Observations & Insight
Reaching Out: Middle East Exchanges (Almost) Ready and Waiting
By Jim Kharouf, JLN
The World Federation of Exchanges Qatar 2015 Annual Meeting kicked off on Tuesday in Doha. It’s an interesting place as the Qataris attempt to win the award for city with the most construction. If China still holds the lead in terms of construction cranes, Qatar cannot be far behind, as it continues to prepare for the World Cup Soccer event now just seven short years away. But it’s more than Doha’s 24/7 construction zones. This is a country that is striving to compete as a state-of-the-art commerce center, which includes the Qatar Stock Exchange.
Doha is a place with jaw-dropping growth, now boasting a population of 2 million people. Interestingly enough, it’s not so easy to find native Qataris, as just about everyone you meet is from somewhere else – cab drivers from Sudan, Pakistan and Bangladesh, local public relations staff from Egypt and elsewhere. It is a melting pot that creates a rather fun exercise when I ask, “Are you from Qatar?”
But this is what makes the WFE special in many regards. It’s an organization that has more than 60 exchanges in its membership and moves its annual meeting around the globe each year to locales that are worthy of more visibility. The Doha venue, held at the swanky new Kempinski Hotel, attracts some exchange executives one may never meet elsewhere, from the Palestine Exchange (yes, there really is a stock exchange there, since 1995) to the Amman Stock Exchange, Qatar Stock Exchange, multiple Dubai exchanges and Muscat Securities Market.
It’s where exchange execs can sit down and talk about the challenges, opportunities and partnerships ahead. All three appear to be in front of the Middle Eastern exchanges, which recently instituted cross listing rules for the regional exchanges – a step forward – but are also challenged by different regulatory, ownership and structural issues that have prevented the region from partnering much or uniting, a move that collectively would help attract regional and broader international investment.
Doha is far from the political strife that garners headlines from Syria, Israel and Iraq. But these political realities, whether they are close or not, are considered serious deterrents for investors. Whether it’s Dodd-Frank or European regulation, politics always impacts markets. Here the ripple effects of war and politics extend much further and are another element to deal with.
There is much more to say about the region, which will be covered more in depth soon.
Barclays Sees VIX Rebound With Risk Premium at Bull Market Low
Joseph Ciolli – Bloomberg
The U.S. stock market is quiet — too quiet.
One example is the price investors are paying for options on the Standard & Poor’s 500 Index, a value that is captured by the Chicago Board Options Exchange Volatility Index. At present, options dealers are charging so little for protection in equities that the VIX is trading at a six-year low compared with the actual volatility of the benchmark gauge.
The pitfalls of trading derivatives in Asia
FTSE Global Markets
The derivatives of markets of Asia are the destination of choice for many firms. Nonetheless, bear traps remain for the unwary, warns Lewis Richardson, Derivatives Business Development Manager at Fidessa.
Treasuries Volatility Drops Toward ’15 Low as Fed Seen Sidelined
Kevin Buckland and Jennifer Surane – Bloomberg
Treasuries investors are paring bets for price swings toward the lowest level this year as the odds recede for the Federal Reserve’s first interest-rate increase since 2006 to come by December.
Crazy Math, Illiquidity, and More Takeaways from the OptionMetrics Conference
Adam Warner – Schaeffer’s Research
Food for thought from the OptionMetrics conference
Citadel Securities Joins LCH.Clearnet’s SwapClear Service
John D’Antona Jr. – Traders News
LCH.Clearnet just landed its first non-bank clearing member for its swaps clearing system.
Citadel Securities, a global market-maker across the equities, futures, options, treasuries, FX and swaps markets, Europe-based subsidiary is now a clearing member of LCH.Clearnet’s SwapClear, an interest rate derivatives clearing service.
He was for the community
The Garden Island
Bill Porter, the E-Trade founder who funneled generous portions of his fortune into businesses and nonprofits benefiting organic farming, recreation and community building on Kauai’s North Shore, died Wednesday at his home in Princeville, surrounded by family and friends.
Convergex Taps Jon Simblist as the Managing Director of its Options Team
Jeff Patterson – Finance Magnates
Convergex, an agency-centric brokerage and trading related services provider, has appointed Jon Simblist to its Options team as its newest Managing Director, according to a Convergex statement.
New Cash-Settled Options on Russell 1000 Indexes – Large-cap, Growth and Value
Matt Moran – CBOE Options Hub
On October 20 CBOE launched new cash-settled options on three indexes –
Russell 1000 Index (RUI) – is preferred by many investment managers as a broad-based index that represents approximately 92% of the total U.S. equity market.
Russell 1000 Growth Index (RLG) – measures the performance of those Russell 1000 companies determined to have higher price-to-book ratios and higher forecasted growth values.
Russell 1000 Value Index (RLV) – measures the performance of those Russell 1000 companies determined to have a lower price-to-book value and lower expected growth values.
SGX’s Q1 profits rose 28% thanks to market volatility, Companies & Markets News & Top Stories
Chong Koh Ping – The Straits Times
Singapore Exchange (SGX) posted its best quarterly results in seven years thanks to the recent volatility in global markets.
The increase in market activities boosted earnings in the stock market operator’s securities business, while its derivatives unit continue to enjoy higher transaction volumes.
LME wants China to have price-setting input
Neil Hume – FT
The London Metal Exchange wants China to play a bigger role in setting prices and will work with a group of Chinese banks and brokers to encourage greater participation in its market, the biggest and oldest for industrial metals.
ISE Signs Memorandum Of Understanding With Korea Exchange
The Irish Stock Exchange (ISE) has signed a Memorandum of Understanding (MOU) with the Korea Exchange (KRX) which aims to foster a long term relationship between the exchanges.
World Federation Of Exchanges: Global Exchanges Publish Position Paper On Key CCP Risk Management, Recovery And Resolution Issues
The World Federation of Exchanges has published a position paper, setting out the views of global market operators and CCPs at its Annual Meeting in Doha, Qatar.
Regulation & Enforcement
High-Speed Traders Will Face CFTC Proposals to Curb Disruptions
Silla Brush – Bloomberg
The main U.S. derivatives regulator as early as next month will take its biggest step yet to impose new curbs on high-speed trading to limit market disruptions.
Timothy Massad, chairman of the Commodity Futures Trading Commission, said on Wednesday that the agency will lay out requirements for testing and supervising automated algorithms to ensure they can be stopped in emergencies. The CFTC’s proposals, more than two years in the making, will also probably mandate registration for standalone trading firms.
The Most Diverse S.E.C. Ever May Be Taking Shape
Julie Hirschfeld Davis – NY Times
President Obama on Tuesday announced he would nominate Lisa M. Fairfax to be a commissioner to the Securities and Exchange Commission, elevating a law professor who has studied shareholder activism after progressive groups lobbied intensely against naming a Wall Street insider.
MiFID II – the road ahead
David Lawton – Automated Trader
To say that MiFID II will change the way European markets operate in future is without doubt hugely underplaying the likely impact of this legislation. From new transparency regimes for equity and, for the first time, non-equity trading, regulation of new entities like OTFs and authorisation of firms utilising high-frequency trading, strengthened conduct of business requirements and disclosures, to caps on dark trading of equities and positions limits for commodity derivatives.
BME plans Mifid II trade reporting service
Futures & Options World
Spanish exchange group, BME, on Wednesday said it plans to launch a new transparency service to help clients comply with Mifid II post-trade reporting requirements, which are set to come into force in January 2017.
BME said the service would publish, in real-time, details of clients’ over-the-counter transactions in equities, fixed income, certificates, ETFs, structured finance products and derivatives.
Approaching Earnings Season with Caution
Bob Lang – CBOE Options Hub
The stock market’s comeback from the lows reached just two weeks ago is legendary stuff. Just a year ago the same type of rally occurred with some very powerful price action, a nearly 200 handle move in the SPX 500. This followed the threat of an ebola crisis, a steep drop of 9.4% from the all time highs amidst an unknown outcome that seemed to cause everyone to pause or even panic. Of course, that fear subsided quickly and that big rally caught many out of position. Bears hung on too long and were once again routed (though they had their day in the sun – no doubt).
The Secret All Spot Traders Should Know
James Friedman – Finance Magnates
Although options are complex financial instruments, traders who are new to options can use them for very simple, yet effective strategies: sell options to initiate limit and stop orders.
In using short options as limit orders, the sale of a naked put is used as a vehicle to get long spot at a predetermined price while earning time-decay. The first thing you must have is a platform that trades both spot and options in the same account.
The Volatility Index: Do You Need to Pay It Any Attention? — The Motley Fool
Many investors panic when market volatility increases, while other investors rejoice, as volatility often offers attractive buying opportunities. With this in mind, wouldn’t it be nice to have some idea of the kind of volatility we can expect in the market’s near term? Well, we can. There’s a volatility index that you can check out any time you’d like.
ALTSO Rocktoberfest Chicago, Thursday Evening, City Winery
Tickets to ALTSO’s 4th Annual Rocktoberfest-Chicago will be available for $200 (plus – buy 4 and get the 5th free) until noon on Thursday, October 22. Tickets will then be available at the door, beginning at 6pm, for $250. Be sure to check out our amazing lineup of performances and not to worry, we will also be broadcasting the MLB game for all you Cubbies fans.
***DA: Alas, they may need an asterisk by that comment about the Thursday Cubs game. Let us hope there is one.