LEAD STORIES

How the ‘Smartest Guys in the Room’ Flubbed the Volatility Trade  
Bernie Schaeffer – Schaeffer’s Investment Research
With the huge preponderance of short selling activity in this market generated by and for the hedge fund contingent, it is easy (and proper) to conclude that the so-called “smartest guys in the room” are in fact having a very disappointing year, due in large part to the severe beating they have sustained on their bearish bets.
http://jlne.ws/15Bjl9X

Is the Sleeping Giant (volatility) Ready to Awaken?
Ron DeLegge – ETF Guide via Fox Business
Like a sleeping giant, stock market volatility can lie dormant, but it never goes away. This time around, the giant is showing hints of awakening and whether the beast completely tramples the city or not remains to be seen. Regardless, the foundation for a good old fashion trashin’ has been laid.
http://jlne.ws/15ULs8h
**Po-tay-toe -JB

Avoid the VIX Trap; Too Many People Are Expecting Volatility
ETF Daily News
Like an angry bear that’s been prematurely awoken from hibernation, the iPath S&P; 500 VIX Short Term Futures TM ETN (NYSEARCA:VXX) has come roaring back to life lately and is suddenly the hottest mover in an otherwise jittery market place. But before you look to hitch a ride to new heights aboard this momentum play…
http://jlne.ws/15UMPnz
**Po-tah-toe -JB

Holiday VIX Rush
Adam Warner – Schaeffer’s Investment Research
Summer holiday weekends are generally known for two things. One is the Last Barbeque of Summer (tears are running down my cheeks as I type that). The other is an ugly CBOE Volatility Index (VIX).
http://jlne.ws/15Bnnzm

Videocast: VIX ‘feels like a biotech’
optionMONSTER
http://jlne.ws/15Bn1J0

Wall Street falls, ends worst month since May 2012
Ryan Vlastelica – Reuters
U.S. stocks fell in a thinly traded session on Friday as the S&P; 500 index recorded its steepest decline since May 2012 and investors avoided making large bets before a long weekend with the situation about Syria still uncertain.
http://jlne.ws/1foI3jv

S&P; 500 trading volume lightest in 15 years
Wallace Witkowski – MarketWatch
Stock-market volume always tanks during the summer as much of Wall Street flocks to the Hamptons, but the drying up of trading has reached lows not seen in 15 years, and that’s raising red flags for some analysts.
http://jlne.ws/15V4ziL

Against the tide
The Economist
WITH each great rush of capital into or out of a region of the world, and with the blooming of crisis that seems inevitably to follow such swings, macroeconomists inch ever further away from the assumption that free capital flows are always and everywhere a good thing.
http://jlne.ws/15V4P0Y

Ronald Coase Was The Greatest Of The Many Great University Of Chicago Economists
Fred Smith – Forbes
Ronald Coase (1910-2013), the greatest of the Chicago School economists in my view, died this week. Yet, his work lives on. If it gains the recognition it merits, it will do much to enhance the quality of public debate and public policy. Coase developed a unique understanding of how solutions to real-world organizational and financing problems evolved through the voluntary interactions of individuals and firms.
http://jlne.ws/15V5GyS

**Thought this part in The New York Times on Mr. Coase was particularly interesting: 
In his autobiographical essay written for the Nobel committee after being awarded the prize, he recalled being taken by his father at age 11 to a phrenologist to hear what could be discovered from the shape of his head. The phrenologist detected “considerable mental vigor,” Professor Coase wrote, and recommended that he work in banking or accounting and raise poultry as a hobby. http://jlne.ws/15BmKpx

EXCHANGES

London’s ICAP next to plan U.S. swaps trading platform
Douwe Miedema – Reuters
Britain’s ICAP Plc said on Tuesday it planned to set up a trading platform for swaps, satisfying a requirement from regulators who are rewriting the rules for the derivatives that helped cause the 2007-09 credit crisis.
http://jlne.ws/15UJKnt

Uncertain Future For NYSE Technologies 
Ivy Schmerken – Wall Street & Technology
With the acquisition of NYSE Euronext set to close soon, InterContinental Exchange is reviewing the multifaceted business of NYSE Technologies, leading to industry speculation on what ICE will do with the technology group.
http://jlne.ws/15UKfhw

OCC Announces Cleared Contract Volume Rose 4% in August
Press Release (OCC)
OCC announced today that total cleared contract volume in August reached 326,697,656 contracts, representing a 4 percent increase from the August 2012 volume of 313,781,757 contracts. OCC’s year-to-date total cleared contract volume is up 3 percent from 2012 with 2,797,892,003 contracts.
http://jlne.ws/15BkEpu

The Options Industry Council Announces August Options Volume Rose 4 Percent
Press Release (OIC)
The Options Industry Council (OIC) announced today that 321,976,044 total options contracts traded in August, which is up 3.55 percent compared to last year when 310,936,920 contracts were traded.
http://jlne.ws/15BkVJ5

ISE and ISE Gemini Report Business Activity for August 2013
Press Release (ISE)
The International Securities Exchange (ISE) today reported a combined average daily volume (ADV) of 2.1 million contracts in August 2013 for its two exchanges, ISE and ISE Gemini. This represents16.2% of U.S. equity options market share.
http://jlne.ws/15Bl3Z7

CBOE Holdings Reports August Volume Of Over 100 Million Contracts
Press Release (CBOE)
CBOE Holdings, Inc. (NASDAQ: CBOE) reported today that August trading volume for options contracts on Chicago Board Options Exchange (CBOE) and C2 Options Exchange (C2SM) and futures contracts on CBOE Futures ExchangeSM (CFE) totaled 101.72 million contracts. Average daily volume was 4.62 million contracts, an increase of 17 percent over August 2012 and up four percent from July 2013.
http://jlne.ws/15V5hwj

CBOE Futures Exchange Reports August Trading Volume
Press Release (CBOE)
August trading volume in VIX futures totaled 3,488,149 contracts, an increase of 83 percent over August’s total in 2012 and a gain of 19 percent over the previous month.  
Average daily volume in VIX futures during August was 158,552 contracts, an increase of 91 percent over August 2012 and up 19 percent from July.    
Year-to-date trading volume in VIX futures is outpacing last year by 97 percent. Through the end of August, a total of 27.1 million VIX futures contracts have traded.
http://jlne.ws/15BnzyB
Average daily volume of 6.6 million contracts at Eurex Group in August
Press Release (Eurex)
At Eurex Exchange, the equity index derivatives segment totaled 44.1 million contracts (August 2012: 56.8 million). The future on the EURO STOXX 50 Index recorded 16.7 million contracts. The options on this blue chip index totaled 17.2 million contracts. Futures on the DAX index recorded 1.9 million contracts while the DAX options reached another 3.0 million contracts. The Eurex KOSPI Product recorded 1.8 million contracts (August 2012: 1.8 million).
http://jlne.ws/15Blt1F

REGULATION

Regulators agree on global swap rules ahead of G20 summit
Douwe Miedema – Reuters
Finance watchdogs on Friday laid out joint rules for the $630 trillion derivatives industry that was at the core of the 2007-09 credit meltdown, in a report to the G20 most powerful economies of the world.
http://jlne.ws/15UKQzw

Regulators ease derivatives rule to avoid harming economy
Huw Jones – Reuters
Global regulators have eased the impact of new rules designed to make the $630 trillion derivatives market safer as they seek to avoid too-tight controls on the sector that some banks argue could harm economic recovery.
http://jlne.ws/1a392kg
**Of course derivatives never hurt the economy.  Oh wait… -JB

TECHNOLOGY

Why some markets have tech failures and others don’t
Lynne Marek – Crain’s Chicago Business
While the Chicago Board Options Exchange has shut down twice this year, part of a spate of electronic trading snafus plaguing the industry, the futures exchanges operated by CME Group Inc. haven’t ground to a halt since Sept. 11, 2001.
http://jlne.ws/17Bq2Mb

OPTIONS EDUCATION

Volatility Trading Digest – Downward Momentum
The Options Insider
Last week we thought the S&P; 500 Index (SPX) was most likely to continue higher and attempt to fill the gap between 1679.61 and 1684.83. Of course, the best plans based upon technical analysis can be upset due to unforeseen fundamental developments and this is exactly what happened as the news about the Syria created a rush out of risk assets.
http://jlne.ws/15V4bkc

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