Observations & Insight

Lively “Crossfire” Panel of Exchange Leaders Opens SFOA Burgenstock 2015
Sarah Rudolph – JLN

The 2015 Burgenstock SFOA conference in Geneva kicked off with a lively discussion on “Crossfire,” the well known panel hosted for many years by Patrick Young, the editor of ERivatives Review. The panelists were Phupinder Gill, CEO of CME Group, Chitra Ramkrishna, CEO of the National Stock Exchange of India, David Peniket, president and COO of ICE Futures Europe, Magnus Billing, the president of Nasdaq, and Christian Katz, the former CEO of Six Swiss Exchange and former president of FESE.

The panel was at odds over the horizontal versus the vertical clearing model. Nasdaq strongly believes in the horizontal model as a key component of competition in the exchange space, said Billing. A recent regulatory proposal regarding open access among exchanges will bring Nasdaq’s model forward, he added.

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Lead Stories

Volkswagen-Led Pain in Auto Stocks Seen Deepening by Options
Sofia Horta e Costa – Bloomberg
Money manager Michael Woischneck has been inundated with calls from charities, foundations and churches — clients that prefer investing in socially responsible companies — urging him to avoid Volkswagen AG. He says he has had little choice but to dump the automaker’s shares.
His firm, Lampe Asset Management, is among many surprised by the German company’s widening scandal over faked pollution controls. That caused VW to lose a third of its value, or about 23 billion euros ($25 billion), in just two days.

Volatility Reigns as Fed No Longer Provides Buffer on Bad Days
Joseph Ciolli and Oliver Renick – Bloomberg
Investors seeking a silver lining on bad days for stocks aren’t finding it in the Federal Reserve.
The Chicago Board Options Exchange Volatility Index jumped the most since August’s selloff on Tuesday as companies from energy to autos slumped. The ratio of puts to calls on the Standard & Poor’s 500 Index has surged 12 percent over the past week, signaling investor appetite for protection against losses. That’s the most pronounced five-day jump since 2009, with the biggest increase coming the day after the Fed’s rate decision last week.

The Fed Blinked, and That Wasn’t a Good Thing
Bob Lang – CBOE Options Hub
We can all take heart that the Fed is still supporting the global markets. But if the message of the market is any indication, then this may be the wrong approach. I suspect this was a contentious meeting, the committee struggling with a pivot to tighter policy. Simply put, the current funds rate near zero has been in place for more than six years, and while the recovery is not anything hoped for, extremely generous policy has passed its time. The market remains confused by policy that seems to have the Fed boxed in.

Where VIX Stands In Our ‘Sell the News’ Phase
Adam Warner – Schaeffer’s Investment Research
The more things change, the more they stay the same.


CME, ICE hit out at open access rules
Futures & Options World
Global exchange giants CME Group and the Intercontinental Exchange have hit out at the EU’s open access provisions saying they damage intellectual property rights and product innovation.

CME Group Named ‘International Exchange of the Year for Asia’ by Futures & Options World for the Fourth Year Running
Press Release – MarketWatch
CME Group, the world’s leading and most diverse derivatives marketplace, announced the company was named ‘International Exchange of the Year for Asia’ by Futures & Options World (FOW) at the 4th FOW Awards for Asia 2015. The awards ceremony held in Singapore today recognized CME Group’s excellence in the launch of products and services for the Asian market in the past year.

BATS Global Markets Expands Team With Two Key Hires In Market Data, ETF Listing Business
Press Release – BATS
BATS Global Markets (BATS), a leading global operator of exchanges and services for financial markets, today announced the hiring of Kal Chan as Director, Market Data Sales, and Robert J. Marrocco, Director of Listings.

Singapore Exchange faces test as China-led boom fades
Anshuman Daga and Saikat Chatterjee – Reuters
The new head of Singapore Exchange Ltd, which was hit hard in its derivatives trading by China’s economic slowdown, could face his toughest questions yet at an annual shareholders’ meeting on Wednesday as pressure mounts to find new sources of revenue.
Trading in one of the exchange’s key futures contracts for Chinese shares has slumped by nearly three-fourths from a record high hit in early July, Thomson Reuters data shows, at a time when its derivatives business has been growing and contributes a rising share of its revenue.

Regulation & Enforcement

No consensus over stopping clearers becoming too big to fail
Huw Jones – Reuters
Banks and mutual funds have no way of comparing the health of clearing houses for derivatives just months before their use becomes mandatory in Europe, an industry conference heard on Tuesday.

U.S. regulators revise proposal on commodity position limits
Tom Polansek – Reuters
U.S. derivatives regulators are revising their proposal to limit the positions that traders can hold in commodity markets to make it easier for some hedge funds and banks to keep large trades.
The Commodity Futures Trading Commission wants to allow financial firms to count their market positions separately from subsidiaries if the parent company says it does not control trading at the affiliate, according to a proposal issued on Tuesday.

Beer Cans Giving Wall Street Derivatives Regulator a Headache
Silla Brush – Bloomberg
Beer is giving one top U.S. financial regulator a headache.
Timothy Massad, chairman of the agency that spends most of its time deep in legalese overseeing Wall Street’s most complex trades, relished talking in front of a group of beer industry executives earlier this month.

In An Effort To Better Regulate Bitcoin, CFTC Classes It As A Commodity
Brendan Byrne – ValueWalk
The Commodity Futures Trading Commission (CFTC) looking to shackle cryptocurrency currency traders and traders in derivatives of Bitcoin has ruled that it now be treated no differently than those trading in pork bellies, oil or gold.


What kind of advisor are you?
Press Release – Russell Investments
Global multi-asset manager Russell Investments has launched a new online experience for financial advisors – What kind of advisor are you? – through which they can explore the real-life, day-to-day challenges of working with clients and managing a business. During the course of the game, advisors can step back and consider the best course of action in scenarios that may keep them and many of their peers up at night. Based on the responses to this quick, anonymous quiz, participants are classified into one of five categories and receive a snapshot of their advising and investment decision-making style, along with possible associated superpowers, opportunities and risks. In addition, alongside their personal snapshot result, Russell Investments shares insights and best practices for handling the various situations encountered throughout the online journey.

***JB: Admittedly not really options related but still interesting.

Trading Technologies adds APAC Clients, Connects to FEX Global
Chicago-based Trading Technologies, a provider of trading front-ends with a focus on the global commodities markets, has unveiled a connection to the FEX Global exchange, an energy and commodities futures exchange and a subsidiary of Sydney-based FEX Group. According to the terms of the relationship, Trading Technologies will provide the exchange’s trading participants with access to its flagship trading platform, TT.

Buy-Side Options Trading: Covering the Spread in Complex Order Books with Multi-Leg Strategies
Markets Media
As multi-leg options strategies gain traction on the buy- and sell-side, sophisticated front-end tools are essential for accessing complex order books at US options exchanges.
Multi-leg orders have been around a long time, but in recent years they have moved from the trading floors to electronic systems.


The TYVIX Index: Navigating through interest rate volatility
Interest rate volatility is like a storm cloud building on the horizon. The US Federal Reserve has kept rates stable for nigh on a decade, but global asset managers are now preparing for their fixed income portfolios to feel the impact of a rate rise later this year.

Credit Suisse Observes Tradeable Volatility Divergence
Mark Melin – ValueWalk
Overall market volatility is engaged in an interesting divergence pattern, a research piece from Credit Suisse Group AG (ADR) (NYSE:CS) observed yesterday, with market correlation overlaps that investors and traders might want to consider. It shows that volatility in correlated markets is reducing at an uneven pace and stock market volatility attribution is not primarily coming from interest rates.

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