JLN Options: FOA chief steps down after 20 years; A Warning Sign From the Options Pits; Scared? This could be the perfect time to get protection

Jan 13, 2014

Lead Stories

FOA chief steps down after 20 years
Michelle Price – Financial News
Industry veteran Anthony Belchambers is to step down as chief executive of the London-headquartered Futures and Options Association after some 20 years at the helm.
His departure comes at a critical juncture for the FOA, which last year announced that it would merge with the US-headquartered Futures Industry Association in a bid to more effectively combat sweeping post-crisis regulatory reforms.

A Warning Sign From the Options Pits
Steven Russolillo – The Wall Street Journal
As U.S. stocks kick off the year with a whimper, one indicator from the options market suggests some investors are gearing up for a bumpy ride.
In the year’s first seven trading days, the Dow Jones Industrial Average is down 0.8%, the first time it has started a year in the red since 2009. The S&P 500 is off 0.3%.
Neither are big drops. So, should investors be worried?

Scared? This could be the perfect time to get protection
Alex Rosenberg – CNBC
Even as stocks see a soft start to the year, investors don’t seem to be getting too fearful. In fact, the market’s “fear gauge” fell Monday to a low touched only once in the past 10 months, and that could give investors a great chance to get protection.

Mr. Market Says, ‘I Was Too Complacent’
Brendan Conway – Barron’s
It’s a selloff! More than that. It’s a selloff with a modest rise in the so-called fear gauge, which spent 2013 in a deep slumber.
The CBOE Volatility Index is ahead by 9.3% late in Monday’s session as the S&P 500 drops 1.3%. Sure, Goldman Sachs strategists’ assessment that U.S. stocks have grown expensive is part of the story.

Speculators Build Bullish Positions In Gold, Cover Shorts In Silver, Platinum – CFTC Data
Kitco News (via Forbes)
A rise in price prompted large speculators to add to their bullish futures and options positions in gold at the Comex division of the New York Mercantile Exchange, as seen in the latest weekly commitments of traders data from the Commodity Futures Trading Commission, released Friday.

Investing Insights: Let The Earnings Fun Begin
JJ Kinahan – Forbes
Earnings floodgates open this week, with financials up front, giving traders a peek at the latest quarterly results and Corporate America’s outlook for 2014. This means that until we get a little closer to the Federal Reserve meeting at month’s end, earnings look to drive the action.

On the road to double-dipped recession or deflation?
The Economist
There is a tug‐of‐war between the euro zone and emerging markets (EMs). As American output and interest rates rise, capital outflows in one or both regions are likely to rise. What form these outflows will take, which region will suffer more, depends on each region’s financial vulnerabilities, and how their politicians are expected to operate under duress.

How to capture growth in an autocallable world
Yakob Peterseil – Risk Magazine
Strategists are cautioning investors to look beyond autocallables and take advantage of low volatility to buy growth products. The banks have listened, engineering new solutions to capture upside. But will investors take the bait?

What Is The VIX Telling Investors?
Bill Luby – ETF Daily News
There was a time when investors would generally fret about the VIX being “too high” and the resulting possibility that there was some sort of unseen threat to the financial markets that was not showing up on their radar. In the last few years, the situation has reversed and now I find investors expressing more concern about a low VIX more often than a high VIX.

Videocast: Unusual VIX call action

Is a Volatility Squeeze In the Cards?
Adam Warner – Schaeffer’s Investment Research
Got this on StockTwits the other day:
– Hi adam, a lot of people are tweeting this, don’t you think short vol is the most crowded trade now that gold is unwinding? Thx
On the surface, it sure seems like the short volatility trade has gotten crowded.

Getting an Early Fix on Market Mood in 2014
John Kimelman – Barron’s
Should stock investors make much of the market’s soft slide in the early days of 2014?
USA Today seems to think so. The national newspaper ran with a feature Thursday discussing the outsize role that January results play for a market’s yearly performance.


FOA announces change of leadership
Press Release (FOA)
Anthony Belchambers has announced his intention to step down as Chief Executive of the Futures and Options Association (FOA) to seek other challenges in the industry. He will, however, stay on as Special Advisor to the Board during this time of intense regulatory and market upheaval.
Anthony will be succeeded by Simon Puleston Jones, who joins the FOA as Chief Executive on 10 March 2014 from Barclays’ Investment Bank (previously known as Barclays Capital).
http://jlne.ws/1ayUXgv (PDF)

Elimination of Position and Exercise Limits in SPY Options – Update
Press Release (NYSE)
In 2012, NYSE Amex Options was the first exchange to file for and receive approval to eliminate position and exercise limits for options overlying the SPDR S&P 500 ETF Trust (“SPY”) . The approval order can be found here. (This elimination of position and exercise limits for SPY options was done on a pilot basis; the pilot was extended until December 15, 2014 as discussed in this filing.) Subsequently, other exchanges and Self-Regulatory Organizations (“SROs”), the most recent of which is FINRA, have amended their rules governing position and exercise limits on SPY options.
Please see below for links to additional rule filings pertaining to the elimination of position limits in SPY Options:
http://jlne.ws/1cXaW7Q (PDF)

DGCX Trading Volumes Reach New Highs in 2013
Continuing its strong growth momentum from the previous year, trading volumes on the Dubai Gold and Commodities Exchange (DGCX) touched new highs in 2013. Annual volumes in 2013 grew 43% from 2012 to reach 13,759,255 contracts, the Exchange’s highest ever. Traded over a period of 253 trading days, 2013 volumes represent a value of $ 448.25 billion. Average daily volume (ADV) registered a significant growth to reach another all-time high of 54,384 contracts.

Exchange of the year: Ice
Risk Magazine
It took Ice six years to find a way into the interest rate futures market. Its arrival – via the $8.2 billion acquisition of NYSE Euronext – will intensify competition in over-the-counter derivatives clearing.

Equity derivatives house of the year: Morgan Stanley
Risk Magazine
There were lots of chances to get things wrong in last year’s equity derivatives markets. Morgan Stanley took none of them.

Derivatives house of the year: HSBC
Risk Magazine
Confident and capable, HSBC’s markets division has prospered as its rivals have retrenched, but the bank also approaches the business in its own – distinctively wary – style.

Bank risk manager of the year: Deutsche Bank
Risk Magazine
It was a busy year for risk managers at Deutsche Bank, who navigated fixed-income and foreign exchange turmoil, while continuing to squeeze the risk of the bank’s unwanted assets and overhauling its value-at-risk framework.

Regulation and Enforcement

MAT all clear but CFTC leadership shuffle could hit market
Richard Henderson – The Trade
The Commodity Futures Trading Commission (CFTC) is expected to pass all ‘made available to trade’ (MAT) filings for new swap execution facilities (SEFs), but uncertainty around leadership could affect the initial period of mandatory trading on the new platforms.

Federal Reserve Said to Probe Banks Over Forex Fixing
Keri Geiger and Caroline Salas Gage – Bloomberg
The Federal Reserve is investigating whether traders at the world’s biggest banks rigged benchmark currency rates, raising the risk that firms will be penalized for lax controls as regulators look for wrongdoing.

Banks Seek to Limit Volcker With Challenge to Meaning of ‘Own’
Yalman Onaran – Bloomberg
U.S. banks are seeking to limit the reach of the Volcker Rule by challenging its definition of what it means to own a hedge fund or private-equity fund.

** Next they’ll change the meaning of “is”.  – SR

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