Turkey agrees derivatives deal with London Stock Exchange
Philip Stafford – Financial Times
Turkey is to allow derivatives based on its blue-chip stocks index to be traded via the London Stock Exchange Group as part of its overhaul of capital markets and ambition to become a regional financial hub.
The LSE and its counterpart Borsa İstanbul concluded months of talks on Tuesday with an agreement to trade futures and options based on Turkey’s blue-chip BIST 30 Index. Trades will be cleared by LCH.Clearnet, the LSE’s clearing house. The pair will also launch an index partnership later this year.
***DA: LSE has been on a quite the spree over the last couple years, and it shows.
Traders Prepare for Stock Volatility
Saumya Vaishampayan – WSJ
The stock market’s fear gauge is marching higher, as investors bet the big swings of recent days will become a fixture of 2015.
The Chicago Board Options Exchange Volatility Index, or VIX, rose 12% to 19.60 on Monday. That is above its average since 2010 but in line with its 10-year average of 20, which includes a spike to 80 during the 2008 financial crisis.
***DA: A more telling sign is on days like today, an up day for the equity market, but the VIX (as of publication time) is still hanging above 19.
Yields Continue To Fall Despite Looming Fed
Price Headley – CBOE Options Hub
Stocks were on pace to close last week out with a gain, thanks to Wednesdays and Thursday’s big rebound. But, solid news on the employment front sent stocks lower on Friday, and into the red for the week. Still, the bulls were just strong enough to hold all the major indices above a key line in the sand, maintaining hope that stocks may find their way out of this lull and renew the bigger uptrend soon.
We’ll examine exactly how the bulls are hanging on to hope below, after a deeper inspection of last week’s key economic figures.
The Option Queen Newsletter
The action of the S&P 500 futures contract reminds us of a rollercoaster, trudging higher gaining altitude then whoosh, dropping like a stone. These waves of up and down are not uncommon in the market place. As a pit trader, we learned that the downside momentum is generally far greater than the upside momentum. We also learned that up moves take longer than the downside washout trade. This market has provided a great example of this behavior. It seems as though the buy-the-dips crowd jumps into the market after a retreat. The last two dips have produced higher lows and much higher lows than were seen in October of 2014.
***DA: Taking the stairway up and the elevator down.
Why Momentum Matters More in Trading than Football
Adam Warner – Schaeffer’s Investment Research
Let me just take this opportunity, as your self-appointed “momentum” spotter, to highlight yet another case of “momentum” being used as an inaccurate shorthand for “the actual effect of plays on a football field.”
About an hour and half before Dez Bryant’s Immaculate Non-Reception, the Cowboys attempted a long field goal with about 30 seconds left in the half. It missed. The Packers then got quickly into range and hit their own field goal attempt. The Cowboys’ lead went from (potentially) 17-7 to 14-10. And, of course, the announcers couched the turn of events in “what a change in momentum!” terms.
***DA: Don’t knock the value of momentum. Sustained momentum can lead to capitulation, in both markets and football.
One Reason Why The New VIX Calculation is Better
Vance Harwood – Investing.com
The CBOE changed the way the VIX was calculated on October 6th, 2014—asserting the change would provide a more accurate assessment of expected volatility. The new process does look better to me, but I’ve been surprised that the new VIX and the old VIX (listed as VIXMO) sometimes differ by as much as plus/minus 10 percent.
***DA: Makes sense to me. The term structure can get quite steep indeed.
Euronext launches options on ETFs
Futures & Options World
Pan-European exchange, Euronext, has launched options on six iShares exchange traded funds (ETFs) on its Amsterdam derivatives market.
The first ETF options contracts will be launched on iShares MSCI Emerging Markets UCITS ETF, iShares EURO STOXX 50 UCITS ETF, iShares MSCI Europe UCITS ETF, iShares S&P 500 UCITS ETF, iShares MSCI World UCITS ETF and iShares MSCI Japan EUR Hedged UCITS ETF.
BATS Global Markets Statement Regarding Today’s SEC Announcement
Press Release – BATS
BATS announces the conclusion of two separate investigations into the development of order types; one relates to BATS and the other relates to Direct Edge. With regards to BATS, the Securities and Exchange Commission (SEC) has concluded its investigation with no action taken, and we are pleased to have this matter formally closed. With respect to Direct Edge, the SEC is taking an enforcement action against the legacy Direct Edge exchanges with respect to functionality that was implemented prior to the acquisition by BATS. We entered into a settlement agreement with the SEC, without admitting or denying the allegations, in order to put this matter behind us.
Regulation and Enforcement
Transaction-tax plan brings fresh Wall Street battle to Capitol Hill
Robert Schroeder – MarketWatch
A top House Democrat said Monday he wants a broad new plan to bolster the middle class to be paid for in part by a fee on financial transactions, a proposal that brings a fresh battle over Wall Street to Capitol Hill.
Rep. Chris Van Hollen of Maryland, the top Democrat on the House Budget Committee, unveiled what he called an “action plan” Monday designed to grow middle-class wages and the U.S. economy.
***DA: Perhaps the biggest concern is that, once an FTT is established, it becomes the new cigarette tax – the go-to tax to pay for any and all new programs. The best way to avoid falling off a slippery slope is to stay away from it entirely.
BATS to Pay $14 Million Penalty Stemming From Direct Edge Merger
William Alden – NY Times
The stock exchange operator BATS Global Markets has agreed to pay $14 million to settle accusations by the Securities and Exchange Commission concerning two exchanges it acquired through its merger with Direct Edge last year.
The two exchanges, known as EDGA and EDGX, failed to disclose enough information about various types of orders used by traders for buying and selling stocks, the S.E.C. said on Monday. The agency said the penalty was its largest to date against a national securities exchange.
***DA: Part of the baggage BATS got when it acquired DirectEdge last year.
Anyoption “Taking Binary Options Industry to Next Level” with First Social Trading Network
Avi Mizrahi – Forex Magnates
Leading binary options broker, Anyoption, has just released a new multi-device platform called copyop, for following, copying and trading binary options based on a social network of investors. Like on social forex trading networks, traders who are successful with binary option trading will now be rewarded, as leaders and beginners can gain from their experience.
S&P 500 Update: What’s The VIX Telling Investors Now?
Andrew Nyquist – See It Market
During my typical S&P 500 update, I tend to focus on technical support and resistance levels to watch. But rather than focusing on key price levels, I’d like to focus on the S&P 500’s relationship with the Volatility Index (VIX) and what it may be saying (I’ll cover some levels to watch at the end).
The VIX has long been followed as a fear index, gauging whether or not investors are fearful (buying puts), which shows up in a higher VIX, or comfortable, which shows up in a lower VIX. Typically, a VIX above 20 is a near-term sign of elevated risk and volatility, while a move above 30 typically signals a stock market correction and extreme volatility (potentially crash-like conditions – think 2001-2002 or 2008-2009).
Oil Plunge, Dollar Brawn Add Dimension to Earnings
JJ Kinahan – Forbes
The Q4 earnings spigot opens wide a full week from now, but this week’s handful of teaser reports are big names in their own right.
Alcoa AA -1.92% (AA) unofficially cuts the ribbon on this earnings round with its release after hours on Monday. Beyond its own bottom line, AA’s results could give an indication of late-year manufacturing economy health. From the banking corner, JPMorgan Chase JPM +1.21% (JPM) and Wells Fargo WFC +0.48% (WFC) will be the first big financials to report results this go-around when they announce on Wednesday. Dow Jones Industrial Average (DJIA) component Intel INTC +2.08% (INTC), a potential tech-sector bellwether, is out with results Thursday.