Observations & Insight
2016 Exchange CEO Series: LSE’s David Weisbrod Talks Clearing And Openness
Weisbrod, who serves a dual role as US country head of the USA for LSEG and CEO of LCH.Clearnet US, has been focused on providing more access to customers to the London market and its clearing facility.
“We’re a big believer in open access, which enables market participants to use whichever clearing house they want or whichever exchange they want as it meets their own needs,” Weisbrod told John Lothian News at the FIA Boca Conference. “We don’t have a vertical silo which binds the participants to use the clearing house, the exchange, or vice versa.”
Watch the video »
OCC Cleared Contract Volume Up Four Percent in March
OCC, the world’s largest equity derivatives clearing organization, announced today that total cleared contract volume in March reached 354,445,999 contracts, a four percent increase from March 2015. OCC’s year-to-date volume is up six percent with 1,064,617,055 cleared contracts in the first quarter of 2016 compared to 1,006,510,362 contracts in the first quarter of 2015.
Market volatility will be back, investors say, with plenty of risks ahead
Sydney Morning Herald
It was the quarter that almost took down Deutsche Bank, negative interest rates went mainstream, and oil resumed its wild ride. But surveying the landscape at March 31, global markets have been coaxed into a dovish lull. The VIX – Chicago Board Options Exchange SPX Volatility Index – stands at 13.56, after spiking above 25 in January and February and 40 in August last year.
Trading in eight stocks suspended for rest of day: NYSE ARCA
NYSE Arca has suspended trading in eight symbols for the balance of the trading day because of a technical issue, including Amazon.com and both classes of Alphabet Inc shares, according to an alert from the exchange. The alert stated that all orders have been canceled back to customers and a spokeswoman for the exchange confirmed it was not an April Fool’s Day prank. The NYSE said the problem was not a system or trading issue but a market data issue affecting a small subset of stocks that it was working to rectify.
****SD: The one day of the year when a spokeswoman has to clarify, “Yes, this is not a drill.”
Broken Hedges: Credit Traders and the Lure of Equity Options
Recently, violent price swings across financial markets have forced corporate bond investors to re-evaluate their portfolio allocations. As part of this process, investors are also re-thinking how they hedge their portfolios. Equity investors have a broad range of tools they can use for hedging purposes, including index futures and options, options on single stocks and options on exchange-traded funds (ETFs). The challenge for fixed income investors tends to be more complex, as they have fewer traditional instruments with which they are able to hedge. Achieving correlated exposure to a specific corporate bond holding can typically most efficiently be executed through credit-default swaps (CDS), but the CDS market has had its fair share of problems with diminishing liquidity.
****SD: Ahh, broken hedges; a telltale sign that your estate in the English countryside is due for a facelift.
Nasdaq interested in Oslo Bors, but feels Norwegian chill -exec
Transatlantic exchange operator Nasdaq Inc would consider acquiring Oslo Bors VPS Holding ASA if the Norwegian stock exchange operator was willing to sell, one of Nasdaq’s executives said on Thursday. A deal to acquire Oslo Bors would bring together all the major equity exchanges in the Nordic region on Nasdaq’s trading platform. The New York-based company runs stock exchanges in Denmark, Finland, Sweden, and Iceland, as well as in Latvia, Estonia and Lithuania.
ICE market data fee regime kicks in on Friday
US exchange giant the Intercontinental Exchange will introduce on Friday a new charging regime for data, reigniting fears amongst the prop community that rising costs risk pushing trading firms out of the market. ICE will start charging technology partners and clients for re-distributing ICE data from Friday April 1, as reported by FOW in November. London’s prop trading community has voiced concerns over the latest levy on operations, fueled by anger over being charged for data that the traders themselves contribute to. “The issue is that fees – in whichever way they are presented – seem to be seen as alternative revenue streams. In line with the low fees that high-frequency traders (HFT) face, it is easy to see why exchanges are facing a backlash over these rising costs,” said the head of market making at a London-based proprietary trading firm.
****SD: Many wishing this was an April Fools’ Day joke.
Bats to Start Public Offering Roadshow as Soon as Next Week
Bats Global Markets Inc., the exchange group making its second swipe at a public offering, will begin its roadshow as soon as next week, according to a person familiar with the matter. The timing positions it to be one of the first U.S. IPOs of 2016 outside of the health-care industry, and the biggest company so far at a market value of about $2 billion, people familiar with the matter said in December. Stock market volatility and wary investors have kept the market for going public quiet so far in 2016. Only nine companies have listed on American exchanges for the slowest start to the year since the recession.
Eurex Trading statistics March 2016
In March 2016, the international derivatives markets of Eurex, part of Deutsche Börse Group, recorded an average daily volume of 10.5 million contracts (March 2015: 9.6 million). Of those, 8.2 million were Eurex Exchange contracts (March 2015: 7.3 million), and 2.3 million contracts (March 2015: 2.3 million) were traded at the New York based International Securities Exchange (ISE). The volume traded on the spot and derivatives power markets of the European Energy Exchange (EEX) amounted to 255.8 terawatt hours. Eurex Repo recorded in all markets in March 2016 an average outstanding volume of 147.4 billion euros.
Eurex taps ex-Santander strategist Bennett
Deutsche Boerse has hired a former derivatives strategy expert from Santander to lead a product development team at Eurex in the latest personnel change at the German exchange.
NYSE Options: April Fee Changes
Beginning on April 1, 2016, pending effectiveness of regulatory filings, NYSE Amex Options will be increasing all credits available in the ACE Program and modifying CUBE Transaction rates. Additionally, NYSE Arca Options will be lowering the threshold for one of the criteria by which a firm can achieve the Super Tier credit.
/goo.gl/Hi5f6N – AMEX
/goo.gl/FKqBLX – ARCA
360 degrees – Eurex Exchange’s Equity Derivatives segment
Equity Derivatives are elementary instruments for every portfolio manager. That is why they belong to the core asset classes at Eurex Exchange. We spoke with Eurex’s Equity Derivatives experts Markus-Alexander Flesch and Cornelius Müller on the development of this segment, what is so unique about it and what are the future perspectives.
Bats Global Markets, Kansas City Royals Extend Partnership
Bats Global Markets, a leading global operator of exchanges and services for financial markets, today announced the extension of its partnership with the World Champion Kansas City Royals, through the 2018 season. Bats, which has been a title sponsor of the Royals since the 2010 season, will remain the title sponsor of the Bats Crown Club and will continue supporting Habitat for Humanity Kansas City through the Bats 1000 program.
****SD: Truly a match made in heaven.
Banks call for LSE guarantee on CurveGlobal
The seven investment banks that own shares in the LSE’s CurveGlobal project have approached the British exchange seeking a guarantee the trading platform will continue to be supported if the LSE merges with Deutsche Boerse. The banks – Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Goldman Sachs, JP Morgan and Societe Generale – are said by sources to have asked the LSE for confirmation that the project will go ahead irrespective of a merger with the German group. The banks are worried CurveGlobal may be side-lined after a merger deal between the LSE and Deutsche Boerse because the planned European interest rate futures platform, slated to go live in the third quarter of this year, is set to compete with Deutsche Boerse-owned Eurex.
Regulation & Enforcement
$6M in Attorney Fees Awarded to Chicago Board Options Exchange
The National Law Journal
Fish & Richardson attorneys already helped Chicago Board Options Exchange Inc. beat back a patent infringement case from a rival exchange. Now, they’ve won their client more than $6 million in attorney fees. U.S. District Judge Joan Lefkow in Chicago on Thursday awarded payment to be made by International Securities Exchange LLC to CBOE for the entirety of what Fish & Richardson had asked, $6,069,266.81. Two years ago she ruled the fees were warranted after the case filed in 2006 became “exceptional” in 2012 when International Securities continued to litigate following an adverse ruling by the U.S Court of Appeals for the Federal Circuit.
****SD: Keep in mind recent context: Appeals Court Upholds Determination that CBOE Patents are Invalid
Mifid III may be introduced before Mifid II says EU
The European Parliament is seeking to fast track the implementation of the third Markets in Financial Instruments Directive (Mifid III) as it seeks to remedy potential market disruption from the introduction of Mifid II. Mifid II is expected to be introduced in January 2018 following a year’s delay from its original implementation date. However, sources close to European policy makers said that there were so many outstanding problems with the legislation that another update was essential and a target date of December 2017 has been set for the introduction of Mifid III.
****SD: “European Parliament admits ‘most of Mifid II is incomprehensible.'” Well, now I don’t feel so bad.
Basel Said to Weigh Change That Could Ease Derivatives Capital
Global regulators are moving toward a new way of calculating leverage ratios that could ease capital requirements for some banks, especially in the U.S. The Basel Committee on Banking Supervision, which brings together regulators from 27 countries, will probably replace its current method of calculating derivatives exposure with a new one that allows more netting, according to two people familiar with the group’s discussions. That could result in a lower amount of assets and a higher leverage ratio, a measurement of a bank’s financial health that looks at Tier 1 capital as a percentage of total assets.
Date leaked for release of DOL fiduciary rule
The Labor Department will unveil a final version of the so-called fiduciary rule next Wednesday, according to a published report.
United States: CFTC Finalizes Relief From Trade Option Reporting And Recordkeeping Requirements For Commercial End Users
On March 16, 2016, the U.S. Commodity Futures Trading Commission (“CFTC”) approved a final rule that eliminates the reporting and recordkeeping requirements in current CFTC regulations for trade option counterparties that are neither swap dealers nor major swap participants (“Non-SD/MSPs”), including commercial end users that transact trade options in connection with their businesses. Significantly, the final rule eliminates the requirement that such counterparties annually file a Form TO in connection with their trade options, and does not require them, as had been proposed, to notify the CFTC’s Division of Market Oversight (“DMO”) if they enter into trade options that have, or are expected to have, an aggregate notional value in excess of $1 billion in any calendar year.
Exclusive: Two Law Firms to Start Class Action Against LBinary and NRGbinary
International law firm Giambrone Law and London-based financial litigation boutique firm Healys LLP have teamed up to prepare two class action lawsuits against a duo of binary options brokerages, LBinary and NRGbinary, who have allegedly defrauded nearly 70 investors from their deposits of in excess of EUR4.3 million. The majority of claimants are from Saudi Arabia and Kuwait, with some European clients from Germany and Italy joining the class action.
Citigroup partners to create 3D trading headset
Citigroup has partnered with a US tech firm to develop a headset that replicates a trading desk in three dimensions, enabling traders to access and interact with data sources more effectively. The US bank has worked with Seattle-based 8ninths to develop the Microsoft HoloLens platform to build a prototype Holographic Workstation that shows in three dimensions the numerous data points used by modern traders.
****SD: Know what else replicates a trading desk in three dimensions? A trading desk. But I guess if you loved “Minority Report,” this is for you.
Global regulators move closer to regulating fintech
Huw Jones – Reuters
Global regulators have moved closer to regulating the fledgling fintech sector, which includes blockchain technology that supports bitcoin, to ensure the industry’s rapid growth does not pose any risks to the financial system.
2 Options Greeks for Next-Level Traders
To be a successful options investor, it’s important to understand how options prices move and what causes those moves. All too often, new options traders are left baffled as to why an options contract languishes while its underlying stock takes off. Thankfully, guidance can be found in pricing models and the Greeks. Simply stated, the Greeks are a group of mathematical models that each help to calculate the theoretical value of an option. Here we will introduce two of the Greeks, delta and theta.
The Value Of Trading Education
Cam White – Nadex
Learning any new skill requires a receptive mind, training, practice, and consistent application before mastery is achieved. In the 1970s, Gordon Training International introduced “The Four Stages for Learning Any New Skill.” This model works well for learning any new skill, whether it’s cooking or automotive repair. It works equally well for learning how to trade, whether stocks, forex, or futures—or Nadex binary options and spreads.
A Word From Gary Katz of ISE On Autism Speaks
At this year’s Options Industry Conference, attendees will be participating in a 5K charity event to benefit Autism Speaks, a charity near and dear to my heart. I have pledged to match all individual donations, dollar for dollar. I invite you to support this event either by participating or donating (any donation amount will be appreciated).