BATS to file for second U.S. options exchange
Exchange operator BATS Global Markets said on Thursday it plans to open a second options bourse in November as it tries to capture a larger share of the U.S. options market.
BATS Global Markets said it will file an application on Thursday with the U.S. Securities and Exchange Commission to launch a new exchange called EDGX Options, an addition to its existing BATS Options platform.
***DA: With ISE up to three exchanges, everyone else needs to at least have two.
Launch of stock index futures offers new tools for short selling
Gabriel Wildau – Financial Times
Amid a run-up in Chinese stock prices that has sparked warnings of a bubble, two new derivative products that offer investors tools to take bearish bets on the market debuted in Shanghai on Thursday.
Exactly five years after the launch of mainland China’s first equity futures contract, based on the large-cap CSI 300 index, new futures products based on the CSI 500 and Shanghai Stock Exchange 50 began trading on Shanghai’s China Financial Futures Exchange. The move follows February’s rollout of equity options based on the SSE 50.
***DA: Still one impediment to short selling – the risk of getting one’s face ripped off by short selling into a market that has gone vertical.
TCS Supplants Infosys as India Options Bellwether on Results
Santanu Chakraborty – Bloomberg
Tata Consultancy Services Ltd. is supplanting rival Infosys Ltd. as traders’ bellwether for the Indian earnings season, sending the cost of options on the nation’s biggest software company near a three-month high.
While Infosys has traditionally been the first major Indian firm to report quarterly results, TCS is announcing earnings before its competitor on Thursday. That’s spurring traders to shift their wagers, with open interest on TCS options climbing to more than twice the level of Infosys. Implied volatility on the contracts, the key gauge of prices, rose to the highest since Jan. 13 this week.
***DA: The Iowa Caucuses of India’s equity market.
Does This VIX Signal Indicate Trouble Ahead?
Adam Warner – Schaeffer’s Investment Research
The VXV/VIX ratio is over 1.2, but that’s no reason to panic.
A ‘flash crash’ or two gives needed jolt
Ralph Atkins – Financial Times
“I was flabbergasted, I could not believe it.” The veteran portfolio manager at a top US fund was this week recalling the US Treasury “flash crash” exactly six months ago, when yields in the world’s largest government debt market swung wildly in a matter of minutes.
Statistically, such events happened only once every 3bn years, Jamie Dimon, chief executive of JPMorgan Chase, noted recently (although he agreed such claims made you doubt the worth of statistics).
***DA: That does not make sense to me, since we only have a few years worth of data points in which to assess market dynamics in the algorithmic age. Not sure how many years will lapse between flash crashes, but I am a seller at 3 billion.
There’s a slow meltup going on
Bob Pisani – CNBC
Wake up! There’s a slow meltup going on.
I know, another snoozefest. Low volume, the CBOE Volatility Index at 13 and change, near the lowest level of the year.
But look around you. Earnings season has begun, but instead of falling apart because of the negative earnings environment, the S&P has rallied 1.25 percent since Alcoa reported earnings after the close last Wednesday.
China Just Made It Easier to Bet Against Its Priciest Stocks
Betting against China’s most expensive stocks just got a whole lot easier.
Futures on the small-cap CSI 500 Index started trading on Thursday, giving investors a cheaper way to wager on declines in shares valued at more than twice the level of the benchmark Shanghai Composite Index. The CSI 500 has surged 47 percent this year, versus a 26 percent gain for the Shanghai measure.
Virtu or Vice? Fund Managers Face Dilemma Over Speed-Trading IPO
Leslie Picker and Sam Mamudi – Bloomberg
Virtu Financial Inc. has plenty of attributes that IPO investors should clamor over: The high-frequency trader is profitable, growing and should benefit from an uptick in stock market volatility.
There’s one major sticking point. Some can’t get over the idea lionized by Michael Lewis’s book “Flash Boys” — that the split-second trading strategies deployed by Virtu hurt the very fund managers who buy new shares.
***DA: Pfft. In the end, the stock price will represent the present value of expected future cash flows, no different than any other stock.
BATS to Launch Second U.S. Options Exchange
Press Release – BATS
BATS Global Markets (BATS), a leading operator of exchanges and services for financial markets globally, today filed rules to launch a second options exchange – EDGX Options – with the Securities and Exchange Commission (SEC). BATS, operator of the fastest-growing U.S. options market today, is planning to launch the new exchange in November 2015, pending SEC approval.
EDGX Options will be based on a customer priority/pro rata allocation model and is designed to complement the existing fast-growing BATS Options market, which will now be called BZX Options. The launch of EDGX Options will enable BATS to compete for a new segment of order flow that does not trade on the price-time markets that BATS currently operates.
‘Groundhog Day’ Sets Tone for Assault on Europe’s Futures Giants
Matthew Leising and John Detrixhe – Bloomberg
Working to set up a futures exchange to compete with established rivals can sometimes resemble the plot of “Groundhog Day,” the movie in which Bill Murray’s character keeps repeating the same day until he gets it right.
With a nod to the film, a group of Wall Street executives convened in 2013 to plan a new European market they’ve dubbed “Project Rita” after the character played by Andie MacDowell who is pursued by Murray in the movie. In conjunction with London Stock Exchange Group Plc, the consortium aims to steal market share from established venues owned by Intercontinental Exchange Inc. and Deutsche Boerse AG.
NLX talks with founders over trading push
Luke Jeffs – Futures & Options World
Exchange has seen volumes fall to a fraction of their levels six months ago
Nasdaq NLX has opened talks with its founders over the terms of their participation in the European futures exchange in a bid to revive trading volumes after a period of slower activity.
NLX, which has seen this year volumes fall to a fraction of their levels six months ago, has started talks with its 15 founding participants, made up of investment banks, clearing broker and prop traders, about the commercial terms of their involvement in the venture.
ICE Brent Crude Futures Achieves Open Interest Record, Surpasses 2 Million Contracts
Press Release – ICE
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, today announced that ICE Brent Crude futures achieved an open interest record of 2,006,759 contracts on April 15, 2015. The previous open interest record was set on April 2, 2015, with 1,992,780 contracts at ICE Futures Europe.
As of April 15, average daily volume for ICE Brent Crude Futures was 817,569 contracts year to date, up by 37% compared to the same period last year. Introduced in 1988, the Brent futures contract has continuously evolved to reflect changing market fundamentals and continues to meet the hedging requirements of market participants across the globe.
Meet Alt-Options: Profit on Bitcoin Volatility without Buying a Single Coin
Joe, Marco, Andrei and Kevin are students and alumni of Boston University by day, and they are building Alt-Options, a solution to the liquidity challenges in virtual currency markets, by night. Joe was a derivatives trader prior to school, and Marco dabbled in trading and learning about new virtual currencies such as bitcoin.
The Hedge Bomb – Why Hedging Will Not Save Shale Oil
Pedro de Almeida – Seeking Alpha
For a producer (and seller) of a commodity, hedging is a relatively simple idea. You have a company. Let’s say, a company that extracts oil from shale formations, and then sells it. At a given time, the selling price for your product (crude oil, mainly) is around $100, and you think that is a fair price – you hope your company will prosper selling at that price. No, strike that, you know your company will prosper (see Note 1, in the end of the article).