JLN Options: SEC Rebuffs Nasdaq on Options-Market Rule Change; Options Traders Turn Bearish on Energy Sector

Oct 31, 2013

Lead Stories

SEC Rebuffs Nasdaq on Options-Market Rule Change
Kaitlyn Kiernan – The Wall Street Journal
Federal regulators rebuffed an attempt by Nasdaq OMX Group to grant greater options-trading rights to certain large trading firms.
In rare disapproval of a proposed rule change, the Securities and Exchange Commission told the Nasdaq BX Options market that the change could fail to protect investors and the public interest.

U.S. small cap stocks have reached all-time highs amid historically low levels of volatility, according to Russell Indexes.
Russell Investments
While U.S. small-cap stocks have continued to reach all-time highs in 2013, U.S. small-cap market implied volatility is at or near record lows, according to Russell Indexes.

Options Traders Turn Bearish on Energy Sector
Tom Lydon – ETF Trends
After a significant rally in the energy sector, options traders are turning bearish, pressuring the largest exploration and production-focused exchange traded fund.
The SPDR S&P Oil & Gas Exploration & Production ETF (NYSEArca: XOP) dipped 1.8% Wednesday, trading around $70.6 per share. XOP touched a record high of $73.74 on Oct. 21.

The VIX: Here’s Where Fear’s Been Hiding
Adam Warner – Schaeffer’s Investment Research
Well, if you’re bearish and a contrarian and looking for some data points, there’s really no shortage of them in the last couple of days.
We have investor sentiment.

Earlier Nasdaq Glitch Cued Talk, No Action
Jacob Bunge – The Wall Street Journal
U.S. stock-market officials and regulators earlier this year may have missed a chance to head off problems related to a major glitch in August that stopped trading in Nasdaq Stock Market listed securities for hours, according to people with knowledge of the matter.
**Singly they can do nothing, together they decide nothing can be done. -JB

Industry Divided Over Fragmentation
Peter Chapman – Traders Magazine
Is the proliferation of trading venues at an end? Industry professionals can’t agree.
There are now 13 stock exchanges and more than 40 alternative trading systems. While some industry observers say the explosion of trading centers in recent years reflects a healthy and competitive marketplace, others bemoan the cost of connecting to the platforms and the complexity they bring to trading.

ETFs Scarier Than Halloween (VXX, GLDX, SCIF, JO)
On the eve of the scariest holiday of the year investors have not had much fear in regards to their portfolios in 2013.
As a matter of fact, the S&P 500 has not been in negative territory at any point during the year. The same cannot be said for all the ETFs that trade in the U.S.
**Boo! -JB

Videocast: Betting on December VIX

India volatility index drops nearly 6%
India VIX, a volatility index, dropped sharply on Thursday. The index settled at 18.39, down 5.83% from 19.53. It witnessed a high of 19.75 and low of 18.21.


KCG Mulls Selling Stake in Combined BATS-Direct Edge
Jacob Bunge and Nathalie Tadena – The Wall Street Journal
KCG Holdings Inc. intends to eventually sell the trading giant’s investment in electronic exchange operator BATS Global Markets Inc., KCG’s chief executive said Wednesday.

NASDAQ Technology Refresh – Drop Migration
Press Release (NASDAQ)
– NASDAQ OMX is undergoing a technology refresh on The NASDAQ Stock Market system.
– New IP addresses will be provided for all OUCH, Flite, and Drop ports.
– A street-wide UAT is scheduled for Saturday, November 9, 2013.
– Phase One includes the customer migration of Drop ports only, beginning on November 11, 2013.
– Phase Two, which will include all OUCH and Flite ports, will begin mid Q1 2014.
FIX and RASH ports will not require new IPs.

BATS Chi-X Europe Welcomes Initial Customers to New Trade Reporting Service
Press Release (BATS)
BATS Chi-X Europe, the pan-European Recognised Investment Exchange, is in the process of onboarding customers to “BXTR”, a suite of on- and off-exchange trade reporting services. With all functions fully operational, the BXTR pan-European trade reporting service has captured significant market share since its launch earlier this month.
http://jlne.ws/1cqMUke (PDF)

NADEX CEO Yossi Beinart Elected To Head Tel Aviv Stock Exchange
Forex Magnates
Senior appointments within national stock exchanges are often the subject of large scale attention within the financial sector, especially if the venue concerned is held in high esteem.
Today, the Tel Aviv Stock Exchange (TASE) welcomes a new CEO, namely Yossi Beinart.
Mr. Beinart replaces Esther Lebanon, having been elected this evening by the stock exchange’s board members.

Regulation and Enforcement

CFTC Residual Interest Rule Has no Logical Connection to MF Global
Dan Collins – Dan Collins Report
In its story on the Commodity Futures Trading Commission’s (CFTC) recently passed “customer protection measures” the New York Times’ webpage DealBook references the MF Global debacle in its lead. This must be particularly disturbing for futures commission merchants many of whom claim the new residual interest rule will put them out of business and futures end users who stand to have to put up significantly more margin capital, double by most estimates, to control the same trades.

House Approves Derivatives Pushout Bill Amending Dodd-Frank
Cheyenne Hopkins – Bloomberg
Legislation to undo a Dodd-Frank Act measure requiring banks such as JPMorgan Chase & Co. (JPM) and Citigroup Inc. to separate swaps trading from deposit-taking units was advanced by the U.S. House with bipartisan support.

C.F.T.C. Approves Tighter Commodity Trading Rules
Alexandra Stevenson – Dealbook
In October 2011, as the futures broker MF Global teetered on the brink of collapse, it dipped into client accounts in an effort to avert bankruptcy.
But the action failed to save the broker, and its implosion left thousands of clients short a total of $1.6 billion.

Options Education

The VIX Index: step by step
Vito Turitto – Inside Futures
The VIX Index has been introduced by the CBOE in January 1993 and since then it has become the most popular and well known volatility index in the world. The VIX is an index extracted from S&P500 options and its calculation has been changed in September 2003 in order to obtain observations not linked or dependant from any model idiosyncrasy.

When to be a trader or an investor
Chris McKhann – optionMONSTER
There are traders and there are investors. The primary difference is time frame, but there are other important distinctions as well.
Investing implies long-term buying and holding. Trading could also be buying and holding, though the window for the transactions could be anything from microseconds to a month or so.

How to Trade the Futures Markets with Binary Options
Wall Street Sector Selector
Binary Options are unique because you have the entire trading universe at your fingertips.
Unfortunately that can also lull you into a false sense of being comfortable in trading such a large group of choices.




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