Lead Stories

Trading volume at 5-year low. Don’t panic
Hibah Yousuf, CNN
August is always a quiet month on Wall Street as traders escape to catch some rays during the final days of the summer, but this year’s lull is more pronounced than usual.
Trading volume hasn’t been this low since September 2007, with a daily average of fewer than 3.3 billion shares exchanging hands so far this month. And trading volume is down more than 30%, compared with the average August over the past five years.
**  I have an image of the cover of The Hitchhiker’s Guide to the Galaxy in my head reading that title (yes I’m a nerd…great book though). –JB

NYSE Amex Options to Eliminate Position Limits for Options on SPY
Press Release
NYSE Amex Options, one of NYSE Euronext’s (NYX) two leading U.S. options exchanges, today announced that it has become the first exchange to file for and receive approval from the U.S. Securities and Exchange Commission (SEC) to eliminate position limits for options on the SPDR® S&P 500 Exchanged-Traded Fund (“SPY”) on a fourteen-month pilot basis. Designed to meet growing demand by options customers to trade the most active class of options, this pilot program is launching immediately. NYSE Amex Options is the only options exchange that does not charge customers a fee to trade SPY options.

NYSE Steps Up ETF Competition To S&P 500 Options
Brendan Conway, Barron’s
NYSE Euronext’s (NYX) Amex Options exchange has convinced regulators to end position limits in options on the SPDR S&P 500 exchange-traded fund (SPY) on a trial basis. This should be of interest to mutual funds and institutional investors with very large hedging needs, since it frees them (to take one example) to buy as many protective put options on the S&P 500 ETF as they desire.

Nasdaq proposing new class of Treasury options
Kaitlyn Kiernan, MarketWatch
Nasdaq OMX Group Inc. NDAQ -0.95% plans to introduce a new class of option contracts on U.S. Treasury bonds by the end of the year, pending regulatory approval, the exchange operator was set to announce Thursday.
The new options, expected to launch in the fourth quarter if the Securities and Exchange Commission signs off, would allow investors to wager on the movement in 10-year and 30-year Treasurys. The contracts would make Nasdaq the only U.S. exchange operator offering options tied to U.S. government bonds.

Blame the Greeks
Tom Keene, BloombergBusinessweek
August S&P 500 option positioning put significant pressure on realized volatility. Overwriting, collaring at 1400 level, put pressure on implied and realized volatility; ~$5b of long gamma imbalance (per 1 percent move in S&P 500) existed over past ~10 days. One of largest estimated long gamma positions of dealers on JPM’s records helped pin market around SPX 1400.
—Marko Kolanovic, strategist, JPMorgan, in Joanna Ossinger, Long Gamma Position Expiry May Boost Volatility, Bloomberg First Word, 17 August 2012.
** This quote from a different article is the lede for the rest of this article which uses it as an example. –JB

Citigroup Urges SEC to Block Nasdaq Facebook Compensation
Nina Mehta, Bloomberg
Citigroup Inc. (C), whose market-making unit suffered millions of dollars of losses trading Facebook Inc. (FB) in its public debut, urged U.S. regulators to reject Nasdaq OMX Group Inc. (NDAQ)’s proposal to make up for its errors.
The third-biggest U.S. bank said New York-based Nasdaq OMX’s claims that its liability should be limited by immunity afforded to exchanges is unsupported by legal precedent. Decisions made by the second-largest U.S. equity trading venue in the May 18 initial public offering were aimed at protecting its profits rather than member firms, the company said.

FIA Announces Hiring of Dawn Stump as Head of Government Affairs
Press Release
The Futures Industry Association is pleased to announce that Dawn Stump will join the association as senior vice president and head of government affairs, starting Sept. 10. In this newly created position, Stump will lead and coordinate FIA’s relations with Congress and participate in the development and implementation of FIA’s legislative and regulatory strategy.

OptionMonster Daily Volatility Report with Jamie Tyrrell of Group1 Trading:

OptionMonster Cash Money Zone with Eric Wilkinson:


Index Options: BSE a top 3 global exchange (India)
The Indian Express
India’s premier stock exchange BSE Ltd today said it has been ranked third in the world in terms of number of index options contracts traded.
On YTD (year-till-date) basis, BSE finds place in the top five exchanges globally, according to July 2012 data released by the World Federation of Exchanges (WFE).


New derivative rules could force money market funds to up risk
Sarah Miloudi, Wealth Manager
Tougher derivatives rules could force money market and bond funds to take riskier bets, as tighter collateral controls put a squeeze on government debt yields.
Moody’s, the ratings agency, has warned that normally lower risk vehicles might change their stance as newly announced over-the-counter derivative regulations make collateral requirements stricter.

Knight’s $440 Million Loss Spurs Questions on Trade Cancel Rules
Nina Mehta, Bloomberg
Knight Capital Group Inc. (KCG)’s $440 million loss from a computer malfunction this month highlights the dangers of limiting human input in decisions about canceling trades, according to two industry executives.
Regulators should have discretion to reverse transactions when the outcome puts a firm’s survival at risk, said Neal Wolkoff, former chairman and chief executive officer of the American Stock Exchange and ex-head of ELX Futures LP. They should allow “do-overs” in extreme cases, said R. Cromwell Coulson, CEO of OTC Markets Group Inc. (OTCM) in New York.


The Striking Price Daily: Swap Pricey Stocks for Cheap Calls
Steven M. Sears, Dow Jones Newswires
The price of call options has fallen to record lows, which has created extraordinary opportunities for nimble bulls to take advantage of potential gains with limited risk.
The options market’s mirror image of a stock — call options that expire in one month and have strike prices equal to the stock price — is at the lowest level since 2002 for the average Standard & Poor’s 500 index stock.

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