JLN Options: Citadel Asks Supreme Court to Hear Derivatives Case

Apr 4, 2013

Lead Stories

Citadel Asks Supreme Court to Hear Derivatives Case
Jacob Bunge, The Wall Street Journal
One of the biggest U.S. derivatives traders has joined a long-running legal battle over a lucrative slice of the market and asked the Supreme Court to decide the matter.
Citadel LLC, which trades one in five stock-options contracts dealt daily on U.S. markets, has called on the nation’s highest court to loosen the hold of the Chicago Board Options Exchange over heavily-traded contracts linked to major stock indexes.

U.S. Stocks Little Changed as Stimulus Optimism Fades
Lindsey Rupp & Nikolaj Gammeltoft, Bloomberg
U.S. stocks were little changed, paring an earlier rally, as optimism over central banks’ stimulus efforts faded…
The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against losses, increased 3.9 percent to 14.77 today after jumping 11 percent yesterday. The gauge, known as the VIX (VIX), is down 18 percent for the year.

S&P 500 Retreats From Record as Treasuries Gain on Economy Data
Stephen Kirkland and Nikolaj Gammeltoft, Bloomberg (via San Francisco Chronicle)
The Standard & Poor’s 500 Index retreated from a record and Treasuries rose, while oil and industrial metals led commodities lower, after reports on the American economy trailed estimates. Spanish and Italian bonds advanced for a third day.

VIX ETF Traders are Gluttons for Punishment
John Spence, ETF Trends
The iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX) is down 36% year to date but investors looking for a hedge against a stock-market pullback have pumped nearly $700 million into the volatility-linked exchange traded product.
But wait, it gets worse.

Raymond James launches strategic options trading desk
James Phillipps, Wealth Manager
Raymond James has launch a strategic options desk that will approach volatility as an individual asset class and provide hedging and alternative investment strategies to its clients.

High Frequency Trading Loses Its Luster  
Ivy Schmerken, Advanced Trading
With profits down due to lower volumes and declining volatility in U.S. stocks, high-frequency traders face growing pressure to find new markets and innovate when speed is not enough.


CME Group Volume Averaged 12.5 Million Contracts per Day in March 2013
Press Release (CME)
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that March 2013 volume averaged 12.5 million contracts per day, flat compared with March 2012.  Total volume for March 2013 was more than 249 million contracts, of which 88 percent was traded electronically.  First-quarter 2013 volume averaged 12.5 million contracts per day, up 1 percent from first-quarter 2012.  Highlights included record quarterly futures and options volume in the British Pound, Japanese Yen, Ultra Treasury Bond, longer-dated Eurodollar and live cattle contracts.  In addition, during the month of February, CME had record FX options volume, record Treasury futures volume and strong Treasury options volume.

IntercontinentalExchange Sets New Daily Record for ICE NYH RBOB Futures (full text)
Press Release (ICE)
IntercontinentalExchange (NYSE: ICE), a leading operator of global markets and clearing houses, reported record daily volume in the ICE NYH RBOB Gasoline futures contract. ICE NYH RBOB Gasoline futures traded 41,175 on April 3, 2013. The previous daily record was 37,744 on March 11, 2013.
ICE NYH RBOB Gasoline futures trade 22 hours a day, from 8 p.m. through 6 p.m. Eastern time the next day, and from 1 a.m. through 11 p.m. London time. The contract is sized at 42,000 gallons and priced in U.S. dollars and cents per gallon.

CBOE Futures Exchange Plans Extended Trading Hours
Press Release
CBOE Futures Exchange, LLC (CFE®) today announced plans to expand CBOE Volatility Index® (VIX® index) futures trading hours – currently 7:00 a.m. CT to 3:15 p.m. CT — in two phases, beginning in May.


CFTC’s Chilton calls for derivatives ‘bill of rights’, including HFT registration and conduct rules
Automated Trader
Commissioner Bart Chilton of the Commodity Futures Trading Commission (CFTC) has suggested a “bill of rights” for end users in the derivatives markets, including a call for high frequency trading firm registration and conduct rules.

Chilton Seeks End-User Enforcement Delay for CFTC’s Swaps Rules
Silla Brush, Bloomberg
The U.S. Commodity Futures Trading Commission should refrain from sanctioning so-called end-users of swaps for six months while the agency seeks to clarify its Dodd-Frank Act rules, Commissioner Bart Chilton said today.

S.E.C. Sets Rules for Disclosures Using Social Media
Michael J. De La merced, Dealbook
Chief executives can now feel free to post, blog or tweet — as long as they inform investors about their social media strategy first.
The Securities and Exchange Commission on Tuesday outlined new disclosure rules that clarify how companies can use Facebook, Twitter and other social networks to disseminate information provided they meet certain requirements.


Equity CEFs: Is It Time To Overweight The Option Income Funds?  
Douglas Albo, Seeking Alpha
Is a change of season finally at hand? I’ve been recommending to investors since early 2012 to overweight the leveraged equity based high yielding closed-end funds (CEFs) for maximum appreciation potential in the face of a strong market environment.

Market Volatility Risk
Michael C. Thomsett, InvestorGuide.com
Understanding the nature of volatility is essential. When you use options to accompany open stock positions, you eventually realize that volatility is going to affect your equity position, and is not just a short-term profit opportunity in options. The risk feature of volatility is going to determine the safety of your portfolio.
** This may be a bit basic for most of our readers but may be of use to some. -JB

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