Andrew Abraham

andy-0101 My name in Andrew Abraham. I have been investing in commodities and managed futures since 1994. I adhere to the philosophy of trend following. Trend following stresses a disciplined approach to commodity/ futures trading. Successful trend following and commodity futures investing requires patience, discipline and actively managing the risk. What sets me apart from other traders is that I am not only concerned about the return on investment but how much risk I will have to tolerate to achieve my goals.

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If you are interested in contacting for speaking engagements. Please email me at or call 954 903 0638.

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Futures and commodity trading involve substantial risk. The evaluations of futures and commodities may fluctuate and as a result, clients may lose more than their original investment. In no event should the content of this website be construed as an express or an implied promise, guarantee or implication by, that you will profit, or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Information provided on this website is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible, where projections of future conditions are attempted.



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The MF Global Rule That The CFTC Is Voting to Amend

It is a joke. The CFTC knew about this potential problem and decided not to act. Now that MF Global has imploded and we do not know who is next ( Morgan, UBS, Newedge) they decided to amend the rule! Why didn’t the regulators regulate. Why did they put the farming communities in turmoil? Why have they allowed the integrity of the US Financial system to be stained?

Why are the officials of the CFTC still in office?

Business insider ran a great piece on this.

What You Need To Know About the “MF Rule” That The CFTC Is Voting to Amend Tomorrow

Image: Lisa Du, Business Insider
In a change of pace, MF Global is now making big headlines in Washington.
Last week, the Senate Agriculture committee grilled Commodity Futures Trading Commission Chair Gary Gensler and SEC Chair Mary Shapiro on how the brokerage’s bankruptcy could’ve been avoided. Then on Friday, former MF Global head Jon Corzine made headlines when the House Committee on Agriculture voted to issue a subpoena after he had failed to meet a deadline to respond to their request for him to appear at a hearing on Dec. 8th. Now, Corzine may be facing two more subpoenas from the Senate Agriculture Committee and the oversight and investigations subcommittee in the House Committee on Financial Services, who will vote on the subpoena Tuesday and Wednesday, respectively.
But what’s more imminent than two more possible subpoenas for Corzine is the CFTC’s vote tomorrow on a rule that would prohibit the breadth of investments that a futures merchant like MF Global can make with its clients’ money. Many have dubbed the proposed regulation the “MF Rule.”
More specifically, the vote will actually be for an amendment to CFTC Rule 1.25—which lays out how a futures brokerage can invest in its customer funds. Some have pointed to a line in the rule that allows futures brokers to invest their client funds in sovereign debt as a possible loophole that might let the firm’s executives get off scot-free. (Refresher: There’s still an on-going investigation into where ~$1 billion in missing segregated client funds from MF Global went, and regulators are saying the responsibly party could be facing criminal charges.)
The CFTC action may appear as federal regulators taking responsive action, but really—the agency is essentially voting to undo changes that they originally passed and amended themselves.
Bloomberg View columnist Bill Cohan has an excellent run-down of how Rule 1.25 has evolved and morphed from its original state—where investments were only allowed in high quality, liquid debt—to now. Since its inception in 2000, Rule 1.25 has gone through three phases, and at each iteration it has only gotten more and more lax because of lobbyists.
To give the CFTC credit, they were already in the process of restricting the breadth of Rule 1.25 last year, but had indefinitely delayed working on the rule in July after they were lobbied by several futures brokers, MF Global included. (Sidenote: Gensler worked at Goldman Sachs when Corzine was CEO of the investment bank, and he’s donated to Corzine’s political campaign when he ran for governor of New Jersey. Early in the CFTC investigation of MF Global, Gensler recused himself because of his past relationship with Corzine.) Also, the fact that Congress has just slashed the CFTC’s budget by 15% as the agency faces new responsibilities as a regulator doesn’t help matters.
Although the restrictions in investment of client funds was probably necessary even before the collapse of MF Global, bear in mind that the passage of this rule—which seems very likely—doesn’t solve any of MF Global’s current problems. There are still around $1 billion dollars in client funds missing, and no one knows what ultimately happened to the money. In addition, without knowing what actually went wrong within MF Global, how can regulators actually successfully prevent the wrong doing from happening again?
CFTC Commissioner Scott O’Malia makes a good point in a statement when the vote was first announced [via Bloomberg]:
“Somewhat prematurely, this proposal is being hailed as the solution to the MF Global problem… At this time, we have not identified the cause of the segregation shortfall, and any action that we take obviously cannot be the solution until we have greater clarification on what caused the problem.”
In the wake of the 2008 financial crisis, the Dodd-Frank reforms followed. It seems like the CFTC is trying to reenact a miniature version of such reforms following MF Global’s bankruptcy as the question of “where were the regulators?” hangs heavily in the air. But just like how the Dodd-Frank reforms are far from perfect, this probably won’t be either.
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Follow Lisa Du on Twitter.

Andrew Abraham
Abraham Investment Management

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