JLN Options: ISE Gets SEC Approval to List Volatility Options; Nasdaq's plan for cutting prices infuriates rivals; VIX Futures Extended Hours Volume Gaining Traction

Jan 29, 2014

Lead Stories

ISE Gets SEC Approval to List Volatility Options
Kaitlyn Kiernan – The Wall Street Journal
The International Securities Exchange moved a step closer to challenging the Chicago Board Options Exchange in the lucrative volatility options space.
The ISE, owned by German exchange group Deutsche Börse AG, said Tuesday it received Securities and Exchange Commission approval to list options contracts on the Nations VolDex Index, a measure of market volatility.
**Press release is below under Exchanges. -JB

Nasdaq’s plan for cutting prices infuriates rivals
John McCrank – Reuters
Nasdaq OMX Group (NDAQ.O) is pushing to cut the fees it charges big customers that trade on several of its exchanges, a move that is arousing the attention of regulators and triggering accusations from rivals that the company is seeking to stifle competition.
In late October, Nasdaq told U.S. regulators that it wanted to offer cheaper trading for customers of one of its options exchanges, if their total volume of trading with all three of Nasdaq’s options exchanges was substantial.
**Stifle competition?  Isn’t this by definition what competition entails? -JB

VIX Futures Extended Hours Volume Gaining Traction
Russell Rhoads – CBOE
Every morning that I’m at CBOE I will check the VIX futures volume in the extended hours session and put a tweet out regarding the volume and front month price change.  Here is today’s tweet –
Almost 34,000 $VIX Futures traded in extended hours trading today – Feb VIX up 0.85 to 16.05 – VIX Index closed at 15.80.

SPX Weeklys – Record Volume Days, as Number of Expiration Dates Is Expanded
Matt Moran – CBOE
CBOE recently issued Regulatory Circular RG14-010 re: “Expansion of Number of Expirations Listed in S&P 500 Index Weekly Options (SPXW).”  The circular provides that CBOE will list out and maintain six consecutive SPXW expirations at once, not counting the current expiration (i.e., January 31, 2014; see the table below for more info). Prior to this expansion, CBOE listed and maintained four consecutive SPXW expirations at once.

What’s Behind This $18 Million VIX Trade?
Adam Warner – Schaeffer’s Investment Research
It’s certainly worthwhile to highlight a trade of this magnitude. It’s especially interesting that it’s a VIX call seller, given that the lion’s share of order flow in VIX involves the “public” buying calls. But we really know too little about what went on here to make any market predictions based off it.

Binary Options Faces Binary Conundrum: Is it Trading or Gaming?
Andrew Saks McLeod – Forex Magnates
As far as new phenomena is concerned, binary options which can be traded online via dedicated platforms by retail customers has enjoyed three years of expansion, with one of the main attractions for entrants being the availability of complete turnkey solutions, as well as the opportunity to play ‘house’, meaning that an investor can either win or lose, with the losses becoming the property of the broker.

It’s a good time to be an ETF bad boy
Leslie Kramer – CNBC
January has been a good month for quick-trigger believers in profiting from short-term market volatility: The kind of spike in the VIX volatility index that historically took a month to play out took just two days last week.

Despite the Big Drop, Call Options Dominate Yahoo!
Jon C. Ogg  -24/7 Wall St
Yahoo! Inc. (NASDAQ: YHOO) may be down about 7% after its earnings signaled what is still a lack of serious growth in its turnaround strategy. What is interesting is that the options trading community is keeping a more bullish stance regarding Yahoo!’s prospects.

Videocast: No panic in VIX trades

ConvergEx Group’s LiquidPoint Hires Paul Finnegan
Press Release (via EIN News)
ConvergEx Group, a leading provider of global brokerage and trading-related services, today announced that Paul Finnegan has joined its LiquidPoint options business as Director of Software Sales. Based in Chicago, he will be responsible for developing LiquidPoint’s market data products and will also manage the sales of its LDB portfolio margining tools.

JPMorgan Said Near Decision on $2 Billion Commodities Unit Sale
Jodi Xu, Hugh Son and Andy Hoffman – Bloomberg
JPMorgan Chase & Co. (JPM) could fetch at least $2 billion for its commodities unit after it received bids from Blackstone Group LP (BX), Macquarie Group and Mercuria Energy Group Ltd., people with knowledge of the matter said.

The 10 biggest energy risk management disasters of the past 20 years
Alexander Osipovich – Risk Magazine
The history of energy trading is littered with losses, bankruptcies and other misfortunes that now serve as cautionary tales. Alexander Osipovich looks back at the biggest energy risk management disasters of the past two decades and how they reshaped the industry


CME and ICE warn on plan to force open European clearing houses
Gregory Meyer in Miami and Philip Stafford – Financial Times
The heads of the world’s two largest exchange operators by market value have warned against proposals to force open Europe’s clearing houses, arguing policy makers could undermine the stability of global markets.

SEC Approves Listing Options on Nations VolDex
Press Release (ISE)
International Securities Exchange Holdings, Inc. (ISE Holdings) today announced that the SEC has approved listing options on the Nations VolDex Index (ticker: VOLI). The Nations VolDex measures implied volatility by focusing on at-the-money options while also offering an alternative gauge of volatility. ISE Holdings’ two options exchanges, ISE and ISE Gemini, are the first options exchanges to enter into a licensing agreement with NationsShares to list options on the Nations VolDex. The exchanges plan to list options on VolDex later this year.

ISE ETF Ventures and BlueStar Indexes Expand Partnership
Press Release (ISE)
ISE ETF Ventures announced today the expansion of its partnership with BlueStar Indexes, a provider of Israeli-focused investment research, by launching the jointly developed BlueStar Israel Global Technology Index, “BIGTech” (Ticker: BGTH). BIGTech provides a benchmark for investors interested in tracking the broadest and deepest universe of Israeli technology-focused public companies, irrespective of listing venue.

COMMENTARY: Trading Venues are Ultimately Responsible for Transparency
John Kelly – Securities Technology Monitor
Who’s responsible for transparency?
The growth of electronic trading has provided many benefits to equity investors by creating new market efficiencies and reducing trading costs. But it has also led to a complex web of venues, liquidity types, and trading strategies that have contributed to a loss of confidence among investors globally.

Regulation and Enforcement

A Suspect Emerges in Stock-Trade Hiccups: Regulation NMS
Jacob Bunge – The Wall Street Journal
The Chicago Stock Exchange long ago ceased to be a major market hub. Its wood-paneled trading floor was boxed up and moved to the Art Institute of Chicago in 1977. Now all-electronic, it accounts for just 0.5% of shares that change hands nationally.
Yet each of the millions of buy and sell orders issued around the world for U.S.-listed stocks each day must scan the Chicago Stock Exchange’s computers before it can be completed.


Volatility: How to Make Money on It
Steven M. Sears – Barron’s
Recent volatility has sent the price of defensive options soaring. Here’s how to sell them to pay for cheap bets that stocks come back.


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