JLN Options: Are Options Used to Cheat on Takeovers Using Insider information? Yeah, I think so… But Let me Prove it.

May 7, 2013

Lead Stories

Are Options Used to Cheat on Takeovers Using Insider information? Yeah, I think so… But Let me Prove it. 
Ophir Gottlieb, Livevol
In my opinion, the use of options to garner unfair (read: illegal) financial gains through the use of private/insider information is a legitimate phenomenon that is identifiable on a case-by-case basis (read three articles included below as heuristic examples), as well as in a broader analysis.
Bottom line, yeah, the cheaters are using options. Or so I think…

Hedge Fund Survey: ‘Findings Are Troubling’
Larry Doyle, Wall Street Pit
Early last year the US Attorney for the Southern District of New York, Prett Bharara, in alluding to activities within the hedge fund community asserted that insider trading was rampant and routine. Strong words.

VIX Survives another S&P Record-High Day
Wall Street Sector Selector
For the Nasdaq Composite, it was only a 12-year record intraday high which had been surpassed.  On the other hand, the S&P 500 advanced 0.19 percent to close at yet another record high of 1,617.50 after setting a new intraday record high of 1,619.77.  Nevertheless, the VIX escaped the bullish, record-setting action with only minor damage:  a retreat by only 1.48 percent.

VIX May Be Low, But High Volatility Continues To Lurk 
Daniel Scholnik, Seeking Alpha
The market has gone back to its Bullish ways, resuming the upward trajectory that has been effectively going on for most of the year, as represented by the 13% gain to date of the S&P 500 Index (SPX).


BOX Exchange Gets SEC OK to Trade Jumbo S&P 500 ETF Options
Nina Mehta, BloombergBusinessweek
BOX Options Exchange, the third- smallest of 11 U.S. options venues, will be the first to begin trading larger-size contracts on the most-active U.S. equity derivatives product, according to a company executive.

ISE Partners with YieldShares
Press Release (ISE)
The International Securities Exchange (ISE) today announced a partnership with YieldShares, a new firm created by Christian Magoon, a well-recognized entrepreneur in the ETF industry. ISE and YieldShares will jointly develop and launch the ISE High Income Index, an index that allows investors to efficiently track a portfolio of high income and high discount Closed-End Funds.
http://jlne.ws/10mnzW4 (PDF)

NYSE Euronext Announces Trading Volumes for April 2013
Press Release (NYSE)
NYSE Euronext (NYX) today announced trading volumes for its global derivatives and cash equities exchanges for April 2013.  Global derivatives average daily volume (“ADV”) of 7 million contracts, excluding Bclear in April 2013 increased 4% compared to April 2012, and decreased 3% from March 2013.   U.S. equity options volumes rebounded in April 2013 with an increase of 10% compared to April 2012 and an increase of 15% from March 2013 levels. ADV in U.S. cash equities declined 10% year-over-year, but increased 2% month-over-month. European cash equities ADV in April 2013 decreased 20% compared to April 2012, but increased 8% from March 2013 levels.

JSE currency derivatives trading volume passes major milestone  [South Africa]
The total value of currency derivatives traded on South Africa’s Johannesburg Stock Exchange (JSE) recently surpassed 500 billion rand ($50.66 billion), according to a statement released on May 6, 2013.


Day of the Deregulators
Jim Lardner, U.S. News
Wall Street will be watching the House Financial Services Committee today – and counting on the rest of us to have our attention elsewhere.
The committee will consider a package of proposals to roll back important reforms adopted after the 2008 financial crisis. Most of these bills involve derivatives – the complex financial instruments that were the proximate cause of the meltdown.

Rep. Scott Garrett to Host Market-Structure Roundtable  
Scott Patterson, The Wall Street Journal
Lawmakers are planning to expand their oversight of stock market regulations amid growing concerns that existing rules governing how stocks trade are obsolete, overly complex and have spawned a race for speed that’s harmed investor confidence.

Swap Regulators Face Congressional Push to Curb Dodd-Frank
Silla Brush & Jim Brunsden, Bloomberg
U.S. regulators face renewed pressure from congressional lawmakers to ease Dodd-Frank Act derivatives requirements amid mounting criticism from Wall Street and overseas officials that the rules overreach.

12 Banks Accused in Lawsuit of Restraining Swaps Market
Andrew Harris & Phil Milford, Bloomberg
Goldman Sachs Group Inc. (GS), Citigroup Inc. (C) and 10 other banks have restrained market competition for credit default swaps in violation of U.S. antitrust law, an Ohio union pension plan contends in a federal court complaint.

CFTC’s O’Malia: Sef rules could favour Europe
Luke Clancy, Risk magazine
The CFTC has a lot on its plate, including the finalisation of Sef rules, dealing with the extraterritorial impact of its regulations, and working out how best to manage the huge amount of data coming its way. Commissioner Scott O’Malia talks to Luke Clancy about the challenges ahead


Unlocking Alpha in the New Normal 
Louis Lovas, AllAboutAlpha.com
If there’s one thing firms must have a strong grasp on in the financial markets, it’s data. These days, data comes from every direction possible, and it comes quickly. But to take full advantage of the ocean of information rushing toward you requires getting a handle on data and then finding meaning within the data to capitalize on opportunities.

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