Observations & Insight

Back to Work
By John J. Lothian
I am back to work today. Today will be my first day back in the office after going under the knife for shoulder surgery. Of course, I will be taking tomorrow off, but that is only to get the stitches out.

Thank you for all the good wishes and prayers, not only for my surgery but also for the passing of my uncle, Thomas A. Lothian, II. They really helped me.

Thank you to my great team for working so hard in my absence and JLN coming out without a hitch. You are a great group and I could not be more proud of you.

Now, back to work!

Lead Stories

S&P 500 Sucker Punched as VIX Jumps 16% From Year’s Lowest Level
By Callie Bost & Joseph Ciolli – Bloomberg
The calmest markets in six months and the best run of economic data this year spelled trouble for U.S. stocks after a three-day break.
The combination ignited yesterday, with the Standard & Poor’s 500 Index falling more than 1 percent as a benchmark gauge for equity turbulence surged the most since January. The Chicago Board Options Exchange Volatility Index jumped 16 percent to 14.06.
Options traders were caught leaning the wrong way as speculation the Federal Reserve will raise interest rates shook investors returning from Memorial Day. For the VIX, it was only the second move of more than 15 percent all year — compared with four in December alone.

***DA: But in this market, if you don’t like what you see, wait a day. In other words, we made it through the bear market of May 26, 2015.

China Stocks – New Rules Create a Great Opportunity
By Steven M. Sears – Barron’s
China’s ongoing efforts to stimulate stock trading and liberalize exchange access has created one of the world’s great trading opportunities.

***DA: Like the story yesterday about the guy who shorted his own stock? Now that’s an opportunity. http://jlne.ws/1ewlvUJ

CBOE announces report on fund use of options in portfolio management
The Chicago Board Options Exchange announced today the release and publication of a groundbreaking new study: “Highlights of Performance Analysis of Options-Based Equity Mutual Funds, CEFs, and ETFs.” The study analysed SEC-regulated investment companies (mutual funds, exchange traded funds (ETFs) and closed-end funds (CEFs)) that focus on use of exchange-listed options for portfolio management (options-based funds).

The two sides of risk management: Alpha rock stars versus actuarial nerds
By Michael Armitage – Professional Planner
Investment returns have always found a natural place in the spotlight. But volatility – and the impact it can have on a portfolio – is only now getting the attention it deserves.

***DA: What about nerdy rock stars?

OCC Appoints Three New Members to Board of Directors
Press Release
In its role as the foundation for secure markets, OCC, the world’s largest equity derivatives clearing organization, today announced that George S. Fischer, Thomas A. Frank, and Eric W. Noll have joined its board of directors as Member Directors. Fischer and Frank were elected to terms ending in 2018, while Noll was appointed to fill a vacancy with a term ending in 2017.


First Options Trade registered via Straight-Through- Processing for clearing at ECC
Press Release
On 18 May, for the first time an Options trade was registered at the European Energy Exchange (EEX) for clearing at European Commodity Clearing (ECC) via Straight-Through-Processing (STP). The STP service enables transactions concluded or registered at the exchange to be routed to the clearing house automatically without the need for further manual intervention.

Deutsche Börse agrees strategic cooperation with Chinese exchanges
FTSE Global Markets
Shanghai Stock Exchange, China Financial Futures Exchange and Deutsche Börse today agreed on a strategic cooperation to launch a joint venture to develop and to market financial instruments based on Chinese underlyings to international investors outside mainland China.

DGCX’s MoU with Bank of China Seeks to Increase Interaction Between UAE and Chinese Financial Markets
Press Release – Zawya
The Dubai Gold & Commodities Exchange (DGCX) today announced the signing of a Memorandum of Understanding (MoU) with the Bank of China (BOC). The agreement creates a framework for both institutions to work together to enhance interaction and collaboration between the derivatives and financial markets of the UAE and China.

Regulation & Enforcement

No more gambling! FCA set to regulate binary options as financial product
By Andrew Saks-McLeod – LeapRate
Recently, LeapRate was the first to go into detail on the FCA’s wish to regulate binary options as a financial product. The British regulator has now outlined its intention to transition binary options from a gambling service to a financial product, with a full set of procedures


FENICS renews its agreement to provide FX options data to ORE, a Leader in OTC option solutions
FENICS, a leading provider of FX options software, announced today that it has renewed and extended its agreement with ORE, a leader in retail-friendly OTC option solutions for web, mobile and MetaTrader4 platforms. Under the terms of the agreement, FENICS will continue to provide ORE with its composite feed for FX options data derived from its premier option pricing, risk management, and lifecycle management software.

13 FinTech Unicorns: The Industry Disrupters That Are Worth Billions
With currently 108 unicorns worldwide, the billion-dollar valuation club is nowhere near getting smaller.


Open options: Euro pessimists are taking the long view
By Swaha Pattanaik – Business Standard Breakingviews
Investors’ bearishness about the single currency is becoming more entrenched. The clearest sign is not the euro’s slide back below $1.09 for the first time in nearly a month. After all, its short-term fortunes depend on when US policy rates will rise and events in Greece. Instead, investors’ long-range pessimism is laid bare in the foreign exchange options market.

One trader’s very contrarian pharma trade
By Alex Rosenberg – CNBC
The American Society of Clinical Oncology’s annual meeting starts Friday, an event that tends to be a big driver for biotech and pharmaceutical stocks.

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