Bats Says Exchange Fee Cuts Would Save $850 Million for Traders
Sam Mamudi – Bloomberg
Another leading stock exchange operator has a plan to improve the $24 trillion U.S. equity market.
Bats Global Markets Inc. suggested a reduction in fees for buying and selling some stocks that could produce industry savings exceeding $850 million for the most-active shares, according to a statement today. The Lenexa, Kansas-based company also said there should be a review of how brokers report where they send stock orders and what standards they use in making those decisions.
***SR: Also see the BATS press release below under “Exchanges”
New Year’s U.S. Stocks Slump Seen Overdone in VIX Futures
Callie Bost and Lu Wang – Bloomberg
U.S. equities are starting the year with the worst losses since 2008. Trading in a corner of the market where speculators bet on future volatility suggests the pain will prove temporary.
The Standard & Poor’s 500 Index has plunged 4.2 percent in five days and is down 2.7 percent since the end of 2014, the biggest retreat since it fell 3.9 percent in the financial crisis. Prices for contracts tied to levels of expected stock turbulence in months through September show traders expect this month’s swings to calm down as the year progresses.
***SR: Everything’s temporary.
Southeast Asia derivatives trading hit record high
Jeremy Grant – Financial Times
Derivatives volumes on the three biggest exchanges in Southeast Asia hit record highs in 2014 in a sign that the region’s capital markets are diversifying beyond equity capital raising and trading into offering risk management and hedging.
The development also shows that the bourses are managing to tap a growing middle class of domestic investors who are becoming familiar with futures trading, which is riskier than equities but can offer higher returns.
Not Everyone is Betting on Higher Volatility
Adam Warner – Schaeffer’s Investment Research
If we all got a dime for every call for higher volatility this year, we’d all have a lot of dimes. I definitely enjoy poking fun at all the calls — and Bloomberg’s piece here is full of some more. But in all fairness, this opinion sounds pretty reasonable:
***DA: Contrary viewpoints on price and direction are what makes markets.
Oil Investors Pour Most Money Into Funds in 4 Years
Moming Zhou – Bloomberg
Investors poured the most money in more than four years into funds that track crude oil on speculation prices will rebound from a five-year low.
The four biggest oil exchange-traded products listed in the U.S. received a combined $1.23 billion in December, the most since May 2010, according to data compiled by Bloomberg. Another $109.9 million was added this month through Jan. 5.
***DA: Trying to catch a falling knife…
Open Letter to U.S. Securities Industry Participants
Press Release – BATS
Dear industry participant,
BATS believes there is consensus among market participants for several market structure initiatives that will maintain the healthy market quality gains investors have realized over the past decade, while achieving further optimizations to our equity market in the years to come. We are seeking feedback and support from a wide array of market participants, and we offer this set of suggestions as a starting point for constructive discussion.
The Chicago Stock Exchange Is Branching Out to Cater to the Underserved
John D’Antona Jr. – Traders Magazine
It gets no respect.
Call it the Rodney Dangerfield of stock exchanges – the Chicago Stock Exchange. Oft forgotten amid the happenings of its Goliath big brothers, NYSE Euronext, NASDAQ OMX and BATS/Direct Edge, the nation’s only remaining independent stock exchange, also known as CHX, is reinventing itself. Real change is underway in the Second City.
Regulation and Enforcement
Derivatives users not ready for margin regulations
Asset Servicing Times
Derivatives end users are concerned about their ability to meet new margin requirements for non-cleared derivatives, according to a survey by the International Swaps and Derivatives Association (ISDA).
Of 400 respondents, one third were unsure if they have to comply with the new requirements. While 36 percent knew they had to comply, of these, 65 percent expressed concern about meeting the requirements.
Non-cleared derivatives margin rules worry market
Banks and broker-dealers are uncertain whether they will be able to meet new collateral requirements for non-cleared derivatives, according to a survey from the International Swaps and Derivatives Association (ISDA).
Swap Markets Debate Anonymous Trading in SEFs
Ivy Schmerken – Wall Street & Technology
Capital Markets Outlook: With more than a year of SEF trading up and running, swap participants are looking at standardized Market Agreed Upon or “MAC” swap products, to fuel anonymous order book trading next year.
Platform Review: Nadex Exchange Traded Binary Options in the US
It’s been a while since Nadex became the first legally operating binary options exchange in the US. Ever since the CFTC took a tough regulatory stance against the binary options industry, seeking to make the market transparent and, most of all, real, with proper contracts transacted on exchanges, there’s been a few additions to the market.
OneChicago preps migration off CBOE feed network
Single stock futures exchange OneChicago is migrating its multicast market data feed from the Chicago Board Options Exchange’s CBOE Financial Network to a proprietary network, as part of its move away from CBOE-hosted trading and data platforms to in-house technologies.
Hedge Against a Volatile Year with VIX ETFs
Max Chen – ETF Trends
With the equities markets in an ongoing rout, exchange traded funds that track the CBOE Volatility Index, or VIX, are capitalizing on the market weakness as traders hedge against further swings.
Equity investors can utilize VIX-related exchange traded products like the iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX), a VIX-related exchange traded note, and the ProShares VIX Short-Term Futures ETF (NYSEArca: VIXY) to track market volatility. VXX was up 5.1% Tuesday while VIXY was 4.9% higher. Over the past month, VXX jumped 27.2% and VIXY increased 27.6%.
Is Rising Stock Market Volatility Bullish?
Ronald Delegge – Seeking Alpha
When stocks go up, volatility goes down and vice versa. While this historically inverse relationship plays out most of the time, there’s been a significant disconnect as of late.
The chart below illustrates this disconnect. As you can see, over the past three months, the S&P 500 (black line) has gained around 2.7% yet the S&P 500 volatility (ChicagoOptions:^VIX) (dotted line) has surged almost 37%. Shouldn’t the VIX be declining when stocks (NYSEARCA:IVV) are rising? What’s going on?