Observations & Insight

Launch Day
by Doug Ashburn
Tuesday is apparently launch day in the options world. CBOE announces a new PM-settlement Mini-SPX, to replace the AM counterpart. We continue getting mileage out of Gemini-related launch puns with the announcement from ISE that it just added a third block of products listed on its secondary options platform. ASX is launching a new volatility contract, and Eurex and Vienna Stock Exchange move forward on their listing agreement. And, the U.S. equity market continues its launch into record territory, to the extent that the VIX is experiencing a rare rally-on-rally.

We kick off today’s newsletter with an update on another launch of sorts – a two-part video interview with CBOE’s Ed Tilly on his transition to CEO six months ago and his plans for propelling the company forward. 3-2-1-Liftoff!

Ed Tilly

Two-part Ed Tilly Interview
It has been half a year since Ed Tilly took over as CEO of the CBOE from Bill Brodsky, who moved to the newly created role of executive chairman. With six months under his belt, John Lothian News Publisher John Lothian sat down with him to talk about his new job, new initiatives from the CBOE and the challenges facing the industry.

WATCH: Getting Shorter: CBOE’s Ed Tilly Introduces Short-term VIX and Industry Taxes

WATCH: Taking the Reins: CBOE’s Ed Tilly Makes The Transition to CEO

Lead Stories

CBOE To Introduce Mini-SPX Options With PM Settlement
The Options Insider
On Tuesday, the Chicago Board Options Exchange, Incorporated (CBOE®) announced the Exchange will list a Mini-SPX Index option (options symbol: XSP) contract with a new PM-settlement feature beginning on Tuesday, November 5.
***DA: The AM-settlement options will be phased out after the rollout of XSP.

CBOE To Introduce Mini-SPX Options With PM Settlement On November 5
CBOE Press Release
Chicago Board Options Exchange, Incorporated (CBOE®) announced today that the Exchange will list a Mini-SPX Index option (options symbol: XSP) contract with a new PM-settlement feature beginning on Tuesday, November 5.

Nasdaq Glitch Prompts Trading Halt in Some Markets
By Kaitlyn Kiernan – WSJ
Nasdaq OMX Group Inc. experienced problems broadcasting the values of key stock-market indexes, including the Nasdaq 100 and Nasdaq Composite Indexes, prompting the exchange operator to halt trading in some markets.
***DA: It’s about time. I was starting to get glitch withdrawal.

Equity Fund Flows on Track for Biggest Rise Since 2000
By Brendan Conway
In a big year for the stock market, investors are finally coming back.
That’s according to TrimTabs Investment Research, which counts some $277 billion in fresh investor cash flowing into equity ETFs and mutual funds for the year through Friday. Assuming it keeps up, this would be the biggest year for stock-fund flows since the $324 billion seen in 2000, according to the firm.
***DA: Yep, the equity market is getting high enough to buy again.

Thomson Reuters to Cut 3,000 Jobs to Focus on Growth Markets
By Edmund Lee – Bloomberg
Thomson Reuters Corp. (TRI), a provider of news and information services, plans to cut 3,000 positions, or about 5 percent of the workforce, in a bid to focus on growth markets and boost profitability.
The announcement followed higher-than-projected earnings at Thomson Reuters, which is trying to rebound from a lingering slump on Wall Street brought on by the financial crisis and recession. Excluding some items, the company posted profit of 48 cents a share for the third quarter. That beat the 44 cents estimated by analysts, according to data compiled by Bloomberg.
***DA: What is this “lingering slump” on Wall Street? Must be volume, not price.

ISE Gemini Completes Third Successful Product Rollout Since Launch
Press Release
The International Securities Exchange (ISE) today announced that ISE Gemini has completed the rollout of 199 additional products. This represents the third successful product rollout since ISE Gemini’s launch on August 5, 2013. ISE Gemini now lists approximately 700 total products that together represent over ninety percent of equity options industry volume.
***DA: Houston to Gemini 3 – we have liftoff.

China Financial Futures Exchange and NASDAQ OMX Sign MOU
Press Release
China Financial Futures Exchange (CFFEX) and the NASDAQ OMX Group, Inc (Nasdaq:NDAQ), signed a memorandum of understanding (MOU) at the World Federation of Exchanges’ annual meeting to strengthen cooperation and promote mutual development. CFFEX Chairman Zhang Shenfeng and NASDAQ OMX Vice Chairman Sandy Frucher signed the MOU.
***DA: Our own John Lothian, one of today’s speakers at the WFE meeting, bore witness to this historic? event.

NYSE Technologies connects “SuperFeed” to the new HKEx Orion Market Data Platform
Press Release
NYSE Technologies, the commercial technology division of NYSE Euronext (NYX), today announced that it is offering consolidated market data from the HKEx Orion Market Data (OMD) Platform via SuperFeed. This cost effective service, that now includes market information from the HKEx OMD Platform, is available from October 2013. SuperFeed in Hong Kong enables colocated and remote proximity market participants to receive direct data feed content and value-added services from NYSE Technologies.

Traders eye profits with new ASX volatility contract
WA Today
ASX Limited (ASX:ASX) A-VIX Product Manager, Brian Goodman details how traders can benefit from the exchange’s first volatility futures contact.

Eurex and Vienna Stock Exchange conclude index licensing agreement
The agreement will allow Eurex Exchange to list futures and options on well-known indices of the Vienna Stock Exchange. This means that Eurex Exchange will be able to complement its Austrian equity futures and equity options segment with the corresponding equity index derivatives based on the ATX and ATX five.


Actant sets new benchmark in execution trigger response times with launch of new low latency execution management system, Actant: ExStream HitLift 


VIX Makes Big Advance as S&P 500 Hits New Record Highs
Wall Street Sector Selector 
The Chicago Board Options Exchange Volatility Index (VIX) climbed 1.68 percent on Monday as the S&P 500 advanced 0.13 percent – to vix etfs, VIX, ETF, NYSEARCA:VXX, NYSEARCA:TVIX, NYSEARCA:VXZ, NYSEARCA:XVZ, NYSEARCA:XIVanother record-high close, surprising many investors.  Most investors assume that the VIX is limited to downside volatility and that it is always a bearish signal.  This is wrong.  The VIX indicates the expected movement of the S&P 500 over the next 30 days, expressed on an annualized basis in percentage points. 

Option Strategies for All VIX Levels
By Dan Keegan, Options Instructor and Head Options Mentor, The Chicago School of Trading
Option mentor Dan Keegan discusses different strategies that he uses depending on whether the VIX is at low or high levels.

Sizing Up Investor Sentiment
The Street
With VIX back at the 13 level, individual company earnings have regained the spotlight. The focus has shifted to the micro from the macro and index volume has slid along with volatility. Not only has VIX seen a dramatic decline, but skew has fallen sharply as well. That is, the difference in implied volatility between downside SPX puts and upside SPX calls has fallen back to levels not seen since mid-September

Benzinga’s Options Outlook: Everyone Waiting on Fed Announcement
Be on the lookout for any rug pull by watching the banks as an indication. Otherwise, traders are in very slow action until some catalyst hits the market.


The Underlying Dog and the Option Tail. Which Wags Which? 
Automated Trader
The direction of information flows in markets has long been the subject of academic debate. Automated Trader talks to Dr. Tyler Brough of Utah State University about recent papers he has co-published with colleague Dr. Ben Blau on this subject in the context of options, their underlying securities and market friction.


John Lothian News (JLN) is the news division of John J. Lothian & Company, Inc. (JJLCO). The online media and financial services firm is staffed by derivatives industry, journalism and technology professionals.

Jeff Bergstrom
John Lothian News
Email – jeffbergstrom@johnlothian.com
LinkedIn – http://www.linkedin.com/pub/jeff-bergstrom/27/294/365
MarketsWiki – http://marketswiki.com/mwiki/Jeffrey_Bergstrom

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