Lead Stories

Key US gauge signals investor complacency
By Nicole Bullock in New York, The Financial Times
US equities are at record highs, but a key measure of investor sentiment for future performance indicates a reluctance to chase the market higher.
S&P 500 call options, which give the buyer the right, but not the obligation to own the index at a future date, are at their cheapest level since the current bull market began five years ago, according to research…

ICE Plans Euronext IPO
By Inti Landauro, The Wall Street Journal
PARIS– IntercontinentalExchange Group Inc said on Tuesday it will split off its European stock market operator Euronext through an initial public offering in the coming weeks, after it unloads part of the exchange to a group of European financial investors.
After the IPO, Euronext shares will initially trade on the stock markets in Amsterdam, Brussels and Paris, ICE said in a statement. A listing will be added in Lisbon before the fourth quarter.

Is Your Hedge Fund Secretly a Pricey Put-Selling Strategy?
By Brendan Conway, Barron’s
No, really. Does your hedge fund’s purportedly sophisticated investment strategy have a similar risk profile to a simple options strategy?
Justin Lahart of the Wall Street Journal argues the answer often enough is yes. To make the argument, Lahart leans on an oldie but goodie by MIT’s Andrew Lo.

Finally A Breakout, But Caveats Remain – Weekly Market Outlook
Price Headley – CBOE Options Hub
We have to give credit where it’s due – if last week’s rally is just another fakeout, it’s the most convincing fakeout we’ve seen in months.  We at least owe it to ourselves to consider the possibility we could be headed into a rare springtime rally.

Gold Prices Sink on Options Expiry to 3.5-Month Low After Strong US Data, Weak Hong Kong Imports
GOLD PRICES fell to a 3-and-a-half-month low versus the Dollar beneath $1270 per ounce Tuesday lunchtime in London, as world stock markets rose and US data again pointed higher.

Boutique Options Shops Ponder Exit, Improvements as Opportunities Narrow
Timothy Bourgaize Murray, Waters Technology
Citing fragmented markets, IT costs, and larger shops’ increasing dominance, a panel of market makers 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.

What Does a Low VIX Mean for the Market?
What the market has historically returned in a low-VIX environment
Adam Warner – Schaeffer’s Investment Research
The CBOE Volatility Index (VIX) is making seven-year lows! We’re too complacent, doesn’t everybody know this won’t last forever, sell everything!
OK, I’m going a little straw man here, but that’s the basic impression I’ve gotten on Twitter and StockTwits over these last few trading days. And on TV as well.
Is it good advice to go to the mattresses here?

Videocast: Trading low volatility

Citadel Securities Expands into FX Market-Making, Teams up with Shift Forex
Forex Magnates
Citadel Execution Services (CES), a division of Citadel Securities LLC and an established market leader in U.S. equities and options, announced today that it has expanded the company’s market-making capabilities to the spot foreign exchange (FX) market.

Volatility Seen Inevitable as VIX Calls Hit 6-Year High: Options
By Callie Bost, Bloomberg
Traders are loading up on VIX (VIX) call options as history shows there’s a good chance stock-market volatility is about to increase.
Calls on the Chicago Board Options Exchange Volatility Index, which become more valuable during times of market stress, outnumbered ones betting on a decrease in market swings by 3.4-to-1 this month, the most since 2008, data compiled by Bloomberg show. The VIX has closed below 15 for the past 27 days. A study from Sundial Capital Research Inc. shows the gauge usually rises after reaching such low levels.

Last Week in VIX
Russell Rhoads, CFA Senior Instructor, The Options Institute
VIX ended up the week pretty low, but not at the post 2008 lows we all like to focus on. Since the end of the great financial crisis VIX has closed at 11.30 twice – last year on both March 14 and 15. From March 15, 2013 to this past Friday (May 23, 2014) the S&P 500 has climbed from 1560.70 to 1900.53 – a rise of 21.77% and VIX has not made a new low.

Summer Trading Plan
Leadership from the S&P 500 continues, leaving the broad-based index poised to own the previously insurmountable 1900. There seems to be little in the S&P 500’s way except, perhaps, a bit of market inertia.

Won Volatility Falls as Korea Intervention Concern Damps Trading
By Jiyeun Lee Volatility in the won slid for a fourth day as concern that South Korea may act to curb the currency’s appreciation sapped trading.
South Korean authorities have succeeded in setting a ceiling for the won around the 1,022 per dollar level after a “fairly strong” effort to buy the greenback last week, Scotiabank said in a report yesterday. Gains in exports as well as inflows into the nation’s equities and debt have fueled the won’s 4.1 percent advance this quarter, the best performance among 31 major currencies tracked by Bloomberg.


ISE Announces New Board Member
Eleven Board Members Re-elected
Press Release
The International Securities Exchange Holdings, Inc. (ISE Holdings) today announced the addition of one new member to the Boards of Directors of its two exchanges, and also announced the re-elections of eleven members, including one Competitive Market Maker (CMM) director, one Electronic Access Member (EAM) director, eight non-industry directors, and the Chief Executive Officer director.

FTI Consulting and NYSE Governance Services Study Identifies Key Legal Risks for Companies in 2014
NYSE Euronext Press Release
Annual Survey Reveals Mounting Concern toward IT/Cyber Risk and Data Security; Different Perspectives between Boardroom and General Counsel around Social Media
Washington, D.C., May 27, 2014 — FTI Consulting, Inc. (NYSE: FCN), the global business advisory firm dedicated to helping organizations protect and enhance their enterprise value, and NYSE Governance Services, publisher of Corporate Board Member magazine, released new findings from the 14th annual Law in the Boardroom Study. This year’s data revealed that emerging issues, including cyber threats, social media and shareholder engagement, are of increasing concern.

Inching Towards Bitcoin Derivatives
Jon Matonis, CoinDesk
Bitcoin derivatives are more in demand than ever, as bitcoin company executives seek a way to hedge balance sheet risk. A liquid futures and options exchange for bitcoin will provide commercial hedging opportunities as well as increase overall price stability. This is not disputed.

TMX Group CEO Addresses the Economic Club
Press Release
Thomas Kloet, Chief Executive Offer, TMX Group, spoke this afternoon at the Economic Club of Ottawa. In the speech, titled Show Me the Money — An Exploration of Capital Raising in Canada, Mr. Kloet discussed the capital ecosystem in Canada and how its vibrancy and diversity are critical to the country’s future success.

ICE Endex to Introduce German Power Contracts
Press Release
IntercontinentalExchange Group ICE +2.45% , the leading global network of exchanges and clearing houses today announced that ICE Endex, the leading energy exchange in continental Europe, will launch German Power futures and options contracts on June 10, 2014.

Eurex plans July start for FX derivatives
Anish Puaar in Moscow, Financial News
Eurex, the Deutsche Borse owned derivatives market, will launch FX contracts from July making it the second exchange to break into currency products this year.
Eurex plans July start for FX derivatives
The exchange said Tuesday that it will launch futures and options contracts based on currency pairs covering US dollars, sterling, euros and Swiss francs from July 7.

New NYSE boss oversaw NYBOT-ICE integration
By Renee Caruthers, FierceFinanceIT
Thomas Farley, the new president of NYSE Group, has a seven-year history with IntercontinentalExchange, having joined the company in February 2007 to run ICE’s then-newly acquired New York Board of Trade (NYBOT) subsidiary. In that role, he oversaw NYBOT, which was quickly renamed ICE Futures U.S., as it transitioned from an open outcry market to an electronic trading marketplace. With the closing of its agriculture options pit in 2012, ICE Futures U.S. became the first commodity exchange in the U.S. to fully eliminate the open-outcry system, the International Business Times reported at the time.

Regulation and Enforcement

Part I: Facts from OCC, U.S. Options Exchanges Adopted Pre- and Post-Trade Risk Principles
The Options Insider in Industry
Last Wednesday, OCC and the U.S. options exchanges announced the adoption of pre- and post-trade risk control principles that are designed to enhance the monitoring of trading activity on a real-time basis and reduce the risk of errors or other inappropriate activity that poses a material risk of significant market disruption.
Here’s some additional information about these principles.


Athens Exchange Selects Cinnober for Surveillance
James Rundle, Waters Technology
The Athens Stock Exchange (Athex) has selected Cinnober’s Scila Surveillance suite to handle a multi-asset monitoring environment.
Scila is also in use at Deutsche Börse, Eurex and the Stock Exchange of Thailand. Athex handles equities and derivatives, and provides technical capabilities to the Cyprus Stock Exchange. The system will be implemented across Athex’s entire trading platform, and can be accessed by regulators.

Enyx, Options Ally for FPGA-Accelerated US Equities Data Distribution
Waters Technology
Paris-based hardware-accelerated data capture and network technology vendor Enyx is enabling clients of infrastructure-as-a-service provider Options (formerly Options IT) to access its managed NXFeed ultra-low-latency market data distribution system via Options’ Velocity market connectivity and application hosting service, under an agreement between the two vendors.


Resurgence of volatility creates options opportunities
FTSE Global Markets
Any memory of last year’s lowest recorded levels of volatility since the financial crisis has surely been erased with the latest geopolitical events. Uncertainty around the pace of growth in China, the trimming of QE in the US, and mounting concern about Ukraine has meant that 2014 has already been marked down as a volatile year. But despite these shockwaves, for some investors a volatile market does not have to mean market losses. By Ben Few Brown, director, Arcanum Asset Management.

9 Is the New 10
Mark Sebastian – CBOE Options Hub
Looking at the market rip up on the surprising housing news and the old highs are in the rearview mirror as stocks race ahead.  Alex Jacobson, who I co-moderate the Options Block with on the Options Insider Radio Network, made a nice call last week watching the Dow transports make new highs and thinking the broader market was not too far behind.  1909 on the SPX and counting today as the shorts are going to have a hard time answering on this one.

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