JLN Options: 2012: The Year In VIX And Volatility

Jan 4, 2013

Lead Stories

2012: The Year In VIX And Volatility
Bill Luby, Seeking Alpha
Every year I assemble a chart that is my retrospective look at the year in volatility. While 2012 was the first year since 2006 that the VIX failed to make it out of the 20s, this was not due to an absence of threats to the stock market.
http://jlne.ws/VAaBQv 

Be Careful for What You Wish For  
While clichés fly, stocks’ dependence upon easy Fed policies remains after fiscal cliff is sidestepped. 
Randall W. Forsyth, Barron’s
In its annual list of words that ought to be banished from the English language compiled by the Lake Superior University of Michigan, “fiscal cliff” and “kicking the can down the road” led the tally for 2013.
http://jlne.ws/WbAdPE

Eunuchs of the Universe: Tom Wolfe on Wall Street Today
Tom Wolfe, The Daily Beast
As America teeters on a cliff, Tom Wolfe draws up a sterling indictment of our unscrupulous financial culture. Twenty-five years after Bonfire of the Vanities, the author returns to Wall Street to see what happened to the Masters of the Universe.
http://jlne.ws/VAcCMC
** Not strictly options I know but an interesting read.  Also very long so be sure you get your coffee first. –JB

Derivatives drive consolidation
Helen Bartholomew, International Financing Review
The planned US$8.2bn acquisition of global exchange group NYSE Euronext by the IntercontinentalExchange represents a landmark move in the transformation currently underway across global derivatives markets. As part of a post-crisis regulatory overhaul, contracts currently traded over the counter have already made the journey towards central clearing, and many products are poised for the next step as they begin the move towards exchange trading.
http://jlne.ws/VAclJK

Hedge Fund Presents Massive, Bearish Outlook On The State Of US Markets
Lucas Kawa, Business Insider
Morgan Creek Capital Management, an investment management firm with offices around the world, released its 2013 market outlook, entitled “Peering Over the Precipice.”
http://jlne.ws/WbqxVt
** It may be worth considering that hedge funds had a lousy year in 2012 (and see stories just below). Just saying… –JB

Investors Are Sticking With Hedge Funds Despite Another Down Year 
Nathan Vardi, Forbes
When big institutional investors were recently polled at a recent Goldman Sachs hedge fund conference about their return outlook for hedge funds, the overwhelming majority of them said they expected single digit returns in 2013.
http://jlne.ws/WbtSnx

Almost All Of Wall Street Got The 2012 Market Calls Wrong
Michael Patterson & Lu Wang, Bloomberg (via Business Insider)
From John Paulson’s call for a collapse in Europe to Morgan Stanley’s warning that U.S. stocks would decline, Wall Street got little right in its prognosis for the year just ended.
http://jlne.ws/Wbx6Hm

Exchanges

CLEARING: CME, DTCC Swap Charges on Swaps Record-Keeping
CME will operate both a clearing house and a data repository. Is that fair?
Gregory Bresiger, Traders Magazine
You may have thought that setting up electronic venues for the trading of standardized forms of credit-default and interest-rate swaps was going to be tough. Or that setting up clearing services, to remove counterparty risk, was going to be difficult.
But what about simply storing the data on those transactions as they come to pass? That could be the most difficult issue.
http://jlne.ws/Wbtpl8
** My dad liked to tell me (frequently) that life isn’t fair (usually right before I was about to get a raw deal). –JB

ICE Outgrew Futures Rivals in 2012
Jacob Bunge, Dow Jones Business News (via NASDAQ)
Business at IntercontinentalExchange Inc. ( ICE ) soared in 2012, even as larger futures markets grappled with a slump in trading.
Brisk energy-market investing helped Atlanta-based ICE retain its reputation as the fastest-growing futures exchange– topping rivals including ICE’s takeover target, NYSE Euronext ( NYX ), according to figures released Thursday.
http://jlne.ws/VA9dO1

BATS Global Markets Sets Full-Year Market Share Records In All Business Segments
Press Release
BATS Global Markets (BATS), a leading operator of securities markets in the U.S. and Europe, reported its best annual market share performance across all of its markets in 2012, including 11.9% U.S. equities market share for the year, up from 11.2% in 2011, the previous annual record, and 10.2% in 2010.
http://jlne.ws/Wbxkyr

Regulation

Banks Face New Checks on Derivatives Trading
Ben Protess, Dealbook
After spending two years and millions of dollars to temper a regulatory crackdown, the world’s biggest banks are now resigned to a wave of new oversight.
http://jlne.ws/UmMAZM

JPMorgan to BofA Get Delay on Rule Isolating Derivatives
Silla Brush, Bloomberg
JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and Bank of America Corp. won a delay of Dodd-Frank Act requirements that they wall off some derivatives trades from bank units backed by federal deposit insurance.
http://jlne.ws/S8Tre4
** Seems a perfect corollary of Parkinson’s Law (Cyril Northcote Parkinson), “Work expands so as to fill the time available for its completion.”  No matter how much time the banks are given to prepare for regulations you can count on them needing more time. –JB

New rules to help exchanges break brokers’ grip on swaps
Luke Jeffs, Reuters
The world’s top brokers face a fight to hold onto hundreds of millions of dollars of revenue this year when U.S. legislation throws open the vast swaps trading market to stock exchanges.
http://jlne.ws/WbuhGr

Technology

Futurisation of swaps drives new technology investment
Futures and Options World
New swap-based products are predicted to draw new users into the futures market, driving investment in trading technology, finds Dan Barnes.
http://jlne.ws/WbAQbW

Strategy

How to Play the Volatility of Volatility
Steve Smith, Minyanville
The past few days surrounding the fiscal thingamajig have been difficult to trade, and nowhere is this better reflected than in the moves of volatility gauges such as the CBOE Volatility Index (^VIX) swinging wildly.
http://jlne.ws/VA9sZt

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