Observations & Insight

The Options Industry Heads to Miami
John Lothian News

Tomorrow marks the beginning of the Options Industry Conference at the iconic Fontainebleau Hotel Miami. Actually, the conference begins this evening with a reception hosted by NYSE, but the real party does not begin until the John Lothian News team arrives Wednesday morning. John Lothian will be moderating the exchange leader panel on Thursday, and both he and Sarah Rudolph will be on hand for meetings, interviews and any other exchange of information. Please look out for them or drop us a line if you would like to carve out some time with John and/or Sarah.

As sort of a kickoff to the OIC, we are releasing two options-centric video interviews this week. First up is Ed Boyle, newly-minted CEO of BOX Options Exchange, host exchange of this year’s conference.

Tomorrow, we will publish our interview with OCC‘s Michael McClain, who stepped into the president role a few months ago.

If you will be attending the conference, enjoy. Otherwise, stay tuned to JLN Options for the daily update, as well as live tweets from Miami.


OIC Conference Preview: BOX CEO Ed Boyle on how the options industry is working to address market challenges

At this year’s Options Industry Conference in Miami Beach, participants will discuss such crucial industry issues as market quality and deteriorating volumes, the implementation of Dodd-Frank and Reg SCI, technology and risk management. The conference is hosted by BOX Options Exchange, whose new CEO, Edward Boyle, spoke with John Lothian News about some of these issues and what’s being done to address them.
Watch the video »


Lead Stories

Here’s the Market Reaction to Those Sohn Investment Ideas
Tracy Alloway – Bloomberg
Mayweather vs. Pacquiao may have grabbed the limelight as the “fight of the century,” but the heavy hitters of finance are duking it out today at the annual Sohn Investment Conference in New York. At the industry confab, some of the world’s biggest hedge fund titans share investment ideas, generating headlines and sometimes moving markets. Here’s a roundup of select fund managers and their market-impact “scores.”

***DA: Rumor has it David Einhorn will be speaking while nursing a sore shoulder, but no word on whether it will affect his odds of delivering a quality speech.

Why the VIX May Challenge All-Time Lows in 2015
The S&P 500 Volatility Index (VIX) spiked to a low of $12.10 on Monday, which may have provided a clue that higher highs are in store. Although the index failed to hold the $12.50 level, the test to $12 was the lowest the VIX has traded all year.
I still want to see if it closes below $12.50 to $11.50 to confirm higher highs, and the VIX needs to hold $14 to $15 this month to make that happen. In trading this morning, the VIX rebounded 5.6%.

***DA: Considering how easily the market yawns off big news, just think what will happen during the dog days of summer. The Fed has already said “see you in September.”

McDonald’s: Retiring the Tired ‘Will It Recover?’ Story
Adam Warner – Schaeffer’s Investment Research
Here’s a headline that’s time has come: “McDonald’s to Reveal … Options Are on Table!” Finally! The Chicago Board Options Exchange (CBOE) invented equity options 40 years ago; now there are about 57 or so U.S options and not one of them lists McDonald’s Corporation (NYSE:MCD) options? Hard to believe.


Toronto Exchange Confronts Controversial Trading Rebate System
Eric Lam – Bloomberg
The Toronto Stock Exchange and its sister markets announced a step to curb one of the most controversial aspects of modern equity trading: the system of rebates and fees exchanges use to spur and reward transactions.
TMX Group Ltd., the owner of the Toronto Stock Exchange and other Canadian markets, said Monday that it will cut rebates it pays traders who provide liquidity by an average of 31 percent and trading fees by 26 percent on average.

CME Group: Assurance In The Face Of Unpredictability – CME Group Inc. (NASDAQ:CME)
Justin Polce – Seeking Alpha
It seems there has been an exorbitant amount of stories lately that tell a tale of lackluster economic performance. Or rather, international governments appear more willing than ever to jump at the chance to beat the proverbial tortoise that is slow economic growth, who always wins the race, albeit slowly and steadily. Nevertheless, governments keep sending the hare (central banks) to boast about extracting speedy relief in the form of monetary policy.

ISE ETF Ventures Receives Award for “Most Proactive Exchange for ETF Options/Derivatives” at 11th Annual Global ETF Awards
Press Release – International Securities Exchange, LLC
ISE ETF Ventures announced today that it received the “Most Proactive Exchange for ETF Options/Derivatives – Americas” award at the 11th Annual Global ETF Awards Dinner and Workshop on April 30, 2015. This marks the fifth consecutive year that ISE ETF Ventures has received this honor. In addition to index conceptualization and development, ISE ETF Ventures assists in bringing new exchange traded funds (ETFs) to market through capital commitment, business development, and marketing support. Currently, total assets under management for exchange traded products (ETPs) tied to ISE ETF Ventures exceeds $2.7 billion.

Intercontinental Exchange – Intercontinental Exchange Reports Record First Quarter 2015 Results
Press Release – ICE
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, today reported financial results for the first quarter of 2015. For the quarter ended March 31, 2015, consolidated net income attributable to ICE was $315 million on $850 million consolidated revenues less transaction-based expenses. On a GAAP basis, diluted earnings per share (EPS) in the first quarter were $2.80.

Continued volume growth on Singapore Exchange markets for April
Singapore Exchange (SGX) saw continued growth in securities trading and record volumes in its derivatives market. There were 21 trading days in April 2015 as compared with 22 trading days in March 2015 and 21 trading days in April 2014.

Regulation & Enforcement

Are OTC derivative rules a blessing or a curse?
The Trade
Asia’s OTC derivatives markets have been both blessed and cursed by the fact they have implemented the structural reforms demanded by the Group of 20 in the wake of the larger European and US markets.
Blessed, in the sense that they can learn from the mistakes and experience of those countries that went before.
Cursed, because the rules already laid down in the west are having a profound and not wholly positive impact in the east.

Goldman’s Self-Defeating Case Against a Programmer
Leonid Bershidsky – Bloomberg
Here’s to Sergey Aleynikov, the former Goldman Sachs programmer convicted Friday of stealing the bank’s high-frequency trading code, for accepting no compromises and persisting with a legal battle that still could put him in prison. By having the U.S. court system recycle the shaky six-year-old case, he is showing others like him the absurdity of working for old Wall Street banks in an era when a tiny startup, or even a guy trading from his home, can run circles around them.

Exchanges urged to do more to oust tricksters
Philip Stafford and Gregory Meyer – Financial Times
The renowned freewheeling and aggressive environment of futures trading is now firmly under the microscope with the industry keen to show it can still police itself.
The arrest of UK trader Navinder Singh Sarao for four years of alleged market manipulation of equity futures has shone a fierce spotlight on the dubious trading practices known as spoofing and layering, and done little to improve the reputation of markets.

Dodd-Frank Update: CFTC Proposes to Reduce Trade Option Obligations for End Users
On April 30, 2015, the Commodity Futures Trading Commission (“CFTC”) issued a notice of proposed rulemaking (“NOPR”) proposing to reduce certain reporting and recordkeeping requirements for end users. Notably, the NOPR proposes to eliminate the Form TO filing requirement and the Part 45 swap reporting requirement for end users in connection with trade options, while requiring end users to notify the CFTC if their trade option transactions have, or, alternatively, are expected to have, an aggregate notional value in excess of $1 billion in any calendar year.


Saxo Bank Lays the Foundations of the Trading Platform of the Future With SaxoTraderGO
Press Release via – IT Business Net
Saxo Bank, the online trading and investment specialist, continues to shape the future of trading with the launch of SaxoTraderGO, a new, intuitive multi-asset trading platform, available on desktop and mobile devices.
The platform was built from the ground up with focus on usability and performance and integrates seamlessly between desktop and mobile devices. The development of the platform also reflects one key trend: 20 per cent of the bank’s overall retail trading takes place through mobile devices, and this new platform allows them to access trading opportunities seamlessly as they switch between mobile and desktop environments.


Volatility Indexes: Google
If you trade Google you may be interested to learn that the CBOE has a Volatility Index for Google.
You can add this to your trading tools to give you an edge on the next Quarterly Earnings Report. CBOE has a wealth of information available to help you if you trade Google.

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