Cost of Protecting Against Market Swings Is at Its Highest Ever; DRW’s Don Wilson bets on a return to market volatility; Managing Duplicate Reporting Under CAT

Mar 20, 2017

Lead Stories

Cost of Protecting Against Market Swings Is at Its Highest Ever
Cecile Vannucci – Bloomberg
While the CBOE Volatility Index declined last week, the cost of protecting against large market swings has surpassed a peak hit following the Brexit vote, reaching a fresh all-time high.

****SD: Aka, so quit talking about a low VIX.

DRW’s Don Wilson bets on a return to market volatility
Gregory Meyer and Philip Stafford – Financial Times
Don Wilson says his company is “in the business of taking risk”. DRW, named after his initials, is one of the world’s largest proprietary trading firms. From a base in Chicago it bets its own capital via futures contracts listed on 40 exchanges around the world. As Wall Street banks take fewer risks, companies like the one he founded have filled the vacuum. There is plenty of risk in the markets DRW plies.

Looking Forward to Retirement: Managing Duplicate Reporting Under CAT
Maryse Gordon – TABB Forum
The Consolidated Audit Trail will be the world’s biggest data repository for options and equity trade-related data, allowing regulators to conduct surveillance and investigations of the markets. But the industry already spends an annual $1.6 billion running related regimes, such as Order Audit Trail System. Will any of these existing reporting systems be eliminated once the CAT is operational?

***SD: Trimming even obvious fat is difficult (and this instance involves regulators). So, I assume it will take a long time to weed out redundant procedures. Launches Unlimited Trading Via Tradier Brokerage, Transforming Into a News & Fintech Portal
Globe Newswire via Yahoo Finance, the emerging growth financial media and investor community, and Tradier Brokerage Inc., a leading brokerage service, announced the launch of unlimited trading on the platform via Tradier Brokerage Inc. The partnership is providing investors and users an unlimited, free monthly trading subscription for the first two months and following the initial two-month period for an unlimited $29.95 monthly trading fee.

****SD: Options coming later this year. Looks like the brokerage space really is headed into a bold new world after the developments of the past year.

DyMynd’s Quest to Change the Dynamic Between Women and Money
Silvia Davi –
When it comes to gender equality, few playing fields are as notoriously imbalanced than the personal finance industry. While there has been some encouraging progress made and better recognition of the issue in recent years, dispelling the misconception that men are just somehow innately better at understanding and managing money than women is still going to be an uphill battle.

COT: Funds exiting commodities at record pace
Ole Hansen, Saxo Bank –
Rising US oil inventories and market jitters ahead of the Federal Open Market Committee meeting were just two of the drivers behind the biggest fund exodus out of commodities on record. Hedge funds sold a total of 370,000 lots of futures and options across the 24 commodities tracked.

****SD: Related stories from Bloomberg – Bullish Crude Bets Cut by Most Ever as Price Falls Below $50 and Yellen Surprises Hedge Funds Who Cut Gold Bets Before Rally

Exchanges and Clearing

Exchanges: Choosing Their Fates
Kurt Dew – Seeking Alpha
The world of exchange trading is in crisis. The crisis springs from the rapid unveiling of the inadequacy of the SEC’s National Market System (NMS). How did we get here and where are we going? The problem is not technical. It’s not simply high frequency trading and speed bumps. It’s a result of a fundamental flaw in the SEC’s regulatory philosophy.

Cross-border exchange mergers in doubt – Jefferies
Futures & Options World
Jefferies said regulatory divergence across regions and nationalism threaten deals
Cross-border exchange mergers are increasingly hard to pull-off due to increasing regulatory divergence across different regional markets, according to Jefferies reflecting on the likely imminent collapse of the LSE Group- Deutsche Boerse merger. The US bank’s equity research unit reckons global M&A between bourses is not likely in the near term due to barriers including differing regulatory frameworks and nationalistic views.

****SD: Same sentiment in Boca.

Are Speed-Bumps, Market Structure’s “Back to the Future”? (and is the CHX Biff Tannen?) David Weisberger – Traders News
In the popular movie series “Back to the Future” the villain is a school bully named Biff Tannen. At the end of the first movie, he gets punched in the face by Marty McFly’s father to enable the timeline to be restored. In the second movie, Biff goes back in time, and, with a sports almanac, uses it to bet his way to wealth and power. In the end, he is stopped by Marty, but not before sobering views of a future changed by Biff’s actions.

****SD: None of it would be possible without Dr. Emmett Brown — who’s Emmett Brown in this analogy?

Euronext and Morningstar collaborate in European Indices and Derivatives launch
Euronext and Morningstar today signed a strategic collaboration to launch product creation opportunities and risk management tools, based on Morningstar Indices. This offering, which includes new European indices for blue chips, will give investors access to relevant benchmarks and related market data at lower cost.

ADX Celebrates International Day Of Happiness
Abu Dhabi Securities Exchange (ADX) celebrated today, the International Day of Happiness, as part of national celebrations carried out by UAE on this international event which falls on March 20th of each year.

****SD: Happy post-quad witching/St. Patrick’s Day/Boca Raton and start of spring/International Happiness Day!


BGC Partners hires two more former ED&F brokers
Luke Jeffs – FOW
US inter-dealer broker wants to expand its futures and options brokerage business
BGC Partners has hired two more senior brokers who worked at ED&F Man and Icap, taking to double figures the number of experienced brokers taken on by the US inter-dealer broker in the past three months.

Mercury Derivatives parts ways with James Thorpe
Julie Aelbrecht – Futures & Options World
James Thorpe, member of Mercury Derivatives’ automated trading group in Chicago has left the firm, according to sources. Mercury Derivatives is part of the Hertshten Group which also includes prop firm Futures First.

Regulation & Enforcement

It’s time for the SEC to take a hard look at this stock market rule
Don Ross – The Hill
President Trump has repeatedly pledged to dismantle outdated or ineffective regulations during his first year in office. As it relates to financial markets, much of the talk has centered around what to do with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the 2010 law that came in the wake of the financial crisis. However, there is another regulation that needs serious review: the Securities and Exchange Commission’s (SEC) Regulation National Market System (NMS).

Sebi chief’s grand plans to boost commodities market
Business Standard News
The new chairman of the Securities and Exchange Board of India (Sebi), Ajay Tyagi, began his innings on a familiar pitch, laying down his vision for the commodities derivatives market. In his first public appearance on Saturday, since taking over on March 1, Tyagi told the international convention organised by commodity brokers in New Delhi that the market would be deepened by opening up to new participants and widened by introducing new products.

SEBI Plans To Allow Diamond Futures Trading
SEBI is working out the details for the introduction of commodity options trading while new institutional players such as banks will be allowed in the commodities derivatives market in a gradual manner.


TradingScreen Taps Full Suite of Tethys Algorithm Analytics
Finance Magnates
TradingScreen, a provider of SaaS solutions for the financial markets, today announced a partnership with Tethys Technology, the industry leader in broker neutral algorithmic trading solutions, to integrate Tethys’ broker-neutral algorithms for equities, futures, options and FX trading.

Rival Systems and Algo-Logic Systems Offer Integrated Trading Platform
John D’Antona Jr. – Traders News
Rival Systems (Rival), a provider of trading and risk management software, and Algo-Logic Systems, a FPGA ultra-low latency trading solutions provider, announced that they have teamed up to develop an integrated offering using Algo-Logic’s FPGA hardware and Rival’s trading and algorithmic strategy development software.

****SD: In case you missed it last week.


Volatility Trading Digest
The Options Insider
Last week speculated the reaction last Wednesday’s FOMC meeting announcement on interest rate hikes could be another “Buy the rumor sell the news” event similar to the one after the nonfarm payroll report on March 10.

A Cheap Way to Buy Expensive Stocks
Steven M. Sears – Barron’s
The beginning of the end of this historically strong stock market may not be near, but the atmosphere in Washington is starting to give us pause. If news reports are to be believed, the branches of government are beginning to engage in some serious internecine conflict.

Weekend Review of VIX Options and Futures – 3/13 – 3/17
Russell Rhoads, CFA – CBOE Options Hub
We got a pretty orderly shift down in the VIX curve last week as the market easily digested a rate hike by the FOMC. Also, the March premium to spot VIX at about 0.50 is pretty narrow, however the April premium remains a bit wide based on pending events in Europe.

Weekend Review of Russell 2000 Options and Volatility – 3/13 – 3/17
Russell Rhoads, CFA – CBOE Options Hub
Mama Tomato and Baby Tomato are walking down the street. Moma Tomato keeps getting upset because Baby Tomato keeps falling behind. She finally stops, walks back to Baby Tomato and squashes him. “Catch up” she says and continued on her way.

Weekend Review of Volatility Indexes and ETPs – 3/13 – 3/17
Russell Rhoads, CFA – CBOE Options Hub
We got a parallel shift lower in the SPX term structure last week as the fed raised rates and lowered the risk of owning equities at the same time. I know the fed gets a lot of criticism, but hiking rates to slow the economy a bit without having a psychologically negative impact on the financial markets seems like a group doing a pretty good job to me.


Options Strategy Selection: What You Should Think About Before You Trade
Wednesday, March 22—3:30 to 4:30 p.m. CT: Join OIC for a discussion this month as we delve into how our panel of experts approach choosing their optimal options strategy. Moderated by Joe Burgoyne, Director of Education at OIC, the panel will discuss important questions investors and traders should consider before trading.


Barron’s 2017 Best Online Broker Ranking
Theresa W. Carey – Barron’s
The bull market is on sale for online brokerage customers. In the run-up to our 22nd annual ranking of Barron’s Best Online Brokers, two developments topped all others: The three major indexes—the Dow Jones Industrial Average, the Standard & Poor’s 500, and the Nasdaq Composite—all set record highs, and six brokers slashed commissions and other fees.

How We Ranked the Brokers (2017)
A breakdown of how Barron’s ranked online brokers for 2017

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