Bats acquisition boosts confidence in CBOE
Jiefei Liu – Medill Reports Chicago
Chicago-based CBOE Holdings Inc. is riding high on its just-completed $3.4 billion acquisition of Bats Global Markets Inc. as analysts and investors focus on the global markets and cutting-edge electronic trading technology that CBOE gains in the deal.
Optimism about the newly combined company has overcome concerns about falling profit and rising expenses at CBOE in the past year that are expected to continue in 2017.
CBOE reaches for new heights with $3.4 billion deal for Bats Global Markets
Robert Reed – Chicago Tribune
There’s a new financial behemoth in town.
Wednesday, the Chicago Board Options Exchange completed its $3.4 billion acquisition of rival Kansas-based Bats Global Markets. Combined, the new CBOE emerges with an estimated $10 billion market capitalization, which is in the neighborhood of the competing and better-known New York-based NASDAQ stock exchange.
U.S. Initial Jobless Claims Drop to Lowest in Almost 44 Years
Patricia Laya – Bloomberg
The fewest Americans in almost 44 years filed applications to collect unemployment benefits last week, indicating the job market continues to power forward.
Jobless claims fell by 19,000 to 223,000 in the week ended Feb. 25, the fewest since March 1973 and below the lowest projection in a Bloomberg survey of economists, a report from the Labor Department showed Thursday. The median forecast called for 245,000 applications.
Dow 30,000 — this is what could rocket stocks to the moon
Barbara Kollmeyer – MarketWatch
The debate continues over exactly what triggered that one-giant-leap for equities yesterday. A sanguine POTUS, Fed-hike euphoria or maybe aggressive algorithms?
In any case, some calm threatens to return today, even as yet another rumble over Russia appears to be brewing, with U.S. Attorney General Jeff Sessions in an uneasy spotlight.
Chance of a March interest rate hike almost doubled: CME
Jeff Cox – CNBC
Hawkish statements from several prominent Fed officials as well as increased optimism for economic growth are pointing to a strong possibility for a March interest rate hike.
Probability that the Federal Open Market Committee will approve an increase at its March 14-15 meeting zoomed to 69 percent Wednesday morning, about double what it was the day before, according to the CME. Other gauges cited by market watchers point to a greater than 80 percent chance.
Rate-Hike Expectations Drive Call Buying on Bank Stocks
Schaeffer’s Investment Research
Bank stocks are leading the broad-market charge today, guiding the Dow to new highs, as Wall Street now expects the Fed to raise interest rates at its March meeting. But anyone who’s paid close attention to the so-called “Trump rally” knows financial shares have been rising since the election. In fact, the “Banks” sector is now at the top of our internal Sector Scorecard, meaning it has the most bullish setup, from a contrarian perspective.
Exchanges and Clearing
With CBOE deal done, here’s what Bats looks like now
James Dornbrook – Kansas City Business Journal
On Wednesday, CBOE Holdings Inc. completed its acquisition of Lenexa-based Bats Global Markets (BATS: BATS) for about $3.4 billion in cash and stock.
The deal was first announced in September, with Bats shareholders approving the sale of the company in January. The combined company is now the largest options trading platform in the United States, the second-largest U.S. stock exchange and the largest stock exchange in Europe.
Renovating OCC’s Risk Culture (Video)
By John Fennell, OCC Executive Vice President and Chief Risk Officer
When I took on the role of chief risk officer at OCC, I realized that as a company we needed to mature from a process-oriented culture to more of a risk-oriented culture. To better serve market participants in our role as the foundation for secure markets, we are working towards this transformation by incorporating a risk lens as we look to improve resiliency, enhance operational effectiveness and prioritize our strategic initiatives.
CBOE Holdings Announces Election And Proration Results Relating To Its Acquisition Of Bats Global Markets
CBOE Holdings, Inc.
CHICAGO, March 2, 2017 /PRNewswire/ — CBOE Holdings, Inc. (NASDAQ: CBOE) today announced the results of the elections made by former stockholders of Bats Global Markets, Inc. (Bats) regarding the merger consideration to be received in CBOE Holdings’ acquisition of Bats. As previously announced, the acquisition was effective on February 28, 2017.
OCC Announces Cleared Contract Volume Down One Percent In February
Securities lending up eight percent in February and 19 percent year-to-date
Index options volume up 11 percent in February and four percent year-to-date
Cleared futures volume up 57 percent in February and 45 percent year-to-date
OCC, the world’s largest equity derivatives clearing organization, announced today that total cleared contract volume in February was 333,411,251 contracts, down one percent from February 2016 volume of 338,300,969 contracts. OCC’s year-to-date average daily cleared contract volume is down five percent from 2016 with 17,225,457 contracts.
Options Exchange Marketshare – February 2017
Courtesy of OCC
Strong ETH VIX Option Volume in February
CBOE Options Hub
Despite exceptionally low realized and implied volatility in February, CBOE experienced a massive increase in our VIX options average daily volume during our Extended Trading Hours session.
VIX options ETH ADV was 7,336 contracts per day in February 2017. This compares to ADV of 1,761 contracts per day in 2016, a 416% increase.
February VIX option ETH volume was bolstered by extremely strong sessions to close the month on February 24, February 27, and February 28, demonstrating that there is ample liquidity for market participants to execute significant size during non-U.S. trading hours.
MIAX Options Reports February 2017 Trading Activity
MIAX Options Exchange today announced that over 19.4 million contracts were executed on MIAX Options in February 2017, equating to an average daily volume (ADV) of over 1 million contracts. The February volume represents a 12.1% increase from the 17.3+ million contracts executed in January 2017 and a 6.9% increase from the 18.2+ million contracts executed in February 2016. MIAX Options’ February equity options market share of 6.84% represents an 11.6% increase from the 6.13% achieved in February 2016 and a 15.2% increase from the 5.94% achieved in January 2017. For the entire U.S. equity options industry, February’s ADV for its 19 trading days was over 14.9 million contracts, or a 0.8% increase from February 2016’s ADV of over 14.8 million contracts for its 20 trading days.
Deutsche Börse Group Further Optimises Its Shareholding Portfolio
Deutsche Börse Group completed the divestiture of its remaining shareholding in BATS Global Markets, Inc. (BATS) last night. After receiving a cash and share consideration as part of the acquisition of BATS by Chicago Board Options Exchange, Inc. (CBOE), the CBOE shares were sold in the market.
Regulation & Enforcement
Mystery Traders Made Millions Illegally on Fortress Deal
Matt Robinson – Bloomberg
Unknown traders made more than $3.6 million in illegal profits by investing in shares and derivatives ahead of Softbank Group Corp.’s announcement last month that it would buy Fortress Investment Group LLC, according to U.S. regulators.
The traders are believed to be overseas investors who used accounts outside the U.S., the Securities and Exchange Commission said in a court filing. The SEC said it won an emergency court order freezing the traders’ assets.
MIAX Options CSO on security’s role in business continuity
Faced with the demands of derivatives trading, CSO John Masserini understands the value of aligning controls with business risk. We ask him how he does it.
Eight Charts Highlighting Growth in Options and VIX Futures
CBOE Options Hub
When instititional investors are considering portfolio management tools, often some of the key considerations concern contract size and liquidity. The estimated average daily value of the notional volume traded in S&P 500 (SPX) options grew from $12 billion in 2001, to more than $200 billion in 2016. The notional value of the volume for options on SPX is much larger than for any other listed option in the U.S. See the 2016 paper by Wilshire at www.cboe.com/wilshire for more analysis of the notional value of volume.
The S&P 500 Coil Springs Into March Rate Hike Expectations
Two days ago, I titled my Above the 40 update “The S&P 500 Coiled In Anticipation.” I described the building technical tension that pointed the S&P 500 (via SPDR S&P 500 (NYSE:SPY)) down a runway (really a ladder) going from the bottom to the top of its upper-Bollinger Band (BB) channel. The subsequent jump in the index could not have unfolded any closer to my description. In the wake of President Trump’s address to a joint session of Congress, the S&P 500 gapped up, closed right below its upper-BB, and printed a 1.4% gain for its troubles.
Swim Lessons Focus: Volatility, Perspective, and the Rule of 16
Scott Connor – TD Ameritrade
For option traders, volatility can sometimes make or break a trade. The ‘Rule of 16’ offers another perspective on volatility measurements. Volatility refers to the amount of variance or changes in a security’s value, and is measured by standard deviation. Since volatility is standard deviation, we need to multiply it by the square root of time. Not by time itself. This allows traders to quickly annualize volatility for perspective. Since there are 252 trading days in a year, and the square root of 252 is 16, we will multiply volatility by 16 to get our annualized volatility amount.
CBOE Holdings To Present At Raymond James Institutional Investors Conference Monday, March 6
CHICAGO, March 2, 2017 /PRNewswire/ — CBOE Holdings, Inc. (NASDAQ: CBOE) announced today that Edward T. Tilly, Chief Executive Officer, will present at the 38th annual Raymond James Institutional Investors Conference in Orlando, Florida on Monday, March 6, at 9:15 a.m. (Eastern Time).