JLN Options: CBOE Futures Exchange And DRW Trading Group Complete Agreement To Create Stock Index Variance Futures

Apr 25, 2012

Lead Stories

CBOE Futures Exchange And DRW Trading Group Complete Agreement To Create Stock Index Variance Futures
Product Features Will Mirror OTC Conventions
Press Release
The CBOE Futures Exchange, LLC (CFE) and DRW Trading Group have completed an agreement that will allow CFE to use DRW’s patent-pending methodology to create variance futures that, for the first time, match the quoting conventions and economic performance of over-the-counter (OTC) stock index variance swaps. CFE plans to introduce a new futures contract based on the variance of the S&P 500® (SPX) later this year, subject to regulatory approval. Variance swaps measure the difference between the expected and actual variance of an underlying instrument over a fixed time period. Currently, variance swaps on the S&P 500 index are estimated to trade $10 million vega notional per day in the OTC market. Vega is the dollar exposure to changes in volatility.

CBOE, DRW teaming up to launch swap-like futures
By Katy Burne, MarketWatch
(This article was originally published Tuesday.)
–CBOE Futures Exchange, DRW Trading in joint venture
–Creating “variance-swap futures” initially on S&P 500
–Instruments to launch later this year
NEW YORK (MarketWatch) — A unit of the company that owns the Chicago Board Options Exchange and Chicago’s DRW Trading Group are working together to create exchange-traded futures contracts that mimic the role of certain equity derivatives traded privately, or “over the counter.”
CHICAGO, April 25, 2012 – CBOE Holdings, Inc. (NASDAQ: CBOE) announced today that its Board of Directors has declared a quarterly cash dividend of $0.12 per share of common stock payable on June 22, 2012, to stockholders of record at the close of business on June 1, 2012. CBOE Holdings, Inc. is the holding company for Chicago Board Options Exchange (CBOE) and other subsidiaries. CBOE, the largest U.S. options exchange and creator of listed options, continues to set the bar for options trading through product innovation, trading technology and investor education. CBOE offers equity, index and ETF options, including proprietary products, such as S&P 500 options (SPX), the most active U.S. index option, and options on the CBOE Volatility Index (the VIX Index).

Can Apple Keep Boosting the Whole Market?
By STEVEN M. SEARS, Barrons.com
Despite Wednesday’s rebound, use options to protect against renewed declines.
Saved by Apple.
If Apple (ticker: AAPL) did not report blowout earnings numbers late Tuesday, the Chicago Board Options Exchange’s Volatility Index (VIX) would likely be sharply higher. Instead, the widely watched volatility index is down about 4%, at about 17 Wednesday morning, decisively back below the psychologically important 20 level that some think is the Maginot Line between bull and bear markets.


Nasdaq OMX Profit Drops 18%
Tom Steinert-Threlkeld, Securities Technology Monitor
The operator of the Nasdaq Stock Market and other venues worldwide said its net income in the first quarter of 2012 was $85 million, down from $104 million a year earlier. At the same time, Nasdaq OMX Group said it would cut costs by $25 million this year and start paying a dividend. Revenue in the quarter was flat. First quarter net exchange revenues, it said, were $411 million, down from $413 million a year earlier. But, it said, first quarter 2012 net exchange revenues increased by $3 million, or up 1% compared to the prior year quarter, when the effect of currencies was eliminated.

2nd UPDATE: Nasdaq OMX 1Q Net Down 18% On Lighter Volume
–Slowdown in stock, derivatives trading hurt profits
–Nasdaq OMX outlines plan to cut expenses, ramp up shareholder returns
–Company initiates quarterly dividend of 13 cents per share
Nasdaq OMX Group Inc. (NDAQ) on Wednesday outlined plans to streamline its operations and cut staff as a years-long slowdown in trading pushed first-quarter profits 18% lower. Chief Executive Bob Greifeld told analysts that the tech-centric exchange operator is targeting $50 million in annualized savings by the end of 2012 as Nasdaq OMX grapples with the quietest markets exchanges have seen in years.

Dubai Gold and Commodities Exchange appoints Gary Anderson as its new CEO
The Economic Times
The Dubai Gold and Commodities Exchange (DGCX) today announced the appointment of Gary Anderson as its new Chief Executive Officer (CEO). Anderson has over 30 years of experience in the financial services industry, which includes serving as the Chief Operating Officer (COO) of Deutsche Bank’s Global Exchange Services (GES) business.

Sensex ends 56 points down ahead of F&O expiry
NY Daily News
Mumbai, April 25 — A benchmark index for Indian equities markets closed 56 points lower Wednesday in choppy trade ahead of April futures and options expiry Thursday and after rating agency Standard & Poor’s cut India’s growth outlook from stable to negative. The 30-scrip sensitive index (Sensex) of the Bombay Stock Exchange (BSE), which opened in the positive at 17,225.54 points, closed at 17,151.29 points, down 0.33 percent or 56 points from its previous close at 17,207.29 points. The 50-scrip S&P CNX Nifty of the National Stock Exchange also ended the day 0.40 percent down at 5,202 points.

The man behind the Big Board
Barron’s CEO profile
It fell to Duncan Niederauer, as leader of NYSE Euronext since late 2007, to gently persuade employees, investors, and the world at large that the parent of the New York Stock Exchange wasn’t especially dependent on its famous floor in New York, or even predominantly a stock exchange any more.
After 22 years at Goldman Sachs, Niederauer first reported for work at NYSE Euronext, at the corner of Wall Street and Broad, as its president, on April 9, 2007. That was just a week after the NYSE had closed its merger with Euronext, a leading group of stock and derivatives exchanges in Continental Europe.

NASDAQ Joins NYSE & CME In Paying Dividends, Finally
The NASDAQ OMX Group, Inc. (NASDAQ: NDAQ) is finally going to start paying out a cash dividend to its shareholders.  The company announced its plans to initiate a quarterly cash dividend at a rate of $0.13 per share of common stock to be paid on June 29, 2012 to all holders of record on June 15, 2012.


Half of Hedge Funds Skittish on 2012: Survey
By Phil Albinus, Advanced Trading
Roughly 48 percent of hedge fund managers surveyed indicated that 2012 will be a difficult year for the sector, with nearly 40 percent
expressing concern that the U.S. could enter a ‘double-dip’ recession.
This was the finding of a survey of 400 hedge fund managers representing 771 hedge fund vehicles that was conducted by Rothstein Kass, a solution provider to the alternative investment community. The firm published its sixth annual report on hedge fund industry trends, entitled. “Hedge Funds 2.0: Evolution in Action.”

Options on Futures

Oil Options Volatility Falls as Futures Stay in Range
Bloomberg By Barbara Powell
Oil options volatility fell to the lowest in more than a year as the underlying futures advanced 44 cents, staying within the trading range they’ve been in since April 4. Implied volatility for at-the-money options expiring in June, a measure of expected price swings in futures and a gauge of options prices, was 23.57 percent at 3:08 p.m. on the New York Mercantile Exchange, compared with 24.23 percent yesterday. It was the fourth straight decline and lowest level since at least March 4, 2011.
‘Mad Cow’ Trade: Will It Continue?
By Brendan Conway, Barrons.com
Mad-cow disease’s first appearance in the U.S. since 2006 stirred up cattle markets on Tuesday even though U.S. officials say the finding doesn’t pose an immediate threat to the country’s beef supplies.
We plunged on Tuesday.
The U.S. Agriculture Department said yesterday that a California dairy cow tested positive for the disease, piling on the woe after the industry’s row over finely textured beef — or “pink slime,” as it’s called in recent media coverage. Overnight, two Korean retailers pulled American beef from their grocery shelves, the Wall Street Journal reports. Chicago Mercantile Exchange cattle futures with April delivery fell three cents, or 2.5%, which is the most the exchange allows in one day, to $1.168 a pound. The Market Vectors Agribusiness ETF (MOO) showed some pain as it fell 1.3% yesterday, and options activity on the ETF surged. This morning the ETF is inactive, so investors have a little hope for a reprieve.

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