Observations & Insight

Bits & Pieces
By John J. Lothian

We are full speed ahead with our MarketsWiki Education World of Opportunity series for Chicago and New York, coming up in July. You can sign up your newer employees, interns and anyone interested on the MarketsWiki Education page of johnlothiannews.com

CME Group

Speakers at our Chicago sessions include Walt Lukken (FIA), Gerry Corcoran (RJO), Karen Wuertz (NFA), Peter Nabicht, Julie Holzrichter (CME Group), Kate Maehr (Greater Chicago Food Depository), Rumi Morales (CME Group), JJ Kinahan (TD Ameritrade), Drew Shields (Trading Technologies), David Widerhorn (Neurensic), Lanre Surami (Riskbone) and Jeff Levoff (DRW).

Speakers at our New York sessions include Adena Friedman (Nasdaq) Kristin Boggiano (WIND), Jenny Knott (ICAP), Steve Gibson (Euclid Opportunities), Gary DeWaal (Katten Muchin Rosenman LLP), Bill Harts (Modern Markets Initiative), Neal Brady (Eris Exchange) and Kenny Polcari (O’Neil Securities).

Part of the original concept for the series was to introduce rock stars of the industry to the next generation, the people who helped make the industry what it is today. Another part was to introduce the rock stars of today who are building the industry for the future. We have a great lineup of speakers who are just that.

Don’t let your investment in the future, the interns and young people of today, miss this opportunity.

If you are interested in becoming a sponsor of the series in any of the cities, please contact me. It is not too late to become a sponsor.


Lead Stories

Exchange-Traded Products Are Making Volatility More Volatile
Amid an era of relative market calm, the proliferation of exchange-traded products that give investors exposure to shifts in implied volatility has laid the foundation for outsized swings in the CBOE Volatility Index, commonly known as the VIX.

Watch the VIX: It Matters This Time
U.S. stocks have been looking a little shaky ahead of the “Brexit” vote, but not nearly as shaky as investors. With Britain’s vote on quitting the European Union just a week away, the Chicago Board Options Exchange Volatility Index, or VIX, has been pushing higher. Since last Wednesday, the so-called fear gauge has climbed to 19.2 from 14.1. What makes the move so unusual is that for once, the VIX is actually telling us something.

****SD: We’re still below the February high of around 28.

There’s an odd disconnect between the fear index and the market
Market fear is rising, but it would appear that someone forgot to tell the market. The CBOE Volatility Index looks set to log its seventh straight rise Tuesday, in what would be only the third time the VIX has managed that long a string of gains in the past 20 years. But what is even more unusual is how the S&P 500 is responding to the surge in expected volatility.

****SD: Consider today’s article from the NY Times, Are Financial Markets Too Complacent About the Global Economy?, a companion piece.

Rising Brexit Angst Drives Weaker-Pound Wagers to $35 Billion
Contracts hedging a drop to $1.35 more than double since March
Protection costs rise to records as Brexit camp pulls ahead
The amount wagered on the pound falling to 1980s levels has more than doubled during the past three months.

****SD: A lot of this Brexit stuff is really repetitive, but the news is the news, innit?

As victims pile up, the binary options industry parties in Cyprus
The Times of Israel
LIMASSOL, Cyprus — The first person I met at the IFX Expo, an annual summit for the binary options and forex industry held at the Palais des Sports in this industrial Mediterranean port, was a prim Russian woman in her thirties who had recently taken a job with a binary options company in Israel. Over cappuccinos at a makeshift espresso bar on the floor of the converted sports arena where the conference was held late last month, we made small talk, discussing life in Israel, how expensive it was, and how Tel Aviv was more fun than Jerusalem. The woman was well-educated, she spoke excellent English, was polite and professional. But when she bade me goodbye and handed me her business card, something was off. It had her name, her company’s name, and a generic email address. But there was no phone number or physical location.

****SD: The Times of Israel’s crusade against fraudulent binary firms continues. I didn’t realize there was a weird ancient Greece element to IFX Expo — Spartan-esque warriors lined a blue ceremonial carpet on the walk up to the Palais des Sports?!

Options Show Swiss Stocks Seen Safer Before Brexit Vote: Chart
As traders prepare for the U.K. referendum on European Union membership, the cost of options on Swiss equities has fallen to an 11-month low relative to contracts on the Euro Stoxx 50 Index.

Euro’s Outlook Darkens in Options Before Brexit Vote: Chart
Investor anxiety over a possible Brexit is spreading beyond the pound. The cost of protecting against a drop in the euro against the dollar over the next month, compared with guarding against an increase, has surged to the most since November 2011, according to risk-reversals data compiled by Bloomberg. The premium touched 3.3825 percentage points on Wednesday, eight days before the U.K. votes on whether to remain in the European Union.

Saxo on Brexit: City of London may be forever changed
No less than 12% of UK GDP comes from financial services, underscoring the City of London’s importance to the British economy. Despite competition from New York, London is still the leader among financial centres with an estimated global market share of 40% in currency trading and almost 50% in interest-rate derivatives. On top of that, almost 20% of the world’s hedge fund assets are placed in London.

At $50/barrel, oil risks ‘reverse Goldilocks’ syndrome
Oil’s battle to reclaim $50 a barrel may have left it in a sticky situation, where the price is too low to lure fresh investor bulls and too high to force more production offline. Global oil production has fallen by nearly 1 million barrels per day in the last year to just over 95 million bpd, based on International Energy Agency figures. Demand is expected to reach 96.7 million bpd this quarter, up more than 1 million bpd in that time.

24option’s New Commercial Features Juventus Football Players
Finance Magnates
With the UEFA Euro 2016 championship finally kicking off in France, ??24option, one of the largest binary option brokers worldwide, has created a new promotional video that ?features four of the famous football stars that play for FC Juventus, one of the ?oldest professional football clubs in Italy. The club signed a partnership labelling the ?binary broker as the club’s exclusive partner on a global level, acquiring offline and online ?marketing rights. ?


MIAX Options – Announcement Of Secondary MIAX Options Trading System Relocation To Expanded NY4 Primary Data Center
Press Release
As previously communicated in the April 1st, 2016 alert announcing MIAX’s comprehensive data center migration and cable equalization plan, MIAX will commence the first phase of its data center relocation by moving the NY2 Secondary MIAX Options Trading System to a newly acquired NY4 data center location. The system relocation, commencing after trading hours Friday, June 24, 2016 for trading on Monday, June 27, 2016 will require no configuration changes to existing customer equipment.

CBOE Unveils Plans to Create Sentiment Benchmarks from Social Media Data
Finance Magnates
The Chicago Board of Options Exchange (CBOE) has just revealed details of an exclusive licensing agreement that it entered into with Social Market Analytics (SMA) to create a suite of sentiment-based strategy benchmark indexes tied to SMA’s social media metrics.

****SD: Yesterday’s news, but wicked interesting. #CBOE #SMA

ESMA recognises CME as third-country CCP
Today, the European Securities and Markets Authority (ESMA) updated its list of recognised third-country central counterparties (CCPs) to include the Chicago Merchantile Exchange (CME).

Western Union Business Solutions launches new FX Options for Hong Kong SMEs
Yahoo Finance
Western Union Business Solutions (‘WUBS’), a leader in global payment services, today announces the launch of a new product to help for tens of thousands of SMEs in Hong Kong who are making international payments. The new FX Options is added to Western Union Business Solutions’ current range of FX products — namely its spot FX and forward FX contracts — and payment products. The new FX Options aim to give more choice to companies that deal with multiple currencies in their day-to-day business. It enables them to hedge currency risks and protect themselves against volatile exchange rates.

Regulation & Enforcement

Alleged fraudster Andrew Caspersen lost more than $100 million on options
He lost it all on “put” options, and now he could very well be put in prison soon. Accused financial fraudster Andrew Caspersen lost a staggering $123 million by compulsively gambling on put options in the S&P 500 index from February until his arrest in March for swindling investors out of what allegedly totaled more than $38 million, it was revealed Tuesday in Manhattan federal court.

****SD: From the WSJ: Prosecutors Bring New Charges Against Andrew W.W. Caspersen


Thomson Reuters, Horizon Software Push Joint Chinese Derivatives Platform
Finance Magnates
Horizon Software, a global technology provider of electronic trading and investment management solutions, has entered into a joint initiative with Thomson Reuters, in an effort to spearhead a comprehensive derivatives trading platform for the Chinese market, according to a Horizon statement.

****SD: FOW’s take here and The Trade’s piece here


It’s time to bet on the US dollar, but you have to use this method: Trader
With a possible Brexit on the horizon, the dollar has strengthened as the referendum creeps closer. One trader sees the greenback going even higher, making an ETF tracking the U.S. currency worth an options play. Looking at a daily chart of the U.S. dollar ETF UUP, Todd Gordon of TradingAnalysis.com starts off by pointing out that options on the UUP have grown more expensive, giving traders an attractive opportunity to sell them.


The Smooth Process Known as Russell Reconstitution
CBOE Options Hub
June means a lot of different things to different people. For my kids it’s get out of school time. For my wife it’s how long until my kids go back to school time. For me it is Russell Reconstitution time. Before joining CBOE I would monitor the reconstitution process and try to trade around stocks that were going to be added or deleted from the Russell 2000. Now as an employee of CBOE I monitor the process since we are home for options trading on many FTSE Russell Indexes. Four of those indexes will be impacted through changes occurring on the market close on June 24th.


The ideal candidate: is there a formula?
Futures & Options World
Different trading strategies require different areas of experience, but when it comes to a ‘wish-list’ of credentials, some traits are non-negotiable in the modern derivatives landscape, Alice Attwood reports. Firms have long-taken differing approaches to recruiting traders – for some, a strong educational background is a must, others may want to appoint traders with a provable track record, while others want a demonstration that the potential candidate has passion and drive across other areas of his or her life.

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