JLN Options: Investors sue to block Heinz takeover

Feb 21, 2013

SPX vs. VIX Trailing 30 Days(click for larger image)

Chart and data provided by Livevol
New Restoring Customer Confidence Video
The final scheduled video in our Restoring Customer Confidence series deals with electronic confirmations of customer funds. As the industry continues to deal with these issues, John Lothian News may highlight new ideas or developments in future Restoring Customer Confidence videos.
Restoring Customer Confidence More ideas»
Confirmations: Plugging Into Electronic Confirmations Confirmations: Plugging Into Electronic Confirmations
MarketsWiki.tv Capital Confirmation, which runs Confirmation.com, is credited with helping to unveil the massive $215 million fraud at Peregrine Financial Group (PFG) in July 2012. The web-based audit confirmation service was hired by the National Futures Association (NFA) last year and applied its technology to PFG. After forcing PFG to use the electronic confirmation service, rather than use the traditional paper-based auditing system, PFG’s fraud was discovered by the NFA. Brian Fox, founder and chief marketing officer of Capital Confirmation, explains how this straightforward technology of providing a third party confirmation service, can help protect customer funds and restore customer faith in the audit system used in the futures industry. Watch the video » +++++ About the Restoring Customer Confidence video series
In the aftermath of the MF Global collapse, fraud at Peregrine Financial Group and high profile high-frequency trading shocks, John Lothian News asks – how do you restore customer confidence and bring traders back? Previous videos:
Visit the video series page on MarketsWiki.tv

Editor’s Note: The story in yesterday’s newsletter, “Has the (Anti-) Gold Rush Begun?”, linked to the wrong story.  Apologies for the confusion.  You can see that story here: http://jlne.ws/157oc5b

Lead Stories

Investors sue to block Heinz takeover
Kevin McCoy, USA TODAY
Investors are attacking the takeover of H.J. Heinz by Berkshire Hathaway and 3G Capital Management, arguing that the deal undervalues the global food giant and rewards company insiders at the expense of shareholders.
http://jlne.ws/Zk9mVL Fear in gold market as hedge funds and retail sell
Mark O’Byrne, Resource Investor
More speculative gold buyers appear to have been spooked by the FOMC minutes from the Fed’s Jan. 30 meeting that said “the central bank should be ready to vary the pace of their $85 billion in monthly bond purchases amid a debate over the risks and benefits of further quantitative easing.”
http://jlne.ws/12ROtWM VIX Blasts off on Wednesday
Wall Street Sector Selector
VIX, the CBOE S&P 500 Volatility Index, also known as the “fear index,” roared on Wednesday as equity markets swooned.
http://jlne.ws/WUPDM5 Livevol Cuts 6 Workers in Move Back to Basics
Peter Chapman, Traders Magazine
Livevol, Inc. dismissed six workers registered with its broker-dealer unit last month as part of a plan to return to its roots as a technology concern.
The dismissals reflect a concern by its management that the San Francisco-based provider of options data, analytics and trading software had waded too deeply into the brokerage business. They come four months after the company’s board hired veteran options industry executive Paul Finnegan as chief executive.
http://jlne.ws/WUTtEZ Insiders on Heinz Deal Have Company 
David Weidner, The Wall Street Journal
Prescient trading in th e options markets on the eve of market-moving announcements has been common for years. And though regulators have brought cases involving some trades, most seem to come and go.
http://jlne.ws/VyFwNF Junk-Bond Volatility Gains in Split With Stocks: Credit Markets 
Lisa Abramowicz, Bloomberg
Price swings in junk bonds are widening, diverging from stocks that are the least volatile in more than five years as concern mounts that the eight-month rally in the debt is coming to an end.
A measure of 30-day volatility in relative yields of U.S. speculative-grade corporate bonds almost doubled to 20 last week from a record-low of 10.5 at the end of December, according to data compiled by Bloomberg. That compares with a 32 percent decline this year in the VIX index, a benchmark for expected stock-market volatility, to 12.3 on Feb. 19, the lowest since April 2007.
http://jlne.ws/VyJy8w Is The Eurozone Waving A Red Flag At The Bull Rally?
Daniel Sckolnik, Seeking Alpha
Wall Street has been traveling in a tight line this past week, a classic tightrope walk between greed and fear. Investors seem unwilling to take profits off the table resulting from the year’s uptrend, not wishing to miss any of the current Bull Run, but also appearing reluctant to allocate more cash towards equities, at least for the moment.
http://jlne.ws/VyKLN2 EXCHANGES Introducing Options on U.S. Treasuries
Jill Malandrino, The Street
The NASDAQ OMX Group, in cooperation with BNY Mellon, introduced options trading on U.S. Treasury Securities at NASDAQ OMX PHLX, the largest equity options exchange in the U.S. The first day of trading took place on February 19.
http://jlne.ws/VyIRMv NYSE Liffe to list MSCI Europe Index on central order book 
Press Release (NYSE Euronext)
NYSE Liffe, the European derivatives business of NYSE Euronext, today announced the extension of its suite of derivatives based on MSCI indices to the London Central Order Book. Trading in NYSE Liffe’s MSCI Europe Net Total Return Index futures Contract will commence on 1 March 2013.
http://jlne.ws/YoIEIC Eurex Exchange Lists Four New MSCI Index Derivatives
Press Release (MondoVisione)
The international derivatives marketplace Eurex Exchange will start listing new derivatives on global MSCI indices on 11 March. From this date, futures and options based on the MSCI World, MSCI Europe, MSCI All Countries Asia Pacific ex-Japan and futures on the MSCI Frontier Markets will be available. Other derivatives on regional and country-specific MSCI emerging markets indices will be launched in July this year. A total of around 30 new index derivatives will be launched in two phases. The two planned product launches will grow the existing offering of equity index derivatives, which currently covers 70 different indices, to around 100.
http://jlne.ws/Zk9GUh

Regulation

Corzine ban faces uphill battle at futures regulator
Tom Polansek, Thomson Reuters
A plan to ban Jon Corzine, the former chief executive of MF Global, from the futures industry for life for failing to protect the failed brokerage’s customers faces an uphill battle at a key industry regulator.
http://jlne.ws/WUYH3z
** How a ban would affect the CFTC’s investigation (the NFA’s reasoning here) is completely beyond me. –JB

Strategy

The Options Trade for Bulls and Bears
Steven M. Sears, Barron’s
Trading patterns show investors are becoming cautious; here’s how to protect against losses while profiting from gains.
http://jlne.ws/XBjsBc

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