Lead Stories

A Little Volatility Can Be Good for You
Editors – Bloomberg
Gyrations in financial markets are giving rise to a plaintive cry from investors: Prices are getting more volatile because new regulations are making big banks less willing to buy when others want to sell.
Actually, if that’s what’s happening, it would be no bad thing.

A bottom has formed, but is it THE bottom?
Jeff Greenblatt – Futures Magazine
It’s just amazing to me what the spinmeisters come up with in a raging bull market. Oh yeah, the market timing windows we’ve discussed for months have also confirmed. That’s probably the real scoop because I really haven’t found anyone talking about these cycles.
But we have to move on because the market is back in rally mode. It found a low last week on some good Fibonacci calculations in the E-mini S&P. As you can see, here is my left handed attempt at Elliott but the ratios are very close to a golden spiral 61/161.

In market storm, a rush to trade volatility itself
Michael Santoli – Yahoo Finance
You can’t sit in the ER and wager on cardiac patients’ chances, hang around the airport laying odds on emergency landings or stand on the beach and bet on a hurricane’s windspeed.
But on Wall Street, buying or selling the probability of market morbidity and mayhem in real time is fair game – and this month’s mini-panic in stocks propelled this so-called volatility trading to new heights of popularity.
***SR: Volumes in the iPath S&P 500 VIX Short-Term Futures go crazy!

Market Volatility Merely a Symptom of Larger Issues
Rob Cox – NY Times
It has been impossible to escape the V-word for the past week. Turn on the television, and it is easy to conclude that central bankers, corporate chiefs, investors and politicians think volatility is the biggest problem vexing global markets. The roller coaster ride recently experienced by financial assets is nettlesome. But it’s merely a symptom of a bigger malady: the fragility of widely accepted assumptions about where the world is headed.
***SR: Including….yes, Ebola.

Investors Seeing Korean Bottom Return to Leveraged ETFs
Sharon Cho – Bloomberg
Investors are returning to funds that amplify the share performance of South Korea’s biggest companies and exiting funds that reward declines after stock valuations fell to the lowest level in more than five years.
Net assets of Samsung KODEX Leverage exchange-trade fund, the largest of four such ETFs, have climbed 74 percent to 2.9 trillion won ($2.7 billion) on Oct. 17 since the end of August, according to exchange data. Samsung Asset Management Co.’s bear-market equivalent has fallen 61 percent to 231 billion won in the same period.

How we can prevent another financial derivatives disaster
Eleanor Bloxham – Fortune
In September, one of the top hospitals in Texas (ranked 15 out of 620 by U.S. News and World Report) sent home a Liberian patient with a 103-degree temperature without even considering the Ebola virus. Despite 38 years of knowledge about the virus and its risks, U.S. hospitals and the CDC are unprepared for the real-world consequences of an Ebola crisis on national soil.
What is the possibility that now, six years after the financial crisis, banks and regulators will be able to stop the next financial contagion in its tracks? The short answer: slim to none. But that doesn’t mean we should give up.
***SR: Oh, so this is not a story about Ebola.

Yes, Market Volatility Is a Job-Killer
Nick Timiraos – WSJ
That study examined global market volatility over the past four years and its effect on domestic job growth. The study used the Chicago Board Options Exchange CBOE Market Volatility Index, known as the VIX, to gauge stock-market volatility as a proxy for uncertainty.


BATS Chi-X Europe Expands Into Turkish Stocks
Press Release – BATS
BATS Chi-X Europe (BATS), Europe’s largest stock exchange, is to offer trading in Turkey’s most liquid stocks from 3rd November 2014.
The addition of BIST30 index names means that BATS will now offer trading across sixteen of Europe’s most liquid and active markets, the greatest breadth of any exchange in the region.
The move follows significant customer demand to trade Turkish securities – the market is one of the fastest growing in Europe with €319bn traded in 2013 – on a low-cost, efficient pan-European exchange. Furthermore, new capital markets legislation in the country should increase competition among trading venues.
http://jlne.ws/1opobaJ (PDF)

Nadex Launching 20-Minute Binary Options In November
Darrell Martin – Benzinga
Nadex continues to amaze the people who are eager to trade binary options. They set the standard by being the only retail focused regulated binary exchange in the United States covering indices, Forex and commodity binary options. They have full transparency in pricing while protecting the anonymity of the trader from the other side. In September of this year, Nadex expanded internationally opening to traders residing in Canada, Mexico and the US Territories.

Regulation and Enforcement

SEC Defends Practice of Steering Cases to Judges It Appoints – Law Blog
Jacob Gershman – WSJ
The Securities and Exchange Commission is increasingly steering tougher cases to hearings in front of the agency’s appointed administrative judges rather than taking them to federal court, according to a front-page report in Tuesday’s Wall Street Journal.
The reason? Administrative proceedings, compared to jury trials, “offer a streamlined process with sophisticated fact finders,” says Andrew Ceresney, the SEC enforcement chief.

Regulators Police Swaps Markets
Markets Media
Manipulation and market abuse have been a long time priority of regulators, including the U.S. Commodity Futures Trading Commission, and now that focus has turned to potential abuse in the swap markets. Such attention creates regulatory risk for swap market participants, where it hadn’t existed previously.

4 Banks, Including JPMorgan, Fined in Europe Over ‘Cartel’ Behavior
Dealbook – NY Times
The European Commission on Tuesday fined four major financial institutions 93.9 million euros, or about $119.9 million, over two types of activity that it deemed as cartel behavior.
In one case, the European Commission fined JPMorgan 61.7 million euros ($78.7 million) for manipulating the Swiss franc Libor benchmark interest rate in an “illegal bilateral cartel” with the Royal Bank of Scotland. R.B.S., however, was granted immunity and avoided a fine of EUR110 million after revealed the existence of the cartel to the commission.
***SR: Most fines reduced or avoided, no admission of wrongdoing…so it goes.

New York Fed Faulted in ‘London Whale’ Case – WSJ
Ryan Tracy – WSJ
The Federal Reserve Bank of New York failed to examine J.P. Morgan Chase & Co.’s investment unit ahead of the bank’s 2012 “London Whale” trading debacle, despite a recommendation from other Fed supervisors that they look at the unit involved in the trades, according to a new report.


CME Rule 575 Market Abuse Solution Identifying Disruptive Activity Launched Ahead Of FIA Expo
Press Release – R3COGNITION (via MondoVisione)
London’s leading financial IT development powerhouse, has launched an innovative CME Rule 575 IT solution. Its market abuse solution enables derivatives trading organisations to pinpoint the disruptive practices prohibited by the new CME rule that came into force on 15 September 2014. R3COGNITION is launching its solution to the North American market at the 30th Annual Futures & Options Expo in Chicago.


U.S. Stocks Are Best
Jim McDonald – Barrons
While investor focus in recent years has centered on the outlook for monetary policy, the collective gaze is increasingly turning toward the prospect of sustainable economic growth. The global economy seems to have lost some momentum in recent months, and the concerns center around Europe. European Central Bank (ECB) policy has been effective in improving financial conditions across the euro zone, but the transmission of benefits to the real economy remains elusive.

Options Education

The Covered Call: The Baseball Will Certainly Find You
Larry Shover – Fox Business
Baseball has a saying, “The ball will certainly find you.” Meaning that the one time you are playing out of position, playing hurt or not at full concentration, inevitably the ball will be hit to you – at the most crucial moment – causing embarrassment for you and misery for your teammates.
This old saying can be equally – almost symphonically – applied to options trading. Be certain that volatility will inevitably strike when you are not ready, over extended, or not thinking clearly in terms of risk and objectives. Be ready at all times as that “rare event” – both good and bad could occur when you are least prepared.
***SR: Yes, that is why I stopped playing baseball.

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