JLN Options: Euro Strengthens as Draghi Promises to Preserve It; Rand Climbs

Jul 26, 2012

Lead Stories

Euro Strengthens as Draghi Promises to Preserve It; Rand Climbs
Joseph Ciolli, Businessweek
The euro advanced against the dollar by the most in almost a month after European Central Bank President Mario Draghi said policy makers will do whatever is needed to preserve the 17-nation currency…
Implied volatility on three-month options for Group-of- Seven currencies declined for a second day, reaching 9.34 percent, according to the JPMorgan G7 Volatility Index. It rose to 9.83 percent on July 24, the highest level this month. The average over the past five years is 12.4 percent.
http://jlne.ws/OeCA64

CBOE Begins Offering Process For Trading SPX Variance Strips Tomorrow
Press Release
Beginning tomorrow, Friday, July 27, the Chicago Board Options Exchange (CBOE) will introduce a process for trading SPX Variance Strips (ticker:VSTRP).
SPX Variance Strips are designed to electronically trade a large and complex portfolio of S&P 500 options (SPX) in a single transaction, replicating S&P 500® implied variance exposure. Additionally, “V-Strips” will employ a quoting convention similar to that used in over-the-counter (OTC) variance trading.
Upon execution, matched SPX Variance Strip trades will be sent to a special post-trade system (“BasketWeaver(SM)”) and will be broken up into as many as one thousand SPX contracts, which are then cleared by the Options Clearing Corporation (OCC).
http://jlne.ws/MofaXI

ICE Futures U.S. to End Floor Trading for Options
Matthew Leising, Bloomberg
Intercontinental Exchange Inc. (ICE)’s New York futures exchange plans to cease all floor trading in its options contracts at the close of business on Oct. 19 as it switches to electronic buying and selling exclusively.
http://jlne.ws/MofiGN

Buy-side Seen Ramping Up Use of Complex Options Strategies, Low-Touch Systems
Suzanne Cosgrove, OptionsCity
The buy side is ramping up investment in infrastructure — and education — to support its use of new options products, according to a recent study of options traders conducted by the advisory firm TABB Group.
“As buy-side traders understand the capabilities of option enhancement on returns … they are turning to structures that are more complex,” such as multi-leg spread trades, said Andy Nybo, the author of the study and head of TABB’s derivatives group.
http://jlne.ws/Mogl9w

Exchanges

CME Profit Slides
Jacob Bunge and Saabira Chaudhuri, The Wall Street Journal
CME Group Inc.’s CME +2.34% second-quarter profit slumped 17% on slower trade in the derivatives-exchange giant’s futures markets, though cost-control efforts helped the company top Wall Street’s expectations.
Trading volume on CME’s markets over the quarter fell 9% from the year-ago period, pressured by economic turmoil gripping the European Union and key interest rates stuck at historically low levels. The exchange operates the Chicago Mercantile Exchange, Chicago Board of Trade and New York Mercantile Exchange.
http://jlne.ws/Nx4daw

BM&FBOVESPA Announces The Market Makers For Options On The Stocks Of Itaú Unibanco And OGX
Press Release
BM&FBOVESPA announced today the winning institutions in the competitive bidding process to select market makers for ITUB4 and OGXP3 equity options. The market maker obligation shall last twelve (12) months as of September 13, 2012.
Citadel Securities LLC, Credit Suisse International and Morgan Stanley Uruguay Ltda. shall be market makers for options on the stocks of Itaú Unibanco Holding S.A. (ITUB4),  complying with a maximum volatility spread of 1%.
http://jlne.ws/MKdaKf

Regulation

Could SEC’s Plan to Track Trades Also Combat Financial Fraud?
Jordan Maglich, Forbes
The United States Securities and Exchange Commission (“SEC”) recently voted to establish a centralized database to track and monitor all trading activity across U.S. equity and options markets, prompted in large part by the difficulties encountered in pinpointing the cause of the “flash crash” on May 6, 2010 that temporarily wiped out nearly $1 trillion in shareholder value.  Because various exchanges and centralized clearing firms stored market data in different formats, it took the SEC nearly five months to gather and analyze market data from just a few hours of trading activity.
http://jlne.ws/Oex3MR

Technology

Cruisin’ the Freeway
Hazem Dawani (OptionsCity), Automated Trader
Those looking to employ more sophisticated trading strategies, involving multiple instances of multiple strategies in a co-located environment at minimum latency, face two unattractive alternatives. Off the shelf solutions are extremely costly, while building the same functionality in house is enormously time consuming. Fortunately, as Hazem Dawani, President & CEO of OptionsCity explains, these barriers need not be as insuperable as they appear.
http://jlne.ws/Mogbz0

Nasdaq Shaves 2+ Microseconds, With 40G Connections
Tom Steinert-Threlkeld, Securities Technology Monitor
Nasdaq OMX chief executive Robert Greifeld said that customers using recently introduced 40 gigabit a second connections at its data center in Carteret, N.J., are seeing order acknowledgment times drop by between two to seven millionths of a second.
http://jlne.ws/OeAIdk

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