Volatility Update: Listen To The Little Guys?
JJ Kinahan – Forbes
The stock market’s slow crawl to fresh records in recent sessions included a retreat for the CBOE Volatility Index (VIX). VIX, the market’s “fear gauge,” reflects expectations for future, short-term movement in the broad S&P 500. It’s been creeping higher in Q3, but moved back toward 52-week lows with last week’s 9% drop.
Long-Term Uptrend Remains Intact
Price Headley – CBOE Options Hub
While Friday wasn’t a particularly great day for stocks, the week itself was a winner on the heels a Goldilocks assessment from Janet Yellen and her cohorts at the Federal Reserve. While the economy isn’t yet strong enough to end the bond-buying program cold turkey, it’s also not weak enough that the Fed doesn’t see the end of low interest rates somewhere on the horizon. The “just right” situation of not-too-hot and not-too-cold means Yellen is going to be proactively stimulative…. which has been the lifeblood for stocks for a long while now, and will continue to be for at least several more months.
Alibaba I.P.O. Underwriters Increase Deal Size to Record-Setting $25 Billion
Dealbook – NY Times
Alibaba, the Chinese e-commerce giant, has officially set the record for the biggest initial public offering ever, after its bankers on Friday increased the size of the deal by 15 percent to $25 billion, two people with knowledge of the matter said on Monday.
Alibaba Group Holding Ltd (BABA) and the Changing of the Options Tides
Adam Warner – Schaeffer’s Investment Research
Alibaba Group Holding Ltd (NYSE:BABA) has traded for half a day, and we don’t even have options listed. What is this, early 2014?
I’m told we have to wait until a week from today. Seriously? We might actually have an idea of volatility. Not a great idea, mind you, but at least something to go on. Where’s the fun in that?
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Yahoo options volume hits record on Alibaba’s market debut
Saqib Iqbal Ahmed – Reuters
Alibaba Group Holding Ltd’s record public offering of shares on Friday further spurred already elevated activity in Yahoo Inc’s options, pushing volume on the U.S. Internet company to a one-day record high.
Shares of Alibaba, in which Yahoo holds a big stake, surged 38 percent in their first day of trading on Friday, valuing the company at $231 billion by the close of trading.
Nifty Futures Rollover Increases as India VIX Drops to Record
Santanu Chakraborty – Bloomberg
Indian futures traders are extending a greater proportion of their wagers on the CNX Nifty Index (NIFTY) to next month amid speculation economic ties with the U.S. will improve.
Traders rolled over 37 percent of their Nifty contracts as of 3:50 p.m. in Mumbai, compared with the six-month average of 27 percent three days prior to expiration, data compiled by Bloomberg show. The India VIX index, a gauge of protection against stock-market losses using options, declined 2.7 percent to a record low of 11.6.
Videocast: VIX quiet despite selloff
Why CalPERS Is Exiting The Hedge Fund Space
Jon Hartley – Forbes
Last week, California Public Employees’ Retirement System (CalPERS), the largest pension fund in the U.S., announced that it would pull all $4 bn from its hedge fund investment program of 24 hedge funds and six hedge fund-of-funds. CalPERS was one of the first pension funds to invest in hedge funds in 2002, and as a leader in the pension fund industry, the move is very symbolic and perhaps symptomatic of a larger trend of a disenchantment with hedge funds, or more specifically their high fees.
Levine on Wall Street: IPOs and Post-Its
Matt Levine – Bloomberg
Alibaba is public now.
But what does it all mean? Well, for one thing it means that Jack Ma is quite rich; the value of his stake went up by about $5 billion on the first day of trading, so he’s probably not sweating too much the fact that the initial public offering was in some strict sense underpriced. And Alibaba now has lots of money and may start buying stuff. Also the greenshoe was exercised, “officially making it the biggest initial public offering ever.” Does it mean that the IPO window is closed? No, say some IPO consultants and stock exchanges.
ISE Gemini Reaches Daily Volume Milestone
Press Release (International Securities Exchange)
ISE Gemini announced that it surpassed 900,000 contracts for the first time (actual: 948,609 contracts) in a single day on Friday, September 19. Month-to-date, ISE Gemini has an average daily volume (ADV) of 687,292 and an overall equity options market share of over 4.4 percent (excluding dividend trades), both new monthly records.
BATS Chi-X Europe Lights Up Pan-European ETF Trading
Press Release (BATS)
BATS Chi-X Europe (BATS), Europe’s largest stock exchange, has today announced a new trade reporting initiative, designed to bring greater transparency to the European market for exchange-traded funds (ETFs).
On any given trading day, between 70-80% of ETFs listed in Europe are traded over-the-counter (OTC), and up to half of this volume goes unreported. It is the view of issuers, brokers and market-makers – as described in this letter to Steven Maijoor, Chair of the European Securities and Markets Authority – that this opacity materially hinders the development of the pan-European ETF market, which remains a tenth1 of the size of its US equivalent.
LME Clear joins the throng
Futures & Options World
Some 40 months after the London Metal Exchange put out a short, cryptic statement that it was thinking about bringing clearing inhouse and cutting off LCH.Clearnet, the Hong Kong Exchanges and Clearing-owned exchange did exactly that on Monday.
LME Clear is a boost for the LME and puts it on a par with some of its larger rivals such as the IntercontinentalExchange, CME Group and Eurex, all of which own the clearing houses that clear trades executed on their exchanges.
Owning your own clearing house is sensible from a product development point of view.
Regulation and Enforcement
Wall Street regulator unveils proposals for dark pools, bond markets
Sarah N. Lynch – Reuters
Wall Street’s self-funded regulator unveiled a list of proposals on Friday to bolster rules governing alternative trading platforms like “dark pools,” computerized high-speed trading, and price transparency in the corporate bond market.
The list, approved by the governing board of the Financial Industry Regulatory Authority (FINRA), calls for new rules that would require the people on Wall Street who develop computer algorithms to register with regulators.
FSB publishes study on OTC derivatives trade repository data | Financial Industry & Algorithmic Trading News
Financial Industry & Algorithmic Trading News | Automated Trader
G20 Leaders agreed in 2009 that all over-the-counter (OTC) derivatives contracts should be reported to trade repositories, as part of their commitments to reform OTC derivatives markets in order to improve transparency, mitigate systemic risk and protect against market abuse.
To date, a total of 25 trade repositories in 11 jurisdictions are either operational or have announced that they will be. Aggregation of the data being reported across these trade repositories is necessary to ensure that authorities are able to obtain a comprehensive global view of the OTC derivatives market and activity. The FSB is publishing today a study of the feasibility of various options for a mechanism to produce and share global aggregated data.
A consultative version of this report was published on 4 February 2014. The public feedback received has been taken into account in this report.
Intercontinental Exchange Completes Sale of NYFIX and Metabit to ULLINK
Press Release (Intercontinental Exchange)
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, announced today that it has completed its previously announced transaction with ULLINK for the combined sale of NYFIX and Metabit, both units of NYSE Technologies. The transaction closed on September 19 and terms were not disclosed.
Five Ways To Make Money From the Current Options Market
Steven M. Sears – Barron’s
Tom Sosnoff was a top index trader at the Chicago Board Options Exchange and later founded thinkorswim, which was named Barron’s No. 1 online brokerage in 2010. Not long afterward, TD Ameritrade bought his options-focused firm. Now Sosnoff runs tastytrade.com, a Website where he and other experts talk finance and strategy while teaching investors how to think about trading and markets.
The market in a minute: Prepare for a volatile week
Stocks ended the week mixed, as ambiguity over the Fed statement and overall unease about the strength of the global economy made investors jittery. The divergent reaction by bond buyers, who viewed the statements as a bit more hawkish, compared to stock buyers who saw a continued dovish stance, caused a small bout of volatility at the end of the week. With six different Fed governors set to speak this week, expect further mixed messages and the likelihood of increased volatility, providing traders an opportunity ahead of earnings season.