Credit Suisse VIX Note That Ran Amok in 2012 Back on Top
By Cecile Vannucci, Alexis Xydias and Nikolaj Gammeltoft, Bloomberg
One of the worst things that can happen to an exchange-traded note is that it takes on a life of its own, unhinging itself from the assets it was built to track.
That’s what befell Credit Suisse Group AG (CSGN)’s VelocityShares Daily 2x VIX Short-Term ETN (TVIX:US) in 2012, when investors became obsessed with using it to bet against stocks and bought so much that it broke away from its moorings in the futures market.
DERIVATIVES: CFTC transaction fee gaining traction – Wetjen
Mike Kentz – IFR
After several false starts in implementing alternative mechanisms to increase funding for chief US derivatives regulator the CFTC, acting chairman Mark Wetjen believes a proposed transaction fee on derivatives market participants may finally be gaining political traction.
SGX China A50 futures and Nikkei 225 options are fastest growing contracts globally
By Emily Perryman, HedgeWeek
The FTSE China A50 futures and Nikkei 225 options traded on Singapore Exchange (SGX) topped the global equity derivatives category between 2008 and 2013, according to the Futures Industry Association (FIA) Annual Volume Survey.
SGX China A50 futures’ volume grew 63894.2 per cent to 21.9 million while SGX Nikkei 225 options grew 4260.9 per cent to 10.2 million.
Chinese Investors Explore Equity Options in 2014
Matt Moran – CBOE
During the past three weeks I delivered presentations on use of index options and volatility products to an aggregate total of more than 300 Chinese financial professionals…
…Numerous attendees told me that the timing of the presentations was very good, in that Chinese regulators are reported to be exploring the possibility of permitting the use of certain equity options and stock index options by Chinese investors later this year.
***JB: Also see our report “Options – and the Options Industry Council – Come to China” from several weeks ago.
Investors Gearing Up for Volatility, Turn to VIX ETFs
Tom Lydon, ETF Trends
Despite the lingering geopolitical uncertainty induced by the crisis in the Crimea peninsula, CBOE Volatility Index-linked exchange traded funds are still reflecting a relatively complacent market. However, investors have been quietly funneling money into the VIX funds.
India VIX signals fall in market volatility
India VIX, a volatility index, declined on Thursday. It is currently trading at 16.83, down 1.20% from 17.04. It witnessed a high of 17.04 and low of 14.65 after opening at 17.04 (at 1.11 pm).
Bitcoin Derivatives Platform BTC.SX Resumes Trading After Mt Gox-Induced Freeze
Danny Bradbury – CoinDesk
Derivatives trading site BTC.SX has resumed trading after a few weeks of downtime induced by the Mt. Gox collapse. The company has signed Bitstamp as its new exchange partner, said BTC.SX CEO Joseph Lee.
Monopoly Talk Riles Futures Market CEOs Amid Nasdaq’s Critique
Matthew Leising – Bloomberg
Do futures markets run monopolies? Depends on which chief executive officer you ask.
At an industry conference yesterday, the CEOs of Nasdaq OMX Group Inc. and CME Group Inc. (CME) squared off in a debate over whether the business models of the dominant futures exchanges — where everything from bets on interest rates to oil, wheat and hogs trade — are aligned with customers’ best interests.
Catastrophe Prevention Drives Insurance Pitch to Clearinghouses
Matthew Leising – Bloomberg
A group of insurers is for the first time offering to shoulder risk for clearinghouses backing hundreds of millions of derivatives trades, proposing more protection in markets where a collapse could cripple the global financial system.
About 20 insurers were brought together by GCSA LLC, a New York-based underwriter, who declined to identify them. They are capable of offering $6 billion to $10 billion of protection to clearinghouses such as CME Group Inc. and LCH.Clearnet Group Ltd., GCSA President Chris Cononico said during an interview.
Regulation and Enforcement
SEC proposes new rules to safeguard clearing agencies
Sarah N. Lynch – Reuters
U.S. regulators proposed long-awaited rules on Wednesday designed to safeguard the country’s largest clearing agencies from collapsing and spreading systemic market risks.
The Securities and Exchange Commission’s plan primarily targets the major clearinghouses it regulates, such as the Options Clearing Corp (OCC) and units of the Depository Trust & Clearing Corp (DTCC).
U.S. swaps regulator plans trading data overhaul
By Douwe Miedema, Reuters
The U.S. swaps regulator will outline its plan next week to clean up trading data, a top official said on Thursday, as it struggles to make the market less opaque after the credit crisis.
The Commodity Futures Trading Commission, which was put in charge of the $630 trillion global off-exchange derivatives market after the crisis, may come up with a guidebook, or tweak its rules, one of its members told Reuters.
SEC May Not Flex Dodd-Frank Muscle on Brokers
Sarah Krouse – The Wall Street Journal
The SEC may not tighten the vise on brokers after all.
Under the 2010 Dodd-Frank financial regulation, the U.S. Securities and Exchange Commission has the option–but not a mandate–to require broker dealers to meet the same fiduciary standards as investment advisers when dealing with retail clients.
But comments from SEC Commissioner Daniel Gallagher show the SEC isn’t necessarily keen on enforcing these standards for brokers.
Acting CFTC chairman touts success of substituted compliance, pledges more
Mark Wetjen, acting chairman of the Commodity Futures Trading Commission (CFTC), said the US regulator was committed to establishing a harmonised approach to international regulation.
“Moving ahead, the CFTC will continue to lead in promoting harmonised regulation, doing what it can to avoid incentivising personnel decisions, inter-affiliate relationships, and corporate structures that will make financial firms only more difficult to manage, understand, and unwind during a period of market distress,” Wetjen said.
FIA elects board of directors
FIA has announced the election of board directors at its annual meeting in Boca Raton, Fla. Fifteen directors were elected in total at this meeting, including eight regular member directors for two-year terms; two regular member directors for one-year terms; four associate member directors for two-year terms; and one associate member director for a one-year term. Following the election, the new board elected the association’s officers and public directors.
OPTIONS REPORT: Streamlining European ETF Trading
Renee Carruthers, Traders Magazine Online News
With the European ETF market attracting increased attention, some firms are bringing technology to market that is aimed at streamlining and increasing the efficiency of European ETF trading.
Ride the Gold Rally
By Steven M. Sears, Barron’s
Global forces are aligned to keep pushing the price higher. With this options trade, investors can leverage decent gains into triple-digit returns.
SPDR Gold Trust options are hard to beat if you want to make serious short-term returns without wandering into the stock market’s crack den. (Think Plug Power.)
CBOE Risk Management Conference Next Week
By Marty Kearney, CBOE Options Hub
The S&P 500 is off ~19 points this afternoon to 1848 (if that rings a bell, the SPX closed 2013 a few pennies above 1848), and the VIX was up more than 10% to 16.04.
Fortuitous timing. The 30th Annual CBOE Risk Management Conference in Bonita Springs Florida begins next Monday, March 17th. RMC is the foremost event in the financial industry, geared towards money managers and other institutional users of options and derivatives.
***SR: Among the attendees will be John J. Lothian, not one to pass up a foremost event.