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Get ready for a major market move
By John Nyaradi, MarketWatch
As VIX, the CBOE S&P 500 Volatility Index, plumbs new lows, many market observers are preparing for a major market move.
Many investors rely on the Chicago Board Options Exchange Volatility Index VIX +0.96%  to keep an eye on stock-market volatility. As the VIX continues to sink closer to its historic low of 9.39, many commentators are now discussing the VIX as a “complacency index.”

VIX near critical low: What do options say?
Prominent option activity with depressed VIX
Andrew Wilkinson – Futures Magazine
As the equity market creeps higher into virgin territory, portfolio managers have one eye on the CBOE volatility index. On Tuesday both stocks and the so-called fear gauge rose with VIX adding 1.32% to 11.51. Last week’s close at 11.36 marked a 14-month low-point which at the time was the lowest since March 2007.

VIX’s Signal is Bullish, Says McMillan
Steve Sears – Barron’s
Larry McMillan, one of the options market’s most respected strategists, is telling clients not to worry that the CBOE Volatility Index is below 12.
The volatility index (VIX) ended Tuesday’s session at 11.51 and got as low as 11.36 on Monday. Aside from a brief tour in early 2013, the measure hasn’t been below 12 since 2007. So you can guess why the more skittish sort of investor thinks it’s a bad sign.

VIX No Longer a Reliable Market Indicator: Melloy
ohn Melloy, Chief Executive Officer at StockTwits, and Jonathan Miller, president and Chief Executive Officer at Miller Samuel, discuss how the Federal Reserve is impacting market volatility and how slack in the housing market is affecting the U.S. economy. They speak on Bloomberg Television’s “Bloomberg Surveillance.”
http://jlne.ws/1tohQIZ [Video]

VIX to Add Half-Point Strikes in Near-Term
Marty Kearney – CBOE Options Hub
On Thursday, May 29, 2014, CBOE will list half-point strikes in CBOE Volatility Index (VIX) options. The half-point strikes will be listed in the near-term expiration month of June and in the strike price range of 10 to 15 (i.e. 10.5, 11.5, 12.5, 13.5 and 14.5 strikes).

Volatility ETFs Crash Signaling Further Volatility?
Volatility in the stock market is represented by the CBOE Volatility Index (VIX), also known as fear gauge. This tends to outperform when markets are falling or fear levels over the future are high. None of these has happened lately thanks to mixed economic indicators. As such, VIX plunged last week to its lowest level in 14 months, reflecting no fear or a greater complacency in the stock market.

Goldman’s Cohn Says Inactive Trading Environment Is Abnormal
By Michael J. Moore, Bloomberg
Goldman Sachs Group Inc. (GS) President Gary Cohn said low volatility and interest rates that are holding in tight ranges have resulted in an “abnormal” trading market.
“The environment for all the firms is quite difficult right now,” Cohn, 53, said today at an investor conference in New York. “What drives activity in our business is volatility. If markets never move or don’t move, our clients really don’t need to transact.”

Gold falls for third day, sticking to February lows
Analysts attribute decline to drop below key technical levels
By Myra P. Saefong and Shawn Langlois, MarketWatch
Gold’s drop to levels not seen since early February still wasn’t enough to lure buyers back, as prices settled lower on Wednesday for a third session in a row.
Gold for June delivery GCM4 -0.61%  lost $6.20, or 0.5%, to settle at $1,259.30 an ounce on the Comex division of the New York Mercantile Exchange, finding no rebound from its 2% retreat a day earlier. August gold GCQ4 -0.59% , also among the most-active contracts, fell $6, or 0.5%, to end at $1,259.70.
Options on June gold expired on Tuesday.

About That Low VIX…
Is the VIX merely reacting to the bullish price action?
Adam Warner – Schaeffer’s Investment Research
About that low CBOE Volatility Index (VIX) being bullish, I really want to clarify some points.
The important takeaway is that it’s not bullish that VIX is so low. Rather, VIX is so low because the market is acting so bullishly.
We like to remind everyone that VIX is a volatility index, and not an inverse exchange-traded fund (ETF). But the reality is that on a day-over-day basis, it really does act like an inverse ETF.

Benchmark indices end almost flat ahead of derivatives expiry
Mumbai: Equity benchmarks Sensex and Nifty today eked out marginal gains in choppy trades on alternate bouts of buying and selling ahead of the expiry of May derivative contracts tomorrow.

Can Calm VIX Predict Bumpy Road for Markets?
Bloomberg’s Alix Steel and Callie Bost examine the boost oin calls on the VIX as they hit a six-year high and what it means for a potential market pullback. They speak in “On The Markets” on Bloomberg Television’s “In The Loop.”
http://jlne.ws/1nv9P7u [Video]

Exchanges Can Ruin High-Frequency Trading Benefits: Study
Jonathan Morgan – Bloomberg
Exchanges risk making it harder for investors to get the best price by facilitating ever-faster trading, according to academics who examined Nasdaq OMX Group Inc. venues.
When Nasdaq sped up its markets in Copenhagen, Helsinki and Stockholm in 2010 by introducing its INET software platform, it spurred a race for profits among high-frequency traders, according to the report from VU University Amsterdam’s Albert Menkveld and his student, Marius Zoican. That competition reduced earnings.

Boutique Options Shops Ponder Exit, Improvements as Opportunities Narrow
Timothy Bourgaize Murray – Waters Technology
Citing fragmented markets, IT costs, and larger market makers’ increasing dominance, a panel of proprietary traders discussed what ails options firms at this year’s Options Industry conference, recently held outside Austin, Texas. Though not every panelist described the situation as dire, at least one said he’s concerned enough to consider leaving the space altogether.
***JB: This story was posted yesterday and was one of the most popular stories of the day.  Unfortunately some readers ran into a paywall which may have blocked them from reading the story.  We think this new link should fix that.

Volatility ETFs Crash Signaling Further Volatility? – ETF News And Commentary
By Zacks.com  
Volatility in the stock market is represented by the CBOE Volatility Index (VIX), also known as fear gauge. This tends to outperform when markets are falling or fear levels over the future are high. None of these has happened lately thanks to mixed econom
ic indicators. As such, VIX plunged last week to its lowest level in 14 months, reflecting no fear or a greater complacency in the stock market.


Nasdaq’s revamp of PSX exchange to put focus back on order size
The Business Times
[NEW YORK] Nasdaq OMX Group Inc plans to revamp the smallest of its three US stock exchanges for the second time in about a year, placing the emphasis back on the size of incoming orders rather than when they are received, according to a regulatory filing.

Athens Stock Exchange buys surveillance platform
Elliott Holley, Banking Technology
The Athens Stock Exchange has chosen a new surveillance system that it says will help it cope with new European financial regulations, including MiFID II and EMIR.
The exchange will use Cinnober’s Scila Surveillance software, which was specifically designed for exchanges.

CBOE Holdings Given Average Rating of “Hold” by Brokerages (NASDAQ:CBOE)
CBOE Holdings logoCBOE Holdings (NASDAQ:CBOE) has been given a consensus recommendation of “Hold” by the fourteen brokerages that are covering the company, Stock Ratings Network.com reports. Nine investment analysts have rated the stock with a hold recommendation and three have assigned a buy recommendation to the company. The average twelve-month price target among analysts that have updated their coverage on the stock in the last year is $51.62.

Looking for a Summer Rally?
By Bob Lang, CBOE Options Hub
We all heard the cries of ‘sell in May and go away’, but that hasn’t materialized – at least for this month.  With only four trading days remaining it appears the SPX 500 and Dow Industrials may squeak out a gain (currently up a fraction in May) while the NASDAQ has been the leader and is up solid.  For all the complaining the Russell 2K has received it is about flat for the month.  Ironically, it has only really spent one full day in the green for May as it continues to chop around, but perhaps a bottom has been found in the 107-108 range on the IWM shares.   Sell in May?  That ‘saw may not work this time around.

Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To List and Trade on the Exchange Options on Shares of the iShares MSCI Mexico Index Fund.

Regulation and Enforcement

Ex-Barclays New York Trio Face Libor Charges in U.K. Court
Suzi Ring – Bloomberg
Three former Barclays Plc (BARC) New York derivatives traders appeared at a London court after being charged with manipulating Libor by U.K. prosecutors, in the second group from the British bank to face U.K. criminal action.
Ryan Reich, Alex Pabon and Jay Merchant had their first hearing at Westminster Magistrates’ Court today. The group face a charge of conspiracy to defraud with other employees of Barclays, including three former London bankers already charged in the case, between June 2005 and September 2007, according to the Serious Fraud Office.

Swap packages raise dual oversight fears
Some of the most widely traded swaps transactions in the market are set to be pushed on to swap execution facilities on June 16, creating a potential compliance headache as market participants face the prospect of bowing to two separate regulators on a single transaction.
The multi-legged deals involve the pairing of an interest rate swap and a Treasury contract into a single trade. Traders estimate that 90% of the dealer-to-dealer interest rate swap market and 60% of dealer-to-client trades are transacted as swap spread packages, as they are known.


Instinet adds global connectivity to Nomura electronic futures platform
Automated Trader
New York – Instinet Incorporated has announced the availability of Nomura advanced electronic futures trading platform via the Newport Execution Management System (EMS).
Commenting on the announcement, Jonathan Kellner, Chief Executive Officer at Instinet, said: “Building out our multi-asset offering has been a major strategic focus for Instinet globally over the past few years.


Volatility: Fearless Investors Not Scared Enough? (Video)
Bloomberg’s Michael Regan examines the level of volatility in the current market as VIX call options reach a six-year high and what it means for markets going forward. He speaks on Bloomberg Television’s “Bloomberg Surveillance.”

Options Education

How to Make Winning Trades With Options Volatility
Here’s a quick primer on how you can use volatility to your benefit
By Zacks Investment Research, InvestorPlace
There’s been a lot of talk about volatility in stocks lately. But today, I want to focus on options volatility and what it means for the options investor.
So let’s start off with a definition:
Volatility measures the rate at which a security moves up and down. If a security is moving up and down quickly, volatility will be high. Conversely, if a security is moving up or down slowly, volatility will be low.

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