A recent study by Tabb Group reported that the level of confidence in the markets continues to fall with every technology-associated market crash, based on the survey of 260 market participants. The study reported that following Knight Capital’s fiasco, 26% consider the present market structure to be “very weak.” By contrast, in June 2012, only 7% of market participants deemed market structure “very weak,” and in May 2010 only 3% of the polled parties thought so.

One of the regulatory solutions to boosting market structure mentioned in the poll is the idea of slowing the markets down. In fact, according to the poll, 31% of asset managers, 20% of broker-dealers, 18% of financial services vendors, and 10% of exchanges believed that slowing down markets “would help minimize the types of events we have seen in 2012, or, more broadly, help the industry regain the trust of investors.”

While the idea of slowing down markets did not generate a majority vote among any specific group, the support for the measure is quite surprising. It is particularly surprising to find 20% of broker-dealers backing the idea, as profitability of their primary business—market-making—grows with increases in trading speed.

A study of market-making on actively traded stocks on the Stockholm Stock Exchange, for example, found that the expected profit on limit orders increased as the time duration between market orders decreased. The study, written by Sandas (Review of Financial Studies, 2001) and confirmed by Beltran, Grammig and Menkveld (working paper, 2005), shows that market-makers’ profitability does not grow as they wait their turn at the exchange; instead, market-makers’ profit grows as their order matching frequency increases. In other words, modern market-makers’ profits are directly related to the number of market orders they service; the more trades the market-maker can take on within a given fixed period of time, the higher is the market-maker’s profitability.

By contrast, market-making theories of the 1980s presumed that market-makers’ profit increased with their waiting time to order execution, identifying slower execution as a driver of higher profitability. The thought went that market makers were patient traders and were compensated for their time making markets, not for the number of trades market-makers took on. Such models reflected exchange conditions circa 1970s. Changing the details of a limit order and cancelling orders was prohibitively costly, and market makers indeed expected a tidy compensation for bearing the risk of ending up in an adverse position once their limit orders were hit. In most modern markets, however, limit order cancellations and revisions can be performed free of charge at the time this book is written, and high-frequency market-makers enjoy better profitability than their low-frequency counterparts.

Still, some brokers who argue against fast execution are under the impression that the technology required for successful trading in today’s computerized markets is prohibitively expensive. The main reason behind such thinking also happens to be brokers’ past experience: just some fifteen years ago, the cost of purchasing technology required for a modern high-frequency setup was tens of millions of dollars. Today, comparative systems cost a few thousand dollars. The drastic reduction of technology in costs has been driven by two main developments, completely independent of financial services:

1. Demand for cheap yet powerful technology by numerous video-game players lacking funds
2. Overseas’ manufacturing capabilities

The very latest iterations of video games require even more drastic technological improvements: specialized chips to quickly receive and process information, much alike the demands of high-frequency markets. These chips, called Graphical Processing Units (GPUs) and Field-Programmable Gate Arrays (FPGAs), were originally designed for ultra-fast processing of video graphics. The chips are now making rapid inroads on Wall Street, where the technology is adopted by more serious applications, like market-making algorithms processing billions of dollars in positions a day. A blank FPGA chip costs as little as $100, yet, when properly programmed and installed in a regular PC, it can deliver performance similar to a cluster of thirty to three hundred interconnected computers. Such amplification of computer power delivers further savings to financial institutions seeking to modernize their technology via savings on computer power, ventilation and physical space.

In summary, fast markets improve market-makers’ profitability without outrageous cash outlays. The biggest cost of implementing modern market-making models lies in the know-how of designing and implementing of algorithms, a discipline hardly straightforward. The last two years, however, have witnessed an explosion of research and other information on the subject, bound to convert even the most hard-crusted anti-speed market-makers to the camp of profitable trading.

Irene Aldridge is teaching courses on design and implementation of algorithms in Chicago (September 5 and 6, 2012) and New York (September 20 and 21, 2012). For more information and to register, please visit http://www.hftcourse.com today. She will also be speaking on a panel about algorithmic trading at HedgeWorld New York 2012, to be held Sept. 19 at the Metropolitan Club.

Published July 31, 2012
CBOE Futures Exchange
“Futures in Volatility” Newsletter
By Mark Shore

While analyzing the utility value of the CBOE Volatility Index (VIX) futuresÂź contract relative to the underlying market (S&P 500), a question often arises regarding the correlation of these two instruments. In this article we look at various durations of rolling correlations to determine its utility value.

The “static” correlation of two investment components is often quoted in a correlation matrix table when multiple markets are discussed or if there are only two markets, a single quote.

From January 2004 to June 2012, static correlation of daily VIX end of day data to the S&P 500 is -0.75. However, a static correlation does not always offer a strong profile of correlation. Correlation typically depends on the time duration of a holding period, thus building a profile of that period. One must keep in mind the S&P 500 has a growth component, whereas the VIX is more of a mean reverting market with moments of upward or downward spikes.

Between January 2004 and June 2012, the VIX reached its maximum close of 80.06 on October 27, 2008. It reached a minimum of 9.89 on January 24, 2007. During this period the VIX has averaged 21.08

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Copyright ©2012 Mark Shore. Contact the author for permission for republication at info@shorecapmgmt.com Mark Shore has more than 20 years of experience in the futures markets and managed futures, publishes research, consults on alternative investments and conducts educational workshops.

Past performance is not necessarily indicative of future results. There is risk of loss when investing in futures and options. Always review a complete CTA disclosure document before investing in any Managed Futures program. Managed futures can be a volatile and risky investment; only use appropriate risk capital; this investment is not for everyone. The opinions expressed are solely those of the author and are only for educational purposes. Please talk to your financial advisor before making any investment decisions.

Written by Bob English

Ahead of Tuesday’s Senate Banking Committee hearing on MF Global, we present the April 20 installment of Capital Account with Lauren Lyster, featuring futures industry veteran guest, Mark Melin. Ms. Lyster pulls no punches in the opener:

Has the case really gone cold? Or, are those who are in charge of the investigation, the “regulators” and the trustees, simply spraying teflon on every piece of sticky evidence that could lead to criminal prosecutions–and, ultimately–the recovery of stolen customer money?

We wish that MF Global were just a one-off affair–a bad apple, if you will. Unfortunately, it seems more likely to us that this is another milestone in the history of what we see as criminality, which has swept through the financial services industry, like some sort of Medieval Black Plague–the Black Death for capital formation. It seems the only time people are held accountable anymore, is when they commit crimes that affect the super-rich.

Bernie Madoff is a prime example…Madoff is securely behind bars, but Jon “Teflon Don” Corzine is busy ordering carmel-Frappuchinos at the local Starbucks as he goes to shop for office space in New York…bothered only by the low din of discontent emanating from the blogosphere (and shows like this, Capital Account). What a nuiscance we must be to the new God-fellas of Wall Street…

Nuiscance, indeed, to which we hope we are part. Here is a link to the entire episode, in which Ms. Lyster and Mr. Melin cover the following salient points, all pointing to a criminal intent to commit fraud, as well as the role of regulators and investigators:

Why was the MF Global back office cleared out with three top personnel allowed to leave, just as the firm was exeriencing its most serious liquidity (ahem solvency) crisis in its soon-to-be-terminated existence?

Why were C-level executives, far from being sequestered by investigators and being placed in an information silo, allowed to run the company for six weeks (prior to Mr. Freeh being installed as Trustee of the Holdings company)?

Why did Lois Freeh wait until early March to have MF Global Holdings USA declare bankruptcy, the very entity that retained the few remaining executives and employees and may have been cash-rich?

Why did Federal criminal investigators fail to so much as question Mr. Corzine nearly six months after the crime?

Why were large counterparties paid with wire transfers, when requests from lowly customers for wires were converted to checks (which ultimately bounced)? “Sloppy is when you don’t do things consistently. Sending all checks to customers and all wires to counterparties–that’s consistent.” See here for details published by John Roe of the Commodity Customer Coalition.

Why were the final days characterized as so “chaotic” when a properly programmed iPhone or Android smart phone (sorry, RIMM) should have been able to handle what amounts to maybe a few dozen megabytes of transfer instructions?

Just what were the details surrounding the successful lobbying effort by top level MF Global execs that effectively postponed reforms on rules that would limit use of customer funds (coincidentally, or not perhaps, just ahead of a $325 million bond offering by MF Global)? [For more details, see our prior piece from this week, which includes exclusive CFTC emails on the issue.]

Even Chuck Grassley, the sponsor of the now-widely criticized 2005 bankruptcy reform act, has stated, “The bankruptcy laws are written to ensure that company executives who were involved in the demise of a company because of fraud or mismanagement shouldn’t be eligible for bonuses,” Mr. Grassley said.

More broadly, MF Global customers have an absolute right to clawback of questionable margin payments and asset transfers from the broker unit that occurred in the weeks leading up to the firm’s demise because there was a clear pattern of intent to deceive investors and customers alike–from manipulating regulators and the regulatory process to changing business practices in the final wee–all of which ensured that customers would be last in line for the remaining morsels of the MF Global carcass. (And, as we have pointed out since early November, 2011, the very nature of the Corzine Trade from Day One was such that all the risk was put in the customer brokerage house, while profits were diverted to an offshore business unit).

“Fraud” is the operative word here. There is no dispute that the Commodity Exchange Act (sic, the law) has been broken, but until fraud is investigated, customers are at the mercy of a very fuzzy and opaque legal process.

It’s time for Congress to put pressure on those in charge of this investigation and oversight to break their own glass of silence and dare them to utter the magic “F” word.

To view the full video interview with Lauren Lyster and Mark Melin click here.

Bob English is the author of this article, the opinions expressed are entirely his own. View his work at:

http://english.economicpolicyjournal.com/2012/04/mf-global-roundup-so-far-great-escape.html

Recent arguments accuse high-frequency traders (HFTs) of a specific market distortion scheme. The HFTs, the argument goes, use their soon-to-be-cancelled limit orders to mislead large investors about the shape of the supply and demand curve. This HFT strategy is purported to work as follows: 1) an HFT posts lots of limit orders on both the bid and the ask sides of the trades; 2) once the large trader’s market order hits the bid (or lifts the offer), the HFT now knows that the large trader is now selling (or buying); 3) the HFT cancels all other limit orders and starts aggressively trading in the same direction as the large trader—relying on their ultra-fast infrastructure to essentially front-run the large trader. This short note looks through the nuts and bolts of the proposed strategy to show that it is simply unprofitable, and therefore, is not actively practiced in the markets.

The key assumption behind the feasibility of such a strategy is that just by serving as a counterparty to a market order, an HFT obtains superior information about the intentions of the institutional traders. While an HFT may indeed be ‘hit’ by orders from a well-researched institutional strategy, such an HFT carries significant risks of being on the opposite side of impending direction of the market. Consider the following example: an HFT places a buy limit order, which is then matched by a market sell order of a well-researched institutional investor. If the institutional investor sells because he expects that the market price is about to drop with high probability, the HFT starts losing money as soon as that order is executed. The higher is the predictive power of the institutional investor, the deeper the loss of the HFT. Not many HFTs would be able to stay solvent using this strategy.

The following issues further complicate matters for the HFT.

1) The HFT has to place limit orders. To reel in large traders, the HFTs presumably need to place large limit orders (otherwise, how would the HFTs separate large traders from small traders)? A large order makes the HFT’s loss that much bigger.

2) Suppose the HFT then absorbs the initial loss, and starts to aggressively trade in the direction of the institutional trader (sell in the case of our example). With his first sell order, the HFT closes the previous buy position, incurring the first loss. The HFT then proceeds to place a series of really fast market sell orders, with the intention of “front-running” the future market impact of the institutional trader. In this case, the HFT quickly reduces the price to its fundamental value. The institutional trader then has no reason to make any trades following his first large trade—he can now just close his initial large short position at a profit—a profit on a smaller dollar amount than planned, yet of expected magnitude, and most importantly, guaranteed via the actions of the HFT! In fact, in this setup it is the institutional traders who are most likely to manipulate the markets—regardless of any fundamental values, any large institutional trade would lead to a riskless profit!

3) If all HFTs trade the same strategy, however, as is often assumed, the seemingly limitless HFT riches in point 2 above vanish. This is why:
- most limit buy orders are cancelled shortly after the institutional trader’s sell order goes through;
- the HFTs are unable to find counterparties to front-run institutional traders; and
- the market price instantaneously drops drastically.
As a result, the institutional trader immediately closes his position at a considerable profit, but the HFT is experiencing a severe loss.

This is not an HFT strategy I (or anyone I know, for that matter) would trade!

Irene Aldridge will be teaching a course on the cutting edge developments in best algorithmic execution, specifically geared towards institutional investors and their brokers to help risk-manage their order flow and minimize trading costs. The course will take place in NYC on May 9 and 10, 2012. For more information and to register, please visit www.hftcourse.com .

After 2011’s volatile movements in the S&P 500 index, we received a long-term buy signal in mid October basis the June 2012 E-mini S&P 500 contract.

However, the market keeps bumping up against the 1365 to 1370 area and then sells off.

Currently on a long-term basis, the market would need to close below 1321 for a new short signal to occur. There is strong support in the 1337 area.

Our indicators are showing the market entering into an overbought region, but our long-term indicators can remain overbought or oversold for a while before the market finally begins to turn. However, we need to be aware of the area it has entered.

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Copyright ©2012 Mark Shore. Contact the author for permission for republication at info@shorecapmgmt.com www.shorecapmgmt.com Mark Shore publishes research, consults on alternative investments and conducts educational workshops. Mark Shore is also an Adjunct Professor at DePaul University’s Kellstadt Graduate School of Business in Chicago where he teaches a managed futures/ global macro course.

Past performance is not necessarily indicative of future results.  There is risk of loss when investing in futures and options.  Always review a complete CTA disclosure document before investing in any Managed Futures program. Managed futures and futures trading can be a volatile and risky investment; only use appropriate risk capital; this investment is not for everyone.  The opinions expressed are solely those of the author and are only for educational purposes. Please talk to your financial advisor before making any investment decisions.

3/10/2012

What can we say about corn basis May? Not a lot.

The market has been a real “yawner” and caught in trading range since mid December based on a longer term analysis when it bottomed at $5.8550. Since January we’ve had a long term buy signal, but the market is currently trapped between $6.67 and $5.99.

On a short term analysis we may be near a new buy signal as the market closed at $6.45. It is possible long and short term signals are converging towards a confirmation, however we need to see this market break above $6.70 to confirm a buy signal.

On a short-term basis $6.98 is our first resistance level, if $6.70 is broken. Somewhere between $7.14 and $7.31 would be the second resistance level. Support can be found in the $6.30 to $6.10 range.

Read more

Copyright ©2012 Mark Shore. Contact the author for permission for republication at info@shorecapmgmt.com www.shorecapmgmt.com Mark Shore publishes research, consults on alternative investments and conducts educational workshops. Mark Shore is also an Adjunct Professor at DePaul University’s Kellstadt Graduate School of Business in Chicago where he teaches a managed futures/ global macro course.

Past performance is not necessarily indicative of future results.  There is risk of loss when investing in futures and options.  Always review a complete CTA disclosure document before investing in any Managed Futures program.  Managed futures can be a volatile and risky investment; only use appropriate risk capital; this investment is not for everyone.  The opinions expressed are solely those of the author and are only for educational purposes. Please talk to your financial advisor before making any investment decisions.

Some institutional investors believe that their orders are routinely compromised by high-frequency traders (HFTs). In my conversations with representatives of mutual funds and pension funds, long-term traditional equities and futures funds tend to be particularly negative about HFTs. The likelihood of adverse HFT activity in any given market, however, can be successfully measured. I illustrate a simple version of the HFT activity analysis on Eurobund futures in my latest study, accessible here (PDF). While the study shows that in the Eurobund futures market large traders’ fears of HFT are unfounded, the likelihood of adverse HFT activity varies with market conditions. My firm, Able Alpha Trading, is now selling an advanced software solution to help low-frequency investors gauge the market quality of any market as a probability of adverse HFT activity at any given moment. (Please contact me at ialdridge@ablealpha.com to learn more). Dubbed HFTSpotlight, this real-time system does not miss a beat in checking and reporting the likelihood of adverse HFTs.

What are the major concerns of large traders vis-à-vis HFTs? One execution trader at a mutual fund cited his observations of “multiple fills” as proof. Some ten years ago, this trader’s large orders (on the scale of $10 million each) would be matched by a single counterparty, whereas nowadays a similar order can be matched by as many as 10,000 limit orders or “fills.” In fact, multiple fills are indicative of a liquid and a well-functioning market with a small average trade size. By competing with other HFTs to stay on top of the book, HFTs provide a fast piecemeal fill to large orders, lowering overall fill costs and guaranteeing execution. Still, a theoretical possibility for adverse activity among HFTs exists. An example of a theoretical strategy is the high-frequency “pump-and-dump:” think of the movie “Boiler room” transplanted into the cyberspace.

As I describe in my new study, high-frequency pump-and-dump works only in certain market conditions: if the market price response to a buy order is different to the market response to a sell order, then an HFT can pump the price in the direction of the fast market response, creating a speculative micro-rush, and then dump his position in the opposite direction. All orders are followed by a change in the market price: buy orders tend to be followed by a rise in price to reflect the potential knowledge of the trader placing the buy order – the buyer may potentially know that the price will imminently rise. Similarly, a single sell order often causes a small drop in prices. If the absolute price change following a buy order of a certain size S is significantly higher than the size of a market movement following a sell order of the same size S, then a high-frequency trader could place several small buy orders, driving up the price, and then disburse his position capturing the difference between the market adjustments to the trader’s buy orders and his sell orders. Markets with magnitude-comparable responses to buyer-initiated and seller-initiated trades ensure the absence of HFT pump-and-dump activity.

The new Able Alpha HFTSpotlight software tool incorporates this and other tests of HFT activity to deliver a simple and clear answer to low-frequency traders’ key question: when is a good time to place an order, given the likelihood of HFT activity? HFTSpotlight, the lightning-fast real-time solution delivers instant updates on the presence of HFT activity in the markets and simplifies the job of many a low-frequency investor.

Irene Aldridge is a quantitative portfolio manager at ABLE Alpha Trading, LTD., where she supervises creation and production of quantitative and high-frequency trading strategies. Aldridge is the author of High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems (Wiley, 2009). Her latest research on high-frequency trading is forthcoming in Equity Valuation and Portfolio Management (Frank Fabozzi and Harry Markowitz, eds., Wiley 2011). She can be reached at ialdridge@ablealpha.com

The Big Mac index, first jokingly described in The Economist, and then used seriously ever since, measures the relative price of McDonald’s Big Mac burgers around the world. The idea behind the Big Mac index is that the burger is a commodity comparable across various regions appealing equally to different people and, therefore, the burger price adequately reflects currency valuations. The price of burgers in each individual economy, however, is determined in turn by supply and demand, the same factors driving McDonald’s profitability in each individual economy. And, as the Quant Profile section of this report shows, the supply and demand for McDonald’s goods in the U.S. may be predicted by several macroeconomic factors.

Specifically, factor analysis indicates that higher layoffs increase the demand for burgers in the U.S. U.S. burger sales appear to dwindle along with increases in the following variables, indicating expansion in the economy:

Wholesale Trade; Inventories - M/M change
Treasury International Capital; Foreign Demand for Long-Term U.S. Securities
Retail Sales; Retail Sales - M/M change
Retail Sales; Retail Sales less autos - M/M change
Philadelphia Fed Survey; General Business Conditions Index - Level
Leading Indicators; Leading Indicators - M/M change
ISM Mfg Index; ISM Mfg Index - Level
Industrial Production; Production - M/M change
Housing Market Index; Housing Market Index
GDP; Real GDP - Q/Q change - SAAR
Factory Orders; Factory Orders - M/M change
EIA Petroleum Status Report; Crude oil inventories (weekly change)
Business Inventories; Inventories - M/M change
ADP Employment Report; ADP employment

The above macroeconomic announcements may be used to predict the Big Mac index ahead of time, improving forecasts.

Throughout the year, most equities are closely tracking the S&P 500. Every December, however, most equities “split off” from the S&P 500 dependency. This feature of the equities markets enables investors to better diversify their risk in the last month of the year, and also allows room for investing strategies that would be too risky in other months. In short, December is the gamblers’ paradise!

Specifically, the dependency under the consideration is a stock’s beta, a measure of how closely the changes in the price of each stock move in tandem with the changes in the S&P 500. For most stocks during most other months of the year, the beta is different from 0 with 99.99% statistical confidence. In December, however, the statistical significance evaporates, implying that the beta becomes statistically indistinguishable from 0 as stocks mysteriously lose their relationship with the S&P 500.

The cause of this phenomenon is unknown. It may be due to the fact that most firms’ fiscal years coincide with the calendar years, and it is their individual end-of-year performance figures that dominate returns in December. In the remainder of the year, stocks are priced relative to market-wide conditions.

Irene Aldridge is a quantitative portfolio manager at ABLE Alpha Trading, LTD., where she supervises creation and production of quantitative and high-frequency trading strategies. Aldridge is the author of High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems (Wiley, 2009). Her latest research on high-frequency trading is forthcoming in Equity Valuation and Portfolio Management (Frank Fabozzi and Harry Markowitz, eds., Wiley 2011). She can be reached at ialdridge@ablealpha.com

Commodity Customer Coalition founder James Koutoulas is requesting that MF Global bankruptcy Judge Martin Glenn investigate three potential legal issues that are said to have occurred in transferring of MF Global assets.  The key issues include the fact that JP Morgan was able to purchase MF Global bonds at a discount without any open bidding process and the assets were apparently sold without disclosure to or approval from the U.S. bankruptcy court or trustees.  The third issue centers on JP Morgan seeking special favors from the Federal Reserve to receive priority treatment over investor segregated fund accounts.

The first such non-transparent movement of assets occurred when JP Morgan is said to have purchased MF Global’s Sovereign Debt at a significant discount without an open bidding process, paying $0.89 and later selling that debt to investor George Soros for $0.95.  No one is going to complain about JP Morgan generating profit.  However, purchasing assets of a bankrupt firm without an open bidding process or disclosure to the bankruptcy court and trustees is where JP Morgan may be in trouble, according to Mr. Koutoulas.  This sale could be subject to clawback provisions, legal experts speculate.  (On December 9, 2011 The Wall Street Journal reported the fact that bonds were moved to KPMG London office, which was the bankruptcy administrator, but at the time the article did not discuss sale details or approval through the bankruptcy process.  See “Corzine’s Loss May Be Soros’s Gain” by Gregory Zuckerman and Dana Cimilluca.)

The key issue is that such transfers is the bonds were purchased at a discount without open bidding and the process was not disclosed to or authorized by the U.S. Bankruptcy Court, according to Mr. Koutoulas.  “Who gave JP Morgan permission to purchase those bonds at a discount without open bidding?”

The second questionable movement of assets is said to have occurred when JP Morgan purchased MF Global’s stake in the London Metals Exchange (LME) without proper disclosure.  The event was widely reported at a basic level on November 28, 2011.  The larger issue, however, appears to center on the fact that such a transaction was not approved by the U.S. bankruptcy court and trustee.

“Was this disclosed in court?” Mr. Koutoulas rhetorically asked.  “No.  Was their trustee approval?  No.”

The third issue occurred in congressional testimony Thursday, December 15, 2011 where it was discovered JP Morgan asked the Federal Reserve to write a letter claiming that the segregated funds should not be categorized as client money.

“How many letters like this have they asked for in the past?  I want all the statistics regarding the number and content of letters,” Koutoulas questioned.  “JP Morgan wanted a ‘get out of jail free card’ from the Fed.  Guess what?  That doesn’t fly with me.”

“Their hubris is so severe.  They think we don’t know the industry, like we are Occupy Wall Street radicals or something and don’t have a clue or message,” Mr. Koutoulas said, noting that the CCC is comprised of experienced industry participants who understand the financial services industry from the inside.

Mr. Koutoulas seeks to solve the problem with JP Morgan without dragging the issue through court.  In speaking to JP Morgan, Mr. Koutoulas said “Listen, you are buying vulture MF Global claims at $0.86 Âœ on the dollar.   Why don’t you pay a fair price of $0.97 Âœ take the customers out of the bankruptcy and we will indemnify you from any class actions resulting from this.”  A vulture claim occurs when an MF Global claimant such as a farmer or small business person is in desperate need of cash and sells their claim to someone such as JP Morgan, who purchases the claim at a lower rate than the value at maturity.  In this example if JP Morgan purchased the claim at $0.87 and all clients were eventually “made good” JP Morgan would receive the par value of $1.00.  With the MF Global bankruptcy proceedings apparently moving along much quicker than expected, JP Morgan stands to potentially make a quick 13% return on such vulture claims.

Mr. Koutoulas reports that JP Morgan would not even discuss the issues.  “I can see that you disagree with me,” said Mr. Koutoulas, whose organization represents over 7,000 MF Global clients, mostly professional investors.  “They won’t even meet with me and talk with me.”

Mr. Koutoulas is currently working Pro Bono and many of the lawyers are working at a highly discounted rates and requested that industry participants donate to help .  “I need professional litigators and bankruptcy attorneys backing me up,” said Northwestern Law School grad Koutoulas who also operates Typhon Capital Management, which is an NFA-registered Commodity Trading Advisor and Commodity Pool Operator.  ”We’ve had an outpouring of lawyers who want to help,” Mr. Koutoulas said, sitting with a young Yale Law School grad as we spoke.

In calling on MF Global presiding bankruptcy Judge Glenn to investigate these issues, Mr. Koutoulas is rallying the futures industry to boycott use of JP Morgan.  “Call your FCM and if they are using JP Morgan say ‘We won’t do business with you if you work with JP Morgan,’” he said, requesting that industry participants get on Twitter and follow the #BoycottJPM hash tag.

For additional information on the Commodity Customer Coalition visit www.CommodityCustomerCoalition.org and on Twitter use hash tag #boycottJPM

For a related radio interview: http://bit.ly/vGsnh2

Mark H. Melin is author / editor of three books, including High Performance Managed Futures (Wiley, 2010) [http://amzn.to/vyonBA] and was an adjunct instructor in managed futures at Northwestern University.  Follow him on Twitter @MarkMelin or visit www.Go2ManagedFutures.com for additional information.

Risk Disclosure: Managed futures can be a volatile investment and is not appropriate for all investors.  Past performance is not indicative of future results.

The opinions expressed in this article are those of the author, may not have considered all risk factors and may not be appropriate for all investors.