LEAD STORIES

Rational Behavior from the CBOE Volatility Index (VIX)  
Adam Warner – Schaeffer’s Investment Research
Well, I guess they’re going to drag this debt limit battle out until the bitter end.
It has left our markets both frozen and volatile at the same time. We’re seeing gaps and reversals and midday swings like crazy, but net-net … we’re moving nowhere. The S&P 500 Index (SPX) was sitting close to here in mid May, again in mid-July, early August, and finally early September.
http://jlne.ws/1csA3B7

A Tale of Two Volatility Curves
Russell Rhoads – CBOE
VIX and VIX Futures reacted as expected based on today’s 14 plus point drop in the S&P 500.   The near end of the VIX Futures curve went into backwardation with VIX closing at 19.41, the October contract closed at 18.50 and the next two months at lower levels as well.  There hasn’t been too much backwardation in the VIX market over the past couple of years.
http://jlne.ws/19y3Dy6 

A Worrisome Calm on Wall Street
William Alden – Dealbook
Wall Street has predicted financial panic should the government default on its debt, but markets so far are showing few signs of fear, Nathaniel Popper reports in DealBook. “We all tell ourselves, ‘This is something that is not going to happen,’” said David Coard, the head of fixed-income trading at the Williams Capital Group.
http://jlne.ws/19y2nuO

Debt-Ceiling Benefit to Volatility ETFs Could Be Short Lived
Brendan Conway – Barron’s
The unusual state of the market for volatility futures this week will be short lived if it turns out anything like recent occurrences. That, of course, is a big “if.”
http://jlne.ws/15TS5dv 

Buyside Sees Fewer Rewards from Sellside: Study
Phil Albinus – Traders Magazine
According to a report by Greenwich Associates, titled “U.S. Equities: Five Reasons Why the Great Rotation Might Not Be So Great,” Q1 2013 daily trading volume in U.S. equities is down to about 6.3 billion shares, or down roughly one-third from the 2009 market high of 9.3 billion.
http://jlne.ws/19y2JSc

Videocast: Why the VIX isn’t higher
optionMONSTER
http://jlne.ws/19y4DSR

Top Bankers Warn on U.S. Debt Proposal 
Deborah Solomon and Dan Strumpf – The Wall Street Journal
Top Wall Street executives are warning that any effort to pay interest on U.S. debt before other obligations such as Social Security, a strategy some lawmakers think would placate bond investors if the government breaches its borrowing limit, would pose severe risks to financial markets and the economy.
http://jlne.ws/19y5R0k

The Worst Investment in the World
Sverre Rørvik Nilsen – CFA Institute
What if you could invest in something that has retained all the worst qualities from different asset classes? Would you buy it?
Let me present what I think is the very worst investment in the world: VXX.
http://jlne.ws/1csBorT

EXCHANGES

CME Group to allow talks before some grain options trades
Tom Polansek – Reuters
CME Group Inc on Monday said it will begin allowing customers to discuss the details of electronic grain and oilseed options trades during certain times before the orders are executed.
http://jlne.ws/19y3omI 

IntercontinentalExchange Completes Trading and Clearing Transition for ICE Endex Futures Markets
Press Release (ICE)
IntercontinentalExchange (NYSE: ICE), a leading operator of global markets and clearing houses today announced the completion of the trading and clearing transition for the ICE Endex futures markets to the ICE trading platform and ICE’s European clearing house, ICE Clear Europe.
http://jlne.ws/19y45ML

BATS Chi-X Europe vows to fix broken ETF market
John Bakie – The Trade
Pan-European exchange BATS Chi-X Europe has launched a listing business with two iShares exchange-traded funds (ETFs) in a move that it believes will “fix” the European ETF market.
The two ETFs – iShares MSCI Emerging Markets UCITS ETF and the iShares MSCI World Minimum Volatility UCITS ETF – are expected to begin trading on BATS Chi-X Europe in November this year.
http://jlne.ws/19y3cnw

STRATEGY

Government Default Fear Hits Market 
Steven M. Sears – Barron’s
A wall of worry is rising in the volatility market.
Some investors, widely believed to be hedge-fund managers, are buying futures on the CBOE Volatility Index (VIX) that will increase in value should the Standard & Poor’s 500 index plummet during the next two months.
http://jlne.ws/GFAr1r

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