Observations & Insight

Editor’s Note: Due to a company meeting, there will not be a JLN Options newsletter tomorrow, July 2, nor will there be one Friday, July 3, in light of Independence Day.


(CTA) Call To Action: Bryan Johnson Calls For Strategic, Practical Marketing For Managed Futures


Marketing is one of the toughest parts of running a managed futures firm. It takes time, money and is often outside the skill set of most CTAs. Bryan Johnson of Johnson & Co. has spent the past five years helping and teaching fund managers about its importance and how to do it. He said CTAs may in the perfect spot right now to offer managed futures and expand their businesses.

“Marketing has become more critical than it been ever before,” said Johnson, who sat down with John Lothian News at CTA Expo New York. “There’s more noise and there are more people who are misinformed than are appropriately informed. And that’s all that marketing really is – communicating, educating and informing other people about not only your space but who you are, what your processes are and what your performance is like.”

Watch the video »

Lead Stories

Best of Times Turn Sour as Europe Quarterly Stock Gains Fade
Inyoung Hwang and Roxana Zega – Bloomberg
As global investors sped into Europe’s rally at the end of March, Rupal Bhansali was switching gears.
Concerned bullishness on exporters was too rampant, the chief investment officer of international and global equities at Ariel Investments LLC took profits on the highest-flying stocks and sought safety in defensive equities. It’s a decision others wish they’d made after the events of the last two months.
Anyone lured to Europe after the easy money policies of Mario Draghi has been bathed in volatility for months, most recently as Greece’s bailout broke down. Swings in the Stoxx Europe 600 Index reached the highest in three years as practically everything that wasn’t a phone company or a household-goods maker dropped.

Mid-Year Recap – Vol-selling Indexes Up; Big Jump for VIX and VVIX on June 29
Matt Moran – VIX Views
A recent Bloomberg story noted —
“The S&P 500 drifted to an all-time high on May 21, before the Greece crisis overshadowed signs that a first-quarter slowdown in economic growth would prove transitory. The benchmark index tumbled 2.1 percent Monday, the most since April 2014 and erasing gains for the year, as Greece surprised investors by shutting lenders and imposing capital controls after debt negotiations broke down.”
Below are four key points regarding volatility and options-based indexes.

S&P 500 Index Falls in Quarter Amid Worst First Half Since 2010
Jennifer Kaplan and Annelise Alexander – Bloomberg
While the battle of whether stocks would finish the quarter up or down wasn’t settled till the final moments, one statistic was clear all day: the Standard & Poor’s 500 Index was destined for its worst first half to a year since 2010.

The Meaning of Monday’s 90/90 Down Day
Karee Venema – Schaeffer’s Research
Heading into this week’s trading, it had been 132 days since the last 90/90 down day signal on the Desmond volume/price indicator — with Monday’s flash marking the first one of 2015. In other words, the S&P 500 Index (SPX) saw panic selling in which downside volume equaled 90% or more of the total upside volume plus downside volume, and the number of points lost equaled 90% or more of the total points gained and lost.

Despite rally, traders bet on more volatility
Amanda Diaz – CNBC
Volatility surged to a four-month high this week as the Greece debt crisis weighed on investors. And even as the market found its footing on Tuesday, some traders are still betting that fear is here to stay.

Nasdaq advocates for U.S. stock exchange pricing reform
John McCrank – Reuters
Nasdaq OMX Group said on Tuesday that U.S. equities exchange rules should be changed so that the price of trading a stock is based on the how actively it trades, echoing a similar proposal by rival exchange operator BATS Global Markets.

The Aussie Dollar, and Commodities, Could Be Poised for a Rebound
Carley Garner – TheStreet
The Australian dollar is often referred to as the “commodity currency” because of its close ties to the value of assets such as crude oil, copper, natural gas, platinum and even cocoa. In fact, the positive correlation between the Aussie and the aforementioned commodities ranges from 85% to 90%. Simply put, as goes the commodities, so goes the Aussie.


Energy Derivatives Trading Not Enough To Offset Low Volumes For IntercontinentalExchange
Derivative trade volumes for IntercontinentalExchange Group have been low in the second quarter thus far. Limited trading activity for interest rate and equity derivatives has overshadowed the growth witnessed in trading of energy products including oil and natural gas derivatives. The exchange operator reported an 8% year-over-year decline in average daily trade volume to just under 5 million contracts per day through May. If this weakness persists, there could be a downside to our $222 price estimate for ICE’s stock, which is in line with the current market price.

CME Group: updated performance bond requirements
FTSE Global Markets
The CME Group has issued its performance bond requirements, which will be effective after close of business today. In this advisory, the CME says there are changes to the Short Option Minimum and/or Volatility Scan Range.

CBOE Volatility Index Rises 19.2 PCT for the Quarter; Largest Quarterly Gain Since Quarter Ending Sept 2014

Intercontinental Exchange Announces ICE Data Services Appointments; Lynn Martin Named President and COO, David Goone Named Chairman
Press Release
Intercontinental Exchange, the leading global network of exchanges and clearing houses, announced two appointments at ICE Data Services, Intercontinental Exchange’s global data business comprising ICE and NYSE’s exchange data, analytics and connectivity services.

OCC Cleared Contract Volume Declined 3% in May
Press Release
OCC, the world’s largest equity derivatives clearing organization, announced today that cleared contract volume in May reached 308,639,215 contracts, a 3 percent decrease from the May 2014 volume of 319,742,239 contracts. OCC’s year-to-date average daily cleared contract volume is down 7 percent from 2014 with 16,144,143 contracts in 2015.

Average Daily Volume Of 11 Million Contracts At Eurex Group In June
Press Release
In June, the international derivatives exchanges of Eurex, part of Deutsche Börse Group, recorded an average daily volume of 11.0 million contracts (June 2014: 8.0 million). Of those, 8.6 million were Eurex Exchange contracts (June 2014: 6.0 million), and 2.4 million contracts (June 2014: 2.0 million) were traded at the U.S.-based International Securities Exchange, part of Eurex Group. In total, 189.8 million contracts were traded at Eurex Exchange and 52.7 million at the ISE in June.

MIAX Options Exchange Announces May 2015 Market Share Record and Volume Statistics
Press Release
MIAX Options Exchange announced today that in May 2015 it established a new MIAX monthly market share record with 7.56% of the overall equity options market share for the month. This new record surpasses the 7.29% mark established in April 2015. For the month of May 2015, MIAX executed over 20,800,000 million contracts. This equated to an average daily volume of over 1,040,000 contracts, or 2.7 times May 2014 volume.

EEX Trading Results Of June 2015 – Volume On The Derivatives Market For Power And Emissions Increased Significantly
Press Release
In June 2015, trading volumes on the power derivatives market of the European Energy Exchange amounted to 184.0 TWh. Compared to the same month in the previous year, the volume increased by 84 percent (June 2014: 99.9 TWh). In this context, EEX recorded volume increases in all markets. Especially in French (+387 percent) and Italian (+172 percent) power futures as well as in Phelix Options (+111 percent), the trading volume was significantly above the volume from the previous year.

Nasdaq OMX Nordic Trading Statistics June 2015
Press Release
Nasdaq today publishes monthly trade statistics for the Nordic1 and Baltic2 markets. Below follows a summary of the statistics for June 2015:
The share trading increased by 29.6% to a daily average of 2.917bn EUR, compared to 2.251bn EUR in June 2014. Compared to the previous month, May 2015, the daily average decreased by 10.3 %.

Tokyo Financial Exchange: Trading Volume In June 2015
Press Release
The trading volume of Three-month Euroyen futures in June was 186,136 and its average daily volume was 8,461. See the TABLE 1 for the composition of the trading volume.

Nasdaq Will Conduct Its Annual Election for Member Representative Directors on Wednesday, July 1, 2015
Press Release
The Nasdaq ExchangeSM will conduct its 2015 Annual Election for Member Representative Directors on Wednesday, July 1, 2015.
Three Board seats for a one-year term of office will be filled.

BX Will Conduct Its Annual Election for Member Representative Directors on Wednesday, July 1, 2015
Press Release
BX will conduct its 2015 Annual Election for Member Representative Directors on Wednesday, July 1, 2015.
Three Board seats for a one-year term of office will be filled.

Regulation & Enforcement

More haste, Less speed
Futures & Options World
At the G20 summit in Pittsburgh in 2009, representatives of the G20 nations committed to fundamental reforms of the derivatives market, agreeing that standardised derivative contracts should, by the end of 2012, be traded on exchanges or electronic trading platforms and be cleared through central counterparties. Now, however, almost six years after the summit, and fast approaching the three-year anniversary of the year-end 2012 deadline, we are still some way from full-scale implementation of this commitment and even further away from it being applied in a consistent and coordinated manner across different jurisdictions.

SEC’s panel still at a loss over how to fix ‘broken market’
Francine McKenna – MarketWatch
Equity markets are “broken,” a “complete mess,” or maybe even “rigged.” Luis Aguilar, a commissioner on the Securities and Exchange Commission, was quoting others when he used those words in remarks to the inaugural meeting of the SEC Equity Markets Structure Advisory Committee on May 13. But his warnings were no less emphatic. Almost five years to the day since the so-called flash crash, the SEC and key market players were finally gathered to discuss, and inevitably debate, the causes and responses to a significant decrease in investor and regulator confidence in the markets. It’s been a long road getting to this point.

Monetary Authority Of Singapore Consults On Proposed Regulations For Mandatory Clearing Of OTC Derivatives
Press Release
The Monetary Authority of Singapore (MAS) issued for consultation today proposed regulations for central clearing of over-the-counter (OTC) derivative contracts. Central clearing seeks to mitigate the counterparty credit risks inherent in OTC derivatives trades.


Fidessa Launches New Next-Gen DMA Platform
John D’Antona Jr. – Traders Magazine Online News
Fidessa is bringing the equity market traders a new hyper-fast direct market access system.
Fidessa group, a provider of trading technology, announced the launch of its new low-latency DMA platform that provides brokers with high-performance, scalable and consistent access to global equity and derivatives markets. According to the firm, the new system is built on the firm’s latest next-generation technology.

BT Creates Innovation In Financial Markets With Fintech Start-Ups Initiative
Press Release
BT today announced a new drive to accelerate innovation in global financial markets by bringing fintech start-ups onto the BT Radianz Cloud, the world’s largest, secure networked financial community. The Radianz Cloud celebrates its 15th anniversary this year.


Greek Crisis Presents Rare Opportunity
John Zhang – Seeking Alpha
On Monday, markets plummeted around the globe as the fears of a Grexit materialized after Greek PM Alexis Tsipras called for a referendum to decide the country’s fate in the Eurozone. The apprehension regarding a Greek exit and what it might mean for other peripheral EU economies sparked a global downturn in equities, and a rally in safehaven assets such as long-dated US treasuries.

A fascinating statistic about recent selloff
Amanda Diaz – CNBC
The S&P 500 rebounded Tuesday after seeing its worst trading day of the year on Monday. And according to one strategist, history is pointing to even more short-term gains.
“Given Monday’s selloff, I’m looking for ways to profit from a potential pop,” options expert Stacey Gilbert said Tuesday on CNBC’s “Trading Nation.”

GBP/JPY Binary Options Trading – July 1st 2015
The GBP/JPY has retreated from its most recent intra-day high of 195.880 which was reached on June 24th 2015. This level marked a false breakout above its horizontal resistance level and created a double top formation with its previous intra-day high of 195.835 recorded on June 18th 2015. The GBP/JPY started this trading week with a gap to the downside which took this currency pair back to its horizontal resistance level from where an increase in downward momentum is expected. Binary options traders interested in put options trading can take advantage of the attractive downside in the GBP/JPY.

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