Observations and Insight
Global Reach: CBOE to list MSCI options, expand its index coverage
Jim Kharouf – John Lothian News
CBOE announced it will list options on the MSCI Emerging Markets Index and MSCI EAFE Index on April 21.
The exclusive licensing deal with MSCI, is part of the CBOE’s efforts to expand its index coverage well beyond the US market. It also recently signed an exclusive deal to list FTSE and Russell Index products on CBOE.
While those indexes have not traditionally drawn much volume on exchanges, CBOE believes that they will be able to garner more interest from traders and institutions by concentrating the liquidity onto its platform. The exchange also believes that in the case of MSCI, there has been a robust OTC market for the index. But now, more participants are looking for a listed product than in years past.
“Timing on new products is key,” said Ed Tilly, CEO of CBOE. “Some were launched too early and not ready for prime time.”
On the FTSE and Russell Indexes, CBOE is working in tandem with the London Stock Exchange to develop volume in those products for both equities in London and options at CBOE.
CBOE also plans to launch options this year on the MSCI’s ACWI, USA, World and ACWI ex-US Indexes. It also plans to list contracts on the FTSE GEIS, EPRA/NAREIT and FTSE China 50 as well as several Russell Indexes, which will be exclusively offered on CBOE starting on April 1.
Boca Bits & Pieces
Sarah Rudolph – John Lothian News
This is the 40th anniversary of the FIA Boca conference, and befitting such a nice round number, it was also the most highly attended ever, with somewhere around 1130 attendees. This year, pins were given out to those participants who had been attending the conference for 5, 10, and 20 years.
Other highlights for the FIA this year include a newly designed web site at FIA.org, and a newly branded magazine: Futures Industry Magazine, which will now be called “Marketvoice.” The magazine and website now have expanded features, a global reach, and a digital platform, Walt Lukken, the FIA CEO and president, told the crowd.
Read the rest of the column on JohnLothianNews.com – http://jlne.ws/1FaxhOe
Hedge Funds Recorded Strong Recovery in 2014
By ANITA RAGHAVAN, NY Times
The number of hedge funds hit new heights last year, and the amount of money flowing into the funds was the highest since before the financial crisis. Even so, hedge funds’ performance lagged the broader stock market.
R.J. O’Brien to Acquire The Kyte Group from GFI Group
Press Release via CNN Money
R.J. O’Brien & Associates (RJO), the oldest and largest independent futures brokerage and clearing firm in the United States, and GFI Group (NYSE:GFIG), a leading intermediary and provider of trading technologies and support services to the global OTC and listed markets, today announced that RJO’s affiliate, R.J. O’Brien Europe Limited (RJO Europe), will acquire GFI’s subsidiary, The Kyte Group Limited (Kyte). Terms of the transaction were not disclosed. The UK Financial Conduct Authority (FCA) has approved the transaction, which is expected to close no later than March 17. After closing of the transaction, Kyte will operate under the name “R.J. O’Brien Limited”.
Comparing SPX and MSCI Price Action
Russell Rhoads – CBOE Options Hub
Today CBOE set the date (pending regulatory approval) for the launch of trading of the MSCI EAFE (EAFE) and MSCI Emerging Markets (EEM) index options. Recently I was at a conference where an individual trader told me all he trades is SPX. He said he loves (his words not mine) the cash settlement feature of SPX options.
Fund Managers Request CBOE Options on MSCI Indexes, Which Will Launch April 21
Matt Moran – CBOE Options Hub
Regarding the possibility of launching new options on MSCI global indexes, in the past month I have received positive feedback from more than a dozen managers of options-based funds that are listed in a new 2015 white paper. In the past decade a number of managers have requested new CBOE options on MSCI’s global indexes.
Today CBOE announced an April 21 launch date for cash-settled products on two of the world’s best known global indexes –
Options on the MSCI EAFE Index (MXEA), and
Options on the MSCI Emerging Markets Index (MXEF).
The Link Between Overbought VIX and SPY Bottoms
Adam Warner – Schaeffer’s Investment Research
By now, you know the drill. The market sails along, hitting marginal new highs, and volatility contracts. And then, wham — news (or worries of future news) hits, and next thing you know, we’ve lost all those hard-earned gains in a heartbeat. And CBOE Volatility Index (VIX) lifts.
We’re on the cusp of another overbought VIX, approximately the umptillionth overbought VIX since the start of 2014.
SpotOption Is Now a U.S Binary Options Market Maker
Avi Mizrahi – Forex Magnates
Forex Magnates has discovered that the firm has been actively trading and writing options on the Cantor Exchange for the past two weeks. The firm may be laying the groundwork for expansion into the American market.
Outsourcing: Trading places
Gregory Meyer – Financial Times
Anshuman Mishra’s working day inside Bangalore’s Diamond District office building began when the sun rose over the City of London and ended just after lunch in Chicago. Mr Mishra held a new kind of job in this Indian city of call centres and tech groups. He was a futures trader seeking his fortune on western exchanges.
Supplied with Bloomberg terminals, stacks of analyst research, biryani and foreign capital, he and fellow young traders — graduates of the best Indian universities — learnt to decipher Federal Reserve statements and US oil inventory reports published 8,500 miles away in Washington. They watched from afar as Lehman Brothers failed, then coolly traded through the aftermath. One of Mr Mishra’s colleagues made so much money shorting crude oil in 2008 that he bought a string of flats around Bangalore.
New Nasdaq energy futures market to launch mid 2015
Nasdaq has announced the establishment of a new energy futures market with the support of commodities participants. Nasdaq Futures (NFX) aims to offer competitive pricing, an innovative clearing solution and high-performance technology for futures and options based on key energy benchmarks including oil, natural gas and US power, which will launch mid-2015 pending regulatory approval.
Nasdaq has secured support from prominent trading firms, inter-dealer brokers, and futures commission merchants (FCMs) to facilitate broad product distribution and early liquidity. Founding market participants include ABN AMRO Group, Advantage Futures, Goldman Sachs, JP Morgan, Morgan Stanley1 and Virtu Financial.
CBOE to Launch MSCI Index Options on April 21
Press Release – CBOE Options Hub
CBOE Holdings, Inc. (NASDAQ: CBOE) announced today that it plans to list options on the MSCI Emerging Markets Index (EEM) and the MSCI EAFE Index (EAFE) beginning Tuesday, April 21. The announcement was made this morning during a CBOE press briefing at the Futures Industry Association conference, currently taking place in Boca Raton, Florida.
In December 2014, CBOE Holdings, Inc. announced it entered into a licensing agreement with MSCI Inc., a leading provider of investment decision support tools worldwide, to offer options trading on several MSCI Indexes. Under the agreement, options on the MSCI Indexes will be solely listed for trading in the U.S. on the Chicago Board Options Exchange (CBOE). Options on the EEM and EAFE Indexes are the first of six MSCI Indexes planned to launch in 2015. Later this year, CBOE also plans to offer options on the MSCI ACWI Index, MSCI USA Index, MSCI World Index and the MSCI ACWI ex-USA Index.
OCC and eSecLending Create Liquidity Facility with CalPERS
Press Release – OCC
The Options Clearing Corporation (OCC) and eSecLending announced today that they collaborated with CalPERS to develop a product to help OCC diversify and increase their committed liquidity resources while offering a compelling risk-adjusted return for CalPERS. The fully collateralized facility offers the OCC, the world’s largest equity derivatives clearing organization, a source of timely access to liquidity while maintaining CalPERS’ conservative risk profile.
CME Group and TAIFEX Sign Letter of Intent for Greater Collaboration
VPO Press Release
CME Group, the world’s leading and most diverse derivatives marketplace, and the Taiwan Futures Exchange (TAIFEX) today signed a Letter of Intent (LOI) regarding the potential listing on TAIFEX of U.S. equity index-based contracts, and the exploration of cross-border collaboration opportunities and models, and forge greater collaboration between both exchanges.
Regulation and Enforcement
Despite Lack of Details, Central Clearing Has Reduced Systemic Risk
John D’Antona Jr. – Traders Magazine
Four out of five investors agree that mandatory central clearing of derivatives have helped the markets safer, despite not knowing all of the details surrounding clearinghouse practices and processes.
Despite 80 percent of investors feeling comfort with regards to clearing, their lack of understanding about the processes clearinghouses use to manage defaults contributes to a widespread belief that additional measures are needed to mitigate risk, according to a new report on systemic risk and central clearing by market consultancy Greenwich Associates.
Former SEC Director Rips the Red Tape Off His Mouth
Dave Michaels and Sam Mamudi – Bloomberg
For more than a decade, John Ramsay had red tape over his mouth. Now that he’s left government bureaucracy, he says he’s been “uncorked.”
Ramsay, 55, formerly the U.S. Securities and Exchange Commission’s director of trading and markets, joined the stock-trading venue founded by Brad Katsuyama, IEX Group Inc., in June and soon began slamming the industry he’d overseen for the SEC. He called out the “convoluted” and “illogical” pricing rules of major stock exchanges and compared the $25 trillion U.S. stock market’s structure to the Death Star of “Star Wars.”
Lew Says Regulators Undecided on High-Frequency Trading
Matthew Boesler – Bloomberg
U.S. Treasury Secretary Jacob J. Lew said the government is trying to understand high-frequency trading in financial markets and indicated he’s not sure yet whether it should be subject to stricter regulation.
“I don’t want to jump to a conclusion that there is a need for a regulatory response,” Lew said today in response to a question at a conference in New York. “We first have to understand whether there is a problem that traditionally rises to the level of regulatory concern.”
FIA Elects Directors and Officers
FIA today announced the election of directors to its board at its annual meeting in Boca Raton, Fla. Eleven directors were elected in total at this meeting, including eight regular member directors for two-year terms and three associate member directors for two-year terms. Following the election, the new board elected the association’s officers and public directors.
FIA Inducts 13 Individuals to FIA Futures Hall of Fame
Press Release – FIA
Today, FIA announced the induction of 13 members into the FIA Futures Hall of Fame. They join 117 other honorees in the Hall of Fame, which was established in 2005 on the occasion of FIA’s 50th anniversary. The 13 new members were honored at an awards ceremony during the 40th annual International Futures Industry Conference in Boca Raton, Fla.
The FIA Futures Hall of Fame was established to celebrate the accomplishments and recognize the significant contributions that certain individuals have made to the futures and options industry over the course of its history.
CFTC Solicits Public Comment in Response to the U.S. District Court Order Regarding Cross-Border Litigation
The U.S. Commodity Futures Trading Commission (Commission) today published in the Federal Register a request for public comment in response to the United States District Court for the District of Columbia’s remand order in Securities Industry and Financial Markets Association, et al. v. United States Commodity Futures Trading Commission (Cross-Border Litigation).
TT launches new global trading platform
Futures & Options World
Trading Technologies has launched a new trading platform, TT, built on a Software-as-a-Service (SaaS) framework and the success of its original trading platform, X_TRADER.
Announced at the 40th annual FIA meeting in Boca Raton, Florida on Wednesday, Trading Technologies – which supplies ultra-fast trading links to the world’s top derivatives market – said the new platform will be available to “everyone, worldwide.”
The tech firm said the new platform requires no client-side software as it has been built on a SaaS framework. “FCMs can permission new traders in minutes through web-based tools, from anywhere on any device. And our users can begin trading in just minutes after creating a TT account and logging in,” said Trading Technologies.
Interactive Data, GlobalRisk join forces to provide risk monitoring tools
Interactive Data and GlobalRisk marked the beginning of the 40th Annual FIA International Futures Conference on Tuesday by announcing they have entered into an alliance to provide multinational brokerages, future commissions merchants and clearings exchanges better insight into trading activities that will reduce costs and risk across functions, whether front- or back-office.
***DA: A lot happening at GlobalRisk. I used their options valuation/risk management software as a market maker, but they are so much more than that.
ICAP and CME Group tap The Beast Apps Group to Deliver RapidRVTM Market Data and Analytics Tool
ICAP Information Services (IIS), the information division of ICAP Plc, and CME Group, the world’s leading and most diverse derivatives marketplace, have partnered with The Beast Apps Group to create and deliver RapidRV, a real-time market data and analytics tool designed to provide market participants with the capability to analyze relative value opportunities between the Over-The-Counter (OTC) and exchange-based futures markets.
TABB Examines the Consolidated Audit Trail’s Six Critical Problems and Pitfalls, Beginning with ‘Who Foots the Bill?’
Press Release via Sys-Con Media
Characterizing the Consolidated Audit Trail as merely a “big project” understates the technological and project management challenges that come with building the largest, most complicated data storage project in the history of the US capital markets.
When operational, the CAT will house an estimated 30 petabytes of sensitive market-related data that will enable the self-regulating organizations (SROs) and market regulators to understand on a microscopic level the day-to-day impacts, operations and activities of all of the US equity and US options participants.
Charts And Technicals Tell the Story
Bob Lang – CBOE Options Hub
Understanding technical analysis is an art form that is certainly shaped most by experience. As a charting veteran, I have evaluated thousands of charts, a daily ritual that exceeds well over 100 in a day. That may seem exhausting but it is my requirement to perfect my craft and find the next winning trade – nobody will just hand it over to me, I have to work for it.