Observations and Insight

Ray Cahnman, chairman, Transmarket Group – Me, Us & You: How Trading Works

“Opportunities today are even greater. Competition, however…is brutal. “

Ray Cahnman, chairman of Transmarket Group, begins his presentation with a list of books, movies and news stories he recommends that give a glimpse into the financial industry. He then discusses how he entered the financial industry and how the opportunities and challenges facing the industry have evolved. Cahnman remembers how trading used to be about the individual trader and how no one wanted to divulge their secrets to success. Today, trading has turned into a team effort, especially with the role technology is playing. Cahnman says that the trading ecosystem now involves programmers and coders as well as traders. However, while there is an influx in new opportunities in the industry, one still needs to stay persistent and embrace competition in order to strive.
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Lead Stories

Error Prompts Nearly Full-Day Shutdown of ISE Options Markets
Sam Mamudi – Bloomberg
The two U.S. options markets run by International Securities Exchange Holdings Inc. were closed for most of Monday’s session due to a technology malfunction.
The International Securities Exchange and its smaller sibling, ISE Gemini, were halted at about 9:45 a.m. New York time and never reopened, said spokeswoman Molly McGregor. The venues had accounted for about 12 percent of all U.S. options trading in December, according to Options Clearing Corp. data.

VIX: 4-Hour Bare Knuckle Street Brawl
Alan Bradley – Investing.com
In the market Monday we saw a unique event take place. From the opening bell the market started falling and by 11 AM C.S.T. the S&P 500 had sliced through all the key support levels that it had closed at Friday afternoon. The market was moments from a freefall when the Fed turned on what is obviously a brand new algorithm buying program that made the intraday VIX (volatility index) meter shake in four-point spikes every few minutes the rest of the day.
***DA: Back for another round today, it appears. Big range on both sides of settlement.

VIX of VIX Near Record: Some Market Observers Are Nervous
After weeks of lying dormant, CBOE’s Volatility Index (VIX) erupted last week amid concerns that falling crude prices could roil U.S. producers and export-dependent economies alike.
Some market watchers see the abruptness of last week’s VIX spike as a reason in and of itself to be cautious.
***DA: More evidence of that today as, even after a hefty rally, the VIX is still higher on the day.

This Hedge Fund Manager Who Remembers 1998 Says Prepare for Pain
By Simon Kennedy, Bloomberg
Stephen Jen landed in Hong Kong in early January 1997 as Morgan Stanley’s newly minted exchange-rate strategist for Asia.

Volatility ETFs in Focus on Oil Upheaval
Broad markets took a step back to end the year. Concerns over global growth especially in the big three  regions ─ Euro zone, Japan and China ─ and the rising risks of a sooner-than-expected hike in the U.S. interest rates weighed heavily on stocks in the month, and led some to believe that the bull run is finally nearing a correction.

Volatility Update: Early Present For Vol Junkies
Fear Is Back
Sweeping global stock market losses tossed ice water on expectations for quiet trading into the holidays. As the S&P 500 (SPX) shed 3.5% to suffer its biggest weekly loss since May 2012, most measures of market volatility spiked last week.
***DA: Getting your kicks if you have a VIX fix.


CBOE Holiday Trading Schedule
CBOE Holdings, Inc. announced the following trading schedule for Chicago Board Options Exchange (CBOE), C2 Options Exchange (C2) and CBOE Futures Exchange (CFE) in observance of the Christmas and New Year’s holidays.

VIX December Settlement Reminder
CBOE Options Hub
Today, Tuesday December 16th is the last trading day for December in the following: VX, VM, VXEM, OV, VN, VXEW, VXST and GV futures and options.

Euronext eyes dividends as trading resumes
Futures & Options World
Pan-European exchange Euronext said it plans to launch a number of single stock dividend futures on the most liquid stocks listed on its Amsterdam, Brussels, Lisbon and Paris markets. The exchange said the new dividend futures contracts will be available for trading in the first quarter of 2015, beginning with CAC40 Index components. Euronext said the single stock dividend futures will give investors additional dividend trading potential and will enable them to benefit from efficient pricing.

Euronext launches iOS app for retail investors
Automated Trader
A new iOS app providing retail investors with access to market data from Euronext’s Cash markets and other equity exchanges on their mobile devices is being launched by Euronext. The app offers information on indices, stock prices, currencies and more. Aimed primarily at investors in Euronext’s home markets in Belgium, France, Portugal and The Netherlands the app is free to download from Apple’s App Store as of today.

NASDAQ Options Trader Alert, Effective January 2, 2015
Effective Friday, January 2, 2015, pending SEC approval, the following Fees will be assessed on PHLX, NOM, and BX Options

CBOE Holdings’s “Hold” Rating Reaffirmed at Deutsche Bank (CBOE)
The Legacy
Deutsche Bank reiterated their hold rating on shares of CBOE Holdings in a research report released on Friday morning. Deutsche Bank currently has a $66.00 price objective on the stock, up from their previous price objective of $65.00.
***DA: Pushing 63 right now, and volume has been through the roof these days.

Regulation and Enforcement

ICE urges caution on European derivatives reform
Philip Stafford – Financial Times
Intercontinental Exchange has urged Europe to give clearing houses leeway over what products they must accept, warning that lawmakers’ plans to open up the derivatives market would remove operators’ incentives for innovation.
The New York Stock Exchange owner has again warned that trading could move away from Europe if the continent pursues new rules in the coming days to introduce more competition for derivatives.

CFTC Requests Public Comment on Related Applications Submitted by LedgerX, LLC for Registration as a Derivatives Clearing Organization and Swap Execution Facility
The U.S. Commodity Futures Trading Commission (CFTC) is asking for public comment on related applications submitted by LedgerX, LLC (LedgerX), for registration as a derivatives clearing organization and registration as a swap execution facility. LedgerX plans to list and clear fully collateralized, physically settled options on bitcoin. Comments should be submitted on or before January 30, 2015.
***DA: Bitcoin options? Why not?

Dodd-Frank under fire in trading case
Gina Chon in Washington, FT
A new law against placing and quickly cancelling bid orders to sway others to trade was “hopelessly vague” and prosecutors over-reached by bringing the first criminal case against a high-frequency trader, according to a motion to dismiss the case.
***DA: Not easy to prove “intent.”

MF Global Holdings nears settlement with CFTC
Douwe Miedema – Reuters
MF Global has agreed with the Commodity Futures Trading Commission to settle charges of wrongdoing during the collapse of the futures brokerage, which left a $1.6 billion shortfall in customer accounts, a court document showed
But Jon Corzine, the former New Jersey governor and U.S. senator, could still object to the agreement, the document showed, and so could the other individual defendant, MF Global’s former Assistant Treasurer Edith O’Brien.


Euronext launches iOS app for retail investors
Automated Trader
A new iOS app providing retail investors with access to market data from Euronext’s Cash markets and other equity exchanges on their mobile devices is being launched by Euronext. The app offers information on indices, stock prices, currencies and more. Aimed primarily at investors in Euronext’s home markets in Belgium, France, Portugal and The Netherlands the app is free to download from Apple’s App Store as of today.


Bullish on China? Put Your Chips on Alibaba
Steven M. Sears – Barron’s
Investors looking for a China trade in the midst of recent volatility should consider focusing on Alibaba (ticker: BABA ), rather than the broader market, as an unexpected regulatory policy shift has knocked local markets for a loop. After all, consumer spending is likely to remain robust even as China evolves its approach to operating securities markets.

Volatility Spikes: Here’s The Trade that Tames It
As oil plunge roils markets, the VIX goes nuts. Here’s a profitable trade and a whole new word.

Options Check-Up: First Solar, Kandi Technologies, and Spirit Airlines
Schaeffer’s Investment Research
Among the stocks attracting attention from options traders lately are alternative energy concern First Solar, Inc. (NASDAQ:FSLR), China-based electric automaker Kandi Technologies Group Inc (NASDAQ:KNDI), and discount airline Spirit Airlines Incorporated (NASDAQ:SAVE). Below, we’ll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on FSLR, KNDI, and SAVE.

Play Market Volatility with This New UBS ETF (VQTS)
ETF News And Commentary
Given the recent uncertainties, some issuers are introducing new products in the market to enable investors to survive the ups and downs. On this line, UBS has recently come up with a new product – ETRACS S&P 500 VEQTOR Switch ETN – which trades under the ticker VQTS.

Volatility Soaring – Whipsaw – Down Bias For Now –
Volatility is soaring and traders are suffering. Too difficult to play with massive whipsaw moves intraday just about everywhere, but with the trend still clearly lower for now. When the VIX is in the low teens it’s easy on the soul, but when it rockets in to the lower 20-range, things can get very intense. You can barely keep up with the score. You blink and the S&P 500 moves five points. You blink again and it’s another five, and so on. The range for the day across the board on all the key-index charts can give you motion sickness. Huge drifting. This is when markets become too difficult to put the finger on the buy or sell button. It becomes luck trades and that’s not what you want to be doing. It can work, but Russian roulette is better used somewhere else.

Options Education

TABB Group’s Options LiquidityMatrix for November 2014
TABB Forum
The report includes options trading volumes and statistics on execution metrics for each US listed options exchange and the industry, using data sourced from the OCC and Premium Hosted Database (PhD),a joint offering from Hanweck Associates and the International Securities Exchange (ISE).  

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