Observations & Insight

Challenging the Status Quo: Cinnober Aims To Break Into The Back Office Clearing Space
Jim Kharouf – JLN

There was a time when many thought there wasn’t really much of a market for full clearinghouse solutions with real time clearing and risk management. But in 2007 and 2008, Cinnober successfully pushed into the space and carved out a nice niche for itself, especially as the global financial crisis illustrated the intense need for such solutions.

Now, the company is pushing into the established space of back office clearing for clearing member banks and brokers. That space is essentially a duopoly owned by FIS, (formerly Sungard, formerly GMI and now called Stream) and ION, (formerly Rolfe & Nolan). And many firms run their own in-house back office systems. Last month, Cinnober announced plans to create a separate subsidiary that will offer new post-trade technology, or client clearing.

For the rest of Jim Kharouf’s commentary, go here

Lead Stories

CFTC Reproposes Position Limits, Adopts Aggregation Regulations
Natural Gas Intelligence
With the Obama-to-Trump transition and the expected change in attitude toward regulations that will come with it less than seven weeks away, the Commodity Futures Trading Commission (CFTC) on Monday voted unanimously to repropose regulations implementing limits on speculative futures and swaps positions as called for in the Dodd-Frank Wall Street Reform and Consumer Protection Act, and approved final aggregation regulations, which are a key component of the agency’s position limits regime.

****SD: Others on position limits – Reuters and the WSJ.

Some Thoughts by OCC on Risk Management
John Fennell – OCC
John Fennell, OCC Chief Risk Officer, shares his insights into how OCC proactively manages its internal and external risks and best practice models that promote an enhanced risk culture within the organization.

VIX Falls 14% But Futures Signal Market Turbulence in 2017
Stephen Grocer – WSJ
Wall Street’s so-called fear gauge slumped 14% on Monday to its lowest level in more than two months. Meanwhile, investors are bidding up volatility further out in the future, said Pravit Chintawongvanich, a New York-based equity-derivatives strategist at Macro Risk Advisors.
In contrast to Brexit and the U.S. election, when populist movements caught markets by surprise, investors were better positioned before the Italian vote on Sunday that rejected constitutional changes and prompted the resignation of Prime Minister Matteo Renzi.

Hanweck Introduces New Corporate Branding and Website
Press Release
Hanweck Associates, LLC, the leading provider of real-time risk analytics on global derivatives markets, today announced a corporate rebranding. Going forward, the company will simply be called Hanweck. As part of the rebranding, Hanweck introduced a new corporate logo that represents a more modern appearance, marked by the distinctive arrow that signifies a company accelerating forward to provide high performance, real-time data and analytic solutions. Hanweck also launched a new website available at www.hanweck.com.

Russell Investments’ 2017 Global Market Outlook
Russell Investments
Russell Investments today released its 2017 Global Market Outlook, offering economic insights and market forecasts from its global team of multi-asset investment strategists for the year ahead.

Morgan Stanley’s commodities head swaps swagger for small and smart
Olivia Oran – Reuters
Nancy King, global head of commodities trading at Morgan Stanley, has spent the last few years remodeling what used to be one of the most profitable units on Wall Street, by downsizing and focusing on smaller, smart trades for customers instead of the big, risky bets it used to make on its own account. The shift in strategy, which has cut the size of Morgan Stanley’s commodities business by roughly two thirds, was largely forced on the bank by post-financial crisis regulations that banned banks from using their own money on potentially risky speculation, and increased capital requirements.

Exchanges and Clearing

Data Feeds? We Don’t Need No Stinking Data Feeds!
Themis Trading Blog
We have found numerous instances over the past few years where information is leaked from exchange proprietary data feeds. For example, we recently highlighted how Nasdaq data feeds were leaking information when post-only orders interacted with hidden orders. Also, a few years back we wrote a paper titled “Data Theft on Wall Street” which revealed that some exchanges were displaying an indicator in their data feed that identified hidden orders. While the speed of data feeds is often debated, there is not much talk about the enriched content that these feeds provide and how this could be hurting traditional investors.

Nasdaq looks to reduce data fees for broker-dealers
The Trade
Nasdaq has proposed a reduction in its monthly data fees for broker-dealers and to eliminate a requirement that broker-dealers purchase other products to qualify for a license.

Euronext announces volumes for November 2016
Euronext, the leading pan-European exchange in the Eurozone, today announced trading volumes for November 2016.

Dubai Exchange with record volumes on its 11th anniversary
Valentina Kirilova – LeapRate
Dubai Gold & Commodities Exchange (DGCX) celebrated its 11th anniversary on November 21, 2016, delivering a stellar year-to-date growth of 38%, trading over 18.3 million contracts.


Derivatives technology veteran Traquair retires
Joe Parsons – The Trade
Brian Traquair, a pioneer of capital markets technology for over 20 years, has retired.
Traquair, previously group executive vice president for the FIS Global capital markets business, stepped down from his role last month, one year after the company acquired technology vendor SunGard.

Wedbush Securities Appoints Bob Fitzsimmons Managing Director
Wedbush Securities is pleased to announce the appointment of Bob Fitzsimmons as a Managing Director. In this capacity, Bob will oversee the business operations within the Futures Commission Merchant (“FCM”), with a focus on developing and defining the strategic direction for the Futures and Treasury division. Bob is based in the Chicago office and reports to Executive Vice President of Wedbush Securities, Rich Jablonski.

TRADING UP: OCC Fills Senior Roles: Tower Research Snags DB Vet
The Options Clearing Corporation has named Amy Shelly Senior Vice President and Chief Financial Officer. She replaces Kim McGarry, and will start in her new role on December 5th.

Flextrade Appoints Aaron Levine Vice President, OEMS Solutions
FlexTrade Systems, a global leader in multi-asset execution and order management systems, today announced the appointment of Aaron Levine as Vice President, OEMS Solutions. Based in the company’s headquarters in New York, Levine will manage sales and business development for FlexTrade’s new OEMS solution, FlexONE.

Colt Technology Services Secures TS Narayanan as its CIO
Finance Magnates
Colt Technology Services, a provider of network and communications services for trading groups, has announced its latest senior hire, adding TS Narayanan as its newest Vice President and Chief Information Officer (CIO) with immediate effect, according to a company statement.

Regulation & Enforcement

Dodd-Frank: To Repeal or Not to Repeal Title VII?
Stephen Anikewich, NICE Actimize – TABB Forum
While the controlling majority of Congress appears to be steadfast in its resolve to dismantle Dodd-Frank, and certain provisions might indeed be vulnerable, Title VII will and should remain substantially sacrosanct, says NICE Actimize’s Stephen Anikewich. But there is one significant Dodd-Frank area that may be put under the knife: the Volcker Rule.

IRS relief issued for non-delta one products
FIA Market Technology
On 2 December 2016, the IRS released a notice postponing the implementation date for non-delta-one products to 2018 and stating that it will consider the extent to which a taxpayer or withholding agent has made a good faith effort to comply with the regulations in enforcing the regulations for any delta one transaction.

FCA to clamp down on spread betting to ‘protect’ ordinary investors
Julia Bradshaw – The Telegraph
The Financial Conduct Authority (FCA) is cracking down on spread betting with tougher rules on firms offering the service, after finding that 82pc of clients using these products have lost money.

Court Backs Prosecutors Over Family Tips in Insider Trading Cases
Dow Jones Business News
The Supreme Court on Tuesday cemented the ability of prosecutors to pursue insider trading cases based on tips passed along among friends and family. The court, in a unanimous opinion by Justice Samuel Alito, affirmed the conviction of a Chicago man for trading on inside tips from relatives.

Deutsche Bank to pay $60 mln to settle U.S. gold price-fixing case
Jonathan Stempel – Reuters
Deutsche Bank AG has agreed to pay $60 million to settle private U.S. antitrust litigation by traders and other investors who accused the German bank of conspiring to manipulate gold prices at their expense. The preliminary settlement was filed on Friday with the U.S. District Court in Manhattan, and requires a judge’s approval.


Block Trade Analysis – TOL Earnings Trade
Russell Rhoads – CBOE Options Hub
As I write this Toll Brothers (TOL) is trading up 0.73 to 31.20. The company reported earnings this morning. I scrambled to find a trade that called the direction of this earnings reaction from yesterday and didn’t have to look to hard. With just under half an hour to the close and TOL trading at 30.47 someone came in and sold several hundred TOL Dec 9th 29.50 Puts for 0.50 and purchased the TOL Dec 9th 27.00 Puts for 0.15 netting a credit of 0.35 per spread. The payoff as of the close on Friday the 9th appears below.

Block Trade Analysis – Long Dec VIX Put
Russell Rhoads – CBOE Options Hub
Buying a single option is not the most exotic trade, but it can be interesting, especially when it involves buying a VIX option. This morning, with VIX at 12.75 and the December VIX futures trading at 13.95 there was a buyer of 12,000 VIX Dec 21st 14.00 Puts for 1.10. A payout at expiration on the morning of the 21st appears below. Note the VIX futures and spot VIX levels when the trade was executed are highlighted on the diagram.

Whistling Over the Bridge
Meredith Kelley Zidek – CBOE Options Hub
At my last writing I had taken an accounting-sheet loss by simply exchanging one security for a comparable one and then selling some options against that position with the intention of bringing in some extra return on that position. Refresher:

As small stocks jump, trader bets that the bigger move is just beginning
Small stocks were enjoying a big day on Monday, as the Russell 2000 was up some 1.5 percent in afternoon trading. And one trader believes that another big surge for the small caps is around the corner.


A Letter from a Binary Options Trader
Martin Kay – Finance Magnates
We’ve heard many stories about binary options, from news reporters, financial bloggers, regulators, scam victims, technology providers and brand owners. This time I’m happy to bring you readers something new, a different angle on binary options. Here’s someone whose opinion you forgot to ask for, a regular trader, just someone who wants to trade without fear. “Trader Joe” has a live account with one of the biggest binary brands and he’s an active member of our community. This is a letter from a real trader.

Blackstone Buys Stake in Brokerage BTIG Through Blitzer’s Unit
Zeke Faux – Bloomberg
Blackstone Group LP, the world’s biggest private-equity firm, is buying a stake in institutional brokerage BTIG LLC, providing cash for further growth.

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