JLN Options: BOX Options Venue Files With SEC for Its Own Exchange License

Feb 2, 2012

Lead Stories

BOX Options Venue Files With SEC for Its Own Exchange License
By Nina Mehta, Bloomberg – Feb 1, 2012 3:11 PM CT
BOX Options Exchange LLC, owned by the operator of the Toronto Stock Exchange and seven brokers including Citadel LLC and Interactive Brokers Group Inc., filed to become a U.S. securities exchange. TMX Group Inc. (X), which owns 53.8 percent of BOX, will limit its equity stake in the self-regulatory organization, the entity registered with the U.S. Securities and Exchange Commission that will operate the market, to 40 percent and its voting share to 20 percent, BOX Chief Executive Officer Anthony McCormick said in a phone interview. The Toronto company will continue to own the same portion of the BOX parent, he said.

Deutsche Bank Told to Pay $19.7 Million Over Currency Option

By Karin Matussek, Bloomberg
Edmund Shing, an equity strategist at Barclays Plc, discusses investment strategy, growing dividend yields and domestic consumption in China. He speaks with Mark Barton on Bloomberg Television’s “The Pulse.”
Deutsche Bank AG (DBK), Germany’s biggest bank, was ordered to pay 15 million euros ($19.7 million) in a lawsuit over a currency option product it sold to a client. The Frankfurt Regional Court today ruled partly in favor of German travel company Schauinsland-Reisen GmbH, which had sought 30 million euros. The judges ruled the company was experienced in using options to hedge currency risks, so it was partly responsible for its losses, court spokesman Arne Hasse said.

FX options herald challenge to Swiss franc peg

Thu Feb 2, 2012
* Some investors take aim at euro/Swiss peg via options
* Drop below 1.20 francs per euro will be temporary
* SNB expected to intervene and defend peg
By Anirban Nag
LONDON, Feb 2 (Reuters) – Some investors are betting the Swiss National Bank’s resolve to cap the franc’s rise will be challenged soon, with expectations of a massive injection of European Central Bank funds keeping the safe-haven Swiss currency buoyant. Traders say demand is rising for short-dated downside options – bets the euro will fall against the franc – on the common currency dropping below the 1.20 franc floor.

ISE Reports Business Activity for January 2012
NEW YORK, February 1, 2012
ISE is the second largest equity options exchange in January with market share of 18.7%, excluding dividend trades.
Dividend trades made up 8.8% of industry volume in January 2012. The International Securities Exchange (ISE) today reported average daily volume of 2.7 million contracts in January 2012. This represents a decrease of 18.6% compared to January 2011. Total options volume for the month was 53.8 million contracts. ISE was the second largest U.S. equity options exchange in January with market share of 18.7%*.

CBOE Holdings Reports January 2012 Trading Volume
CBOE Holdings, Inc. Press Release
CHICAGO, Feb. 1, 2012 — /PRNewswire/ — CBOE Holdings, Inc. (NASDAQ: CBOE) today reported that January trading volume for options on the Chicago Board Options Exchange (CBOE) and C2 Options Exchange (C2), combined, totaled 90.36 million contracts. January average daily volume (ADV) was 4.52 million contracts, a 15-percent decrease from January 2011 ADV of 5.29 million contracts and a 27-percent increase from December 2011 ADV of 3.55 million contracts.

CBOE January Trading Volume Falls 16%; Market Share Slides
CBOE Holdings Inc. (CBOE) average daily trading volume of options at its namesake exchange fell 16% in January compared with a year earlier, while its market share continued to slide.
January’s average daily options volume of 4.32 million contracts fell from 5.13 million a year earlier but was up from 3.36 million in December. CBOE’s market share of total U.S. options-industry volume in January was 25.7%, down 1.4 percentage points from a year earlier and up 3.7 points from the month before.
The parent of the Chicago Board Options Exchange and many other exchange operators have generally benefited from higher trading volumes resulting from the macroeconomic troubles in the U.S. and Europe. Fears over Greece and the euro zone’s sovereign-debt crisis as well as worries about U.S. growth have prompted investors to adjust their positions and hedge for risk.

CBOE Futures Exchange Experiences Busiest January Ever, Trading Volume Up 4% Over 2011
New CBOE Emerging Markets ETF Volatility Index Security Futures Listed During Month
CHICAGO, Feb. 1, 2012 /PRNewswire/ — The CBOE Futures Exchange, LLC (CFE) today announced that trading volume during January 2012 totaled 811,283 contracts, an increase of four percent from the 778,157 contracts traded in January 2011. This was the busiest January in CFE history and it ranks as the tenth most-active trading month ever at the exchange. Average daily volume (ADV) at CFE during January 2012 was 40,564 contracts, also up four percent from the 38,908 contracts traded per day a year ago. January 2012 marked the twenty-eighth consecutive month that CFE monthly volume posted a year-over-year gain.

BATS Global Markets Gains European Market Share In January
KANSAS CITY, Mo. and LONDON, Feb. 2, 2012 /PRNewswire via COMTEX/ — BATS Global Markets (BATS), a global operator of stock and options markets, today reported increased European market share in January and strong equities matched market share in the U.S.
BATS reported 11.1% U.S. equities matched market share compared to 10.4% a year ago. In Europe, BATS Europe and Chi-X Europe, which BATS is combining to form BATS Chi-X Europe, recorded consolidated market share of 25.9% compared to 25.4% in December 2011 and 23.8% a year ago. BATS Options reported 3.0% market share compared to 1.3% a year ago.
BATS operates two stock exchanges in the U.S., the BATS BZX Exchange and BATS BYX Exchange; BATS Options, a U.S. equity options market; and BATS Europe and Chi-X Europe, which operate FSA-authorized multilateral trading facilities.

BATS January Equities Market Share Flat, But Options Rise
Traders Magazine Online News, February 2, 2012
BATS Global Markets reported its U.S. equities matched market share totaled 11.1 percent in January, virtually unchanged from 11.2 percent in December, but up from 10.4 percent a year ago. The exchange operator saw an average daily matched volume of 766.6 million shares. In December, BATS saw an average daily matched volume of 710.7 million shares.
BATS Options saw its matched market share come in at 3.0 percent in January, up from the 2.1 percent level achieved in December, and up from 1.3 percent one year ago. Average daily matched volume was 483,050 contracts. BATS Options’ highest one-day matched contract volume for the month was 738,467 contracts, reported on January 20.

X Reports Fourth Quarter and Full Year 2011 Results

FY 2011 Non-GAAP Diluted EPS Grows 27% Over Prior Year
2011 Full Year Net Exchange Revenues and Earnings Reach Record Highs
Press Release
The NASDAQ OMX Group, Inc. (“NASDAQ OMX”) (Nasdaq:NDAQ) reported strong results for the fourth quarter of 2011. Net income attributable to NASDAQ OMX for the fourth quarter of 2011 was $82 million, or $0.45 per diluted share, compared with $110 million, or $0.61 per diluted share, in the third quarter of 2011, and $137 million, or $0.69 per diluted share, in the fourth quarter of 2010. For the full year of 2011, net income attributable to NASDAQ OMX was $387 million, or $2.15 per diluted share. Included in the fourth quarter of 2011 results are $44 million of pre-tax expenses associated with debt refinancing, the impairment of an available-for-sale investment security and merger and strategic initiatives.

Nasdaq CEO on Earnings, Facebook, NYSE-Deutsche Deal Blocked
By: Lulu Chiang CNBC Senior Producer
Nasdaq OMX posted its second-best quarter ever on a non-GAAP basis Wednesday, in a declining volume environment.
Nasdaq CEO Bob Greifeld told Maria Bartiromo in a CNBC exclusive interview that today’s results “showed the strength of our business model where we diversified away from a transaction-based business model.”
Greifeld has worked hard to diversify Nasdaq OMX’s [NDAQ  24.60    -0.17  (-0.69%)   ] business.
“One of our most successful new ventures is in the U.K. The U.K power market with three of the six largest providers now contributing every day to our options. That grew 100 percent quarter on quarter. So, fairly remarkable,” said Greifeld.


Investing In Commodities: Detailing The Top Commodity Exchanges
ETF DAILY NEWS February 2nd, 2012
Jared Cummans: Commodity investing has become increasing popular in recent years as the exchange traded world has opened this once elusive asset class wide open. Still, one of the most effective ways to maintain exposure to your favorite hard asset remains through futures contracts. For the average investor, futures are typically too complex; they can be extremely dangerous, hard to understand, and require a specified account just to trade them. As such, many turn to futures-based ETFs and ETNs to gain their desired positions. While these products can be sound investments, investing in the futures yourself remains the most direct and potentially most profitable way to make a play on the commodity space [see also The Ten Commandments of Commodity Investing].

Warsaw Stock Exchange Derivatives Market In January 2012
Date 02/02/2012
* The total volume of trading in all derivatives was 878.2 thousand instruments in January
* The number of open interest was 180.1 thousand instruments at the end of January.
WIG20 futures
* The volume of trading in WIG20 futures was 767.5 thousand contracts in January;
* The number of open interest in WIG20 futures was 121 thousand contracts at the end of January.
* The volume of trading in WIG20 index options was 35.4 thousand options in January;
* The volume of trading in the last 12 months (February 2011 – January 2012) was 846.5 thousand options;
* The number of open interest in WIG20 options was 34.3 thousand options at the end of January.

UPDATE: CME Jan Daily Trading Volume Down On Year, Up From Quiet Dec
–Exchanges see gains in daily volume in January after light December
–CME daily volume down 5.4% year over year
–ICE daily volume falls 5.7% from year ago
NEW YORK (Dow Jones)–CME Group Inc. (CME) reported its daily exchange trading volume was lighter in January than a year earlier but gained over a quiet December, a view echoed Thursday by rival IntercontinentalExchange Inc. (ICE). For January, CME said its daily volume averaged 11.6 million contracts, down 5.4% from a year earlier although up 21% over December.

Commodity transaction tax to hit volumes: Traders, chambers
Dilip Kumar Jha / Business Standard / Mumbai Feb 03, 2012
The finance ministry’s proposed move to again impose a Commodities Transaction Tax (CTT) is likely to drive volumes to foreign exchnages, say traders and analysts.
The Union food ministry has already represented to the finance ministry against the proposal, saying it would harm development of the commodites futures market. It is believed the finance ministry may levy a CTT of 0.017 per cent (Rs 17 for every Rs 100,000 of transactions) in the budget proposals for 2012-13, initially for non-agricultural commodity futures.

UPDATE: Deutsche Boerse, NYSE Euronext Abandon Merger Deal
–EUR250 million breakup fee won’t be paid because regulators scuppered the deal
–More than $150 million spent by both companies pursuing the deal
–Ending merger agreement gives both Deutsche Boerse, NYSE Euronext greater freedom
–Companies remain precluded from doing large-scale deals for nine months
Deutsche Boerse AG (DB1.XE, DBOEF) and NYSE Euronext (NYX) on Thursday officially ended their year-long merger push, abandoning their agreement after the European Union on Wednesday blocked the deal.
Both exchange companies agreed to a “mutual termination” of the merger plan. Neither party is on the hook to pay the EUR250 million break-up fee carried by the deal terms, on account of the merger falling apart due to regulatory pushback. On Wednesday, the European Commission formally rejected the $17 billion combination on grounds that it would create a “quasi-monopoly” over European exchange-traded derivatives markets.
NYSE Euronext (NYX) Shares Downgraded to “Sell” by Societe Generale Analysts
NYSE Euronext (NYSE: NYX) was downgraded by research analysts at Societe Generale to a “sell” rating in a report issued on Thursday.
Separately, analysts at BMO Capital Markets downgraded shares of NYSE Euronext from an “outperform” rating to a “market perform” rating in a research note to investors on Thursday. Analysts at RBC Capital (NYSE: RY) upgraded shares of NYSE Euronext to a “buy” rating in a research note to investors on Tuesday. Also, analysts at Credit Agricole upgraded shares of NYSE Euronext to a “buy” rating in a research note to investors on Tuesday.


VXX Down, XIV Up: How Long Can Shorting Volatility Work?
Focus on Funds – Barrons.com
By Murray Coleman
Volatility, as measured by the market’s “fear gauge,” bodes well for U.S. equities this year. At least that’s what MKM Partners’ derivatives strategist Jim Strugger told clients today. “While we’re not convinced that all of 2012 will be so rosy, we do expect the trough phase of the volatility cycle to stretch over the first half, providing a constructive backdrop for stocks,” he wrote.
When volatility as measured by the Chicago Board Options Exchange’s Market Volatility Index (VIX) falls sharply, it’s usually taken as a positive sign for stocks. In early January, Strugger told cl
ients that last year’s five-month long high-volatility shock likely ended in mid-December.

Options Trading: Longer-Dated Puts May Be Cheaper, But There’s A Catch
By Wayne Ferbert Feb 02, 2012
Unless you really are committed to holding a position for one year or more, avoid going out too far with your puts.
Among the long-term positions that my firm manages, the most popular tactic we use to hedge is the collar. As a refresher, that is when you own a stock/ETF and pair it with a short call and a long put. The put represents your downside protection. The call effectively limits your upside in exchange for some income. In a lot of ways, we manage our collars as if they were two tactics: a covered call position along with a married put. Effectively, that is exactly what they are. When I say we “manage” them this way, what I mean is that we typically leg in to each position on its own. We look to buy the put protection separate from selling the calls. In fact, often, we leg in to these positions on separate days.

Options Education

Pros And Cons Of Options Vs. Futures Seeking Alpha
By Chris McKhann, optionMONSTER February 2, 2012
For retail investors looking to broaden their horizon, the first step is usually options because they can be traded in the same account as equities. Many then take the next step into futures, but the two markets present very different opportunities and challenges–some of which have come to the forefront recently with the collapse of MF Global.
Futures trading originated in many respects as a way to hedge commodity prices. While that is still a key function, retail futures traders can now speculate on the price movements of a wide array of assets, including oil, gold, currencies, equities, and volatility.

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