JLN Options: CBOE Revamping Board to Drop Traders

Jan 15, 2013

Lead Stories

CBOE Revamping Board to Drop Traders
Jacob Bunge, The Wall Street Journal
The biggest U.S. stock-options exchange is cutting ties between its board and traders on its markets following a federal probe into the exchange’s regulation of its members, according to people close to the situation.
http://jlne.ws/V6erDe

Options Market Watch: Covered Call Trading Starts 2013 with a Bang
Christopher Ebert, Market Playground
Last week’s Option Index Update concluded: “Be prepared for a sideways or choppy market next week, as last week’s gains get digested!”
Not much has changed since last week’s update. Covered call trading continued its nearly uninterrupted streak of profits; a streak that has now gone on week after week for over 13 months.
http://jlne.ws/TYhQ4d 

Equities Volume in 2012 Dropped 18.5%
Tom Steinert-Threlkeld, Traders Magazine
Volume in U.S. equities markets fell 18.5 percent last year, in consolidated statistics recorded by the Nasdaq OMX Group.
All told, 1.6 trillion shares changed hands in 2012, compared to just under 2.0 trillion in 2011.
http://jlne.ws/V29Vlp

The ICE Acquisition of NYSE Is a Failure for Europe 
Georges Ugeux, Huffington Post
In 2011, the Deutsche Boerse Group launched an offer on the New York Stock Exchange. Everybody expected that the U.S. authorities would object to this foreign acquisition of the most iconic Stock Exchange in the United States, and arguably in the world.
http://jlne.ws/TYhE4Z

JPMorgan could face penalties over unsafe derivatives trading
Angela Gonzales, Phoenix Business Journal
The U.S. Office of the Comptroller of the Currency has issued a cease and desist order against JPMorgan Chase NA for unsafe and unsound practices and violations of law or regulation involving its derivatives trading activities.
http://jlne.ws/V2a5cv

Floor traders drop from 3,000 to 300
John Aidan Byrne, New York Post
New York Stock Exchange floor traders already are an endangered species. But with the “ICE” age approaching, they worry about extinction.
http://jlne.ws/TYii2H
** When algos can respond to market news within four seconds it is hard to compete.  Call me old fashioned though because I do not want to see them go.  –JB

Exchanges

Russell Indexes and NYSE Euronext Announce Global Alliance and RussellTick Distribution Agreement
Press Release (NYSE Euronext)
Russell Indexes, a leading global index provider and NYSE Euronext, one of the world’s premier exchange operators and technology innovators, today announced a global alliance which will span three distinct NYSE Euronext business lines and multiple geographies, as well as several facets of Russell’s global index business. The agreement includes the transition of RussellTick, an index feed for real-time, intra-day values for the Russell family of indexes in the U.S. and globally, to NYSE Technologies’ Global Index Feed (GIF) protocol and extensive global distribution.
http://jlne.ws/V2cW5m
** This includes a commitment to introduce new products including index options in the US and Europe. –JB

HKEx to start OTC clearing in April
Viren Vaghela, Risk.net
The Hong Kong bourse is set to start OTC derivatives clearing in April and is planning to expand its cross-asset derivatives offering over the next two to three years.
http://jlne.ws/11xcn92

Regulation

SEC Blocks Nasdaq Plan to Offer Trading Algorithms
Jacob Bunge, The Wall Street Journal
U.S. market regulators blocked a plan by Nasdaq OMX Group Inc. to offer high-technology trading services typically handled by securities brokers, according to a regulatory filing.
http://jlne.ws/V2aR9p

Fed considers altering derivatives regulations for foreign banks 
FinCAD
The U.S. Federal Reserve is currently considering exempting large foreign banks from derivatives regulations that were created to help ensure that U.S. taxpayers do not end up having to pay for the transactions of these financial institutions.
http://jlne.ws/V2ahsi

CFTC Follows SEC in Permitting Offsets for Cleared CDS at ICE
Dow Jones Newswires (via Fox Business)
A federal regulator gave the green light Monday for investors clearing credit derivatives trades with a unit of IntercontinentalExchange Inc. (ICE) to offset certain positions in the clearinghouse, a move that is expected to lead to savings for traders.
http://jlne.ws/X13HjN

Strategy

Use Market Optimism to Buy Cheap Options 
Steven M. Sears, Barron’s
Rather than using the VIX to extrapolate broader meaning for the stock market, sophisticated investors often use the so-called market fear gauge as a compass to select stocks to trade.
http://jlne.ws/Xbej03

Sell naked put options to lift returns
Martin Pelletier, Financial Post
The rally in global equity markets is making it very challenging for regular and professional investors alike to find reasonably priced opportunities.
http://jlne.ws/TYjrXU

The Relationship Between Open Interest In VIX Futures And The S&P 500 
Israel Shenker, Seeking Alpha
This article will examine the relationship between VIX futures’ (VIX, VXX, UVXY, SVXY, XIV) open interest as reported by the CFE and the performance of the S&P 500 (SPY).
http://jlne.ws/V2bPT8

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