Cboe mourns the death of first president and founder; Day-Trader Options Action Is Spotted Yet Again in Nasdaq Surge

Oct 13, 2020

Observations & Insight

Joseph Sullivan, one of the founders of the Chicago Board Options Exchange and its first president, has passed away at the age of 82. He was such an influential figure in the establishment of the CBOE, and the U.S. options industry that followed, that the Options Industry Council named an award after him, given to recognize individuals who have made outstanding contributions to the growth and integrity of the U.S. options market.

Cboe Global Markets honored Sullivan with a moment of silence today before the markets opened.

JLN was lucky enough to work with Sullivan on the CBOE’s 40th anniversary video. He was an extraordinary man, who went from being a reporter for the Wall Street Journal covering Congress to an assistant to the president of the Chicago Board of Trade.

Here is the statement from the CBOE on Sullivan’s passing.

Here is the statement from the OCC on the passing of Joe Sullivan:

“OCC’s Board of Directors, management and colleagues join Cboe Global Markets and the U.S. exchange-listed options industry in honoring the life of Joseph Sullivan III. It was Joe’s vision and astute understanding of U.S. derivatives markets that helped lead the way to the creation of the Chicago Board Options Exchange, the trading of the first listed options contract, and ultimately the formation of the Options Clearing Corporation. Joe’s leadership, along with other knowledgeable industry experts, not only resulted in a strong and vibrant marketplace that provided a powerful risk management tool for investors, it also created economic opportunity for many in Chicago and the U.S., and enhanced the City of Chicago’s position as the financial derivatives capital of the world. We send our condolences to the Sullivan family.”

The FIA has a new podcast out, the title of which is “FIA Speaks Episode 14: CFTC Commissioner Russ Behnam on Climate Change.”

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Stuart Connolly of CloudMargin on bringing efficiencies to post trade derivative processing
JohnLothianNews.com

There has been an advancement in efficiency in derivatives that has stopped before getting to the back end, and CloudMargin is working to change that. The company’s CEO Stuart Connolly wants to bring efficiencies to collateral management and take operational risk out of the process. He spoke to John Lothian about the solutions to these problems as well as the $15 million financing round CloudMargin just closed on, working with partners like DeutscheBank, Deutsche Boerse and Citi, and how the pandemic has actually accelerated people’s mindsets around transforming their technology stack.

Watch the video »

Lead Stories

Cboe mourns the death of first president and founder; Joseph Sullivan III founded the Chicago Board Options Exchange (Cboe) 47 years ago and established the listed options industry in the US.
Annabel Smith – The Trade
Exchange operator Cboe Global Markets has released a statement confirming the passing of its founder and first president, Joseph Sullivan, on the 2 October. Joseph Sullivan III launched Cboe 47 years ago and established the listed options industry in the US. Sullivan began his career for the Wall Street Journal before joining the Chicago Board of Trade. He went on the launch Cboe on 26 April 1973.
/bit.ly/2Ij8imo

Day-Trader Options Action Is Spotted Yet Again in Nasdaq Surge
Sarah Ponczek and Katherine Greifeld – Bloomberg
Nasdaq 100 rises 3.1% in biggest advance since late April; Investors see similarities to August rally before correction
Neither stalled stimulus, booming valuations nor even a congressional report implying they should be broken up is proving any impediment to megacap technology stocks, which jumped the most in almost six months with help from newbie traders.
/bloom.bg/33VnsXe

Derivatives trading surges for big US tech companies; Volume in Apple options hits second-highest level of the year, helping push market higher
Eric Platt and Richard Henderson – FT
A wave of equity derivatives trading in Apple and other large tech companies helped push US stocks higher on Monday in a move analysts said recalled the frenzied market conditions of late summer. Nearly 4m options contracts tied to the iPhone maker were purchased on Monday, the second-highest level of the year and among the busiest Apple options trading days on record, according to exchange operator Cboe. The purchases were concentrated in calls, which offer investors the chance to benefit from a rally in Apple shares.
/on.ft.com/313NzcK

The VIX Is Rising With the Stock Market Again. Why It May Be Time to Worry.
Andrew Bary – Barron’s
Some warning signs are now re-emerging in the stock market similar to what happened in late August and early September, when the S&P 500 peaked and then experienced a roughly 10% correction.
The VIX and VXN fear gauges for the S&P 500 and Nasdaq Composite indexes, respectively, moved higher on Monday along with the two indexes, and the ratio of put option volume to call option volume fell.
/bit.ly/2H4msXP

Contested U.S. election results could trigger volatility in markets – BofA survey
Reuters
Nearly three-quarters of investors surveyed by BofA expect a surge in market volatility in the fourth quarter, given the rising likelihood of U.S. election results being contested, bringing the record bear-to-bull summer rally to a halt.
/reut.rs/2GVHOqt

‘Not Even A Dolphin, Forget Being a Whale,’ SoftBank Exec Says
Erik Schatzker and Takahiko Hyuga – Bloomberg
SoftBank Group Corp.’s Rajeev Misra disputed reports the Japanese company had pumped up tech stocks through its options trading, saying no single investor has that kind of influence on the markets.
SoftBank has been more actively putting money into public securities after selling off tens of billions in assets over the past six months, he said. But he scoffed at reports the company was a “whale” stirring froth in global markets.
/bloom.bg/3jWnsfo

Exchanges and Clearing

Cboe Statement on Passing of Founding President Joseph Sullivan III
Cboe
CHICAGO – October 12, 2020 – Cboe Global Markets, Inc. (Cboe: CBOE), a market operator and global trading solutions provider, today issued the following statement:
Cboe Global Markets mourns the loss of Joseph Sullivan III, the Founder and first President of the Chicago Board Options Exchange, who passed away on October 2, 2020. Cboe extends condolences to the Sullivan family and expresses sincere gratitude for Sullivan’s vision and drive to launch Cboe 47 years ago, establishing the listed options industry in the U.S.
/bit.ly/36XAghT

OCC Marks the Passing of Cboe Founding President Joseph Sullivan III
OCC (press release)
OCC’s Board of Directors, management and colleagues join Cboe Global Markets and the U.S. exchange-listed options industry in honoring the life of Joseph Sullivan III. It was Joe’s vision and astute understanding of U.S. derivatives markets that helped lead the way to the creation of the Chicago Board Options Exchange, the trading of the first listed options contract, and ultimately the formation of the Options Clearing Corporation. Joe’s leadership, along with other knowledgeable industry experts, not only resulted in a strong and vibrant marketplace that provided a powerful risk management tool for investors, but also created economic opportunity for many in Chicago and the U.S., and enhanced the City of Chicago’s position as the financial derivatives capital of the world. We send our condolences to the Sullivan family.
/bit.ly/34SpAhY

Product Modification Summary: Amendments to the Exercise Price Rule of the Options on Three-Month Eurodollar and Three-Month SOFR Futures Contracts – Revised Effective Date
CME Group
Effective Sunday, November 22, 2020, for trade date Monday, November 23, 2020, the Chicago Mercantile Exchange, Inc. (CME or Exchange) will amend the strike listings for Options on ThreeMonth Eurodollar Futures and Options on Three-Month SOFR Futures, as defined below, on CME Globex, the CME Trading Floor and for submission for clearing on CME ClearPort.
/bit.ly/3lBMWyU

HKEX: No Trading Today In Securities And Derivatives Markets Due To Issuance Of Typhoon Signal No. 8
Mondovisione
Hong Kong Exchanges and Clearing Limited (HKEX) announced that today’s trading sessions in the securities and derivatives markets, including After-Hours Futures Trading, have been cancelled due to the issuance of Typhoon Signal No. 8.
/bit.ly/3iWF5KJ

MIAX Exchange Group – Options Markets – Corporate Action Alert: Rush Enterprises, Inc. Class A (RUSHA)
MIAX Options
Rush Enterprises, Inc. Class A (RUSHA) has announced a stock split effective for Tuesday, October 13, 2020. On that date, the current RUSHA option class will change to RUSH1. The MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange will not list RUSH1 options. Therefore, no options on RUSHA will be available for trading on Tuesday, October 13, 2020. Rush Enterprises, Inc. Class A (RUSHA) will resume trading on the the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange on Wednesday, October 14, 2020.
/bit.ly/33SFFVu

MIAX Exchange Group – Options Markets – Listing of Palantir Technologies Inc. (PLTR)
MIAX Options
The option class listed below will begin trading on the MIAX Options Exchange, the MIAX PEARL Options Exchange, and the MIAX Emerald Options Exchange on Tuesday, October 13, 2020: Palantir Technologies Inc. (PLTR) Market Makers can use the Member Firm Portal (MFP) to manage their option class assignments. All LMM and RMM Option Class Assignments must be entered prior to 6:00 PM ET on the business day immediately preceding the effective date. All changes made after 6:00 PM ET on a given day will be effective two trading days later. MIAX Options and MIAX Emerald Primary Lead Market Maker (PLMM) assignments and un-assignments will not be supported via the MFP.
/bit.ly/315dTmV

Market for Underlying Security Used for Openings on MIAX Options, MIAX PEARL and MIAX Emerald for Newly Listed Symbol PLTR Effective Tuesday, October 13, 2020
MIAX Options
Palantir Technologies Inc. (PLTR) will start trading on MIAX Options, MIAX PEARL and MIAX Emerald beginning Tuesday, October 13, 2020. Each Exchange shall use the New York Stock Exchange as the “market for the underlying security” for the purpose of Openings on the Exchange.
/bit.ly/3iWT4A4

MIAX Exchange Group – Options Markets – Delisting of Tim Participacoes SA (TSU)
MIAX Options
Tim Participacoes SA (TSU) will be de-listed from the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange effective on Tuesday, October 13, 2020. All GTC orders resting on the MIAX order books in TSU will be canceled at the close of business on Monday, October 12, 2020.
/bit.ly/2GT5ZGo

MIAX Exchange Group – Options Markets – Delisting of Aimmune Therapeutics, Inc. (AIMT)
MIAX Options
Aimmune Therapeutics, Inc. (AIMT) will be de-listed from the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange effective on Wednesday, October 14, 2020. All GTC orders resting on the MIAX order books in AIMT will be canceled at the close of business on Tuesday, October 13, 2020.
/bit.ly/34RKy0p

MIAX Exchange Group – Options Markets – Corporate Action Alert: Boise Cascade Company (BCC)
MIAX Options
Boise Cascade Company (BCC) has announced a Special Cash Dividend. Associated strike price adjustments will become effective on Wednesday, October 14, 2020. BCC options will continue to trade without interruption on the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange. All GTC orders resting on the MIAX order books in BCC will be canceled at the close of business on Tuesday, October 13, 2020. Additional details about the Boise Cascade Company (BCC) dividend are provided in the attached OCC Memo.
/bit.ly/3iUPjeK

MIAX Exchange Group – Options Markets – Corporate Action Alert: China Petroleum & Chemical Corporation (SNP)
MIAX Options
China Petroleum & Chemical Corporation (SNP) has announced a Special Cash Dividend effective for Wednesday, October 14, 2020. On that date, the current SNP option class will change to SNP1. The MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange will not list SNP1 options. Therefore, no options on SNP will be available for trading on Wednesday, October 14, 2020.
/bit.ly/36Y92I5

Change to the Market for Underlying Security Used for Openings on MIAX Options, MIAX PEARL and MIAX Emerald for Symbol IPHI Effective October 14, 2020
MIAX Options
Inphi Corporation (“IPHI”) will transfer primary listing from the New York Stock Exchange to the NASDAQ Global Select Market (“NASDAQ”) effective Wednesday, October 14, 2020. MIAX Options, MIAX PEARL and MIAX Emerald will use NASDAQ as the “market for the underlying security” for the purpose of Openings on the Exchange.
/bit.ly/3nP3zZS

SGX and NZX to explore global dairy derivatives partnership
SGX
Singapore Exchange (SGX) and New Zealand’s Exchange (NZX) have today signed a Heads of Agreement in relation to a global partnership to grow NZX’s dairy derivatives market together. The non-binding agreement signed between both exchanges will explore the listing of NZX’s suite of dairy derivatives contracts on SGX’s trading and clearing platforms. This would see NZX bring its dairy product development expertise and client relationships, while leveraging SGX’s global market connectivity, strong Asian presence and international distribution, to scale growth and liquidity in the trading of dairy derivatives. Market participants could expect augmented access via current and new trading and clearing channels.
/bit.ly/2GK3A0P

Product Modification Summary: Amendments to the Exercise Price Rule of the Options on Three-Month Eurodollar and Three-Month SOFR Futures Contracts – Revised Effective Date
CME Group
Effective Sunday, November 22, 2020, for trade date Monday, November 23, 2020, the Chicago Mercantile Exchange, Inc. (CME or Exchange) will amend the strike listings for Options on ThreeMonth Eurodollar Futures and Options on Three-Month SOFR Futures, as defined below, on CME Globex, the CME Trading Floor and for submission for clearing on CME ClearPort.
/bit.ly/3lBMWyU

Strategy

Derivatives trading surges for big US tech companies
Eric Platt and Richard Henderson – Financial Times
A wave of equity derivatives trading in Apple and other large tech companies helped push US stocks higher on Monday in a move analysts said recalled the frenzied market conditions of late summer.
Nearly 4m options contracts tied to the iPhone maker were purchased on Monday, the second-highest level of the year and among the busiest Apple options trading days on record, according to exchange operator Cboe. The purchases were concentrated in calls, which offer investors the chance to benefit from a rally in Apple shares.
/on.ft.com/313NzcK

Events

Webinar: Volatility Strategies
OIC
Oct 14, 2020 3:30 – 4:30 PM CST
Once you understand how volatility can impact option prices, you might be looking for strategies to capitalize on changes in volatility. If so, don’t miss a free webinar that will provide some choices. On October 14, join The Options Industry Council’s Ken Keating to learn about:
Long straddles and long strangles
Short straddles vs. the iron butterfly
Short strangles vs. iron condors
Choosing strikes and expirations
Profit and loss calculations, and managing positions at expiration
Sign up now so you can learn more about volatility strategies – it’s completely free. And registration means you’ll have access to the replay anytime, anywhere.
/bit.ly/3aPHgMQ

Shielding Against Drawdowns Using VIX Tradeable Products
Cboe
Air Date: Wednesday, October 14, 2020
Start Time:12:00 PM ET
Duration:60 Minutes
Description: You’re invited to join a live 60-minute webinar hosted by Cboe Global Markets as we examine – Shielding Against Large Drawdowns and Left Tail Risk with VIX Futures and Index Options. In 2020 investor interest in portfolio protection has increased, with a new pandemic, trade wars and uncertainty about the November elections. This year several stock indices experienced their first corrections in more than a decade, and on March 16 the Cboe Volatility Index (VIX) closed at 82.69, its all-time daily closing high. The webinar is designed to provide actionable information in how to use investable securities to protect investment portfolios.
/bit.ly/3iOJ385

Save the Date for the Annual Chicago Conference on Futures and Derivatives
Thompson Coburn LLP
Between the pandemic and the resulting financial devastation, the futures and derivatives markets have displayed unprecedented volatility. Add working from home to the mix and compliance has never been more challenging.
In response, we are offering a two-hour webinar on the current state of regulation and enforcement in our industry. At no cost, you can hear from regulators and enforcement attorneys about the latest developments and earn two hours of CLE.
Tuesday, October 20, 2020
1:00 PM – 3:00 PM CST
/jlne.ws/3ngHKT5

FIA Legal Opinions Primer
FIA.org
13 October 2020 • 2:00 PM – 3:00 PM BST • Webinar
If you are an experienced user of FIA legal opinions, new to the world of FIA netting and other legal opinions for regulatory capital purposes or just curious as to why FIA maintains a library of legal opinions, please tune in to this FIA webinar where experts from Clifford Chance LLP and FIA will explain the types of legal opinions that FIA maintains, their structure and purpose in the context of regulatory capital requirements. Speakers will also discuss practical aspects of how firms can go about accessing FIA legal opinions, how the legal opinions are reviewed and made available to member and non-member firms. This webinar will focus on the FIA legal opinions procured out of Europe and will not cover the US FCM netting opinions.
/jlne.ws/2SixOds

FIA Disaster Recovery Test
FIA.org
The 17th Annual Industry-Wide Disaster Recovery Test
24 October 2020 • 9:00 AM – 5:00 PM EST
On October 24, 2020, the futures industry will conduct its 17th annual FIA Disaster Recovery Test.
The annual exercise, an initiative of the FIA Market Technology division, is a coordinated industry effort to test business continuance, process recovery, connectivity and functionality between exchanges, clearinghouses and their member firms. Participants are provided with an opportunity to test the resiliency of their trading systems by conducting order entry from alternate recovery sites and verifying connectivity with exchanges and clearinghouses.
The test remains a valuable apparatus for the industry to assess its response to potential disaster scenarios and is an extraordinary example of a collaborative effort across the futures industry.
/bit.ly/33Px4CT

Miscellaneous

(Podcast) Option Block 942: The Options Vice Squad
Option Block – Options Insider Podcast
/bit.ly/3dofdGl

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