Commentary & Insight
Options leaders opposing tax reforms and transaction tax
By Jim Kharouf Options exchange leaders at the Options Industry Conference in Las Vegas voiced strong opposition to proposed tax reform and transaction tax proposals. Steve Crutchfield, who heads NYSE Arca and NYSE AMEX, said that the proposal at tax reform would issue a tax on regular retail investors who are looking to cover their stock positions. The 60/40 tax treatment is also under fire, under the proposal. Crutchfield said that the proposal is “a severe deterrent to investors to manage their risks.” “Just buying some downside protection while I own stock, would cause the stock position (with) a long put as part of my portfolio would be treated as ordinary income for the purpose of any gains that are seen, not even realized, during the time that option is held, sold or expired,” Crutchfield said. “Just holding an option in the books will negatively impact the tax treatment for equity investors if this proposal goes into effect.” There are also several proposals in Congress and another in the Illinois State Legislature that call for various transaction taxes. Gary Katz, CEO of International Securities Exchange, said the concept of taxing the financial industry is popular in Congress, as well as in Europe. “Right now financial transaction taxes sound great to group people who don’t think of themselves as investors in the market,” Katz said. “The only thing we can do is to continue to educate. And it will do the exact opposite of what Dodd-Frank intended to do, which is to drive volume in the over-the-counter derivatives market into the lit market, the exchange traded market. These are the things we have to pound home.” While all oppose a transaction tax, one exchange leader said it may be the lesser of two evils that is coming, like it or not. Tony McCormick, CEO of BOX Options Exchange, said that the transaction tax may be the better of the two deals, tax reform and transaction tax, being proposed. “But it’s coming, it’s down the road,” McCormick said. “The tradeoff down the road is the transaction tax. Don’t think this is going away if we dodge this bullet, because the need (from Congress) is there.” Crutchfield, however, said a transaction tax would raise the price of transactions and lower execution quality – a double whammy against investors who would likely have a tax passed down to them and get poorer fills from market makers. Retail brokers also have pushed to oppose the tax reform bill, proposed in late January by Sen. Dave Camp. Katz urged conference attendees to get involved to oppose the bill and help educate Congress about unintended consequences.
Lead StoriesThe Curious Nature of Gold Volatility
Russell Rhoads, CBOE
The trading action in the SPDR Gold Trust ETF (GLD – 141.63) continues to grab the headlines. Of course the recent headlines are not as loud as when GLD dropped about 20 points in two days, but traders are still keeping a close eye on gold. This time the news is about the move to the upside as GLD has rebounded from the low 130’s and is now resting in the low 140’s.
http://jlne.ws/11qdbcj CBOE Preaches to Vegas Choir as ‘Glitch’ Crashes Exchange
Nikolaj Gammeltoft, Bloomberg
As Ed Provost took the stage at the Green Valley Ranch Resort & Spa in Las Vegas to explain how a software malfunction had shut the Chicago Board Options Exchange for three-and-a-half hours, he was surrounded by people who were victims of similar disruptions.
http://jlne.ws/15LZlXN Technical glitch that darkens CBOE doesn’t shake traders
Lynne Marek, Crain’s Chicago Business
“There is no shortage of other venues to trade on,” said Steve Sosnick, equity risk manager at Timber Hill, a division of Interactive Brokers Group. “We have not heard much about the cause of the outage at CBOE.”
The shutdown was mainly an opportunity cost, and not so much a negative, said independent trader Scott Mikros, who operates his own proprietary trading firm, Chicago-based Risk Management International LLC.
http://jlne.ws/11KtHVb Hedge funds favour collaborative outsourcing
Pauline McCallion, Risk Magazine
Outsourcers are taking a more collaborative approach, providing greater access to tailored services and specialist technology, leaving managers to concentrate on making money.
ExchangesNYSE Euronext Announces 2013 Annual Meeting of Stockholders Vote Results
Press Release (NYSE)
At the NYSE Euronext (NYX) annual stockholders’ meeting held on April 25, 2013:
• 16 director nominees received a majority of votes cast, with an average approval rate of 96.35% of votes cast,
• Stockholders ratified the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2013,
• Stockholders approved on an advisory, non-binding basis, the Company’s executive compensation,
• Stockholders approved a Company proposal amending and restating the Company’s Omnibus Incentive Plan,
• Stockholders reapproved the performance goals under the Company’s Omnibus Incentive Plan,
• Stockholders did not approve a Company proposal amending certain provisions in the Company’s Amended and Restated Certificate of Incorporation (Charter) to allow stockholders to call special meetings (Special Meeting Proposal), and
• Stockholders did not approve a Company proposal amending certain provisions in the Company’s Charter to allow stockholders to act by written consent (Written Consent Proposal).
RegulationDealers Petition SEC for Block Order Exposure Rule
Peter Chapman, Traders Magazine
Three options market-making firms have petitioned the Securities and Exchange Commission to adopt a rule that would require all block orders to be exposed to all market participants electronically.
Susquehanna International Group, Citadel Securities and the Chicago Trading Company argue in their petition that investors are often hurt when firms execute block orders—those of 500 contracts or more—on the floors of exchanges.