Observations and Insight

Post-Trade Views: Euronext’s Andrew Simpson on Interoperability and Open Access

Financial regulators began their overhaul a few years ago with several goals in mind, one of which was to make clearing and trading venues more open and transparent. But can cash securities and derivatives be shoehorned into the same set of rules? Andrew Simpson, head of post-trade services at Euronext, compares the regulatory objectives with the realities of the market.

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Lead Stories

OCC Boosts Risk Management
Options Clearing Corp., which clears U.S. listed derivatives, is expanding its liquidity capability in order to backstop its role as a systemically important financial market utility.
In addition to expanding its authority to require liquidity margin calls, it recently expanded its committed credit facilities from $2 to $3 billion. It’s also in the process of diversifying these facilities to include approximately $1 billion in committed funding from non-bank providers, thereby reducing cross-exposure risk and pro-cyclicality during times of stress.

Start-ups making waves in Chicago’s derivatives industry
Financial Times
Last month, the world’s largest futures exchange played host to a meeting of tech workers, venture investors and traders. CME Group had not formally organised the event, but it had provided the venue and Rumi Morales, representing the CME’s new venture capital fund, was moving about the crowd.
CME’s involvement demonstrates its appreciation of the important role that start-ups are likely to play in the future of the derivatives industry – and the city.

Are VIX Futures More Accurate Than Chris Berman?
Adam Warner – Schaeffer’s Investment Research
Analyzing the CBOE Volatility Index (VIX) futures term structure.
Time to get Back to the Futures! As we periodically note, CBOE Volatility Index (VIX) futures always anticipate a future VIX lift, provided VIX itself hasn’t already lifted too much.


ICE chief blasts rival’s tactics to lure users
Gregory Meyer – Financial Times
The head of Intercontinental Exchange, the world’s second-largest exchange group by market value, launched an unusually explicit criticism of its bigger competitor’s business strategy as he touted growth in his flagship oil contract.
Jeff Sprecher, chief executive of ICE, said that the number of futures contracts outstanding in its benchmark Brent crude oil market had surpassed open interest in CME Group’s rival oil contract, West Texas Intermediate.

Singapore Exchange hit by trading outage
A major power failure caused a suspension of trading in stocks and derivatives on the Singapore Exchange (SGX) for several hours on Wednesday.
The exchange said the problem was due to multiple power supply issues affecting market participants’ connectivity. “The outage did not arise from a cyber-attack,” it said.

Major exchanges seek to dismiss high-frequency trading lawsuit
Jonathan Stempel – Reuters
Major U.S. stock exchanges have asked a federal judge to dismiss a lawsuit accusing them of costing ordinary investors billions of dollars by rigging markets to benefit high-frequency traders.
Exchanges including Nasdaq, Intercontinental Exchange Inc’s New York Stock Exchange, Bats Global Markets and CHX Holdings Inc’s Chicago Stock Exchange said they deserve “absolute immunity” because they regulate themselves, and that only the U.S. Securities and Exchange Commission could review the plaintiffs’ claims.

Intercontinental Exchange Reports ICE and NYSE Volume for October 2014; Cash Equities ADV up 32% year on year
Press Release – Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE: ICE), the leading global network of exchanges and clearing houses, today reported monthly exchange traded volumes.
In October, futures and options average daily volume (ADV) was flat and cash equities ADV increased 32% over the prior October.
– Commodity ADV increased 1% year to year, with energy ADV up 2% driven by increases in Brent and Other Oil ADV, up 28% and 20%, respectively, from the prior year period.
– Financials ADV declined 2% from the year period due to continued low volatility in Continental European short-term rates impacting the Euribor ADV, and was partially offset by growth in Sterling and Equity Indices ADV, which were up 62% and 50%, respectively, over the prior October.
– NYSE’s U.S. cash equities and U.S. equity options ADV increased 32% and 10%, respectively, over the prior October.
– U.S. cash equities market share was 23.9% and U.S. options market share was 22.8% for the month.


Trading Technologies Previews New X_TRADER Functionality and Introduces TT Mobile Trading App at FIA Futures & Options Expo
Press Release – Trading Technologies
Trading Technologies International, Inc. (TT), a provider of high-performance professional trading software, today announced it will release new cross-market aggregation and enhanced yield-trading functionality for its flagship X_TRADER product this quarter. The company also has released Android and iOS versions of the TT Mobile trading application for early-stage users of the next-generation TT trading platform.
Trading Technologies is showcasing the new X_TRADER capabilities and TT Mobile apps at the FIA Futures & Options Expo, the annual futures and options industry conference taking place today and tomorrow at the Hilton Chicago.

Nomura Joins Trading Technologies’ MultiBroker Platform
Press Release – Tarding Technologies
Trading Technologies International, Inc. (TT), a provider of high-performance professional trading software, and Nomura, a leading Asia-based financial services group, today announced Nomura is now a participating broker in TT’s global MultiBroker service. Customers may select and route orders to Nomura through TT’s high-performance global trading network, which provides direct market access (DMA) to 40 markets across five continents.

Nasdaq OMX Expands Market Access in Chicago for Futures & Options Trading Community
Ivy Schmerken – Wall Street & Technology
Nasdaq will open a point of presence (PoP) in Chicago, enabling traders in the midwest to connect with the eSpeed bond trading platform as well as Nasdaq cash equity and equity derivatives markets.
Signalling the imporatnce of futures and options traders, Nasdaq OMX announced the launch of a Point of Presence (PoP) in Chicago during the first half of 2015 that will expand its market services to the financial trading community there and connect them to the eSpeed bond trading system.


Buy CBOE Stock to Profit From Volatility
Steven M. Sears – Barrons
When bad things happen to the stock market, good things happen to the options market.
October is a perfect example of the Schadenfreude Effect. October was extraordinarily volatile. Stocks whipped around with such fierceness that at times the great bull market seemed poised for an indignant end.

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