EU, U.S. Reach Deal on Clearing Rules for Derivatives Market
Silla Brush and Julia-Ambra Verlaine
U.S. and European Union regulators reached an agreement on oversight of the $553 trillion global derivatives market, seeking to prevent capital increases from hitting EU banks this year and enabling CME Group Inc. to continue settling some of the world’s most common contracts.
Retail investors value US listed equity options
Gary Delany – TradingFloor
Since their inception in 1973 the exchange-listed US equity option markets have grown significantly. In 1974, the first full year of operation, volumes were 60 million contracts, rising to 210m in 1990, 727m in 2000, 3.9 billion in 2010 and 4.1bn in 2015, after a peak of 4.5bn in 2011 (see chart). Clearly, the model of competing exchanges (13 at last count) being linked together by OCC, the world’s largest equity derivatives clearing house, has something compelling to offer.
****SD: A Q&A with Delany regarding using options in portfolio management can be found under our Education section.
Investors pouring into oil options
Jamie Chisholm – Financial Times
Strong demand pushes implied volatility for WTI to the highest level since 2009
West Texas Intermediate, the US-based oil contract, fell back below $30 a barrel this week.
Probably the only reason the decline didn’t claim broader market resonance is that investors were focused on turmoil in financial stocks at the time.
****SD: Later on the FT references the chance that oil “becomes a teenager” — perhaps the most amusing/upbeat way of saying things could get much worse. Reuters’ take on the oil option surge can be found here
Currency Swings Soar to 2012 High as Yellen Comments on Turmoil
Lananh Nguyen and Rachel Evans – Bloomberg
Foreign-exchange volatility climbed to the highest level since 2012 as Federal Reserve Chair Janet Yellen signaled continuing market turmoil may hurt the prospect of multiple interest-rate increases this year.
SGX derivatives volumes up 21% in January
Futures & Options World – Let’s Talk Derivatives
The Singapore Exchange (SGX) was one of the top performing exchanges in January as large gains across all categories drove derivatives volumes up 21% on the same month last year.
Equity index futures volume increased 17% on January 2015 to a total of 15.4 million while the exchange’s most active contract, FTSE China A50 Index Futures, was up 15% year on year to a total of 8.2 million trades.
The total volume for FX futures was just over half a million trades, up 119% compared to the same period last year. SGX USD/CNH Futures did particularly well, with a 504% year on year.
****SD: The SGX release can be found here
Nadex Halts Trading in Bitcoin Binary Options Contracts
Avi Mizrahi – Finance Magnates
The North American Derivatives Exchange (Nadex) has revealed that it submitted an emergency notice to the CFTC on Tuesday that it halted trading in its Weekly and Daily Bitcoin Binary contracts. Nadex explains that this was done due to the unavailability of the underlying Tera Bitcoin Price Index market upon which its bitcoin contracts are based.
****SD: As of this writing, there’s no news I’ve been able to find as to why the underlying index is unavailable. One of the key points: “The TeraBit index was the only option for Nadex, as it was the only bitcoin price index calculated by a CFTC regulated company at the time. Since than TeraExchange has somewhat fallen out of favor with the CFTC as in September 2015 the regulator charged it for failing to enforce prohibitions against circular trading schemes.”
Cattle, Hog Traders Win Cut in Trading Hours on Chicago Exchange
Lydia Mulvany – Bloomberg
CME Group Inc. is reducing trading hours for livestock futures, the latest measure taken by the Chicago-based exchange in response to beef producers who say there is too much volatility and undue influence from high-frequency traders.
CME’s 4Q15 Earnings: Will the Beat Continue into 2016?
CME Group (CME) reported its 4Q15 earnings on February 5, 2016. It beat Wall Street analysts’ adjusted EPS (earnings per share) estimates of $0.90 with posted EPS of $0.92. Including non-recurring items, EPS stood at $0.86, a decline of 5.5% on a year-over-year basis.
CME’s fourth-quarter earnings saw a revenue decline of 3.2% to $814 million on lower clearing and transaction fees. The decline in revenues was partially offset by lower operating expenses. The stock rose 2.5% on the announcement of the results.
MGEX Tops Open Interest Record
MGEX, a Designated Contract Market (DCM) and Derivatives
Clearing Organization (DCO), has set a new open interest record for the second time in as many weeks, closing Monday’s activity at 83,259.
****SD: Apple juice!
LSE Group eyes late May for Curve Global launch
Luke Jeffs – Futures & Options World
The London Stock Exchange Group has agreed a provisional plan to launch its new rates exchange Curve Global at the end of May subject to customer readiness, according to sources.
The LSE Group, which said in October Curve Global would go live before the end of June this year, has pencilled in late May to launch the new rates market but sources stressed this is a provisional date that could change due to client readiness.
CBOE Establishes VIX Oversight Group, Adjusts Index to Meet IOSCO Rules
The leading measurement of volatility, the VIX Index, is getting more oversight in its measurement and administration.
The VIX also now will meet the certification requirements that bring it into compliance with the International Organization of Securities Commissions (IOSCO).
****SD: More on the VIX adjustment
NYSE, NYSE Arca And NYSE MKT Short Interest Reports
NYSE today reported short interest as of the close of business on the settlement date of January 29, 2016.
TMX Group Revenue Reporting Reclassification
In June 2015, TMX Group announced a strategic realignment designed to streamline the company’s operating structure and investment priorities around strategic pillars. In advance of the release of its financial results for the fourth quarter and year ended December 31, 2015, and to assist investors in updating their financial models, TMX Group today provided a reclassification of its revenue for the last seven quarters ended September 30, 2015, based on these strategic pillars.
ICE Clear Canada Receives Third-Country Central Counterparty Recognition Under EMIR
Intercontinental Exchange (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, announced today that ICE Clear Canada has been recognized as a third-country central counterparty (CCP) in accordance with the European Market Infrastructure Regulation (EMIR).
Regulation & Enforcement
Governor Rauner on CTU’s La Salle St. Tax idea: Absolutely not
Illinois News Network
The Chicago Teachers Union has repeatedly called for a financial transaction tax, commonly known as the La Salle St. tax as one of their demands to fund the cash-strapped Chicago Public School district.
According to the union, either Chicago or the state would tax both buyers and sellers of trades on the Chicago Mercantile Exchange and the Chicago Board of Options Exchange. They claim it would raise billions of dollars in taxes.
****SD: Would you look at that? A second reason the CME can be happy today.
MiFID II one-year delay announced
As widely expected, the European Commission has today officially announced a one-year extension to the entry into application of MiFID II. The proposal “amending Directive 2014/65/EU on markets in financial instruments as regards certain dates” will now have to be formally endorsed by both the Council and the European Parliament, most probably in a simplified procedure.
Japanese Watchdog Warns Against Three Binary Options Brands Unlicensed to Operate in Japan
The Japanese binary options market is one of the largest and the most active in the world. It is also one of the most strongly regulated by local financial institutions. Kanto Local Finance Bureau regularly informs investors about potentially dangerous brokers and other companies that offer their services without proper licenses. Today, the regulator published information about three more firms associated with the binary options market.
US Securities and Exchange Commission drops insider-trading case against Luo Haijian over Qihoo 360 shares
Bien Perez – South China Morning Post
The US Securities and Exchange Commission has dismissed its complaint against Luo Haijian, the chief executive of Chinese online gaming company 4399, for alleged insider trading involving shares of Qihoo 360 Technology last year.
Trading Technologies To Include EPEX SPOT Power Markets
The European Power Exchange EPEX SPOT today announces the inclusion of its markets on the direct screen of Trading Technologies (TT Screen). The inclusion of EPEX SPOT, also part of EEX Group, will allow traders to see all spot and derivatives products and prices on one screen, empowering them to easily trade the entire curve.
MIAX Options – Modification To Retransmission Services Timeout Windows
MIAX Options Exchange will be modifying the Retransmission Services Timeout Windows to minimize user contention for all MIAX Retransmission Services. This change should be seamless to users.
Hackers are offering Apple employees in Ireland up to EUR20,000 for their login details
Business Insider India
Hackers are offering Apple employees thousands of euros for their company login details, according to someone that works for the company in Ireland.
The employee, who spoke to Business Insider on the condition we kept their anonymity, said there are a lot of people trying to get hold of Apple’s inside information.
****SD: Given the prevalence of the cybersecurity/safeguards talking point in the industry, I thought I’d include this as an indicator of the (sometimes straightforward) types of difficulties faced by firms.
Options Traders Bracing For Huge Move in Twitter Shares
Saumya Vaishampayan – WSJ
Options traders are bracing for a giant move in Twitter Inc. shares after the company reports earnings Wednesday.
Twitter is scheduled to post fourth-quarter results after the bell. Shares have cruised to all-time lows in recent sessions, bringing the 2016 loss to a whopping 38%, as of Tuesday’s close
OIC Expert Series – Using options in portfolio management
Gary Delany, director of European Marketing and Education for the Options Industry Council, talks to PWM’s Yuri Bender about the advantages and pitfalls of trading US-listed equity options and how they can be best used within investment strategies.
****SD: Video can be found here
CBOE RMC, Feb. 29-Mar 2, 2016, Bonita Springs, FL
Now in its 32st year in the U.S., the annual CBOE Risk Management Conference (RMC) is the premiere financial industry conference designed for institutional users of equity derivatives and volatility products. Hosted by the Chicago Board Options Exchange (CBOE), RMC is an educational forum dedicated to exploring the latest products, trading strategies and tactics used to manage risk exposure and enhance yields. RMC brings together top traders, strategists and researchers, enabling participants to learn the state-of-the-art in investment risk management from true experts in the field. Learn more HERE and register for the event HERE
****SD: John Lothian News is a sponsor of the event.