VIX Jump on Ukraine Invasion May Portend Volatility Rise Ahead
Steven M. Sears – Barron’s
The CBOE Volatility Index initially rose some 7% Thursday on news Ukraine accused Russia of invading the country.
The sharp rise in VIX, as the volatility index is universally known, was a reminder that investors are wary as stock prices trade around record highs while volatility still is subdued by historical standards.
Stocks Are Red Hot. Investors Are Cold Sober
Ben Steverman – Bloomberg
The stock market ain’t the party it used to be. It just blasted through one important psychological barrier, and another now looks tantalizingly close. Yet the mood among investors is dour and businesslike.
As the S&P 500 Index reaches 2,000, part of a worldwide rally that’s brought global stocks to an unprecedented $66 trillion in value, advisers say their clients aren’t celebrating. They’re nervous.
S&P 500 Loses 2000 as Fear Returns
Anthony Mirhaydari – InvestorPlace
Some fear returned to the stock market on Thursday and the S&P 500 dipped back below 2000 on growing evidence that Russian forces have moved into Ukraine with significant military assets. NATO released satellite images of what it identified as Russian artillery battalions cross the border and setting up offensive positions against Ukrainian forces.
And after the close, President Barack Obama said Russia’s “ongoing incursion” into Ukraine was responsible for the violence there and that the latest events would bring “more costs and consequences for Russia.”
Ukraine worries rekindle risk aversion
Dave Shellock – Financial Times
Escalating concerns over the situation in Ukraine reintroduced an element of risk aversion into the markets, although Wall Street showed some resilience as growth bulls took heart from an encouraging batch of US economic data.
Allergan Attempts to Elude Ackman Bid Fuel Bearish Bets
Oliver Renick – Bloomberg
Should Bill Ackman and Valeant Pharmaceuticals International Inc. (VRX) fail in their bid to take over Allergan Inc., options traders will be hedged.
There are 1.4 bearish puts on Allergan for each call outstanding, close to the highest level since 2008, according to data compiled by Bloomberg. Last week, two-month contracts betting on a decline in the shares reached the most expensive level since 2011, compared with those betting on a gain.
Banks’ pressure stalls opening of U.S. derivatives trading platform
Karen Brettell – Reuters
The first interdealer trading platform aimed at opening up credit derivatives markets to new competition has hit roadblocks due to resistance from some banks that dominate such trading, according to several people familiar with the situation.
Derivatives markets continue to revolve around the small group of dominant banks, and credit markets have become more – not less – concentrated since the 2008 global financial crisis.
Videocast: Big buyer in VIX puts
Foreign Trades Find a New Home
Jacob H. Rappaport – Traders Magazine
In the minds of many investors, the over-the-counter market is like a neighborhood that is best avoided. Its dark corners are rife with shady stock promoters, boiler room brokers and pump-and-dump scammers.
But in at least one corner of the neighborhood, gentrification has set in. Trading in foreign securities on the U.S. OTC exchanges is flourishing, driven in large part by institutional investors. Based on mid-year data, OTC trading volume in American Depositary Receipts (ADRs) and foreign ordinary shares is on track to reach $160 billion this year, more than doubling over the five years since 2009, as U.S. investors have increased their portfolio allocation to non-U.S. securities.
Speed Traders Seize NYSE Floor as IMC Takes Goldman Post
Sam Mamudi and John Detrixhe – Bloomberg
When Scott Knudsen rang the opening bell at the New York Stock Exchange this week, he signaled the ceremonial start of the day’s session and the conquest of the NYSE floor by high-frequency trading firms.
His firm, IMC Chicago LLC, just finished its takeover of Goldman Sachs Group Inc.’s NYSE unit, giving it rights to manage buying and selling of dozens of stocks including prominent ones like International Business Machines Corp., Verizon Communications Inc. and Visa Inc.
CME Group says CFO to retire at age 49, new CFO is 50
Tom Polansek – Reuters
CME Group Inc’s 49-year-old chief financial officer will retire at the end of the year and will be replaced by an executive who is a year older, the world’s largest futures exchange operator said on Wednesday.
Jamie Parisi, who has held the role of CFO for a decade, will be replaced by his deputy, John Pietrowicz, 50, who has worked for CME since 2003.
Bet You Didn’t Know CME Runs a Trading Unit on Its Own Exchange
Matthew Leising – Bloomberg
While CME Group Inc. (CME) makes most of its money charging the people who use its markets, the world’s biggest futures exchange captures a sliver of sales with a little-known group that trades directly with those customers.
The GFX Corp. unit, which has been disclosed for years in regulatory filings, generated about $9 million in revenue last year, or 0.5 percent of CME’s total, according to spokeswoman Anita Liskey. GFX makes markets on the exchange’s electronic trading system to stimulate volume in new or underused futures tied to currencies, interest rates and equity indexes, according to filings.
S. Korea to place price limit on derivatives market
Kim Eun-jung – Yonhap News Agency
South Korea’s main bourse said Thursday it will introduce a real-time price limit system that can fix or reject erroneous orders and increase the number of underlying equities for stock futures to give investors greater options.
The latest move comes after a major trading error that forced a local brokerage house to shut down. In December, a futures trader at Seoul-based Hanmag Securities misplaced orders to buy and sell index options, incurring US$43.8 million in losses to the company that had only $18.8 million in equity capital.
Regulation and Enforcement
Plan to slow ‘Flash Boys’ already has some holes
Jeff Cox – CNBC
A test program to change the way small-company stocks are traded could slow high-frequency action, though some market participants worry that the initial steps are too tepid.
The Securities and Exchange Commission announced the proposal Tuesday in which 1,200 small-cap firms will be divided into three equal-sized groups with different standards governing each.