The News / Hottest

After reporting an unexpected increase in first-time claims for U.S. unemployment benefits in the previous week, the Labor Department released a report on Thursday showing that initial jobless claims pulled back by more than expected in the week ended May 3rd. The Labor Department said initial jobless claims fell to 319,000, a decrease of 26,000 from the previous week's revised level of 345,000.

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Guest host John O'Donnell chats with Dr. Mark Skousen. Mark was recently named one of the 20 most influential living economists. The duo discuss the new Wall Street Journal article Mark wrote on Gross Output replacing GDP as primary indicator. They also discuss Mark’s upcoming Freedom Fest in Las Vegas, and his High Income Alert Service for investors in dividend stocks.



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Japan saw a current account surplus of 116.4 billion yen in March, the Ministry of Finance said on Monday.

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4 weeks ago, Joanne was a guest on the show and talked about why she felt the market was headed for higher highs. Well, the markets have had a nice run since then! We talk to Joanne again to see if her opinion about market direction has changed, or if it’s still bullish. Merlin and Joanne also take a look at several listener questions including: WPZ, HOT, and the divergence between the Russell2000 and the Dow 30.



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Have you ever read a book on trading or investing? If you have read more than one of them, you will notice that they usually regurgitate the same old technical analysis. Most books and academics themselves follow the traditional route for technical analysis. The problem is that if that traditional method worked so well, you could be expected to read those books and make a lot of money.One of the common trading tools that is suggested in most trading books is the moving average. But have you ever read a book that says to buy below an upward sloping moving average? No they say you buy above an upward sloping average and sell below a downward sloping average. Look at the opportunities you would miss by doing that.



When you enter the trend late, you increase your risk in the position as well as reduce the potential profits. This is counter to what
we want to accomplish.



So we know there is more to being successful in trading than just reading a book. You need to discover how the professionals trade and how institutions make their decisions. By understanding and mimicking what the truly successful traders do, you have a better chance for success yourself.That is what we do at Online Trading Academy. We teach how the institutional traders think and make entry and exit choices. We have traders with experience teaching the courses. Most importantly, we are dedicated to building your skills that can make you a consistently profitable trader in any market.


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On past shows, Jasmine has shared highlights from the XLT and mastermind programs at Online Trading Academy. This time she joins Merlin for a breakdown of some current currency markets offering insightful analysis as well as key market levels. The duo address several listener questions as well, for an informative and technical show.



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President of Trade Pro Futures (www.tpfutures.com), Trey Lazzara joins Merlin for a look at the growing world of Automated Trading Systems. Both stress the importance of performing due diligence when selecting the system to invest in as they all have different targets, stop losses, and objectives. Merlin talks about why he chose the specific system that he invested in and why he passed over others with better performance. Trey also shares what he sees as the biggest problem facing traders, and offers a solution.




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Master Instructor Tillie Allison joins Merlin for a look at portfolio allocations and when to adjust. A listener sends in a question about his portfolio which he is rightfully worried about as it is very heavily weighted in one area and lacking risk protection for downside risk. The duo discuss this as well as a better balanced portfolio using a variety of different financial instruments. Tillie stresses the benefit of using Options to help increase rate of return while incurring minimal risk.



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Insider trading case may open Pandora's Box on forex markets

One of the biggest insider trading cases in Australian history puts the spotlight on the forex market. Ben Butler and Georgia Wilkins report.



Transparency of the forex market could change under rules being introduced by the Australian Securities and Investments Commission.

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It's the crime where no one is sure whether or not they are the victim.

Someone - most likely one of the globe-spanning banks that back the secretive retail forex market - must have been on the wrong end of a series of now notorious insider trades allegedly perpetrated by a pair of 20-something Australian university friends.

But, a week after 26-year-old NAB employee Lukas Kamay and his mate, 24-year-old Australian Bureau of Statistics worker Christopher Hill, faced court charged with offences that could see them jailed for 10 years, global financial institutions have yet to figure out which of them lost out in the multimillion-dollar trades.

Either that, or they're just not telling. Most of the alphabet soup of banks touted as liquidity providers by the two forex brokers used by Kamay, Pepperstone Financial and AxiTrader, declined to comment. However, it is believed a legal team at BNP Paribas is still investigating whether it was exposed to one of the trades.

The ambiguity around who lost out is perhaps to be expected in an industry that, despite its vast size and glossy marketing that targets retail investors, operates largely outside of the regulatory and media spotlight.

Every day, about $4.5 trillion churns through the global forex market - which, unlike the sharemarket, operates 24 hours a day. And Australia is a key part of this global circus, punching above its weight due to the strength of its economy and the high yield available to investors.

The dollar ranks fifth on the list of most traded currencies, and the Australian-US dollar is the fourth-most-traded currency pair in the world, according to the Reserve Bank.

It's a trade that has long been a trap for the unwary. In the early 1980s, farmers desperate for finance plunged into the forex market, snapping up low-interest loans denominated in Swiss francs.

But the loans, essentially a bet on the Aussie dollar remaining strong against the franc, went horribly wrong when the dollar plunged in 1985 and 1986, costing some borrowers their farms.

Industry figures say the foreign exchange market is secretive and unregulated by its very nature, as most transactions occur on an over-the-counter basis, through a dealer or broker, rather than a central exchange. This means that any information available to regulators and consumers is limited, particularly compared with other markets such as the sharemarket, where companies are required to release information to investors under continuous disclosure rules.

Complicating matters, what most retail clients see as forex does not actually involve buying and selling foreign currency; it is instead a bet with the broker as to the direction in which the currencies involved move.

Those brokers then hedge their exposure to trades through the big banks that provide their liquidity.

One source says the over-the-counter market, including foreign exchange, was ''self-regulated and always has been''.

Another was blunter, saying that ''they're all pirates in retail''.

Banking experts have stressed the difficulty in trying to regulate a market as big as forex.

''There are trillions of transactions in the foreign exchange market each day, so it is beyond the capacity of any individual regulator,'' George Gilligan, a senior research fellow at the University of New South Wales law school, says.

''If there is chronic loss of confidence again in capital markets, you run the risk of plunging into the vortex of another global financial crisis.''

But despite the risks, forex is extremely popular with day traders seeking a fresh thrill away from the equities markets.

And with most of the big brokers offering a mobile phone app, traders can win or lose while at the hairdresser or waiting for the bus.

According to documents filed with the court, Kamay did just that, using his iPhone to bet on movements of the Australian dollar just moments before the ABS put out key economic statistics.

Federal Police allege the 23 trades netted Kamay almost $7 million - making it one of the biggest insider trading cases in Australian history.

The insider trading busts have given the forex market more attention, even if it's not the kind of attention the industry had been seeking.

Before the dramatic arrests, Pepperstone had been gathering a few finance media headlines as a potential float on the Australian Securities Exchange, while Sky News viewers might occasionally have seen ads for a UK group called Knowledge to Action, which spruiks training courses designed to turn clients into gun forex traders.

Knowledge to Action's website features plenty of its tanned founder, Greg Secker, ''a multimillionaire by his mid 20s'', and success stories from graduates of its courses - including a Youtube video of a ''trader success day'' filmed on a yacht in Sydney Harbour.

However, a Knowledge to Action spokesman said forex was not a way to get rich quick.

''The guy who thinks he's going to be flying a helicopter in three months after paying $5000 to do a course is not our ideal candidate,'' he said.

Meanwhile, broker Halifax Investment Services promotes itself using a celebrity ''ambassador'', former Test cricket captain Mark ''Tubby'' Taylor.

According to Taylor, who also advertises Fujitsu airconditioners, Halifax is pretty much the greatest thing since sliced bread. ''They just offer me the best all-round solution for managing my investments,'' Taylor says in a promotional video on the Halifax website. It seems the US regulator in charge of foreign exchange markets, the Commodity Futures Trading Commission, disagrees.

Last month, after being taken to US Federal Court by the commission, Halifax agreed to a permanent injunction barring it from accepting American customers.

Following the global financial crisis, the US brought in strict new laws cracking down on the sale of exotic financial products to ordinary mum and dad investors.

While retail foreign exchange dealers are still allowed to operate, since September 2010 they have been required to register with the commission and comply with new rules, including holding $US20 million in net capital. The commission alleged that because Halifax allowed US residents to apply for an account, it was in breach of the rules. Halifax said it was happy with the outcome because it did not admit to any wrongdoing and had in any case recently bought a US company through which it could legally do business with Americans.

It's not the only Australian retail forex provider caught up in the commission's crackdown. Enfinium, which trades as Vantage FX, was dragged before the US courts in 2011 for allegedly offering to sign up retail customers - including those with annual incomes of less than $15,000.

In February 2012 it also agreed to a permanent injunction against signing up US customers, and paid the commission an $80,000 penalty. Halifax has also run into trouble with its local regulator, the Australian Securities and Investments Commission, which in April last year raised concerns of a laundry list of problems at the broker, including inadequate supervision of staff, inadequate breach reporting and deficiencies in complaint handling. Under an enforceable undertaking with ASIC, Halifax agreed to hire an independent consultant to overhaul its risk management procedures and assess the competence of its staff.

But regulation in the US appears tougher than in Australia, where retail forex houses are required to have net tangible assets of 10 per cent of their average revenue, half of which must be in cash.

It appears unlikely one of the forex providers Kamay used to carry out his alleged insider trades, AxiTrader, would meet the strict US standards. According to its latest financial accounts, as of June 30 last year, AxiCorp Financial Services, which trades as AxiTrader, had net capital - assets minus liabilities - of about $6.13 million.

Customers are also warned that AxiTrader may use client money to ''hedge our exposure to you … or hedge our exposure to other clients''. ''Your moneys may be co-mingled into one or more trust accounts with our other clients' moneys,'' AxiTrader says in its product disclosure statement. ''Should there be a deficit in the segregated trust accounts and in the unlikely event that we become insolvent before the topping up of the segregated trust accounts in deficit, you will be an unsecured creditor in relation to the balance of the moneys owing to you.''

This is contrary to standards set by the Australian CFD Forum, which represents the big contracts for difference providers, and says providers should hold client money in completely separate bank accounts.

AxiTrader, which also provides CFDs, opposed the standard, which was approved by the competition regulator on Thursday. In a submission to the Australian Competition and Consumer Commission, it said the move was motivated by the ''self-interest'' of the big CFD groups. Business Day chased AxiTrader all week in an attempt to find out what had happened in the Kamay case and whether the allegedly dodgy trades put other customers at risk.

Calls to the company and emails to its head of trading, Emanuel Georgouras, went unanswered until late on Thursday afternoon, when a man who refused to give his name phoned to say a statement from AxiTrader was on its way.

In it, AxiCorp chief risk officer Justin Friemann said the company's ''risk management practices were strictly applied during the relevant period and that all of the relevant trades were automatically fully hedged''.

''As a result, AxiCorp was not exposed to market movements. AxiCorp is subject to liquidity requirements under conditions of its Australian Financial Services Licence and at no stage were those conditions at risk.''

AxiTrader ''can confirm that, following internal assessments of a series of trades, AxiCorp reported suspicious activity to the Australian Federal Police, AUSTRAC and [ASIC],'' he said. ''Subsequent to making these reports, AxiCorp provided assistance and support as requested by the investigating authorities.''

The transparency of the forex market could change under new rules being introduced by ASIC. These will require institutions to report information on derivatives trading to relevant authorities and the public.

Last month the second phase of the rules was introduced, requiring financial entities with $50 billion notionally outstanding to disclose information to the regulator. The last phase will be introduced in October, requiring smaller entities to commit to the standards.

The G20 has also moved to improve the integrity of the foreign exchange market, with its spinoff, the Financial Stability Board, announcing in February its intention to review the setting of foreign exchange benchmarks. The review is chaired by Reserve Bank assistant governor Guy Debelle, and will report its findings at the G20 meeting in Brisbane in November.

David Lynch, chief executive of the Australian Financial Markets Association, welcomed the efforts to improve transparency. ''It's an appropriate forum to deal with these issues given the global nature of the market,'' he says.

And the corporate regulator is currently investigating potential manipulation of foreign exchange benchmarks in Australia, following similar action by authorities overseas.

Regulators have focused on the potential manipulation of benchmarks relating to the euro, US and Australian dollar.

ASIC announced the probe in March but has not specified the focus of its inquiries or which banks would be targeted. However, it is believed the regulator has widened the inquiry to take in other potential misconduct in the forex market. ASIC has also set up working groups to look at online retail forex, especially overseas players who hold an Australian financial services licence and target local investors.

If the big banks allegedly burnt by Kamay do manage to figure out which among them suffered a financial loss, they may be able to claw back the money.

Juliette Overland, at the University of Sydney business school, said such action would be possible under the Corporations Act. ''If this were to occur here, it would just add to the seriousness of the potential consequences for the parties in this case,'' she says. Overland says if the total profit made in the case is $7 million as alleged, it would be the largest amount ever made in an Australian insider trading case - far greater than the $2664 that Rene Rivkin was sent to jail over.

''Since the amount of money involved is considered a significant factor when sentencing is occurring, this could be expected to influence the severity of any sentence imposed, if the trader is ultimately found guilty of insider trading,'' she says.

Whatever the outcome for Kamay and Hill, it seems the forex market's days in the shadows may be coming to an end.

Singapore's gross domestic product added 4.9 percent on year in the first quarter of 2014, the Ministry of Trade and Industry said on Tuesday - unchanged from the previous three months.

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