission to operate a stock exchange that will compete more directly with NYSE Euronext's New York Stock Exchange and Nasdaq OMX Group Inc.'s Nasdaq Stock Market.

Closely held BATS, of Kansas City, Mo., says the BATS Exchange will open in about two months. The company already trades about 10% of the share activity on NYSE and Nasdaq-listed stocks, combined, illustrating the ability of upstart stock markets to take business away from established exchanges that have gone public and focused more on profits.

Launched in January 2006, BATS's electronic trading network has grown quickly by offering heavy discounts on trading fees and promises of faster execution of buy and sell orders. Its owners include affiliates of large banks and Wall Street brokers, including Citigroup Inc., Credit Suisse Group, Deutsche Bank AG, Lehman Brothers Holdings Inc. and Morgan Stanley. It also counts more than 340 firms as subscribers.

BATS, an acronym for Better Alternative Trading System, filed for exchange status in November 2007 after working on the application since early last year.

Operating as an exchange will enable BATS to send out price quotes more quickly and directly to customers. As an electronic communication network, or ECN, it currently disseminates quotes via the National Stock Exchange and the ISE Stock Exchange, a method that some say led to small delays.

"Our timeliness will improve dramatically" as an exchange, said Joe Ratterman, chief executive of BATS. "Our market share is starting to rival other exchanges, and it makes sense to be on the same playing field as our competitors." ECNs traditionally were "not mentioned in the same sentences as exchanges...we were like second-class citizens," Mr. Ratterman added.

BATS executives expect becoming an exchange will help the firm increase market share by three to five percentage points by the end of this year. Its longer-term goal is to reach 25% market share, making it much more of a threat to the established exchanges. In July, BATS traded an average of 969 million shares per day, which compares with the 2.9 billion U.S. shares that Nasdaq traded daily that month and 3.7 billion at the NYSE. Those figures don't count the significant portion of trading activity that brokers conduct off exchanges.

An NYSE spokesman said "we welcome the competition," while a Nasdaq spokeswoman declined to comment.

BATS was founded by David Cummings, a computer programmer who was successful at developing trading strategies. BATS first began trading Nasdaq-listed stocks and later expanded to NYSE stocks.

"Anyone who can come up with 10% market share in two years is obviously a threat" to the larger exchanges, notes Michael Henry, a senior executive in the capital-markets practice at Accenture, the consulting firm. He adds that smaller trading networks, many of which are backed by banks, are claiming to be more nimble than large players at seizing market opportunities.

When it becomes an exchange, BATS may endure more regulatory requirements that slow down certain projects, however. It is adding about a dozen employees to increase its regulatory presence in order to become an exchange.