Observations & Insight

Women In Listed Derivatives 4th Annual Symposium | The Evolution of Women in Listed & OTC Derivatives
JohnLothianNews.com

Come join us for an interesting and inspiring symposium on the constant changing nature of the derivatives industry and the role of women in it. Three panels – The Generation Shift; Evolution of Women in Risk and IT Roles; and Evolution of Trading – will feature 11 speakers, as well as remarks from Craig S. Donohue is executive chairman of OCC.
Watch the video »

Lead Stories

VIX August Blackout Tied to Weekly Options in Barclays Research
Joseph Ciolli – Bloomberg
The 30-minute outage in the Chicago Board Options Exchange Volatility Index on Aug. 24 may have been the result of changes in the way the measure is put together.
That’s the view of Maneesh S. Deshpande, a strategist at Barclays Plc in New York who wrote that the addition of weekly options to the soup of derivatives on which the index is based probably played a role in the VIX travails that day. For half an hour on Aug. 24 the VIX flatlined as equities plunged more than 5 percent.
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****SD: Mmmmm, derivative soup. I’ll take an order for March expiry please.

BlackRock Calls for Halting the Stock Market to Avoid Volatility
Annie Massa – Bloomberg
BlackRock Inc., the world’s biggest asset manager, has concocted its own remedy for days of extraordinary volatility in the U.S. equity market.
The fund company is proposing a three-part cure: the whole $23 trillion market should automatically come to a halt if a significant number of shares stop trading; venues should use the same triggers to suspend trading throughout the day; and rules on when to pause securities should apply equally to shares, listed options, futures and exchange-traded products.
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****SD: Some guy in the corner of a BlackRock meeting, “Uhhh, why don’t we just turn it off?”

Investors Say Glencore Leaves Trading Questions
Christopher Harder – WSJ
Glencore PLC released new information about its finances but failed to answer many questions that investors still have about its trading operations, Sarah Kent, Scott Patterson and Margot Patrick report.
Some investors have described Glencore’s trading business as an area in which risks are impossible to value. Their worry is that a sharp drop in commodity prices, combined with high debt, could result in a credit-rating downgrade, potentially crippling its debt-fueled trading division. The miner said a credit downgrade of two notches to junk status would boost its payments on $4.5 billion in bonds by 1.25 percentage points, or about $56 million a year.
Glencore has a large trading division that buys and sells other companies’ goods as well as its own production like coal. Investors are especially concerned about Glencore’s use of financial instruments such as derivatives to hedge its trading of physical goods against price swings.
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****SD: Yikes. Pretty hard to manage risk when your “risks are impossible to value.”

ETF Firms Tackle Wall Street on Ways to Prevent Another Aug. 24
Sam Mamudi, Sabrina Willmer and Annie Massa – Bloomberg
The world’s largest issuers of exchange-traded funds are holding talks with stock exchanges and market-makers to avoid a repeat of the issues that plagued ETFs during Aug. 24’s market turmoil, according to five people with direct knowledge of the matter.
BlackRock Inc., Vanguard Group Inc. and State Street Corp., which between them manage close to $2 trillion in ETF assets, are among the money managers that have in recent weeks held discussions, according to the people.
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Outlook on Recent Market Volatility (VIDEO)
Sam Tsui – VIX Views
In the past two months, several global volatility indices such as the CBOE VIX have been in the spotlight as they rose to the highest level in months or years.
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China Dread Loses Bite as Global Shares Jump Most Since 2011
Adam Haigh, Kana Nishizawa and Nao Sano – Bloomberg
China is no longer such a fearful place for global investors.
As traders prepare for the opening of the world’s second-biggest equity market on Thursday after a week-long break, LGT Capital Partners Ltd.’s Mikio Kumada says concern about the nation’s slowdown is overdone. The MSCI All-Country World Index began a six-day, 6.5 percent rally on Sept. 30, when the Shanghai Composite Index last traded. The steepest gain for global equities in almost four years came as volatility waned from New York to London.
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Bank of Russia to check binary options brokers – sources
Maria Nikolova – LeapRate
Bank of Russia, the “Megaregulator” responsible for the oversight of financial markets in the country, is planning to check the operations of binary options brokers amid suspicions that they are indeed offering gambling services.
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Gold Bulls Flood Into ETF ‘Call’ Options
Chris Dieterich – Barron’s
Christopher Jacobson, a derivatives strategist at Susquehanna, says options trading has been bullish in the SPDR Gold Shares exchange-traded fund (GLD) of late.
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Exchanges

CBOE Holdings Well Poised on Business Model, Cost Control
Nasdaq
Being the global options exchange in the U.S., CBOE Holdings is also strengthening its position in the futures business. Over the past few years, the company has significantly expanded its operations with the help of a strong business model.
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BOX Price Improvement Activity for September
Press Release
In the month of September, price improved contracts on BOX Options Exchange (“BOX”) averaged 226,490 per day. Price improvement versus the prevailing NBBO for contracts submitted via BOX’s price improvement auction, PIP, averaged $370,997 per day, while total savings to investors in September was $7.79M.
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CME leads cocoa battle six months on
Alice Attwood – Futures & Options World
Trading volumes in CME Group’s euro-denominated cocoa contract have outperformed the Intercontinental Exchange’s rival offering during the first six months of trading in the exchange’s battle for supremacy in the new Euro-cocoa market.
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****SD: ICE is getting burned. Day One: CME traded some 240 contracts while ICE traded none. As of the end of September the score rests at 16,841 to 937. Better rub some aloe on that.

Nasdaq announces new corporate threat preparedness series – ‘POINT’
Automated Trader
Nasdaq has announced a new global initiative under the acronym, POINT (Perspectives, Opportunities and Insights on the Next Threat). The quarterly corporate-focused series will take a best practices approach to identifying the coming corporate threats and how companies and their boards can prepare for and find opportunities in these potential threats to their business.
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****SD: Thankfully, Nasdaq didn’t opt for ‘Operation Something-or-other.’

Options on MSCI Emerging Markets Index (MXEF) – Volume of 472 Contracts on Tuesday
Matt Moran – CBOE Options Hub
On Tuesday, October 6, the CBOE options on the MSCI Emerging Markets Index (MXEF) had reported volume of 472 contracts (236 call options and 236 put options).
Why are several investors expressing more interest in the MXEF options that launched earlier this year? Below are four key reasons I have heard from investors.
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Regulation & Enforcement

Esma warns 2016 budget cuts to hit IT work
Cian Burke – Futures & Options World
EU markets regulator, the European Securities and Markets Authority (Esma), has warned EU authorities that a proposed EUR38 million budget would leave a EUR2.3m hole in its 2016 work programme, forcing it to cut spending on IT projects.
Esma released it 2016 work programme on Wednesday, stating that if the European Commission’s proposed EUR38m budget was accepted by the other EU institutions, Esma would need to cut its activities by EUR2.3m.
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Technology

Google Linked to Symphony Funding Talks that Value Firm at $650 Million
Ron Finberg – Finance Magnates
For a startup that just launched last month, Symphony has done a great job building a buzz, as well as hefty valuation. Behind its rise from messaging app obscurity to Wall Street darling is the consortium of banks and financial firms led by Goldman Sachs that are backing the company. As a result, Symphony hasn’t only arrived to market with a messaging solution to rival that of Bloomberg’s, but more importantly with a large community of banks and massive user base.
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****SD: Still trying to wrap my head around how someone could look at Symphony and come up with $650 million. Not that valuations are at all out of whack in today’s market…

Xignite Announces Financial Market Data Cloud Streaming Solution For Fintech Apps
Press Release
Xignite, the leading provider of financial market data cloud-based APIs, today introduced CloudStreaming, a web-based solution that streams real-time market data to digital financial applications. CloudStreaming, based on HTTP open standards, simplifies the process of pushing financial data updates, such as stock quotes and trades, to mobile and web fintech applications, and eliminates the need for costly infrastructure.
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Thomson Reuters Leads Way For Openness In Financial Services With New App Development Suite In Eikon
Press Release
Thomson Reuters today announced enhancements to the open capabilities of its flagship financial desktop, Eikon, which will help foster innovation, boost productivity and enhance client servicing for financial institutions around the world. App Studio in Eikon allows third-party developers to create apps that display as native applications on the Eikon screen, distributing them directly and securely to Eikon users.
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Strategy

Brands that make consumers emotional outperform the S&P 500 over time
Ciara Linnane – MarketWatch
Intimate brands, those with the rare ability to elicit an emotional response in their customer, are better business performers than brands that lack that bond, according to a new study.
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