JLN Options: Hedge funds seen behind likely VIX short squeeze

Feb 28, 2013

Nils-Robert Persson

Nils-Robert Persson Talks About Cinnober and the Growth of Real-time Risk Management
MarketsWiki.tv

There are some firms who are ahead of the curve and profit from it. Cinnober Financial Technology, the Swedish-based provider of electronic trading platforms was certainly one of them when it began pushing real-time risk management technology for trading and clearing platforms long before the 2008 financial crisis. Now its an integral part of the marketplace.

Nils-Robert Persson, executive chairman for Cinnober spoke with JLN editor-in-chief Jim Kharouf about the speed of execution and clearing systems, as well as what’s next for the firm.

Watch the video »

Commentary

What Happened at “WILD About Options” in NYC
by Dorothy Friedman, Vice President of Marketing for Fidessa and WILD Steering Committee member

Last night, the New York branch of Women in Listed Derivatives presented our “WILD about Options” event in New York at NYSE Euronext. The gathering was sponsored by NYSE Euronext, Options Industry Council (OIC) and Fidessa. It was well attended, drawing about 50 women from firms across the industry.

Allison Jacobs kicked off the event with an educational overview of the options industry that included some interesting statistics. Options have had a strong growth trajectory since their start 40 years ago. While 2011 was a record year, 2012 had strong volume with 4 billion contracts traded, and 2013 is shaping up well with 13.1 million contracts traded daily.

Amy Farnstrom of NYSE Euronext wowed the room with her thoughts and experiences about her career. She talked about the danger of losing an open mind and reminded us not to miss the present. One of the most important takeaways from her presentation was that we all sometimes suffer from professional fatigue and forget who we are, which is different from what we do. Amy emphasized that our careers are just one part of what defines us — we are truly the sum of our parts. She implored the women to take responsibility to make sure “you’re fulfilled as a person” and to know that is not your firm’s responsibility. She told the group that the more “who I am” we can bring to what we do, the happier we’ll be in our chosen professions.

“The Role of Technology” panel was well received. Gina McFadden of OIC and OCC moderated the engaging discussion. The panelists were Meaghan Dugan of Bank of America Merrill Lynch, Joanna Fields of Deutsche Bank and Joy Rosenstein of Fidessa. The women discussed the evolving nature of the options industry and how institutional and retail market demand is driving new and increasingly complex products. Panelists also commented on how industry regulation is further impacting trading systems and how, as a result, firms are looking to “normalize systems across asset classes” to better address industry requirements. The discussion closed with what participants saw on the industry horizon. The group agreed market data could potentially be the next sizable trend.

The night ended with a great networking reception in the beautiful NYSE building.

Lead Stories

Hedge funds seen behind likely VIX short squeeze
Mike Kentz, Reuters
Hedge funds have levered up their short plays on VIX futures to such extreme levels that the market is poised for a significant short squeeze.
http://jlne.ws/15TCnMz

Three Reasons Market Volatility Has Returned
Russ Koesterich, ETF Trends
The S&P 500 rallied over 5% in January, with small and mid-caps doing even better. Market strength continued into mid-February, with the market gaining another 2% between January 31 and the recent high on February 19.
http://jlne.ws/15TuUNw

Scrutiny of Heinz Trades Intensifies
Jean Eaglesham, Kaitlyn Kiernan and Michael Rothfield, The Wall Street Journal
The probe of potential insider trading ahead of this month’s $23 billion buyout of H.J. Heinz Co. has widened, as regulators and criminal investigators scrutinize what they see as suspicious purchases of stock in the ketchup maker, according to people familiar with the inquiries.
http://jlne.ws/XIApYN

Insider Trading’s Smart Cheats 
The Wall Street Journal
In the world of trading, it is often said there are three types of successful investors: smart, lucky and cheaters.
But amid allegations of insider trading in options in connection with Berkshire Hathaway Inc.’s $23 billion proposed acquisition of H.J. Heinz Co., there is a new, fourth category: the smart cheat.
http://jlne.ws/15TzcnV

What a Jumpy VIX Means for the Market
Brian Stutland, CNBC
The VIX jumped 34 percent on Monday, leading to an obvious question: Why did investors rush out to buy insurance on a day that began with so much promise?
http://jlne.ws/15Tw4IM

Dark Pools Take Record Share of Trading, Rosenblatt Says
Lindsey Rupp, BloombergBusinessweek
Dark pools accounted for a record share of U.S. equity trading in January as a decline in market volatility steered more business to off-exchange venues, according to a report from Rosenblatt Securities Inc.
http://jlne.ws/15TDHyO

VIX Sounds the All-Clear
Kaitlyn Kiernan, The Wall Street Journal
Keep calm and carry on: That was the message from the “fear gauge” this week.
http://jlne.ws/YCbe9x

Is VIX Activity a Hedge or an Ominous Sign?
The Options Insider
As Bill Luby reported on his blog VIXandMore.  VIX option volume and call volume both set records today.  Which leads us to this question?  Why?  There are two potential answers:
http://jlne.ws/YCcidw

Exchanges

CME deal no sure thing, but execs changing tone on M&A
Chicago Business Journal
Ongoing rumors of merger talks between CME Group and Deutsche Boerse have led to a growing anxiety that certain fees for doing business on the Chicago exchange will rise, which is, itself, an obstacle to moving forward with any deal, according to a report by Bloomberg.
http://jlne.ws/YCdKMY

Regulation

MEP warns over delays to Mifid
Philip Stafford, Financial Times
An influential MEP has warned Europe may face a third round of legislation if the region cannot soon agree its much-delayed revision of the dealing rules for banks, brokers and high-frequency traders.
http://jlne.ws/XEUdiX

Fledgling European Equities Market Recovery will be Undermined by Regulation, Says TABB Group in State of the Industry Research 
Press Release (Businesswire)
European equities markets deemed “un-investable” only six months ago are regaining popularity but the financial transaction tax (FTT) and oth

er market reforms may create a false dawn, according to new research published by TABB Group.
http://jlne.ws/13p3KPf

EU watchdogs warns investors of risky derivatives
Huw Jones, Reuters
European Union regulators warned investors on Thursday of the dangers of buying contracts for difference (CFDs), a type of derivative that offers potentially high returns.
http://jlne.ws/15TvRp5

Technology

SEI Study: World’s Wealthy Need Advisors to Provide Strategic Advice via Digital Tools 
Press Release (Marketwire)
According to a study released today by SEI (NASDAQ: SEIC), Scorpio Partnership, and Standard Chartered Private Bank, the world’s up-and-coming wealthy are generally satisfied with their wealth managers’ technology use at a transactional and reporting level, but are unimpressed with the way advisors use technology to show them how to invest their money.
http://jlne.ws/YCigLf

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