this is a series of 3 articles referred by Michael Covel,author of...Trend Following: How Great Traders Make Millions in Up or Down Markets1st...Derivatives and the Common Investor: HedgeStreet Exchange Opens
A new online marketplace called HedgeStreet™ (www.hedgestreet.com) lets investors trade affordable financial instruments designed to cover the full spectrum of financial risk and opportunity.
A Trillion Dollar Market with a Handful of Players
Most investors don't really know a lot about trading derivatives . . . and for good reason. Though the worldwide derivatives market represents one of the largest segments of financial trading, it is almost exclusively the domain of the wealthiest institutional and individual investors. In 2003, the worldwide volume on derivatives exchanges was $874 trillion, according to the Bank for International Settlements (BIS). But roughly 60 percent of that was controlled by a handful of the largest and richest banking institutions. As Philip McBride Johnson, former head of the Commodities Futures Trading Commission (CFTC), has stated: “Major futures markets have always played to the role of the large customer — the hedger, the producer, the institutions, the huge consumer. They've never really wanted to, or even tried to, get the little guy involved.”
Yet the benefits of derivatives trading are not limited to the mega-investor. The concept behind derivatives—enabling investors to hedge their financial risks with instruments explicitly tied to future events—is applicable to common investors as well. We all face numerous risks in our everyday lives. Some of them we can deal with quite simply: we can purchase insurance policies for our health, homes, and vehicles. But it has not been so easy to hedge many of the other risks we face, such as changes in interest rates, real estate values, commodities prices, currency exchange rates, and so on.
Now HedgeStreet is changing that.
A New Marketplace for Retail-Level Hedging and Speculation
In February, 2004, the CFTC (the regulating body of the derivatives industry) designated HedgeStreet as a contract market and registered derivatives clearing organization. This is the first time the CFTC has granted such a designation to a firm offering non-intermediated retail derivative contracts outside the traditional structure of existing futures and options markets.
HedgeStreet has one simple mission, according to CEO and founder John Nafeh: “There should be a marketplace where all investors – not just a select few – can hedge or speculate on the many economic uncertainties of everyday life.” And to accomplish this mission, HedgeStreet has launched an online exchange where investors can trade affordable, easy-to-understand derivatives instruments designed to cover the full spectrum of financial risks.
HedgeStreet clearly represents a breakthrough in online trading. Robert Shiller, Yale University economist and author of the books Irrational Exuberance and New Financial Order, has declared, “HedgeStreet’s products are the next generation of instruments that address economic risks faced by people every day.” Their simplicity, low per-instrument price, and fixed gain/loss potential make them ideal for common investors looking to hedge other investments or to speculate based on their knowledge and beliefs. As a recent analysis in FOW Magazine (September 2004) states, “If the American public embraces the concept of trading derivatives, it seems that the potential for HedgeStreet could be limitless.”
The HedgeStreet marketplace is open now at www.hedgestreet.com.
http://www.turtletrader.com/hedgestreet.html http://www.turtletrader.com/hedgestreet2.html http://www.turtletrader.com/hedgestreet3.html http://www.michaelcovel.com/archives/000198.html
[This message has been edited by King Crimson (edited November 18, 2004).]