Observations and Insight

Mostly Sunny: MIAX Options Exchange Grabbing Some Market share
Jim Kharouf – John Lothian News (JLN)
As options exchanges jostle for position in a crowded field, the monthly OCC options market share report sometimes tells an interesting story about the competition among them.
While the Chicago Board Options Exchange continues to dominate in market share, its the smaller exchanges that sometimes gain notice. Take the MIAX Options Exchange, for example, which posted total equity options market share of 4.38 percent in January, a nice jump from 2.65 percent a year earlier, according to the OCC Options Exchange market share report.

Lead Stories

MIAX Options Exchange Closes Equity Rights Deal With Seven Firms
Bradley Hope – WSJ
The two-year-old MIAX Options Exchange is making a move it predicts will triple its market share in the competitive world of stock options trading.
Seven major firms including Citadel Securities LLC and Morgan Stanley & Co. LLC signed a deal with MIAX’s owner, Princeton, N.J.-based Miami International Holdings Inc., allowing them to buy stock in the holding company if they increase the amount of trading on the exchange, said Thomas Gallagher , MIAX’s chairman and chief executive officer.
***DA: The deal itself has been out there for a while, though it looks like they have tweaked the list of eligible firms.

Speed Trading Pioneers Take Step Toward Paring Their KCG Stakes
Nick Baker – Bloomberg
The founders of high-frequency trading pioneer Getco took a step toward selling almost 6 million shares of KCG Holdings Inc., the broker-dealer formed when their company saved a struggling brokerage.
Trusts and an investment firm tied to Daniel Tierney and Stephen Schuler set up programs letting the former Getco executives sell 3 million and 2.75 million KCG shares, respectively, during the next year. Both would retain millions of shares even if the plans were executed completely, according to Securities and Exchange Commission filings on Tuesday.
***DA: Nothing wrong with a little diversification.

The Messy Relationship Between VIX and VXX
Adam Warner – Schaeffer’s Investment Research
Determining the VIX’s role to the VXX is complicated business. So what happens when a bunch of options folk start debating what goes into the price of iPath S&P 500 VIX Short-Term Futures ETN (VXX)?
***DA: What happens is that anyone listening thinks he or she has just been teleported to Comic-Con.

Is volatility over with? Market signs to watch
Evelyn Cheng – CNBC
The last two day’s oil gains are encouraging for the short term as investors continue to pick up more signs of coming stabilization in markets.
Oil extended the past few days’ gains to settle up $3.48, a 7 percent surge, to $53.05 a barrel, the highest settlement of 2015. WTI crude is up 22 percent from its intraday low of $43.58 last Thursday.
***DA: Yep. We are all perfectly safe. No more down days this year.

In a Sale Gone Awry, a Lesson for Other Deal Makers
Steven Davidoff Solomon – NY Times
The prolonged takeover battle for the GFI Group, a New York brokerage firm and clearinghouse, has been littered with missteps by Michael Gooch, its founder and executive chairman, raising the question of why supposedly intelligent leaders time and again do dumb things when they sell their companies.
***DA: The question is not about Gooch’s “intelligence,” as the author put it. Rather, he wished to have his cake and eat it too. Sounds sensible to me. He also has no interest in being subservient to Mr. Lutnick. That sounds sensible as well. Whether he has upheld his responsibility to the shareholders is another story.


Euronext Expands Derivatives
Adam Rose, head of financial derivatives at Euronext, said the pan-European exchange has launched more products in the last months than in the previous three years as it expands its derivatives franchise.
During the third quarter results presentation in November Euronext management said: “Our major priority will be to grow our under-exploited derivatives business through new product expansion in listed and over-the-counter equity options and futures, index volatility products and commodity derivatives and exchange-traded funds.”

Derivatives Exchanges Look to Add Liquidity to the Bitcoin Market
Robert Stowe England – Institutional Investor
Say what you will about Bitcoin’s ebbs and flows, the cryptocurrency’s profile just keeps rising. As it has been in the past with Bitcoin, each new player seems to increase the odds that more will join the wave.
Yet so far, U.S. trading volumes on Bitcoin have been very low. Bitcoin trading hit a seven-day average of $39.5 million in December 2013. A year later, the seven-day average was about $2.6 million.

BATS Reports Record U.S. Options Market Share of 8.8% in January
Press Release – BATS
BATS Global Markets (BATS) today reported January volume, market share, and monthly highlights including record market share for BATS Options of 8.8% and one of its strongest months on record in European equities with 24.2% market share.
http://jlne.ws/1zAQuF7 (PDF)

Intercontinental Exchange Reports ICE and NYSE Volume for January 2015
Press Release – ICE
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, today reported January exchange traded volume.
ICE’s January 2015 average daily volume (ADV) declined 7% compared to January 2014.
Commodity ADV increased 7% led by Brent, Gasoil and Other Oil up 42%, 9% and 51%, respectively, from the prior January.
Financials ADV declined 22% from the previous January primarily due to continued low Continental European short-term interest rates, partially offset by a 6% increase in equity index ADV.
ADV for NYSE’s U.S. cash equities increased 19%, while U.S. equity options ADV declined 26% over the prior January. NYSE’s U.S. cash equities market share increased 3 percentage points to 23.9% and NYSE’s U.S. options market share was 18.3%.

Regulation and Enforcement

BATS Files Market Structure Reform Petition with SEC
John D’Antona Jr. – Traders Magazine
BATS Trading took one giant leap for equity market structure reform today and filed a petition with the Securities and Exchange Commission (SEC) for more rulemaking designed to make the market better.
BATS, in its filing, issued a “call to action” to drive regulatory reform urging participants to engage in a constructive dialogue to improve the already healthy U.S. equity market for all investors.
The petition was filed on January 21st and published to the SEC’s website January 29th.

Most brokerages and advisers have had cyberattacks: SEC
Anil D’Silva – Reuters
U.S. brokerage firms and financial advisers are a routine target of cyber criminals and some have lost money as a result of fraudulent emails requesting transfers of client funds, the U.S. Securities and Exchange Commission said in a report.
At least 88 percent of broker-dealers and 74 percent of advisers have been the target of cyberattacks, the SEC said on Tuesday, citing findings from a cybersecurity examination program it conducted last year.

ICAP Fined $17 Million by EU for Aiding Yen Libor Cartels
Gaspard Sebag and Aoife White – Bloomberg
ICAP Plc, the world’s largest broker of transactions between banks, was fined 15 million euros ($17.2 million) by the European Union’s antitrust arm for helping traders to manipulate benchmark interest rates tied to the Japanese yen.
ICAP spread misleading information to lenders on a panel that set the interbank lending rate for yen Libor and aided contacts between traders, the European Commission said in an e-mailed statement from Brussels today.

U.S. regulators mull legal action against BP on rules violations: company
Ankush Sharma – Reuters
U.S. regulators are considering naming BP PLC (BP.L) and its entities in an enforcement action alleging the British oil major violated anti-fraud and reporting rules while using Canadian oil pipelines, BP said in its quarterly results statement on Tuesday.

Options Education

Want Success in Trading? Lose Your Opinion – Now
Bob Lang – CBOE Options Hub
It’s hard to not listen to the experts and pundits who offer an array of opinions and points of view.  Everyone has to be smarter than us, right?  A market opinion is like a mouth – everyone has one and most don’t know when to shut it (there is a similar analogy most know of, but I wanted to keep it clean!).  But those opinions tend to sway us to move in dangerous ways.  The market will never divulge an opinion, but like Jack Webb said in Dragnet:  ‘just the facts’.

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