JLN Options: CME Seeks to Broaden Cash Options in Clearinghouse Default Rules; Forex: Set Your Expectations for FOMC Volatility, Trend; New risk index shows investors are trending toward higher greed

Dec 23, 2013

Lead Stories

CME Seeks to Broaden Cash Options in Clearinghouse Default Rules
Matthew Leising – BloombergBusinessweek
CME Group Inc., concerned that a new U.S. rule undermines the use of Treasuries as collateral at clearinghouses, is proposing a workaround that would make greater use of client cash.

Forex: Set Your Expectations for FOMC Volatility, Trend
The dollar is close enough to significant reversals with EURUSD, GBPUSD, AUDUSD and USDJPY that the upcoming FOMC rate decision has the market’s focus completely locked in. Yet, Taper speculation doesn’t carry the level of market sway it leveraged 6 months ago; and the outcome’s influence on general risk themes has grown more ambiguous.

Videocast: Unloading VIX premium

How Far Is The Fed Going To Let This Run?
Matthew Boesler – Business Insider
“Investors have been bidding up money market yields since the Fed started tapering, and conversations with hedge fund investors suggest that many of them expect the market to challenge the Fed’s forward guidance.”

New risk index shows investors are trending toward higher greed
Kevin Olsen – Pension & Investment
The Acertus Market Sentiment Indicator level is 61, which is trending toward high complacency with investors, said John Longo, chief investment officer of Acertus Capital Management, which launched the AMSI earlier this month.
At times of high complacency, or taking on more risk, the subsequent returns tend to be lower and vice versa when there is more fear or anxiety in the markets, Mr. Longo said.

The Last Three Times This Happened, Markets Went Crazy
Business Insider
Thanks to Bob “I don’t get out of bed unless it’s over 20” Pisani’s daily diatribes about VIX (the so-called ‘fear’ index), we are supposed to rest assured that all is well in the ever-decreasing horizon world of equity markets.

Technical Glitch Briefly Prompts Small-Cap Surge
Tomi Kilgore and Chris Dieterich – The Wall Street Journal
Christmas came early for small-cap traders, but not for very long, as a technical glitch caused a sharp spike up in the Russell 2000 index of small-cap stocks at the open.


CME Sues Ex-Executive Paulhac in Breach-of-Contract Case
David Voreacos and Christie Smythe – Bloomberg
CME Group Inc., the owner of the world’s largest derivatives marketplace, sued former Managing Director Laurent Paulhac for breach of contract, seeking to block him for a year from becoming chief executive officer of ICAP Plc’s swap-execution facility.

NYSE proposes ‘kill switch’ to help catch trading errors
John McCrank – Reuters
IntercontinentalExchange Group’s NYSE Euronext unit has filed a plan with regulators to offer firms that trade on the New York Stock Exchange a “kill switch” that could cut off trading if preset levels were breached.

CME says to adjust bond futures trades after overnight trading spike
The CME Group said on Monday that it will adjust the clearing levels of some bond futures trades after the contracts saw unusual price spikes in overnight trading.

Regulation and Enforcement

US watchdog reaches substituted compliance verdict
The Trade
The Commodity Futures Trading Commission (CFTC) has finalised substituted compliance determinations for six key jurisdictions.
The US regulator on Friday announced regulations in Australia, Canada, the European Union, Hong Kong, Japan and Switzerland are deemed compatible with certain swap provisions of the Dodd-Frank Act.

U.S. permits some foreign swaps rules, EU still unhappy
The United States granted foreign banks a reprieve on Friday from some of its new rules for risky derivatives, putting itself on a collision course with overseas regulators who want more reliance on home-country rules.

US SEC revives insider trading suit over Onyx shares
Aruna Viswanatha – Reuters
U.S. securities regulators have filed a new lawsuit accusing two Dubai residents of illegally trading in Onyx Pharmaceuticals Inc stock based on inside information, one month after a federal judge dismissed an earlier version of the lawsuit.


Lessons for Complicated Times
Steven M. Sears – Barron’s
As the bulls and bears retreat to their holiday hibernaculum, it is appropriate to reflect on that which worked during that which has passed.
The key lesson learned in the 2013 options market was to make a friend of volatility, lest volatility become a fierce enemy.

Options Education

What Witching Means on Wall Street and Why You Should Care
Dan Caplinger – The Motley Fool
Listening to commentators talk about the stock market, it’s easy to get lost in the jargon of Wall Street traders. Just yesterday, some analysts explained the rise in the S&P 500 by linking it to what they called “quadruple witching.” As much as that might sound like a holdover from Halloween a couple of months back, the witching concept actually does have a legitimate meaning in the financial markets, and it can have a marked impact on short-term conditions in the investing world.


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