JLN Options: Hair-Raising Critique Aimed at Options Clearing by SEC; Deutsche Bank Starts Trading System for U.S. Options; Suspicious Trades Before Jobs Report in Three Charts

Oct 22, 2013

Lead Stories

Hair-Raising Critique Aimed at Options Clearing by SEC
Nandini Sukumar & Nikolaj Gammeltoft – Bloomberg
For the second time this year, U.S. regulators have cited one of the biggest American options institutions for failing to police itself.
The Securities and Exchange Commission told Chicago-based Options Clearing Corp. that it has “serious concern about systemic weaknesses in OCC’s risk management and operations,” according to a letter obtained by Bloomberg News.

Deutsche Bank Starts Trading System for U.S. Options
Nikolaj Gammeltoft – BloombergBusinessweek
Deutsche Bank AG is introducing an electronic platform for investors to trade options on single stocks, equity indexes and exchange-traded funds across U.S. derivatives exchanges.

Suspicious Trades Before Jobs Report in Three Charts
Steven Russolillo – The Wall Street Journal
Another major economic report, another round of speculation about suspicious trading activity seconds before its release.
A number of futures contracts Tuesday morning showed “distinct activity just before 8:30:00,” says Eric Hunsader, founder of Nanex, a Chicago firm that studies and distributes stock-market data. He illustrated the moves in a number of charts on his firm’s website.

Almost No Risk Is Priced Into Financial Markets, And There’s Virtually Nothing On Investors’ Radar
Matthew Boesler – Business Insider
Since the government shutdown ended and a debt ceiling crisis was averted, global financial stress has fallen to levels not seen since before the financial crisis.

VIX Designer Warns Against Holding On To Volatility ETFs
Tom Lydon – ETF Trends
Robert E. Whaley, credited as the architect of the so-called fear index, stated that VIX ETNs are “not suitable buy-and-hold investments” and are “virtually guaranteed to lose money through time,” reports Brendan Conway for Barron’s.

Bloomberg’s SEF completes first-ever cleared bunched trade
Automated Trader
Bloomberg’s SEF has completed the first-ever cleared bunched derivative trade. The trade was executed by MKP Capital Management through its futures commission merchant Credit Suisse Securities, and CME Clearing provided clearing services.

Rowady’s Thoughts on Volatility, Data and Crowds
If you want to value the derivatives in your portfolio accurately, then you’d love to predict the forthcoming volatility. Right? Since you can’t, you’ll make do with either implied or historical volatility. Still, what you’d really like, the “holy grail” of the knights of valuation, is to know what volatility will be during the life of the instrument.

Videocast: Traders rethink volatility

USDA to keep releasing crop reports during CME trading hours, despite complaints -official
Christine Stebbins – Reuters
A top U.S. Agriculture Department official said key monthly U.S. crop reports will continue to be released during CME Group Inc trading hours, despite complaints from the grain industry that high-speed traders have access to the data before it becomes available on public websites.
**I doubt it matters when the reports come out.  The high frequency traders will beat slow poke humans every time. -JB

Futures Under Fire
Dan Collins – Dan Collins Report
The problem with when a mainstream business outlook writes about the futures industry is they usually get it wrong and unless someone from the industry responds, no one questions it. Worse, others pick up on the flawed story and repeats it without questioning it. This happened when, of all outlets, National Public Radio interviewed David Evans the author of the Bloomberg Oct. 7 story, “How Investors Lose 89 Percent of Gains from Futures Funds.”

IN MEMORIAM: Former Traders Magazine Editor Killed in Accident
John D’Antona Jr. – Traders Magazine
Tom Steinert-Threlkeld, former editorial director of Traders Magazine and Securities Technology Monitor, was killed Sunday afternoon in a bicycle accident.
**Very sad and tragic.  Our thoughts are with his family and friends.  RIP  -JB


NYSE to Host Annual Floor Broker Charity Trading Day
Press Release (NYSE)
NYSE Euronext (NYX) today announced the annual New York Stock Exchange (NYSE) Floor Broker Charity Trading Day will take place on Friday, October 25, 2013.  All net transaction fees on orders executed by floor brokers in NYSE and NYSE MKT securities on the day will be donated to St. Jude Children’s Research Hospital, one of the world’s premier centers for the research and treatment of pediatric cancer and other life-threatening childhood diseases.
**When I first read the title I wondered why in the world would they have a charity for floor brokers?  -JB

OFT Clears EMCF and EuroCCP to Combine
Press Release (BATS)
EMCF and EuroCCP today announce that the Office of Fair Trading (OFT), the UK’s consumer and competition authority, has recommended an unconditional clearance for the two clearing houses to combine to form a new pan-European cash equities clearing house that builds on the strengths of both firms.
http://bit.ly/186iQpO (PDF)

Regulation and Enforcement

Chicago-based AlphaMetrix ordered to repay improper loans
Ann Saphir – Reuters
AlphaMetrix, a Chicago-based fund manager with $700 million under management, on Monday was ordered by its regulator to repay about $600,000 in fees owed to outside money managers by November 1, or be barred from trading.

CFTC asks Citigroup, Deutsche Bank to inspect records – WSJ
The Commodity Futures Trading Commission has asked major currency dealing banks, including Deutsche Bank AG and Citigroup Inc to search their records as part of a global probe into possible currency market manipulation and hand over any evidence of wrongdoing, the Wall Street Journal reported citing people familiar with the matter.
**Asks???  -JB

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