Observations & Insight
5th Annual WILD Symposium Focuses on Shattering Stereotypes and Glass Ceilings
by Jessica Darmoni – The Title Connections
Women In Listed Derivatives (WILD), a group dedicated to helping women advance in the listed and over-the-counter derivatives space, held their 5th Annual WILD Symposium this week at the UBS Building in Chicago. Sponsored by the Options Clearing Corporation (OCC), Integritas Financial Consulting and the Berling Bank, this year’s conference focused on diversity in the Boardroom, how women can get a seat at the table and how the highest glass ceiling, the one of Oval Office, might be broken next week.
Putting Words Into Action
Craig Donohue, Executive Chairman and CEO of the OCC, made a repeat appearance, kicking off the Symposium for the second year in a row. He talked about how he is surrounded by strong women in his family and how issues impacting the female attendees are also issues he cares about.
In prepared remarks passed out to the audience, Donohue points to a 2014 Catalyst Census highlighting that only 1.4 percent of the CEOs in the S&P 500 finance and industry sector are women, compared to 5% in the overall S&P 500. Also, only 19.8% held board seats in the financial sector versus 20.7 percent of the overall S&P index of companies.
“It is critical to advance women in the financial industry and put our words into action when it comes to the state of gender equality,” said Donohue.
With help from OCC’s Chief Human Resources Officer, Tracy Raben, Donohue put his words into action by conducting a survey on gender pay equality practices at the clearing corporation.
“While our track record is good, Tracy reminded me that there are only about 20% of women on staff and in management roles,” said Donohue. “Our challenge is getting more women in the industry and in the workforce. This is an obstacle playing out in front of an interesting backdrop as we are a week away from potentially electing the first female president. If this happens, I hope to hear glass ceilings shattering everywhere.”
To read the rest of the article, go here
Making the case for smarter regulation of centrally cleared markets
Craig Donohue – OCC
Centrally cleared, exchanged-traded derivatives markets have flourished over the last several decades. Under substantial regulation at all critical points in the ecosystem, (i.e. brokers, clearing members, exchanges and central counterparties (CCPs)), these markets proved to be resilient during the 2008 financial crisis. The regulatory regime for these markets included requirements respecting record-keeping, price reporting and transparency, and intermediated access to centralized counterparties such as OCC. Providing robust, independent risk management of financial transactions under the comprehensive regulatory oversight of and examination by the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC), OCC has served as the foundation for secure markets in the U.S. listed equity options markets since 1973.
Traders wake up to hedging as election jitters jolt stocks
Saqib Iqbal Ahmed – Reuters
With a week to go to the U.S. presidential election and some polls showing a tightening race, political risk is suddenly back on the radar, and equity options traders are positioning to deal with any stock market mayhem should it arise.
Until this week, most polls showed Democrat Hillary Clinton with a comfortable lead over Republican Donald Trump. A Reuters equity market poll last month showed a majority of forecasters predicted that U.S. stocks would perform better under a Clinton presidency than a Trump administration.
Trump-Clinton Market Flareup Is Far From a Panic: Reality Check
Brian Chappatta – Bloomberg
For all the angst over the tightening U.S. presidential election, if investors take a step back they’ll see financial markets are far from a full-on panic.
In a sign that all the hand-wringing is still limited by historical standards, a Bank of America Corp. index tracking global volatility across asset classes is below its average for 2016, even as the race has grown more competitive since last week, when the FBI reopened an investigation into Democratic nominee Hillary Clinton’s e-mails.
VIX move: ‘Fear index’ is telling markets more right now than stocks are
Evelyn Cheng – CNBC
A surge in the so-called “fear index” that accelerated Tuesday — coupled with a relatively less severe selloff in stocks — gave traders a taste of just how much the broader market is unprepared for the U.S. presidential election and other events.
Open Interest Rises to 9 Million for SPX Puts and 4.7 Million for VIX Calls, while Implied Vol is Higher for the Nov. 9 Index Option Expirations
Matt Moran -CBOE Options Hub
Several recent news stories have covered this topic – how can investors protect their portfolios in the event of stock market moves during and after the U.S. election on November 8?
For investors who are concerned that stock indexes could decline and volatility indexes could soar in future weeks, two of the simpler index option strategies to consider are (1) buying S&P 500 (SPX) protective put options, and (2) buying call options on the CBOE volatility Index (VIX). In the charts below, not that the recent open interest was 9 million for SPX puts and 4.7 million for VIX calls.
Fed expected to tee up December interest-rate hike
Greg Robb – MarketWatch
The Federal Reserve is not expected to leave anyone guessing.
The central bank will meet for the second day on Wednesday and put the market on notice that it intends to raise interest rates — in December.
Economists expect the Fed to borrow a page from last year’s playbook to tee up a rate hike.
Stocks, dollar down on U.S. election worries; oil tumbles
Saqib Iqbal Ahmed – Reuters
Global equity prices and the dollar slid for the second straight day on Wednesday, while safe-haven assets such as gold rallied as investors were rattled by signs the U.S. presidential race was tightening just days before the vote.
Isaacson a Perfect Fit for New-Look CBOE
Dan DeFrancesco – WatersTechnology
Dan explains why selecting Bats’ global CIO to run the technology for CBOE following its acquisition of Bats is the correct pick.
Trading Giants Clash Over Chicago Exchange’s Speed-Bump Proposal
Alexander Osipovich and Dave Michaels – WSJ
The tiny Chicago Stock Exchange has giants of electronic trading split over a proposal that borrows elements of IEX Group Inc.’s “speed bump.”
The Chicago exchange, which handles a sliver of U.S. stock-trading volume, says it wants to lower costs for investors and thwart aggressive high-frequency trading strategies by slowing down trading for some orders but not others. Supporters such as Virtu Financial Inc. say the plan will improve market quality. Critics including Citadel Securities LLC say it won’t do any good.
SEC review threatens growth of exchanges’ lucrative market data fees
Matthew Macfarland – S&P Global Market Intelligence
The SEC is nearing a decision that could either threaten the business model of top exchange operators or accelerate their growth by condoning higher market data fees, adding more costs onto trading and other firms requiring live quotes.
While trade execution services have dominated the top line for Intercontinental Exchange Inc., Nasdaq Inc. and Bats Global Markets Inc., the data feeds that they provide to brokers and traders have driven revenue growth over the past several years.
OCC reports losses, Eurex sees mixed October
Julie Aelbrecht – Futures & Options World
US clearing giant the Options Clearing Corporation is the first major derivatives hub to report losses in trading volume for October while Deutsche Boerse’s financial and commodity derivatives platform reported mixed results.
The OCC reported cleared contract volume for October down 14% compared to the same month last year to 318 million contracts.
Bats Global Markets Completes Acquisition of Javelin SEF
Press Release – Bats
Bats Global Markets, Inc. (Bats: BATS) today completed its acquisition of Javelin SEF, LLC (Javelin), a swap execution facility (SEF).
The deal was announced on August 11, 2016 and received approval from the Commodity Futures Trading Commission (CFTC) on October 23, 2016. Javelin has been integrated with Bats Hotspot, the institutional FX trading platform, in order to enable trading in non-deliverable forwards (NDFs). Hotspot already offers trading in outright deliverable forward contracts.
TMX Group Introduces Four Letter Trading Symbols
Canada’s Markets lead industry efforts to align ticker symbol conventions with U.S.
Yesterday TMX Group marked the first trading day for four letter stock symbols on Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV), an industry initiative designed to offer Canadian issuers and applicants greater choice in how they are identified and also to provide interlisted issuers with the opportunity to be uniformly represented throughout the North American marketplace. Prior to this initiative, a stock’s root symbol was limited to three letters or less.
BSE revises transaction charges for currency derivatives
The Economic Times
Top stock exchange BSE has decided to levy transaction charge in a phase manner from this month on trades done in currency futures and options contracts.
The exchange has increased the transaction charge to Rs 12 per Rs 1 crore of turnover on both active and passive trades done on its currency future contracts. Earlier, Rs 10 per crore transaction fee was levied on such contracts.
Regulation & Enforcement
Newest weapon in U.S. hunt for insider traders paying off
Nate Raymond – Reuters
When plumber Gary Pusey pleaded guilty in May to insider trading, it was a victory not just for New York prosecutors but for a little-known squad inside the U.S. Securities and Exchange Commission that uses data analysis to spot unusual trading patterns.
Formed in 2010, the Analysis and Detection Center of the SEC’s Market Abuse Unit culls through billions of rows of trading data going back 15 years to identify individuals who have made repeated, well-timed trades ahead of corporate news.
David H. Brooks, 61, Dies Serving Time for Insider Trading
Reed Abelson – NY Times
David H. Brooks, a former military contractor who was found guilty of insider trading and fraudulently enriching himself through company funds, died on Thursday in prison in Danbury, Conn. He was 61.
A spokesman for the Federal Bureau of Prisons confirmed the death. A lawyer for Mr. Brooks’s children, Judd Burstein, said the cause was being investigated.
SEC offers more detail on planned derivatives curb
Julie Aelbrecht – Futures & Options World
The Securities and Exchange Commission has released further details on the US options regulator’s proposal to limit derivatives use by investment companies and business development companies.
Using Stock Options to Generate Income
Steven M. Sears – Barron’s
Generating income is one of the biggest challenges facing investors. Interest rates have been unusually low since the crisis of 2008-2009 nearly brought down the financial system. The Federal Reserve may increase rates this December, but that will do little for anyone who earns a pittance of interest on their bank deposits or bonds.
Yet there is a way to enhance, and even create, an income stream for yourself: stock options.
Volatility and the Election Update
Russell Rhoads – CBOE Options Hub
Usually by this time in the election season we have a pretty good idea of who is going to win the election. However, like everything associated with this election, it is different this time. Things changed on a dime late last week and I’m having a hard time figuring out what to highlight with respect to the volatility markets. So forgive me if I miss a thing or two here…
The Election and Market Sector Volatility Part 2
Russell Rhoads – CBOE Options Hub
So, last week I looked at the implied volatility of various option markets that expired just before and just after next week’s election. You can read all about that here. Of course, as we all know, things changed a bit last Friday. When things change, I start running numbers. First I updated the table from last week where the IV for Nov 4th and Nov 11th options were compared for a variety of sectors, indexes, and one country fund.
CBOE Risk Management Conference Asia 2016
Press Release – CBOE
Chicago Board Options Exchange (CBOE) will host its 2nd annual CBOE Risk Management Conference (RMC) Asia, on Wednesday, November 30, through Thursday, December 1, 2016, at the Conrad Hong Kong hotel.
The two-day financial industry conference will feature presentations and discussions led by highly regarded industry experts who will discuss the latest products and strategies for managing risk, enhancing yields and lowering portfolio volatility.
One of the keynote speakers for CBOE RMC Asia will be John Coates, a former derivatives trader who is now a senior research fellow in neuroscience and finance at the University of Cambridge. Author of the book, “The Hour Between Dog and Wolf,” which examines how risk-taking and stress transform our body chemistry, Coates will address the topic, “Can Neuroscience Now Predict Your Profitability?”