JLN Options: CFTC Rule 1.73: Jim Downs of Connamara Systems Talks About New Options Rule

Aug 7, 2012

Lead Stories

CFTC Rule 1.73: Jim Downs of Connamara Systems Talks About New Options Rule
A little known CFTC rule (Rule 1.73), part of the Dodd-Frank Act, is gaining attention of futures brokers. Jim Downs, founder and CEO of Connamara Systems, explains the basics of Rule 1.73, which will force FCMs and swaps participants to create new market-based limits on options positions, as well as monitor liquidation costs, options stress tests and other compliance elements. Downs talks about the key components of the new rule, which goes into effect on October 1, and what impact it may have on the industry.  Interview by John Lothian News editor-in-chief Jim Kharouf.
http://jlne.ws/OKVhLx (Video)

Tokyo System Errors Underscore Decline in Japan’s Equity Market
Toshiro Hasegawa, Yoshiaki Nohara and Yumi Ikeda, Bloomberg
The Tokyo Stock Exchange Group Inc.’s second major system error in seven months took derivatives trading offline for 95 minutes and underscored the challenge Japan faces to revive its reputation as a global equity hub…
The outage, which affected stock-index and government-bond futures and options, is a further setback for the Tokyo exchange as it pursues a takeover bid for the Osaka bourse, which dominates Japan’s equity derivatives business.

Most Emerging Stocks Rise After Germany Backs ECB Plan
Jason Webb and Sridhar Natarajan, Bloomberg
Emerging-market stocks rose, sending the benchmark index (VXEEM) to the highest level in three months, as speculation central banks will boost efforts to lift global economies outweighed concern slowing growth will lower earnings…
The IShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM) tracking developing-nation shares, climbed 0.7 percent to $40.44, the most since May 10. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index, a measure of options prices on the fund and expectations of price swings, dropped 0.8 percent to 24.39.

Why Are Investors Fleeing Equities? Hint: It’s Not the Computers
Andrew Ross Sorkin, The New York Times
Let’s stop with the excuses.
You’ve no doubt been reading a lot about a “crisis of confidence” on Wall Street in recent days after software problems at a big trading firm sent the stock market, briefly, into a tizzy.
Everyone is hyperventilating at the errant trades at the Knight Capital Group — suggesting, in the words of Arthur Levitt, that these malfunctions “have scared the hell out of investors.”

No Rerun of the Summer Swoon
Randall W. Forsyth, Barron’s
What a difference a year makes. After having retraced 2011’s pattern almost eerily through 2012, the stock market has departed decisively from last year’s script — to the bulls’ favor.
It was a year ago Monday when the sky was falling in the wake of Standard & Poor’s downgrade of the United States’ credit rating from the top triple-A grade. The reduction was a single notch, to double-A-plus, but the existential angst reverberated over the airwaves and the markets. This Monday, stocks moved fractionally higher, holding on to Friday’s 2% or so spurt following July’s less-lousy-than-expected gain of 163,000 in U.S. payrolls.

Hedge Funds Gain 0.7% In July, Lag S&P YTD
Teresa Rivas, Barron’s
Hedge funds’ gains trailed the broader market last month as assets continue to fall for the fourth straight month. Yet there were standouts in the sector, including credit strategies, which logged their best month since the start of the year.
In a preliminary report detailing July performance, eVestment|HFN finds that hedge funds returned a median 0.7% in July, compared to a 1.5% gain by the S&P 500.

OptionMonster Daily Volatility Report with Jamie Tyrrell of Group1 Trading:

OptionMonster Cash Money Zone with Eric Wilkinson and Jeff Kilburg:


BATS Global Markets Records 2nd Best U.S. Equities Monthly Market Share In July; U.S. Options, European Equities Continue Strong Growth
Press Release
BATS Global Markets (BATS), a leading operator of securities markets in the U.S. and Europe, today reported U.S. equities market share of 12.3% in July, the second-best monthly market share performance in the company’s seven-year history, as well as numerous monthly records in Europe including the Nordic and Portuguese markets.
BATS Chi-X Europe remained the largest pan-European market by notional value traded in July, recording a second consecutive monthly market share record in the overall Nordic market with 26.1%, including individual records in Stockholm’s OMXS30 (29.6%), Copenhagen’s OMXC20 (21.8%), Oslo’s OBX (21.1%) and Lisbon’s PSI-20 (16.5%). Overall European market share reached 24.6%, up from 24.4% one year ago on a pro forma basis.
In the U.S., BATS Options again recorded strong month-over-month growth with market share rising to 3.6% matched market share, up from 3.5% in June.

TMX Group Equity Financing Statistics – July 2012
Press Release
TMX Group today announced its financing activity on Toronto Stock Exchange and TSX Venture Exchange for July 2012.
Toronto Stock Exchange welcomed 10 new listings in July 2012, which was on pace with the previous month when there were also 10, though down from July 2011 when there were 16. Of the new listings, 8 were exchange traded funds. Total financings raised was up 65% compared to July 2011 and was down 28% compared to June 2012. The total number of financings was 49, up from July 2011 when there were 33, and down from the previous month when there were 54.


NYSE in talks with SEC to settle data probe
Sarah N. Lynch and Aruna Viswanatha, Reuters
The New York Stock Exchange said on Monday it is in talks with U.S. securities regulators to settle allegations the exchange violated rules intended to promote fair competition.
The Securities and Exchange Commission’s investigation centers on a regulation that prohibits an exchange from sending out data on a private feed to certain clients more quickly than on public data feeds.

SEBI okays call & put options, says no to special rights (India)
Call and put options and affirmative rights – they are standard inclusions in many shareholder agreements. But market regulator SEBI is about to change its positions on both.
CNBC-TV18’s Menaka Doshi reports that call and put options are in, whereas special rights to select investors are on their way out.


Best of Volatility Views: Busting Skew Myths (Audio)
Options Insider
Busting Skew Myths! Does the Lottery Effect actually exist? Do flaws in the Black-Scholes model create skew? Were options traders prior to 1987 completely insane? Also, an exploration of the fundamental and psychological causes of Equity/Investment skew.
http://jlne.ws/Nm82dZ (Audio)

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