Lead Stories

Did Someone Front Run Michael Lewis?
Steven M. Sears – Barron’s
Unusual trading in shares of the Nasdaq suggests investors foresaw “Flash Boys” controversy.
The new Michael Lewis book, Flash Boys, focuses on high-frequency trading, which, Lewis contends, amounts to high-tech front running. Unusual action in the options market late last week suggests a bit of trading ahead of the 60 Minutes segment that effectively launched Lewis’ book.

S&P 500 ends at another record; data puts jobs in focus
Caroline Valetkevitch – Reuters
The S&P 500 closed at another record high on Wednesday as signs of steady private-sector hiring suggested that the economy was slowly building momentum after a winter-related pullback.
That also put more focus on Friday’s government jobs data, which is among the most widely watched economic indicators.

Bulls Prove Immune to Biotech Rout With Bets on Rebound: Options
Joseph Ciolli – Bloomberg
The worst week for biotechnology shares since 2011 did little to dissuade bullish investors. In fact, it provided them with a prime buying opportunity.
While the iShares Nasdaq Biotechnology ETF tumbled 6.8 percent last week, traders piled into options betting on a rebound.

Pondering the Uncertain Markets: What it Means for Options Traders
Bob Lang – CBOE
During these first three months of the year, the markets have been dealing with uncertainty. This has translated into selloffs from much higher levels, but these selloffs have not been your normal, garden variety pullbacks. You know those, right? They occur when a drop frightens everyone into submission and dip buyers jump in to pick up the pieces and ride the markets higher. We had plenty of those in 2013.

Hedge Funds: Where Did All the Volatility Sellers Go?
Brendan Conway – Barron’s
A risky way to capitalize on other investors’ fear isn’t working so well this year — and the hedge funds which specialize in it have pulled back.
“Selling” market volatility was massively profitable in 2012-13. Ways to carry out the strategy include selling CBOE Volatility Index futures or, for smalltime investors with a high risk tolerance, buying exchange-traded funds and notes which do the selling for you.

Era of low volatility may be drawing to a close: SocGen
The stretch of low volatility that’s characterized the stock market in the wake of the financial crisis may finally be showing signs of drawing to an end, say strategists at Societe Generale in a Wednesday note.

Videocast: Huge VIX put spread

Virtu Said to Delay IPO Amid Furor Spurred by Michael Lewis Book
Leslie Picker and Sam Mamudi – Bloomberg
Virtu Financial Inc., the high-frequency trader that announced plans last month to sell shares, will start marketing the offering weeks later than bankers anticipated, two people with knowledge of the matter said.


‘Shame on You’ Is Bats Executive’s Rebuttal of Michael Lewis
Nick Baker and Matthew Leising – Bloomberg
Author Michael Lewis’s argument that U.S. stock trading is rigged reflects a misunderstanding of how the market operates and its history, said Bill O’Brien, the president of exchange operator Bats Global Markets Inc.

Goldman Said to Pursue NYSE Unit Sale as Trading-Floor Era Fades
Sam Mamudi, Zeke Faux and Michael J. Moore – BloombergBusinessweek
Goldman Sachs Group Inc. (GS:US) is looking to sell its New York Stock Exchange market-making unit to a Dutch investment firm, as computers replace traders who once dominated the business at the corner of Wall and Broad streets.

ISE Holdings Reports Business Activity for March 2014
Press Release (ISE)
– ISE and ISE Gemini™ combined represent 16.2% of equity options market share, excluding dividend trades.
– ISE and ISE Gemini reported a combined ADV of 2.4 million contracts.     
– Trading of multi-legged strategy orders on ISE through Implied Order functionality exceeded 26 million contracts.
– Dividend trades made up 1.4% of industry volume in March 2014.

CBOT Traders Lose Bid for Chance to Reverse Pricing Change
Andrew Harris – Bloomberg
A group of Chicago Board of Trade members lost a bid for a court order pausing the exchange’s shift from determining final settlement prices based on trading floor shouting to a method incorporating electronic trades.

Options Exchange Marketshare – March 2014
Press Release (OIC via email)

March 2014 Total Options Marketshare:
AMEX-                 10.76%
BATS-                     4.11%
BOX-                       2.81%
CBOE-                   27.79%                                                            
C2-                          1.46%
GEM-                      2.63%
ISE-                        11.82%
MIAX-                     2.74%
NOBO-                    0.95%
NSDQ-                    9.66%
NYSE Arca-           11.12%
OMX PHLX-         14.15%

March 2013 Total Options Marketshare:
AMEX-                  13.37%
BATS-                      3.76%
BOX-                        2.06%
CBOE-                    25.93%
C2-                            1.86%
ISE-                          15.19%
MIAX-                      0.18%
NOBO-                     0.86%
NSDQ-                      8.13%
NYSE Arca-             10.81%
OMX PHLX-           17.86%

March 2014 Equity Options Marketshare:
AMEX-                  11.68%
BATS-                      4.54%    
BOX-                        3.10%
CBOE-                    20.53%
C2-                            1.60%
GEM-                        2.91%
ISE-                         13.05%
MIAX-                       3.03%
NOBO-                     1.05%
NSDQ-                   10.67%
NYSE Arca-           12.20%
OMX PHLX-          15.63%

March 2013 Equity Options Marketshare:
AMEX-                  14.89%
BATS-                      4.20%
BOX-                       2.30%
CBOE-                   17.83%
C2-                            2.07%
ISE-                        16.67%
MIAX-                     0.20%
NOBO-                    0.96%
NSDQ-                    9.07%
NYSE Arca-          11.99%
OMX PHLX-         19.83%

Regulation and Enforcement

U.S. SEC probing high-speed trading
The U.S. Securities and Exchange Commission has active investigations into high-frequency trading, the head of the agency said on Tuesday.


Trading Technologies to Offer High-performance Link to HKEx’s Futures Exchange
Press Release (TT)
Trading Technologies International, Inc. (TT), a global provider of high-performance professional trading software, today announced that it will introduce connectivity to the Hong Kong Futures Exchange Limited (HKFE) in the second quarter of 2014. One of the largest derivatives exchanges in Asia by volume and a wholly owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), HKFE is home to futures and options on the benchmark Hang Seng and Hang Seng China Enterprises, or H-shares, indexes, a wide range of stock options and Renminbi Currency Futures.


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