CFTC Charges U.K. Resident Navinder Singh Sarao and His Company Nav Sarao Futures Limited PLC with Price Manipulation and Spoofing
The U.S. Commodity Futures Trading Commission (CFTC) today announced the unsealing of a civil enforcement action in the U.S. District Court for the Northern District of Illinois against Nav Sarao Futures Limited PLC (Sarao Futures) and Navinder Singh Sarao (Sarao) (collectively, Defendants). The CFTC Complaint charges the Defendants with unlawfully manipulating, attempting to manipulate, and spoofing — all with regard to the E-mini S&P 500 near month futures contract (E-mini S&P). The Complaint had been filed under seal on April 17, 2015 and kept sealed until today’s arrest of Sarao by British authorities acting at the request of the U.S. Department of Justice (DOJ). After the arrest, the DOJ unsealed its own criminal Complaint charging Sarao with substantively the same misconduct.
BATS fears rule would create unfair competition in options markets
James Dornbrook – Kansas City Business Journal
BATS Global Markets Inc. is waging a battle to stop a new rule proposed to the Securities and Exchange Commission, saying it would create an unfair advantage for legacy options exchanges at the expense of newer options traders like BATS.
**JK – Let’s raise the question: Should more exchanges now be given equity in OCC?
Bats to Offer Free Gold Trading on Hotspot Currency Platform
John Detrixhe – Bloomberg
Bats Global Markets Inc. is going after ICAP Plc as it seeks to broaden its foreign-exchange business.
The Bats Hotspot FX currency market will offer free trading of gold and silver against the dollar beginning May 1, and that pricing will last at least through the end of 2015, according to a statement on Tuesday.
**JK – BATS adding more to the grocery store.
Greece Makes It Expensive to Hedge European Stocks
Callie Bost and Jennifer Kaplan – Bloomberg
A gauge of anxiety in Euro Stoxx 50 options jumped to the highest level in more than 12 years relative to a similar volatility measure in U.S. equity derivatives. The divergence reflects rising costs for hedges to protect gains in Europe even as its benchmark equity gauge sits about the same distance from a record as the Standard & Poor’s 500 Index.
**JK – Worth looking at the VIX versus VSTOXX.
$3.7 Trillion in A.U.M Tracks EAFE and E.M. Indexes, as First-ever Index Options Launch
Matt Moran – CBOE Options Hub
On Tuesday April 21 CBOE launched its first-ever trading in cash-settled options on two MSCI indexes – the MSCI Emerging Markets Index (MXEF) and the MSCI EAFE Index (MXEA). Options on the MSCI Emerging Markets Index and the MSCI EAFE Index are designed to enable investors to efficiently hedge and manage their non-U.S. equity portfolio exposures, to diversify their portfolios, or to generate added income.
**JK – More on this from our FIA Boca report last month Global Reach: CBOE to List MSCI Options, Expand its Index Coverage – http://jlne.ws/1Bz4X5n
Eurex launches weeklies on Bund futures
Alice Attwood – Futures & Options World
Exchange’s new contracts did not trade on the first day, amid fears over Greece
Eurex launched on Monday weekly options with the support of 10 market makers, making the German derivatives giant the latest exchange to expand to weeklies.
A spokesperson told FOW the new contracts went live as planned but did not trade on Monday.
Bot makes $2.4 million reading Twitter: Meet the guy it cost a fortune.
Seth Stevenson – Slate
I know a guy—a human guy—who was on the other side of that trade. And he says this wasn’t the first time it happened to him. He’s convinced that someone’s figured out a tweet-trading algorithm, one that’s faster than anything he’s ever seen before. So fast, he fears, that it might eventually put him out of a job.
**JK – The story of a market maker getting whipped by Twitter, and Twitter-bots and the technology arms race that makes most folks in and out of the markets confused, apprehensive or mad.
The Bot Bubble: Click Farms Have Inflated Social Media Currency
The New Republic
Every morning, Kim Casipong strolls past barbed wire, six dogs, and a watchman in order to get to her job in a pink apartment building decorated with ornate stonework in Lapu-Lapu City. The building towers above the slums surrounding it—houses made of scrap wood with muddy goat pens in place of yards. She is a pretty, milk-skinned, 17-year-old girl who loves the movie Frozen and whose favorite pastime is singing karaoke. She is on her way to do her part in bringing down Facebook.
**JK – Long piece on internet scams, a worthy topic no matter who you are, or what you trade.
TMX Group announces regulatory approval of TSX Alpha Exchange model
Press Release via CNN Money
TMX Group today announced that it has received Ontario Securities Commission approval for changes to its TSX Alpha Exchange (“Alpha”) trading model. The changes are key elements of TMX Group’s recently announced proposal to reposition its equities trading platforms to meet evolving customer needs and strengthen Canada’s capital markets.
Regulation & Enforcement
Exchanges, SIFMA go to SEC trial in battle over market data fees
Sarah N. Lynch – Reuters
Wall Street’s leading trade group went to battle on Monday against two top U.S. stock exchanges, arguing they should not have leeway to hike the fees they charge traders to access crucial proprietary equity market data.
In a hearing before a Securities and Exchange Commission administrative law judge, an attorney for the Securities Industry and Financial Markets Association (SIFMA) tried to undercut testimony from an employee at Intercontinental Exchange’s NYSE Arca.
Volcker Urges Merging Agencies to Boost Financial Oversight
Jesse Hamilton – Bloomberg
Five years after giving his name to a rule designed to restrict trading by Wall Street banks, Paul Volcker is pushing for another change that would put at least one top regulator out of business.
The Federal Reserve would be at the helm of a reorganized regulatory system that eliminates the Office of the Comptroller of the Currency and combines other agencies in a plan released Monday by the Volcker Alliance, a group formed by the former central bank chairman in 2013.
Court Reserves Judgment in Former Goldman Sachs Programmer Case
Christopher M. Matthews – NASDAQ
The Manhattan District Attorney’s case against a former Goldman Sachs Group Inc. programmer will be sent to a jury later this week after a New York judge on Monday said he would not rule on the defendant’s motion to dismiss the case.
Justice Daniel P. Conviser reserved judgment on the motion, meaning he could still reverse any potential conviction of Sergey Aleynikov if he believes there is no factual basis for the jury’s verdict.
CQG to connect to Nasdaq Futures
CQG and Nasdaq have announced that CQG will introduce connectivity to Nasdaq Futures, Inc. (NFX), the exchange group’s U.S.-based designated contract market (DCM). Through NFX, Nasdaq will expand its commodities business with futures and options on key energy benchmarks including oil, natural gas and U.S. power, which will launch in mid-2015.
How to Profit As The Chinese Rally Continues
Steven M. Sears – Barron’s
China is trying to tamp down risk in its securities markets at the same it is trying to push the market higher. The combination is another reason investors should consider initiating leveraged upside trades on China’s stock market.
With iShares China Large-Cap Index (ticker: FXI ) up about 1% at $50.46, investors can sell puts to try to trade themselves into the rally sparked by Sunday’s surprise stimulus move announced by the People’s Bank of China.
How Hard is It to Short Stocks?
Adam Warner – Schaeffer’s Investment Research
It certainly feels like a grind trying to make some money on the long side in 2015. But, it’s no picnic for the shorts, either.
Hedge Funds Net Long In 2 Yr T-Note Highest Since 2013
Michelle Jones – ValueWalk
Hedge fund long positions in the NASDAQ are nearly the biggest they’ve been in a year, and funds are becoming increasingly long on crude oil, according to Bank of America Merrill Lynch, which released its latest Hedge Fund Monitor report today. The firm also found that funds hold their biggest net long position in two-year Treasuries since March 2013.
Don’t Let Fear of a ‘Grexit’ Keep You Out of European Stocks
After nearly three years of extremely weak economic growth, the European Central Bank is finally delivering on Mario Draghi’s pledge to do “whatever it takes” to get the region back on track.
The central bank is set to pump $64 billion into the economy through monthly bond purchases through September 2016. The quantitative easing program, alluded to in September, formally announced in January and started on March 9, may already be having an effect on the economy in terms of sentiment.
VXX Vs. XIV: Enhancing Profitability In The Volatility Sector
Despite Friday’s 280 point sell-off in the Dow and 10% spike in the VIX, betting against volatility has been a highly profitable endeavor for the better part of this decade. As the number and variety of volatility ETFs have increased in recent years, the strategies to capitalize on volatility have increased exponentially. Such strategies include selling short long volatility ETFs as well as purchasing inverse volatility ETFs that increase in value during periods of market turmoil.
Parsing ‘Best Ex’ for Options Trades
Achieving best execution in options trading can be far more complex than in equities because of exchanges’ multi-tiered pricing models, which results in hidden transaction fees that may negate the economics of a trade.
That’s according to David Karat, head of sales and marketing at algorithmic trading-technology company Dash Financial.