Observations & Insight

January Marketshare via OCC
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On another note, check out what the VIX momentarily did after the Fed yesterday:
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Here’s a closer breakdown of the action from the CBOE:

Time Index Quote
12:59:56 p.m. CT   11.50
1:00:11 p.m. CT      9.97
1:00:26 p.m. CT     11.53

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CBOE VIX index briefly broke below 10 after Federal Reserve decision
Fred Imbert – CNBC
Something strange happened to Wall Street’s so-called fear index on Wednesday. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, broke below 10 for less than a minute Wednesday at 2 p.m. ET, right after the Federal Reserve decided to keep interest rates unchanged.
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Lead Stories

Don’t Believe Options Traders
Christopher Langner – Bloomberg
Reading the headlines recently, you’d think the world was falling apart. But stock-market volatility in Asia, particularly Hong Kong, is virtually non-existent.
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****SD: Hey, hey – it’s not like options traders are Chinese statistics.

Europe’s Volatility Curve Is Getting Kinky Ahead of French Vote
Garfield Clinton Reynolds – Bloomberg
France’s election is making Europe’s markets nervous. Traders, already wearied from the 2016 gyrations that followed Brexit, Donald Trump’s victory and Italy’s referendum, are pricing in a surge in volatility for April, when the first round of French voting will occur. The scandal threatening to unhinge Republican candidate Francois Fillon’s run for the presidency has raised concerns that Marine Le Pen, the populist who wants to withdraw France from the euro, may have less of a long shot at winning.
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****SD: Why kinky? Because it’s France?

Trump’s dollar paradox promises roller-coaster ride for currencies
Jamie McGeever – Reuters
If visibility and predictability are two foundations upon which stable financial markets are built, comments from the White House this week on the U.S. dollar suggest investors should brace for increased foreign exchange volatility.
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****SD: The thrilling type of roller coaster, the “oh man, I gotta vom—” type of roller coaster or the “wait a second, why are we stopped?” type of roller coaster?

FX Options is massive in the US and hardly relevant elsewhere. Why?
Andrew Saks-McLeod – FinanceFeeds
FX Options are very rare in the UK, yet a mainstay of the electronic trading sector in America. With the regulators and exchange lobby looming, on-exchange options may be the way to go, however one particular British firm has just bowed out altogether
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Volatility divergence
Russ Koesterich, Blackrock – Nasdaq
Back before the holidays I highlighted what I thought was an unsustainable trend: low equity market volatility . Since then, U.S. equity market volatility has continued to decline; last week, the VIX Index -a commonly used measure of equity volatility-dropped below 11, the lowest level since the summer of 2014, before the U.S. travel ban-related selloffs sent the index climbing earlier this week to near 13.
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VIX: Pros Versus Joes
Peter Tchir – Forbes
While it seems like the uncertainty surrounding the direction of future domestic policy increases, VIX remains mired in a very low range, close to lows last seen over a decade ago. Part of the lower volatility can be explained by decreased correlations among stocks (here) but is seems that more and more the battle for VIX is between the ‘pros’ on one side and the ‘average joe’ on the other side.
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****SD: I do kind of miss “Shaq Vs.” — that show had its moments.

High Frequency Trading ‘Flash Boys’ Losing Steam
Matthew Johnson – Investopedia
Once able to maintain a low profile while generating massive profits from trades taking place in fractions of seconds, the world of high frequency trading (HFT) and all its controversies were pushed into the spotlight in 2014 with the publication of Michael Lewis’s bestselling book, Flash Boys.
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****SD: Well I see the problem, the hft-ers need to stop running on steam power and get with the 21st century.

How Ebrokers Fared Amid January’s Muted Volatility
Teresa Rivas – Barron’s
Sandler O’Neil’s Richard Repetto and Collin Cook take a look at equity volumes to start the year, writing that January was mixed on generally lower volatility.
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Exchanges and Clearing

CBOE Holdings Reports January 2017 Trading Volume
CBOE
CBOE Holdings, Inc. (NASDAQ: CBOE) today reported January monthly trading volume on its website under the Quotes & Data section.
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CME Group Reached Average Daily Volume of 16 Million Contracts per Day in January 2017
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that January 2017 average daily volume (ADV) reached 16 million contracts per day, down 12 percent from a strong January 2016.
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CME Group Inc. Reports Strong Fourth-Quarter and Full-Year 2016 Financial Results
CME Group
CME Group Inc. (NASDAQ: CME) today reported revenue of $913 million and operating income of $540 million for the fourth quarter of 2016.
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MIAX Options Announces Successful Completion of Complex Order Rollout to All Symbols Traded on the Exchange
MIAX
MIAX Options Exchange today announced that it had successfully completed the rollout of its Complex Order functionality to all symbols traded on the Exchange. MIAX Options initially introduced Complex Orders in October 2016 to a single symbol and the functionality was strategically rolled out to additional symbols in phases thereafter.
/goo.gl/b0VyS1

Don’t bank on users to rescue clearing houses top regulator warns
Huw Jones – Reuters
Customers of a failed clearing house should only be made to stump up cash as a “last resort”, otherwise they risk being put off using the system, global regulators warned on Wednesday.
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EEX Trading Results For January 2017 – EEX Increases Volumes In Power Options And Agricultural Products
Mondovisione
In January 2017, European Energy Exchange (EEX) reached a volume of 291.1 TWh on its power derivatives markets (January 2016: 332.4 TWh). At 658,271 MWh, volumes in the Dutch market have more than tripled compared to the previous year (January 2016: 160,302 MWh). In the Swiss power derivatives market, volumes increased by 37% to 707,826 MWh (January 2016: 515,380 MWh). Trading in power options increased by 28% to 16.0 TWh (January 2016: 12.5 TWh).
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Nasdaq ISE Gemini Announces Test Data Availability on Production Market Data Broadcast Channels and the Symbol Migration Schedule
Nasdaq
In support of the ISE Nasdaq Technology Migration, (as detailed in Data Technical News Alert #2017-1) Nasdaq will begin publishing test data over all new production broadcast channels during the week for firms to verify connectivity and receive test data.
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Moscow Exchange announces 4% increase in trading volumes in January 2017
Valentina Kirilova – LeapRate
Moscow Exchange (MOEX) just announced its trading volumes for the beginning of 2017. In January, total trading volumes increased by 4.0% YoY to RUB 63.3 trln.
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Technology

Chicago trading firms like Ronin and Ketchum tap social media
Lynne Marek – Crain’s Chicago Business
When trading firm Ronin Capital invested in Dose Media, it got more than an ownership stake in a highly trafficked digital publisher; it secured a back channel into the social media scene. In the age of a Twitter-holic new president, Chicago trading firms are eager to tap social media chatter and sentiments affecting prices across financial markets around the world. While some of the city’s biggest trading firms, with hundreds of employees, have been experimenting with social media for a few years, others are only rushing in now as industry players scavenge for new data sources.
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Itiviti Introduces Fully Managed FIX Infrastructure Service
Mondovisione
Itiviti, a world-leading technology provider for the capital markets industry, today announced the launch of Itiviti Managed FIX, a fully managed service that delivers an end-to-end connectivity platform. Underpinned by Itiviti’s industry-leading Catalys FIX engine, Itiviti Managed FIX covers multiple asset-classes and provides buy-side and sell-side firms with efficient global connectivity. It eliminates the need for capital investments in FIX infrastructure, while at the same time ensuring premium service delivery that meets the highest industry standards for reliability and performance.
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New Asian Marketplace Signing For Cinnober’s Real-Time Clearing Technology
Mondovisione
Today, Cinnober announces that it has been selected by a new Asian marketplace for a sophisticated real-time clearing solution.
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****SD: Ooh, mysterious – “The name of the new venture is remaining confidential as per the client’s request.”

Calypso Announces Utility Agreement With Equinoxe
Mondovisione
Calypso Technology, Inc., a leading provider of capital markets and investment management software, announced today that it has signed a utility partnership agreement with Equinoxe Alternative Investment Services, a premium service provider to the alternative investment management industry.
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ALGO UPDATE: BTIG Offers New Benchmark Market on Close Algorithm
John D’Antona Jr. – Traders News
It’s 3:45 p.m. The day is almost done; just a few more trades to do. Do you know where your order is? And has it been filled? Increasingly, traders are waiting until the final minutes of the day to trade. Liquidity is more plentiful. Spreads are tighter. Volatility is lower compared with the open. Thus, trading is cheaper and liquidity at its highest.
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Strategy

Amazon options traders are not exactly ready for blowout earnings
Tomi Kilgore – MarketWatch
Wall Street oddsmakers aren’t expecting the usual fireworks show in Amazon.com Inc.’s stock after the e-commerce giant reports earnings, as the options market is pricing in one of the more muted post-results reactions of the past several years.
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BOA: The Market Will Fall In February Before Rising 7% To 10% Over The Summer
Rupert Hargreaves – ValueWalk
Bank of America Merrill Lynch Technical Research Analyst Stephen Suttmeier, CFA, CMT believes there is a strong case for the S&P 500 to dip in February ahead of a midyear rally that will drive the index higher by 7% to 11%.
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Expensive stocks point to new era of risk and volatility
Anora Mahmudova – Marketwatch
U.S. equities are very expensive and volatility is very low—a sign that investors are entering a new era that will be marked by wilder price swings and heightened risk, according to Charlie Bilello, director of research at Pension Partners LLC.
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Will ‘whexit’ spur another wheat price surge?
Agrimoney.com
We’ve had the vote for Brexit, and the invention of terms such as Frexit, Nexit and Italeave to capture concerns of other countries (France, Netherlands, Italy respectively) leaving the European Union.
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****SD: Whexit does not have the right ring to it.

VXX Short Sellers Have Seen Plenty Of Profits Post-Election
Teresa Rivas – Barron’s
The iPath S&P 500 VIX Short Term Futures ETN (VXX), which tracks the market’s expectation of 30-day volatility, hit its historical closing low of $18.97 on January 27, and although it’s recovered a bit since, it’s still down 25% since the start of the year.
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Regulation & Enforcement

Plan B for Trump’s ‘Big Number’ on Dodd-Frank Bypasses Democrats
Elizabeth Dexheimer – Bloomberg
Donald Trump faces a major hurdle in fulfilling his pledge to do a “big number” on the Dodd-Frank Act: persuading enough Democrats to go along. That’s why Republican lawmakers say they are considering a backup plan for dismantling parts of the financial-rules overhaul that wouldn’t require support from a single Democrat.
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FIA comments on Brexit transitional arrangements
FIA
FIA submitted comments to the UK Parliament’s Treasury Select Committee consultation on transitional arrangements in relation to Brexit.
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Finra’s Cook Builds Out Team
Traders News
One financial market regulator is building out team and doesn’t need Senate confirmation. The Financial Industry Regulatory Authority’s new President and CEO Robert Cook has announced the appointments of a new head of government affairs and head of corporate communications as he builds his management team at the self-regulatory organization.
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Quebec set to become first Canadian province to ban binary options
SMN Weekly
Quebec’s financial regulatory body, the Autorite des Marches Financiers (AMF), said on Wednesday it has proposed the formal prohibition of the sale of binary options to citizens in the province. This makes Quebec the first province in Canada to officially consider the ban on such instruments.
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Events

Intercontinental Exchange Chairman & CEO Jeffrey C. Sprecher to Speak at Credit Suisse Financial Services Forum on February 8th
Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, announced today that Jeffrey C. Sprecher, Chairman and CEO will speak at the Credit Suisse Financial Services Forum.
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Miscellaneous

Robert Wilson Applied Game Theory to Economics and Won
Kira Brecht – CME Group
Robert Wilson’s work applying game theory to economic problems likely impacts your life every day. It affects everything from the cell towers that power our phones to the price we pay for electricity.
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High-speed trader Virtu expects Trump era to ‘normalise’ markets
Hannah Murphy – Financial Times
Virtu Financial said it expected the “new pro-growth and pro-business” era under US president Donald Trump to return trading to a “normalised” environment, as it posted a drop in both fourth quarter and full year revenues.
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Saudi Aramco likely to list on multiple exchanges at same time: minister
Reuters
Saudi Aramco is likely to list its shares simultaneously on more than one exchange but this is still under evaluation, Energy Minister Khalid al-Falih said on Thursday.
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