Observations & Insight

Best of Both Worlds: Fidessa’s Steve Grob on Keeping Tech Costs Low

With rapid changes in the financial industry, firms are challenged to keep their technology robust and resilient while at the same time being secure and compliant, says Steve Grob, director of group strategy for Fidessa. He spoke with John Lothian News at the FIA Boca conference about this technology balance as well as what companies like Fidessa are doing to address IT costs.
Watch the video »

Lead Stories

This obscure indicator is a ‘significant concern’ for the market
Alex Rosenberg – CNBC
Most investors have never heard of the three-month volatility index, which is known as the VXV. But the relationship between the CBOE three-month volatility index and the options exchange’s more familiar 30-day volatility index, the VIX, may signal trouble for stocks.
Like the VIX, the VXV is a measure of expected volatility in the S&P 500 that is computed from the prices of options on the index. However, while the VIX measures expected volatility over the next 30 days, the VXV measures expected volatility over the next 93 days.

***DA: Three month vol can hardly be called an “obscure indicator.”

Altera deal story far from over, options data suggests
Saqib Iqbal Ahmed – Reuters
Discussions on a takeover by Intel Corp (INTC.O) of smaller chip maker Altera Corp (ALTR.O) may have ended for now, but activity in Altera’s options suggests traders are still hoping for a deal.
Altera shares, which jumped as much as 30 percent to $45 on March 27 on reports of a potential deal, have held most of those gains and the company’s options continue to imply a huge move for the shares in the near term. The shares were trading up 2 percent at $43.29 on Nasdaq on Wednesday.

***DA: Some inherent value was unlocked?

Options Traders Bet on Big Swing From Netflix
MoneyBeat – WSJ
Options traders still expect Netflix Inc.’s shares to post a big move after earnings, just not as big as recent quarters.
The video-streaming company reports first-quarter results Wednesday after the bell. Netflix projected earnings of 60 cents a share in January. Analysts polled by Thomson Reuters now expect earnings of 69 cents a share on revenue of $1.57 billion.

***DA: When a stock is trading at over 100 times earnings, does the street really care whether it comes in at 60 cents or 69 cents a share? Just asking.

Morgan Stanley Analyst Says Chinese Stocks Are Now Like the Movie ‘Interstellar’
Julie Verhage – Bloomberg
Despite slowing growth in China, equities there are surging, with the Shanghai Composite Index up more than 90 percent over the past year and more than 15 percent over just the past month. This is all while GDP in China is sitting at its slowest pace since the 2009 global recession, and the International Monetary Fund sees Chinese expansion slowing even further.
In the equity market, things are now moving so fast that Jonathan Garner, head of Asia and emerging markets at Morgan Stanley, felt the need to explain things using a Sci-Fi metaphor. He put out a note yesterday comparing the situation to the movie Interstellar.

***JB: Does that mean it is a black hole?

China’s Yuan Advances as Slowing Economy Spurs Stimulus Bets
China’s yuan rose the most in two weeks as the slowest economic growth since 2009 spurred speculation the nation will announce more stimulus measures.
Gross domestic product expanded 7 percent in the three months through March, the statistics bureau said in Beijing Wednesday. That matches the leadership’s full-year target as well as the median estimate in a Bloomberg survey. The government relaxed home-purchase rules last month, cut interest rates and reduced the ratio of deposits that banks have to set aside as reserves.


New Index Option Trading Opportunities at CBOE
Russell Rhoads – CBOE Options Hub
Next week, specifically Tuesday April 21st, CBOE will roll out option trading on two indexes calculated by MSCI. The MSCI EAFE (Europe, Australasia, and Far East) and MSCI Emerging Markets (EEM) Index will be the first two of several index option markets based on the MSCI family of indexes that will have listed options available for trading at CBOE. These two new markets will give money managers an efficient method for managing risk exposure to equity markets outside the United States. There will also be new opportunities for index option traders.

BATS Successfully Migrates U.S. Options Exchange To NY5 Data Center
Press Release – BATS
BATS Global Markets (BATS), a leading operator of exchanges and services for financial markets globally, reported the successful and complete migration of the BATS Options market to the Equinix NY5 data center in Secaucus, N.J., on Monday, April 13.
The migration went as expected and the BATS Options system handled more than 2 billion messages during the past two days with message rates exceeding 4 million messages per second at the close. All BATS Options customers participated on the platform and market share finished at a strong 9.2% Tuesday.

Eris cuts third exchange swaps deal with JSE
Alice Attwood – Futures & Options World
Exchange already offers swap futures to ICE and the Montreal Exchange
US futures exchange, Eris Exchange, has signed its third exchange partner in eight months as it cut a multi-year license deal with the Johannesburg Stock Exchange to use the Eris methodology to list swap futures.

Regulation & Enforcement

Finance Industry Should Fund Swaps Oversight, CFTC’s Bowen Says
Silla Brush – Bloomberg
Wall Street banks and other financial firms should pay new fees to bankroll their own government oversight, according to a member of the top U.S. derivatives regulator.
Sharon Y. Bowen, a Democrat on the Commodity Futures Trading Commission, said Congress should let the agency set fees on banks and other companies that trade derivatives. Fees on firms that register with the CFTC and on specific trades would help the agency — which says its $250 million budget is inadequate — respond faster to industry requests, she said in testimony for a House Agriculture subcommittee hearing Tuesday.


EnergyMatch Partners with OptionsCity
Press Release – Options City
GFI Group (“GFI”) (OTC US: GFIG), a leading intermediary and provider of trading technologies and support services to the global OTC and listed markets, announced today that it completed the integration between EnergyMatch, its electronic central limit order book for WTI, Brent and Natural Gas financial derivatives, and OptionsCity’s Metro, an end-to-end electronic trading and market making platform.


Should You Follow the Money on Exxon Mobil (XOM)?
Adam Warner – Schaeffer’s Investment Research
It’s unwise to conclude too much from big trades, especially on mega-caps like Exxon Mobil (XOM)


Investing In Crisis, A High Risk-High Reward Strategy
Adam Hayes – Investopedia
The financial crisis of 2008 and the great recession that followed is still fresh in the memories of many investors. People saw their portfolios lose 30% or more of their values, and older workers saw their 401(k) plans and IRAs drop to levels that threatened their plans for retirement. Instead of acting rationally during severe bear markets, many people tend to overreact and make matters worse. However, while many people panicked or were forced to sell assets at low prices, a small group of patient, methodical investors saw the stock market collapse as an opportunity.

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