The FBI is Organizing an International Fight Against Binary Options Fraud; Volatility, Stocks in Strange Dance; Wall Street lower as oil drop hits energy stocks – Fed eyed

Mar 14, 2017

Observations & Insight

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Lead Stories

The FBI is Organizing an International Fight Against Binary Options Fraud
Finance Magnates
It seems that the recent troubles facing binary options firms in various parts of the world are just about to get even more serious. The U.S. Federal Bureau of Investigation (FBI) issued a warning to the public yesterday that unregulated binary options websites are being used by criminals as vehicles to commit fraud.
While regulated binary options are listed on registered U.S. exchanges approved by the CFTC, Cantor Exchange and NADEX, the FBI warns Americans that much of the binary options market operates through websites that don’t comply with U.S. regulations.

***JB: FBI press release is below in the Regulation section.

Volatility, Stocks in Strange Dance
The traditional relationship between volatility and stock prices has started to break down recently and reveals that professional traders are worried about both a market meltdown and a sudden rally, writes The Wall Street Journal.
Typically, the market hates uncertainty, which means that on days when implied volatility rises, stock prices fall, and vice versa.

***JB: I’ve seen several strange dances. Scratch that…it was people watching me dance saying that.

Wall Street lower as oil drop hits energy stocks; Fed eyed
Yashaswini Swamynathan and Tanya Agrawal – Reuters
U.S. stocks were lower on Tuesday as oil prices fell and investors focused on the Federal Reserve’s policy meeting, where it is widely expected to raise interest rates.
Trading volumes were light as a blizzard in the northeastern United States grounded flights and kept people indoors.

CNBC survey: Look out for a more aggressive Fed this year
Steve Liesman – CNBC
The CNBC Fed Survey for March sees 100 percent of respondents believing the Federal Reserve will announce a rate increase on Wednesday and 70 percent saying it will do so again in June.
The 50 respondents, who include economists, fund managers and strategists, now also firmly forecast at least three rate hikes this year.

***JB: There was an interesting article in Bloomberg that explored how Fed officials who experienced high inflation tend to be more hawkish.

Singapore warns binary options trading hides high risks – SMN Weekly
Juana Wells – SMN Weekly
The Monetary Authority of Singapore (MAS) issued a notice on Tuesday, warning investors of the risks associated with trading in binary options instruments. Unregulated platforms additionally increase risks as they are not supervised by the relevant authorities.
“This comes in the wake of an increase in the number of complaints from investors who have suffered financial losses from such investments,” the MAS noted.

Asset managers turn to derivatives – report
Julie Aelbrecht – Futures & Options World
Asset managers have chosen to increasingly invest in their derivatives capabilities amidst regulatory shifts, according to a new report by Sapient Gobal Markets.
Although the survey did not reveal a single derivatives approach to suit every firm, the report did find that a majority of asset managers have dedicated derivatives traders embedded within equity and fixed income teams. Another major finding was that with the exception of one asset manager, all others reported high complexity of derivatives being used.


IEX vs NYSE on speed bump
Matt Turner – Business Insider
The war of words between the New York Stock Exchange and IEX, America’s newest stock exchange, just took a strange turn.
Back in January, NYSE announced plans to introduce a 350-microsecond delay in trading on its market for small-cap companies. The delay would apply only to NYSE American, the small market previously known at NYSE MKT, and would be similar to the so-called speed bump introduced by IEX.

Market-makers grow frustrated with US options exchanges
Ginger Szala – The Trade
Market-makers for US options have grown increasingly frustrated with trading volumes remaining flat over the past five years, despite rapid growth in the number of exchanges.
While the number of exchanges has expanded to 14 (with potential for another to open up soon), the number of market-makers has dropped dramatically from about 60 to just 15.

SEC Approves Listing of RealDay SPY Options
Press Release – BOX Options
The Securities and Exchange Commission (SEC) has approved a pilot program to list RealDay Options on the SPDR S&P 500 Trust (symbol SPY). These innovative delayed-strike daily options will be listed through an exclusive license on the BOX Options Exchange (“BOX”). A launch date has not yet been set, as the exchange is waiting for implementation by the Options Clearing Corporation (OCC).
Via Email

Eris Launches Live Swap Curve
Press Release – Eris Exchange
Eris Exchange (Eris), the U.S.-based futures exchange offering cash-settled swap futures as the leading alternative to traditional OTC interest rate swaps, announced the successful launch of the Live Eris Swap Curve, a value-added market data product featuring real-time valuations and analytics for Eris Standard Swap Futures.

Regulation & Enforcement

Binary Options Fraud — A Word of Warning to the Investing Public
Press Release – Federal Bureau of Investigation
Stock options. It’s a pretty common investment term meaning, in general, that one party sells or offers to another party the opportunity to invest by buying a particular stock at an agreed upon price within a certain period of time. All perfectly legal and highly regulated—and if the investor takes advantage of the opportunity and the stock performs well, there’s money to be made. And if the stock doesn’t perform well, the investor knew the risk.

Acting CFTC chair hoping agency budget will stay flat
Sarah N. Lynch – Reuters
As many U.S. government agencies are girding for possible steep cuts in their annual budgets, the top U.S. derivatives regulator on Monday signaled he was optimistic about the possibility of keeping his agency’s budget flat.


Brace for a pullback: S&P headed toward 2,192, UBS strategist warns
Alex Rosenberg – CNBC
The ultra-low levels of expected and experienced volatility are unlikely to last, warns UBS equity and derivatives strategist Julian Emanuel.
“Overall market risks appear to be rising, yet volatility is low,” Emanuel observed in a Friday research note.

More Volatility Ahead For Oil As Funds Unwind
Rupert Hargreaves – ValueWalk
The price of oil could have further to fall as hedge funds, and investors re-position following a record buildup in net long oil futures according to a report from JP Morgan’s Nikolaos Panigirtzoglou published at the end of last week.

Investors Look to Gold, Volatility ETFs to Hedge Lingering Uncertainties
Max Chen – ETF Trends
While the equities may be enjoying a bull market run, linger global uncertainties may shake an investment portfolios. Nevertheless, investors may look to alternative investments, like gold or volatility-related exchange traded funds, to hedge market risks.
“With uncertainty seemingly being the only certainty that lies ahead, investors will need to consider the risks their portfolio may face and how best to hedge against these risks,” according to Rex Shares.

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