JLN Options: Low Volatility’s Big Run: Will It Last?

Mar 28, 2013

Lead Stories

Low Volatility’s Big Run: Will It Last?
Brendan Conway, Barron’s
The more staid parts of the stock market have a reputation for lagging when major indexes rise quickly. Just not this year.
http://jlne.ws/10VPWsu

JPMorgan Tells SEC New VaR Model Didn’t Require Prior Disclosure
Dawn Kopecki, Bloomberg
JPMorgan Chase & Co. (JPM), facing criticism that it misled investors about a change to a risk model as trades backfired last year, told U.S. regulators that the bank wasn’t obligated to disclose the move until May.
http://jlne.ws/WYtqhr

Competition hots up in EU derivatives market
Huw Jones, Reuters
Two U.S. operators are set to go head-to-head in the European Union to record derivatives trades, hoping to cash in on new rules to make markets safer and more transparent.
http://jlne.ws/10VOxCl

Why Derivatives May Be the Biggest Risk for the Global Economy
Michael Sivy, Time
Four years after the U.S. recession ended, the global economy is still beset by problems. The present danger comes from Cyprus – where the sea foam once gave birth to the goddess Aphrodite but now only creates froth in panicky financial markets.
http://jlne.ws/10VQdMc
** As we have noted here before, “derivatives” is a broad category. -JB

CME Group Sees Big European Growth Ahead As OTC Derivatives Clearing Takes Off
Trefis
The CME Group (NYSE:CME) announced that it will start clearing OTC interest rate swaps (IRS) in London. According to the company, the OTC interest rate swaps launched in Europe will initially include seven currencies: GBP, EUR, CAD, AUD, CHF, JPY and USD. The swaps in USD, EUR and GBP will be for maturities of up to 50 years while the maturities for all others will be up to 30 years.
http://jlne.ws/13y9V4z

Dark Pools Open Up About Surveillance Methods 
Ivy Schmerken, Advanced Trading
Brokers operating dark pools have come out with more sophisticated methods for preventing trades at bad prices and profiling client behavior — both in response to buy side concerns and regulatory scrutiny.
http://jlne.ws/10VRDGt

Exchanges

BATS Publishing Rival Spreads Between Exchanges
Tom Steinert-Threlkeld, Traders Magazine
BATS Global Markets has begun publishing rankings of 12 national stock exchanges by measures of “market quality.”  The operator of the BATS Z and Y exchanges is publishing daily rankings by how narrow the effective spreads are between the best bids and offers on orders executed across all exchanges.
http://jlne.ws/10VSsir

Regulation

SEC Delays Ruling on NYSE Plans to Loosen Retail Plan Requirements
PeterChapman, Traders Magazine
The Securities and Exchange Commission has postponed a decision on proposals by the New York Stock Exchange and its sister exchange NYSE MKT to loosen the requirements of their retail liquidity programs.
http://jlne.ws/10VRfYB

Technology

CME, Nasdaq to Launch High-Speed Network Venture
The Options Insider
According to a Dow Jones story by Jacob Bunge, CME Group Inc. (NASDAQ:CME ) and Nasdaq OMX Group Inc. (NASDAQ:NDAQ ) have plans to introduce a wireless network joint venture transmitting stock and derivatives prices between Chicago and New York in fractions of a second.
http://jlne.ws/10VPE4V

Strategy

The 5 Rules of Options Trading Steven M. Sears, Barron’s
Many people think the options market is a place where anyone can easily turn a small stake into a king’s ransom.
http://jlne.ws/10VPj2n

COMMENTS & INSIGHT

Chris Ferreri

Chris Ferreri of ICAP on SEFs, IDBs and the Futurization of Swaps
MarketsWiki.tv

Chris Ferreri is a managing director at ICAP North America, where he oversees ICAP ETC, the company’s hybrid brokered OTC solution. He was the first chairman of the Wholesale Markets Brokers’ Association Americas Inc. (WMBA Americas), and served again as chairman in 2012.

Ferreri spoke with John Lothian News Editor-at-Large Doug Ashburn at the Futures Industry Association Boca 2013 conference about the CFTC’s delay in finalizing rules on swap execution facilities (SEFs), the futurization of swaps, and the future of inter-dealer brokerage. Ferreri stresses the need for voice broking services alongside electronic order books, and reminds that the migration from voice to electronic platforms is not seamless among asset classes. He also requests regulatory consistency among modes of execution. Finally, Ferreri discusses the history of innovation among IDBs and suggests that, after a period of transition to the new regulatory regime, the industry will continue to innovate and evolve.

Watch the video »

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