Commentary & Insight

WILD Panel

A Look at Forensic Accounting and Financial Fraud

In the aftermath of the Peregrine Financial Group fraud, many wondered how it could have happened and how forensic accounting works after a fraud occurs. On June 20, John Lothian News president and editor-in-chief Jim Kharouf moderated a panel at the Women In Listed Derivatives (WILD) event on forensic accounting with John Hague, financial services industry leader with McGladrey and Christen Morand, senior manager, Ernst & Young. He sat down with both separately to ask about the accounting space today and how forensic accounting digs into fraudulent cases.

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Lead Stories

Court Rules TOM May Continue To Offer Options Based On The AEX
Press Release (via Mondovisione)
Today the court in The Hague ruled that trading platform TOM may continue to offer options based on the AEX index and that TOM is allowed to refer to the AEX-index in the description of the options. Nevertheless, TOM will have to add a new ticker symbol for these options. The ticker symbols refer to the abbreviations used to indicate which option is traded. Euronext had filed a lawsuit against TOM for offering options based on the AEX index and the general use of ticker symbols. 

TOM claims options listing victory over NYSE
Despite NYSE Euronext being first off the mark to claim an initial victory, TOM’s chief executive Willem Meijer has responded by telling FOWi that on the principle matter of legally listing AEX products, it was actually a win for TOM.
“The essential positive thing about the court case is that the product we launch – the option based on the AEX index – is a legal product and it is not going to be stopped” said Meijer.

Everyone’s a winner?
Yesterday a court in Hague passed down its judgement on the legal action brought by NYSE Euronext against Dutch rival TOM (The Order Machine). Both sides claimed victory but the implications remain unclear, says William Mitting.
**I think the lawyers were the winners -JB

‘Shorting’ Volatility: Easier Said Than Done? 
Adam Warner – Schaeffer’s Investment Research
The last decade or so has seen a rise in the concept of “Volatility as an Asset Class.” Volatility has existed forever, of course, and we’ve had the ability to trade options on an exchange for 40 years now, but the notion of needing to own volatility in more straightforward ways has led to the mushrooming Tradable VIX complex.

New baby boomer hobby – trading options
Chris Taylor – Reuters
After the financial crisis of 2008 hit their stock portfolio hard, Colorado Springs information technology contractor Mark Brisley and his wife Evie Petrikkou were worried.
Casting about for a way to make up big losses, the two hit upon a strategy often considered the purview of Wall Street insiders: They could trade options.
**If that was my hobby I’d need to get a job to relax. -JB

NYSE Euronext to Take Over Libor
Julia Werdigier – Dealbook
NYSE Euronext won a contract to administer and improve the embattled London interbank offered rate, or Libor, a person briefed on the decision said on Tuesday.
**NYSE press release below under “Exchanges”. -JB

CME Foresees No Changes in NYSE-Libor Deal
Jacob Bunge – The Wall Street Journal
CME Group said Tuesday that it expects its core interest-rate futures franchise to be unaffected by a rival’s purchase of the benchmark used to underpin the contracts.

Hedge Funds Flat in Q2, Underperforming S&P 500 Again
Hedge funds were up 0.13% in 2Q’13 (essentially flat), underperforming the S&P 500 (.INX)‘s price return of 2.36%. Historically hedge funds tend to underperform in 2Q and 4Q according to BAML technical strategist, MacNeil Curry, CFA, CMT. 

Market data crackdown will not level playing field
Matt Samelson – The Trade
A crackdown on early access to private market data will make little difference in making trading fairer, according to industry experts.

Peak6 Sells its NYSE Floor Brokerage
Peter Chapman – Traders Magazine
Chicago’s Peak6 Investments sold its New York Stock Exchange floor brokerage MND Partners to TJM Investments, a Chicago agency brokerage.

Markets face snap back after irrationally exuberant jobs move
John Caiazzo – Futures
As I indicated recently, markets are “influenced” by the U.S. Federal Reserve as well as geopolitical events. On Friday the jobs data prompted a “flight” from the relative safety of Treasuries and precious metals, to the risk asset of equities.


Nasdaq options up but equities fall
The Trade
Nasdaq OMX has seen an uplift in volume and market share for US equity options, while similar figures for equities have declined, Q2 volume data has shown.

Regulations ‘disproportionately’ hit small exchanges
John Bakie – The Trade
Speaking to, Buhl said that incoming regulation, particularly European market infrastructure regulation (EMIR), favours larger exchanges at the expense of smaller groups.

NYSE Euronext Subsidiary to Become New Administrator of LIBOR
Press Release (NYSE)
NYSE Euronext Rate Administration Limited, a subsidiary of NYSE Euronext (NYX), today announced that following a rigorous selection process conducted by the independent Hogg Tendering Advisory Committee, NYSE Euronext Rate Administration Limited has been appointed as the new administrator for LIBOR. The transfer of the administration from BBA LIBOR Ltd, the subsidiary of the British Bankers’ Association (BBA) is expected to be completed in early 2014, once the Financial Conduct Authority’s (FCA) authorisation of  NYSE Euronext Rate Administration Limited is complete.


Talks on US derivatives rules run to the wire
Financial Times
Talks over Washington’s reach in policing offshore derivatives deals are set to run to the last minute this week, with US officials at odds ahead of a key deadline.
Passing the Commodity Futures Trading Commission’s cross-border guidance looks likely to become a final, fractious chapter in its three-year process of writing rules to rein in the $633tn swaps market.

Naked Short Selling: The SEC’s Tall Task Ahead
Seeking Alpha
In another non-surprise to Wall Street Insiders and massive surprise to the common investor, the SEC handed out several naked short selling fines over the last month, to prove to casual investors that they are still “looking out for the little guy”.

Renteria withdraws candidacy for U.S. CFTC chair
Amanda Renteria, mooted as a candidate to succeed Commodity Futures Trading Commission Chairman Gary Gensler, on Monday said she had withdrawn her name from the race to head the top U.S. derivatives regulator.
**I heard that Bart Chilton’s job was offered to her instead but apparently that is too menial a job for her considering her total lack of experience in financial regulation. -JB

RBI bans proprietary trading in currency futures & options segment
K. Ram Kumar – The Hindu Business Line
With the rupee significantly weakening against the dollar, the Reserve Bank of India has directed banks authorised to deal in foreign exchange to refrain from carrying out proprietary trading in the currency futures/exchange traded currency options markets.


A Cheap Bet on a Bank Rally
Steven M. Sears – Barron’s
When it comes to questions about the financial sector continuing its meteoric rise, the stock market says “Oh, yeah!,” but the options market says, “I don’t think so.”

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