JLN Options: Court lets case against CBOE, Options Clearing Corp. proceed

Aug 13, 2012

Lead Stories Court lets case against CBOE, Options Clearing Corp. proceed
 Lynne Marek, Crain’s
The Illinois Appellate Court ruled today that a New York hedge fund case against CBOE Holdings Inc. and the Options Clearing Corp. can go forward.
The case alleges that the exchange illegally disseminated information to select traders in 2010.
**  Two years in to this and we have a ruling the CBOE is immune, then that they are not immune.  I am not privy to what the CBOE will do next but it wouldn’t surprise me if they appeal this ruling.  After all that the central question hasn’t even been litigated yet.  Justice may be blind but it is also slow. –JB Yuan Bulls and Low Volatility Fuel China Currency Note Sales
Alastair Marsh, Bloomberg
Investor confidence in the Chinese currency as volatility in the yuan-dollar exchange rate holds at about the lowest in a decade is fueling sales of structured notes that profit on gains against the greenback…
Implied volatility, a measure of exchange-rate swings used to price options, fell to near record lows for one- and two-year maturities in July meaning that the option component of structured notes became cheaper, said Datta. When this is the case, banks can more easily create capital-protected notes that offer investors greater comfort.
http://jlne.ws/MUuOio Options Trading ‘Explodes’ in Bearish Treasury Bond ETF
John Spence, ETF Trends
Investors are flocking to an inverse Treasury ETF to position for higher yields and lower bond prices.
“Yesterday we saw literally an explosion of call buyers in leveraged inverse product ProShares UltraShort 20+ Year Treasury Bond (NYSEArca: TBT) as more than 100,000 call options exchanged hands,” Paul Weisbruch at Street One Financial said in a note Friday.
http://jlne.ws/MUo58p The Charms of a Hated Rally
Lawrence McMillan, Barron’s
This bull market is rather unpopular—and that’s good.
Since the rally began in early June, most investors and traders have doubted the advance because they were so afraid of Europe’s debt crisis, U.S. economic problems, and even the U.S. presidential election.
Yet option and futures trading suggested in early June that stocks would rally because investors were overly negative. Even now, this negativity persists—though not at the same extreme—which indicates the rally has at least several more months of life.
** “Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.”  –Warren Buffett How Can the VIX Be 14 and Lower than VIN and VIF?
Bill Luby, CBOE
Many novice and advanced VIX followers are scratching their heads today, wondering why the VIX is down more than 5%, hovering around the 14.00 level, when the SPX is down 0.4% and all the major market averages are deeply in the red.  More serious students of the VIX will also note that this drop in the VIX comes on a Monday, when the typical VIX “calendar reversion” is generally responsible for about a 1% pop in the volatility index.
http://jlne.ws/MUweJM The VIX According to a 20-Year-Old ‘Seinfeld’ Episode
Vince Foster, Minyanville
A long time ago before the age of Twitter, the blogosphere, message boards, or even the widely watched VIX Index (^VIX), a 1990 episode of Seinfeld titled, The Stock Tip accurately captured today’s investment climate with a clever portrayal of market sentiment.  As was typically the case, the story gets set inside Monk’s café with the usual threesome, Jerry, George, and Elaine discussing nonsense.  George picks up a newspaper to check the business section and discovers that the stock his buddy keeps telling him about is on the rise yet again. The scene, written by Larry David and Jerry Seinfeld, is paraphrased below:
** I’m forwarding this to my mom who told me watching TV would rot my brain. –JB Former Barclays trader “has cooperated” with Libor probe
Matthew Goldstein and Jennifer Ablan, Reuters
A former Barclays Plc trader who was fired by the bank for sending inappropriate emails about Libor “has cooperated” with the federal criminal probe into the alleged rigging of international benchmark interest rates, according to the New York hedge fund that currently employs the trader.
The hedge fund, WCG Management, sent an email to its investors on Sunday informing them that the $3.4 billion fund is not under investigation in the Libor probe, but confirmed that portfolio manager Ryan Reich has drawn scrutiny from U.S. prosecutors.
http://jlne.ws/MUnJP8 OptionMonster Daily Volatility Report with Jamie Tyrrell of Group1 Trading: OptionMonster Cash Money Zone with Eric Wilkinson:


Two-year battle for TMX Group ends
Philip Stafford, Financial Times
The two-year battle for the future of TMX Group, Canada’s largest exchange operator, has ended with an overwhelming majority of its shareholders favouring a scheme that will create a big bourse in North America.
TMX Group said late on Friday that 95 per cent of its shares had been tendered for an offer by Maple Acquisition Corp, a consortium of a dozen Canadian banks and pension funds, to acquire up to 80 per cent of TMX at C$50 a share, in a deal that valued TMX at $3.8bn.
http://jlne.ws/RabjE2 MCX-SX’s currency options: a relatively soft launch (India)
Mobis Philipose, LiveMint
MCX Stock Exchange has launched currency options on the dollar-rupee pair, its first new product after receiving approval from the Securities and Exchange Board of India (Sebi). Trades worth Rs. 184 crore were executed on the exchange on Monday, understandably much lower than the Rs. 2,497 crore turnover clocked by the National Stock Exchange (NSE), which introduced currency options in October 2012.
http://jlne.ws/MUoGa7 BSE listing in early 2013 (India)
Ravikumar Ramanujam, The Hindu Business Line
One of the country’s premier stock exchanges, Bombay Stock Exchange, has set up a working committee to process its proposed initial public offering (IPO).
** The article claims that Options trading on the BSE is 85% cheaper than on other exchanges. –JB


Why High-Frequency Trading Doesn’t Compute
Jim McTague, Barron’s
Wall Street is no autobahn. Traders pushing pedal to the metal risk hurtling into the Buttonwood Trees.
Knight Capital’s $440 million computer-generated smash-up this month is the latest sign that the world’s most important financial superhighway, where trades take place in less than the blink of an eye, sorely needs a speed limit.
Michael Goldstein, a professor of applied investments at Babson College and a noted advisor on market regulators, suggests slowing traffic to 10 milliseconds—a millisecond is 1/1,000th of a second—the limit in 2007.
** I’m not sure of all the implications of such a suggestion but it is interesting to ponder. –JB TMX Group’s Razor Risk 3.0 launches at ASX
Press Release
TMX Group Inc.’s (TSX:X) technology business, TMX Technology Solutions, today announced that Razor Risk 3.0 launched at ASX Group (ASX), Australia’s multi-asset class, vertical ly integrated exchange group, and one of the world’s top-10 listed exchanges.
The launch of the new Razor Risk 3.0 system provides significant efficiency improvements, more than doubling the speed of the calculations for margining, as well as for capital and liquidity stress tests. 


7th Annual FIA and OIC New York Equity Options Conference
September 12-13, 2012
New York Marriott Marquis
New York, NY
Early-bird registration rates expire August 20.  Register now before the price goes up!  Book your hotel room before August 21 to lock in $409/night! Rack rates in Times Square are upwards of $480-600/night and the Marquis is full outside of our block.

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