JLN Options: CBOE-ISE Trial Over Automated Markets Patent Is Canceled

Mar 14, 2013

Lead Stories

CBOE-ISE Trial Over Automated Markets Patent Is Canceled
Andrew Harris, Bloomberg
A patent trial pitting International Securities Exchange LLC against Chicago Board Options Exchange Inc. was canceled on its scheduled opening day in federal court in Chicago.
** Press releases on this from the CBOE and ISE can be found below under the “Exchanges” section. -JB

New Life for Exchange Traded Derivatives
Colby Jenkins, TABB Group
While the roadblocks of low volatility and low interest rates that stymied the global ETD market in 2012 will likely continue in 2013, the regulatory overhaul in the OTC space will allow for unprecedented innovations in derivatives, providing new avenues to hedge risk and source liquidity.

The ‘New Volatility’: Yesteryear’s Low Is Today’s High
Brendan Conway, Barron’s
The chorus of strategists predicting long-lasting calm in markets is growing. Yesterday we showed you the latest from Barclays Capital, whose case rests on central-bank policy.
Now we’ve got the contention that, these days, the market’s most closely watched volatility index probably should do no worse than hitting somewhere close to its long-term average.

Financial Stress And Volatility Have Declined To Pre-Crisis Levels 
Mark J. Perry, Seeking Alpha
Today, the Federal Reserve Bank of Chicago updated its weekly National Financial Conditions Index (NCFI), which fell to -0.76 for the week ending last Friday, March 8. That’s the lowest index reading since the first week of June 2007, more than six years ago.

U.S. Stocks Rise as Dow Win Streak Grows to Nine, Best Since ’96
Jonathan Cheng, NASDAQ
A surprisingly resilient report on U.S. retail sales nudged the Dow Jones Industrial Average to its ninth straight day of gains, its longest winning streak in 16 years.

The Stock Market and the Economy’s Apparent Disconnect
Peter Coy, BloombergBusinessweek
When he’s talking to his fellow economists, Roger Farmer describes the stock market and the economy as “co-integrated random walks.” For lay audiences he prefers a clarifying metaphor: two staggering drunks connected by a long rope. Sometimes the stock market and the economy go in the same direction, sometimes not.

Is an Oversold VIX a Bearish Sign?  
Adam Warner, Schaeffer’s Investment Research
I recently looked at what happens in the market when the CBOE Market Volatility Index (INDEXCBOE:VIX) gets overbought. I concluded that despite our 2008 nightmare, going long the market into an overbought VIX tended to pay off on balance.
Well, in that case, perhaps the converse will work too: going short (or, at the very least, staying out of the market) when the VIX gets oversold.


CBOE Wins in ISE Patent Suit (full text)
Press Release (CBOE)
The Chicago Board Options Exchange (CBOE) announced today that the federal court in Chicago ended the trial on the International Securities Exchange’s (ISE) patent suit. ISE had sued CBOE for alleged infringement of ISE’s patent relating to an “automated exchange.” By its action, ISE now concedes that CBOE does not infringe ISE’s patent, based on several recent decisions in CBOE’s favor.
“We are gratified that this case has reached the correct result,” said CBOE Chairman and CEO William J. Brodsky. Incoming CBOE CEO and current COO and President Ed Tilly added, “CBOE has always been and will continue to be the leading innovator in the options industry.”

ISE Statement on Patent Infringement Case (full text)
Press Release (ISE)
In the case of International Securities Exchange, LLC (ISE) v. Chicago Board Options Exchange, Inc. (CBOE), case no. 07C623, presiding Judge Joan H. Lefkow has issued a series of pre-trial rulings in CBOE’s favor, thus forcing ISE to cease pursuit of the case in the United State District Court, Northern District of Illinois, at the present time.
ISE strongly believes in the merits of its case that CBOE copied and continues to infringe ISE’s patented trading technology, and ISE plans to immediately file an appeal to the Federal Circuit to reverse these rulings. ISE will have no further comment at this time.

Sprecher Commitment to NYSE Seen Receding Amid Cost Cuts
Nina Mehta & Matthew Leising, Bloomberg
Jeffrey Sprecher, who built the second-largest U.S. futures market, will likely focus on reducing costs after acquiring NYSE Euronext even if that means separating the 220-year-old New York Stock Exchange.

RBI relaxes collateral rules for foreign investors
Economic Times
MUMBAI: RBI opened the door on Thursday to foreign institutional investors (FIIs) using investments in corporate and government bonds as collateral in the futures and options segment of stock exchanges.


Gensler mum on reports he’s staying on at CFTC
Chicago Tribune
Gary Gensler declined to comment on reports that he would serve a second term at the head of the top U.S. derivatives regulator, to see it through the final phase of its Wall Street reform effort.

Gensler at Boca: Upbeat view on regulatory progress
Automated Trader
Days after swaps market mandatory clearing began under the Dodd-Frank act, CFTC Chairman Gary Gensler offered an upbeat account of the progress made in the past year and predicted a thriving market would result.

DERIVATIVES: ISDA warns on non-cleared swap restrictions
Helen Bartholomew, IFR Asia
Legislation that could force end-users of over-the-counter derivatives to abandon non-cleared instruments may leave them exposed to basis risk or lead to transactions that do not qualify for hedge accounting, thereby creating increased volatility in their income statements, according to the latest study from the International Swaps and Derivatives Association.


This Monopoly Money Is Real 
Stephen M. Sears, Barron’s
The CBOE became a takeover target when it renewed a key index license Wednesday. Here’s how options traders can profit.

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