Financial Times, Letter to the Editor - A frank exchange over cocoa beans

 Today's Financial Times runs my letter to the Editor regarding cocoa derivatives, here is the letter in full.

From Mr T.C. Smith.

Sir, I refer to your fine editorial "'Chocfinger' is no Bond supervillain (July 21)".

Many commentators maintain that one lesson of the financial crisis is that all over the counter derivatives should be traded on exchanges.

I wonder how the revelation in your editorial, that the cocoa consumers who attempted to hedge their powder and butter through the imperfect mechanism of the Liffe futures in cocoa beans would have suffered much less if they had taken out OTC contracts with banks which precisely hedged their risk, fits their theory.

They can file your editorial with the reports on the as yet unexplained "Flash Crash" of May 6, in which Apple's shares traded at one cent per share and $100,000 a share within 20 minutes.

But then, why let the facts get in the way of their theory? It will all be safer and more transparent when everything is on exchange.

T.C. Smith,

Chief Executive, Tullett Prebon,

Deputy Chairman, Collins Stewart

 

Comments

[Ronald Smith-Galer]

Terry, you hypocrite. Collins Stewart will invest you in hedge funds, take trail commission and charge management fees. With sterling balances you end up paying them money for doing nothing (minus 3/4% in my case). Compound that.

[Terry Smith]

Ronald, I think you make a valid point about being charged 1% to manage funds which are being invested at a yield of 0.25%. However, I am not so sure that you make a valid point about me. Collins Stewart is a public company and I don't control it. I have not been its Chief Executive for five years, I have been a non executive over the past year, and as you may have noticed I have today announced that I am leaving partly in order to pursue my new venture Fundsmith. There I do have a controlling stake and I assure you that the charging practices will be fair and reasonable.