LOOSE CHANGE

Lehman Brothers was the winner of the first annual Merlin Cup Foreign Exchange Competition. The charity event, sponsored by the London Evening Standard which took place on June 23 at National Westminster Bank Hall, raised £15,000 for Merlin, an international medical aid group. According to one participant, 14 teams from London trading rooms competed, including Citibank, Chemical Bank, Barclays de Zoete Wedd, NatWest, Merrill Lynch, Swiss Bank Corp., Union Bank of Switzerland and CS First Boston. The trading, in two one-hour sessions, was conducted with the aid of PCs, largely by open outcry among the four-person dealing teams. The teams were trading in a simulated cable market. Lehman's team "made" $140 million in play money during the competition, followed by Chemical Bank with $52 million and CSFB with $10 million. One participant says that one bank team "lost" $40 million. The winning team received a silver cup that will be passed to next year's winner. Virgin Airways chairman Richard Branson also donated four first-class tickets to the U.S. West Coast for the winners. According to a Lehman spokesperson, the four tickets were given to the two junior members of the Lehman team, Natalie Baylin, trading assistant to spot yen trader Jeremy Baker, and Rob Lane, assistant to spot chief Jon Korn, who led the team.

In the latest of five cases filed by the Commodity Futures Trading Commission against Asian "affinity boiler rooms" in the past nine months, U.S. District Court Judge D. Lowell Jensen entered an ex parte restraining order against Frankwell Bullion, Ltd., a Hong Kong company, and its U.S. affiliates. They include Frankwell Investment Services of San Francisco, Maywell Investment Services of San Diego, Frankwell Investment Services (Texas) of Houston, and Frankwell Management Services (New York) of New York City. The order freezes the defendants' assets, prohibits the alteration or destruction of the corporations' books and records, grants authorities access to records and appoints a temporary receiver to take "custody, control and possession of all assets of the defendants for the benefit of customers," according to CFTC officials. The complaint alleges that since at least October 1, 1991, Frankwell Bullion and its affiliates violated the off-exchange futures provisions of the Commodity Exchange Act by selling illegal off-exchange gold, silver and forex commodity futures contracts to the public. "Affinity fraud" refers to a method used by fraud perpetrators to gain access to, as well as the confidence of, potential "customers" by referring to ethnic and/or religious affiliations.

Average daily volume on the Marché à Terme Internationale de France's (Matif) dollar/Deutsche mark option rose to 4,879 contracts for the week June 20 to 24 from its low of 503 contracts the previous week. Net open interest on the contract on the Friday of that week fell, however, from 5,220 on June 17 to 4,879 on June 24. In the dollar/French franc option, average daily volume improved as well - to 648 contracts from the previous week's figure of 569.6. Open interest on Friday dipped slightly, to 5,387 contracts on June 24, down on the June 17 figure of 6,630.

With all 39 programs in the index reporting, the Ferrell FX Index fell 1.5 per cent in May with a median return of -0.9 per cent. In April, the index declined 2.2 per cent with a median return of -1.6 per cent. May's top performer was Quantitative Financial Strategies of Conshohocken, Pennsylvania, recording a 3.3 per cent gain. Sanford Grossman, director of QFS, explained that the company's trading strategy "unlike many currency managers...is not a trend-following approach. It is based on a quantitative analysis of economic factors and tends to perform well in markets strongly affected by interest rates and related economic factors such as we saw in May." The second and third best performers in the index were Ezra Zask Associates of Norfolk, Connecticut, reporting a 2 per cent gain and Millennium Partners L.P. of New York City, up 1.5 per cent. Only 26 per cent of the index participants were profitable in May, according to Roberta Keller of Ferrell Capital.