JLN Options: CBOE considers reducing trading hours for VIX futures; Hedge Fund VIX Wagers Tip Toward Turbulence After Selloff; U.S. options exchanges say new rule threatens to hurt investors

Oct 31, 2014

Lead Stories

CBOE considers reducing trading hours for VIX futures
Reuters
CBOE Holdings may trim trading hours at its futures exchange after suffering glitches that disrupted activity this month, the company’s president said on Friday.
The CBOE Futures Exchange experienced problems related to extended market hours for futures on its CBOE Volatility Index, or VIX, as trading volumes spiked, CBOE President Ed Provost said on a call to discuss third-quarter earnings.
http://jlne.ws/1s144LX
***JK: Interesting turn on trading hours.

Hedge Fund VIX Wagers Tip Toward Turbulence After Selloff
Callie Bost – Bloomberg
One of the surest bets in the U.S. stock market over the last 2 1/2 years, speculating on tranquility, is being abandoned.
For the first time since 2011, the balance of futures (VIX) owned by hedge funds and other large speculators on the Chicago Board Options Exchange Volatility Index represents wagers that equity turbulence will increase, according to data compiled by the Commodity Futures Trading Commission. Managers added long holdings after a selloff that sent the Standard & Poor’s 500 Index down as much as 9.8 percent in the 26 days ended Oct. 15.
http://jlne.ws/1pbT1nH

U.S. options exchanges say new rule threatens to hurt investors
John McCrank, Reuters
U.S. equity options exchange operators warned on Thursday that a new rule to be implemented on Jan. 1 aimed at making sure banks have adequate capital levels could significantly raise costs for many investors that trade options.
The rule, known as the Collins Amendment, is part of the 2010 Dodd-Frank Wall Street reform law. While aimed at making sure banks keep capital and credit risks in line, the rule would also apply to the options market-making arms of the banks, which would be required to measure credit risks more strictly than many do now.
http://jlne.ws/1xIMPlW

Bank of Japan has trick for yen and treat for U.S. equities
Andrew Wilkinson – Futures Magazine
With the ink not even dry at the bottom of this week’s FOMC statement, the Bank of Japan has caught global investors asleep at the wheel by boosting its liquidity injection, sending global stocks higher and the yen sharply lower. By all accounts the event of the week had been billed as the Fed’s pontification over whether to wrap-up its stimulus program or perhaps draw it out through year-end on account of recent financial market volatility.
http://jlne.ws/1pbSwtD

Halloween treat as stock market soars
Heather Long – CNN Money
Take a look at the headline numbers: The S&P 500 is now up about 9% for the year. No, that’s not the 30% gain we saw in 2013, but it’s still very solid.
Those who stayed in the market despite the turmoil earlier in the month are having an extra Happy Halloween.
The Nasdaq is up nearly 11% for the year, and the Dow is 4.5% higher.
http://jlne.ws/1pbTvu5

More investor activism expected, but returns likely lower – survey
Reuters
Activist investment campaigns such as the ones conducted by Carl Icahn, William Ackman and Daniel Loeb are expected to pick up in the next one to two years but returns at activist funds are expected to be less robust than before, new data show.
A survey by law firm Schulte Roth & Zabel and corporate financial news and analysis company Mergermarket released to clients this week shows that 98 percent of all respondents expect increased activism, with more than half saying the uptick will be “substantial.”
http://jlne.ws/1pbUKJM

Oil Bears: Smart Money, or Contrarian Signal?
Adam Warner – Schaeffer’s Investment Research
Even though the market has recovered most of its gains, oil really has not. The rolling crude near-ish future (now December) peaked at $107.68 in late June, and then dropped to just under $80 by mid-October. It bottomed at $79.44 on Monday, and is still hovering near $80.
And, all that punk action has of course transferred into stocks in the industry, and lately has sparked a flood of put trading.
http://jlne.ws/10aRIt2

Emerging-Market Serenity Offsetting Brazilian Turmoil
By Joseph Ciolli, Bloomberg
The anxiety over emerging-market stocks has subsided, and even Brazil’s election results are just a blip in the larger world of developing countries.
Seven days after climbing to a 16-month high, the Chicago Board Options Exchange Emerging Markets ETF Volatility Index, used to gauge investor trepidation, had its biggest weekly drop in almost three years. The gauge ran off eight consecutive days of declines, the longest streak on record.
http://jlne.ws/1zmKp0J

Option Volume Impacted By CTA And OPRA Data Issues
Henry Schwartz – The Options Insider
Option flow averaged nearly 20K contracts per minute today, until 1:36PM ET when exchanges reported quote problems and option volume collapsed to near zero for several minutes.
http://jlne.ws/1pbT9n5

Exchanges

CBOE Profit Rises 17% as Trading, Fees Increase
Record Trading Volume Seen in for October in VIX Options
Michael Calia, The Wall Street Journal
CBOE Holdings Inc. said its profit for the most recent quarter rose 17% as trading activity picked up, along with fees.
The company’s profit topped analysts’ expectations, but revenue fell just shy of them.
The firm, which owns the Chicago Board Options Exchange, said average daily volume rose 7.1% to 4.95 million contracts during the period. Total trading volume increased 7.3% to 316.9 million.
http://jlne.ws/1xIL8VB

CBOE Holdings, Inc. Reports Strong Results For Third Quarter 2014
CBOE Press Release
Third Quarter 2014 Financial Highlights
— Operating Revenue of $148.9 Million Compared With $136.7 Million, Up 9 Percent
— GAAP Net Income Allocated to Common Stockholders of $48.1 Million Compared With $41.0 Million; Diluted EPS of $0.57 Versus $0.47, Up 21 Percent
— GAAP Operating Margin Increases 40 Basis Points to 50.4 Percent
CHICAGO, October 31, 2014 – CBOE Holdings, Inc. (NASDAQ: CBOE) today reported net income allocated to common stockholders of $48.1 million, or $0.57 per diluted share, for the third quarter of 2014, compared with $41.0 million, or $0.47 per diluted share, in the third quarter of 2013. Operating revenue for the quarter was $148.9 million, up 9 percent compared with $136.7 million in the third quarter of 2013.
http://jlne.ws/1zmMRV1

Nasdaq drops OMX name from branding
John Bakie – The Trade
Nasdaq has removed OMX from its branding almost seven years after its acquisition of the Nordic exchange group.
The group will now simply be known as Nasdaq, a move aimed at reflecting its growing global presence.
“In the last 11 years, Nasdaq has moved from a private company that ran one US equities exchange to a company that powers 1 in every 10 securities trades on the planet,” a Nasdaq spokesperson told theTRADEnews.com
http://jlne.ws/108DCIE

Disaster Averted in NYSE Stocks as Backup Feed Kicks In
By Nick Baker, Callie Bost and Sam Mamudi, Bloomberg Businessweek
Securities professionals around the country endured a rough few minutes yesterday as a feed for carrying prices and quotes for thousands of stocks on the oldest American equity exchange misfired.
Traders were startled just before 1:30 p.m. when the New York Stock Exchange reported an “ongoing issue” with its securities information processor, the conduit for data underpinning trades and quotes. Ten minutes later the malfunction was reported resolved as backup systems activated.
http://jlne.ws/1xILDza

Regulation and Enforcement

U.S. options exchanges say new rule threatens to hurt investors
John McCrank – Reuters
U.S. equity options exchange operators warned on Thursday that a new rule to be implemented on Jan. 1 aimed at making sure banks have adequate capital levels could significantly raise costs for many investors that trade options.
The rule, known as the Collins Amendment, is part of the 2010 Dodd-Frank Wall Street reform law. While aimed at making sure banks keep capital and credit risks in line, the rule would also apply to the options market-making arms of the banks, which would be required to measure credit risks more strictly than many do now. Market makers post buy and sell orders on exchanges so that securities are easier to trade, profiting from the spread between the bid and the offer.
http://jlne.ws/10aPLNc

SEC Warned Before About Early Release Weak Spot
Scott Patterson and Ryan Tracy – WSJ
Securities and Exchange Commission officials were tipped off earlier this year that some traders could be getting regulatory filings shortly before they’re published on the agency’s website, according to people familiar with the discussions.
The Wall Street Journal reported that rapid-fire traders can get access to market-moving documents seconds ahead of other investors through the SEC’s system for distributing company filings, according to pair of recent academic report.
But some officials at the SEC were likely already aware of potential dissemination issues with its system.
http://jlne.ws/10aQdLj

MF Global agrees to settle platinum, palladium manipulation claims
Nate Raymond – Reuters
The failed MF Global Holdings Ltd and its broker-dealer unit have agreed to settle class action lawsuits accusing them of manipulating platinum and palladium prices.
The proposed settlements, disclosed in court papers filed late Wednesday in Manhattan federal court, call for plaintiffs to receive nearly $21.1 million in allowed claims against the broker-dealer in its liquidation proceeding.
http://jlne.ws/1pbUz0X

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