European Trading at 7-Year Low as Hedging Demand Drops: Options
Cecile Vannucci, Alexis Xydias and Nandini Sukumar – BloombergBusinessweek
Options (SX5E) trading on European shares is falling to a seven-year low as declines in equity volume reduce the need for investors to hedge.
About 858,600 contracts on the Euro Stoxx 50 Index changed hands each day on average this year, on track for the slowest year since 2006, based on data compiled by Bloomberg. Options trading is down 22 percent from 2012 as the region’s shares lagged behind equity-market gains in the U.S. and Japan.
Gold Price Declines Triggered Trading Halt Early Thursday–CME
Matt Day – The Wall Street Journal
Exchange operator CME Group Inc. (CME) said it briefly halted gold trading on Thursday morning to prevent excessive price volatility, according to an email from a spokesman.
Stop Logic, a type of circuit breaker that pauses trading for between five and 20 seconds, was triggered in the December-delivery gold futures contract at 2:54 a.m. EDT and lasted for 20 seconds, the spokesman said.
Can the human regulators defeat the robot traders?
John Carney – CNBC
The Commodity Futures Trading Commission is looking to build a regulatory framework around high-speed and algorithmic futures trading.
The announcement, made earlier this week, comes in the form of something called a “concept release.” It’s a 137-page document that requests public input on more than 100 questions about dozens of proposed ways to control risks from technology that allows for many more trades to be made much faster, with much less human interaction, than any time in the past.
**I for one welcome our robot overlords. -JB
Videocast: Bargain hunters in VIX
Fed Meeting Unites Fears of Stock and Bond Investors
Kaitlyn Kiernan – The Wall Street Journal
Stock and bond investors are increasingly united in their anxiety heading into next week’s key Federal Reserve policy meeting.
Investor expectations for big moves in stock and bonds are rising and falling together, a shift that could mean more overall portfolio volatility for investors over the next few days, though some expect a small move for stocks once the wait is over.
Stock exchanges eye aging tech after outages
Mark DeCambre – New York Post
Regulators and exchange operators will focus on the nation’s aging stock quote system when they meet on Thursday to address system outages that have shaken confidence in the markets.
Is the CME set for another tilt at Deutsche Börse?
Tim Cave – Financial News
Business and politics rarely mix, but for Europe’s financial sector the two are becoming increasingly interconnected.
In the wake of the financial crisis, populist policies such as financial transactions taxes, curbs on derivatives and high-frequency trading have come to play a growing role in election campaigns.
**Better than tilting at windmills. -JB
Exchanges Face Deadline on Plans for Tech Glitches
Jacob Bunge – The Wall Street Journal
U.S. stock and options exchanges have 60 days to deliver plans to better manage major technology problems, following a meeting of exchange executives convened by the Securities and Exchange Commission Thursday in response to a recent spate of market-rattling breakdowns.
REGULATION & ENFORCEMENT
U.S. SEC Chair calls for kill switch, other reforms for exchanges
Sarah N. Lynch – Reuters
U.S. Securities and Exchange Commission Chair Mary Jo White said Thursday that exchanges will implement a series of reforms, including a kill switch to shut down trading, as a response to an Aug. 22 software glitch that led to a three-hour trading halt in Nasdaq stocks.
U.S. watchdog subpoenas swaps association over its benchmark
Douwe Miedema – Reuters
The top U.S. derivatives regulator is probing a widely used benchmark for swaps, the trade body overseeing the rate said, dealing a further blow to the opaque market after the sprawling Libor probe.
Using Volatility to Invest Like the Pros
Historical Volatility is the annualized movements of a stock or ETF over a given time frame. One might look at the past 30 days of a stock’s closing prices and, by observing those price movements, determine that it has been moving at a 30% volatility. You can do this by simply extrapolating those movements into an annual number.
False sense of security: Weighing up volatility products
Elizabeth Savage – IFAonline.co.uk
Concerns about the tapering of quantitative easing, rising interest rates and a potential environment where equities may fall and bond yields rise simultaneously, have led investors to look at ways to hedge their portfolios.
The VIX index, or Wall Street’s ‘fear gauge’, is often peddled as such a hedge.
OIC Announces Investor Education Day in New York September 21
Press Release (OIC)
The Options Industry Council (OIC) today announced that its next Investor Education Day (IED) for 2013 is taking place in New York on September 21.
Options are an ideal tool for a variety of investors and market conditions. The popular, and free, all day options education program is taught by experienced instructors from the various options exchanges and OIC professionals. This event is the third of five IED’s OIC is hosting in various cities across the country this year to help investors develop their knowledge and ability to responsibly trade options.
**They have breakouts for both novice and advanced options traders. -JB