More Fragmentation, Fewer Market Makers Seen in Options Mart
John D’Antona Jr. – Traders Magazine Online News, May 9, 2017
There’s more going on in the options market than meets the eye.
If one measured the activity in the options market in terms of volume, then it would seem the equity derivative markets is quiet and poised for little to no volume growth this year. But this is simply not the case when one looks past volume and focuses on more structural changes, according to Jason Lichten, Director, Equity and Listed Derivatives Trading Strategies at Wolverine Execution Services. In a recent open call to members, he told the audience that changes are occurring that bear scrutiny.
Wall Street’s VIX ‘fear index’ falls to lowest level since 1993
The S&P 500 Index hit a fresh record high of 2,401.36 on Monday
Josie Cox Business Editor – The Independent
Analysts said this week that there are no obvious risky events immediately in the pipeline and macro-economic data has been relatively robust Reuters
The most widely monitored ‘fear gauge’ on Wall Street has fallen to its lowest level since 1993, helped by one of the strongest corporate earnings seasons in years, geopolitical risks around North Korea cooling off, and Emmanuel Macron’s French presidential victory removing a possible source of upset across Europe.
On Monday night, the CBOE Volatility Index, commonly referred to as the VIX, decreased 7.6 per cent to 9.77 according to Bloomberg data, its lowest level in well over 23 years.
Citi Warns Of Volatility Surge As Its Macro Risk Index Crashes Near Record Lows
Earlier today, it was Goldman’s cross-asset team which looked at the historic collapse in equity return correlations, and went on to caution that “the last time correlations were this low was in 2007, just preceding the financial crisis.” The warning came just as the VIX plunged under 9.90, the lowest intraday print in a decade, and shortly before Citi released an ominous warning of its own, in which it looked at the bank’s proprietary Macro Risk Index, and observed that “a sixth consecutive monthly decline in risk aversion has taken our Macro Risk Index to extreme lows. Readings below last Friday’s 4.1% have only been observed on 31 days since 1997.”
As VIX hits multidecade low, investors retreat from volatility products
By Ryan Vlastelica – MarketWatch
What are investors buying when the U.S. stock market is at a historic level of quiet? Evidently, anything except volatility itself.
The largest exchange-traded product designed to track market volatility has seen heavy outflows of late, a retreat that corresponds with historic declines in the CBOE Volatility Index VIX, +2.15% On Monday, the so-called “fear index” fell 7.6% to close at its lowest level in more than 23 years.
Exchanges and Clearing
CBOE Holdings Reports First-Quarter 2017 Results; Reported Results Include Bats Effective March 1
First-Quarter 2017 Highlights
GAAP Revenue Less Cost of Revenue of $193.4 Million, up 35 Percent, Reflects the Bats Acquisition; Organic Net Revenue of $154.2 Million, up 8 Percent, Driven by Increased Trading in VIX Futures and SPX Options(1),(2); GAAP Diluted EPS of $0.16; Non-GAAP Adjusted Diluted EPS of $0.78(1); Bats Integration on Track; Synergy Realization Ahead of Plan; Reduced Debt Incurred in Connection With the Bats Acquisition by $150 Million During the Quarter; Quarterly Highs Set in SPX Options Trading and Bats Options Exchanges and Hotspot Market Share
Bats Announces New Complex Order Options Functionality
John D’Antona Jr. – Traders Magazine Online News
Bats, a CBOE Holdings, Inc. company, and a leading operator of equities and options exchanges in the United States, announced that it is planning to launch new complex order functionality on its EDGX options exchange.
Subject to regulatory approval, the expanded functionality is planned to launch on October 23, 2017. Designed with the goal of creating the most efficient and adaptable complex order book in operation, it will include new order handling, risk management and trade-through protections.
For Crowdfunding Investors, A Way to Sell
Philip Georgiadis – WSJ
One of Europe’s largest equity crowdfunding platforms will be the first to offer investors a chance to trade their investments on the secondhand market, breaking new ground in an industry quickly becoming an important funding source for small businesses. Seedrs—backed by high-profile U.K. fund manager Neil Woodford —said Monday it plans to launch a limited secondary market offering this summer.
Index Industry Association Welcomes Three New Members
CBOE Holdings, China Central Depository & Clearing Corporation and Tokyo Stock Exchange to join global index industry association
Index Industry Association (IIA), a global organization of index administrators, has today announced the addition of three new members. CBOE Holdings (CBOE), China Central Depository & Clearing Co., Limited (CCDC) and the Tokyo Stock Exchange, Inc. (TSE) will join IIA in promoting awareness of the function of indices in global markets.
OCC Announces Robert Bodnar Joins Options Industry Council Roundtable
CHICAGO (May 9, 2017) – OCC, the world’s largest equity derivatives clearing organization and a leading provider of options education content through The Options Industry Council (OIC), today announced that Robert Bodnar, Executive Director at Morgan Stanley, has joined the OIC Roundtable. The OIC Roundtable is the independent governing body of the OIC, and is comprised of representatives from the options exchanges, member brokerage firms, and OCC.
Regulation & Enforcement
EU watchdog urges tougher euro clearing oversight after Brexit
By Huw Jones – Reuters
A draft European Union law on tightening supervision of euro clearing houses in Britain after Brexit would better protect the bloc’s financial system, a top EU markets regulator said.
The London Stock Exchange’s (LSE.L) LCH clears the bulk of euro-denominated swaps, an activity that will be outside EU jurisdiction from 2019 after Britain leaves the bloc.
2017 Volume Rises for VIX and SPX Options, and for VIX Futures
Matt Moran, Vice President, CBOE – VIX Views
May 8, 2017 – 8:48 pm
Today I received multiple questions from customers about press coverage of options volume trends. While many observers believe that low volatility often can inhibit options volume growth, some investors like the idea of purchasing relatively “cheap” options protection when the VIX Index is well below its long-term average.
Gold hits near 8-week low as safe-haven demand fades
BENGALURU: Gold prices hit their lowest in nearly eight weeks on Tuesday as safe-haven demand ebbed on easing political worries after France’s presidential election.
Spot gold was steady at $1,226.13 per ounce by 0810 GMT, after touching $1,223.34, its lowest since March 16.
“The fall of the volatility index further hollows out the safe-haven bid that has underpinned gold for most of 2017. Should volatility remain becalmed, gold may find itself on the losing end of a deeper correction to the downside,” said Jeffrey Halley, senior market analyst at OANDA.