JLN Options: May 2, 2012: Edward J. Joyce to be honored at the 2012 Options Conference in New Orleans

May 2, 2012

Commentary/Story/ Q&A

Edward J. Joyce to be honored at the 2012 Options Conference in New Orleans

Edward J. Joyce, former president and chief operating officer of the Chicago Board Options Exchange, is the recipient of this year’s Joseph W. Sullivan Options Industry Achievement Award, to be presented at the 2012 Options Industry Conference in New Orleans, Louisiana. He was unavailable for an interview, so JLN Options spoke with just a few of the many people in the options industry who have known him since way back when, and they shared some of their impressions and memories.

ED BOYLE, Business Development at Getco LLC:

I started working on the CBOE trading floor in 1981 and Ed was always one of the first go-to guys when we had issue to resolve or you wanted someone to discuss an idea or initiative to grow the business. I worked closely with him while participating on numerous exchange committees and later in both of our careers when I became a member of the Options Clearing Corporations Board of Directors on which Ed served for years and I represented the NYSE.

Ed was always fair, straightforward and open-minded. I would assume these qualities transferred into his management style and is likely the reason I never heard anyone who worked with Ed or for him (and I have known a few) ever speak negatively about him. He was not a guy looking for the single winning trade but rather to stay consistent and continually put small wins on the board that in the long run have provided the CBOE with a winning model.

Ed was always the guy you wanted to be sitting next to in a meeting or at a dinner party for two reasons, first to hear the continuous whispered humor that always made the meeting entertaining and provided levity in often stressful times and secondly as a voice of reason to bounce things off of before you spoke up. And often if you still felt intimidated or were not sure your thought would be well accepted Ed was always there to voice it for you.

Ed could also seem like the absent minded professor at times, I once remember traveling in a rental car with him while at an industry event in Arizona. We got into a very animated conversation over a recent rule proposal that could possibly have significant impact to the U.S. Options business. There were three of us in the car and Ed was driving, I was in the backseat with another colleague in the front. Suddenly in the middle of this very engaging debate I realized Ed had turned completely sideways in his seat and was gesturing wildly with BOTH hands while trying to get a point across to the two of us. He had simply found the debate to be much more important than piloting the car down the road. We laughed about that one all weekend.

GARY KATZ, President and CEO of the International Securities Exchange:

Ed Joyce and I served on the Board of The Options Clearing Corporation together for over ten years. Although we spent the majority of our time competing head-to-head every day for business, these Board meetings afforded the opportunity to get to know each other on a more personal level.

While most people in the industry know of Ed’s business achievements, not everyone knows that he is also one of the funniest individuals in options. At our winter OCC Board meeting, he would act as the emcee for an annual award presentation welcoming new Board members and thanking departing members. His witty comments on the industry, personalities, and the hotel brought Board members and their guests to tears.

Ed’s first concern was always for people, whether carrying the flag for the individuals working at OCC or CBOE, or working in his private life on behalf of a range of philanthropic organizations. I was most impressed by Ed when he received the Lifetime Achievement Award from the Anti-Defamation League. That honor exemplified the integrity and compassion that Ed brought to both his professional and personal endeavors, and seeing him applauded by his colleagues and family together was truly a special occasion.

BILL BRODSKY, CBOE Holdings Chairman and CEO:

I first met Ed Joyce in the mid-1990s when I was CEO of the CME. I was a guest speaker at an Options Clearing Corporation dinner, and I had the pleasure of meeting Ed for the first time at that event. I recall thinking what a warm and wonderful gentleman he was. I also appreciated his sense of humor. Little did I know then that we’d be working together, elbow to elbow, within five years.

Ed and I worked together on countless initiatives over the years, but two stand out from the rest. The first initiative involved moving CBOE to a more electronic marketplace, a highly contentious issue within CBOE’s member ranks. We partnered on various aspects of the plan, and Ed was particularly adept at dealing with the politics of the membership. Working toward the resolution of the CBOT’s exercise right was another significant joint effort. Ed had long-standing relationships with CBOT leaders and was an integral part of that negotiation.

Ed set an outstanding example as a tireless worker. This was one of the qualities that gained him a reservoir of respect from CBOE’s staff and executives and from peers at other exchanges and at our member firms. Ed also possessed the ability to get things done both in the course of a normal day — balancing a lot of balls expertly — and in emergencies.

I don’t know how religious Ed is, but I can say he was “religious” about two yearly events in particular – St. Patrick’s Day and Sox Opening Day. In fact, when CBOE first entered into a sponsorship with the Chicago Cubs, one of the perks involved throwing out the first ball. I suggested to Ed that he might like to be CBOE’s pitcher, and he politely declined, saying that he wouldn’t be allowed back in his South Side Chicago neighborhood if he stood on the Cubs mound.

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NYSE Euronext U.S. Options to Launch SMART2 Marketing Campaign at Options Conference

Competition in the U.S. options market continues growing fiercer, as ISE moves ahead with its plan for a second options exchange, and two others are threatening additional platforms as well [see today’s lead story]. The number is now at nine and counting. So the pressure is on exchanges to let participants know what distinguishes them from their competitors.

In that vein, NYSE Euronext U.S. Options is launching a new marketing campaign this week at the Options Industry Conference in New Orleans. The campaign focuses on the benefits NYSE Euronext brings to its customers by virtue of its two options platforms, NYSE Arca Options and NYSE Amex Options.

Jennifer Telek is vice president of global marketing and branding for NYSE Euronext and leads the team responsible for marketing and advertising of all US trading products. JLN Options spoke with her as well as with Paul Finnegan, co-CEO of NYSE Arca, and Steven Crutchfield, CEO of NYSE Amex, about the new campaign.

Q: What is the “SMART2” (SMART Squared) marketing campaign?

Jennifer: The objective for the campaign is to highlight the value proposition we bring to the market with our two options platforms. Our technology allows our customers to write to one platform and route to both. This dual structure allows customers to capture efficiencies and synergies that are grounded on a solid foundation of our shared technology.

We feel that using a simple headline like Smart Squared underscores how we are differentiated from our competitors, particularly since we operate two distinct but integrated exchange models.

Q: What are the customer benefits you want to draw attention to?

Steve: We thought this was a particularly useful tim
e to highlight the fact that, unlike other options exchange groups, we have two exchange platforms, both with substantial market share, that operate on a single technology platform. This has substantial synergy benefits, particularly in the US options market, where firms have best execution obligations and need to be able to write to all major exchanges.

We have a simplified architecture, so any firm that has written to NYSE Amex options can use the same code and the same lines to write to NYSE Arca options as well. This would enable them to gain access to substantial liquidity, without any additional cost or lost efficiency.

Q: Why is now a particularly good time to launch this campaign?

Steve: The options marketplace is becoming increasingly fragmented. It recently went from seven to nine exchanges – and there has been a lot of talk in the media lately about even more exchanges being launched. So the burden is on us to demonstrate why market participants should write to us rather than to the competition – and that’s where the ‘write to one, route to both’ concept came from.

Paul: Firms can achieve a lot of cost savings with the capability of writing to one technology but getting to two different market centers.

In addition to the benefit of the technology, firms only have to deal with one trading desk. So they only have to deal with one client services group and one relationship manager. The trading permit structure is the same for both markets, and many of the order types available on one of our options exchanges are also available on the other exchange.

The Options Industry conference is a good time to launch the SMART Squared theme, when all of our clients will be in one building for several consecutive days.

The 2012 Options Industry Conference takes place at the Roosevelt Hotel New Orleans from May 3-5.

– Sarah Rudolph

Lead Stories

Nasdaq OMX’s BX Options Exchange to Copy Electronic Market Rules
By Nina Mehta, Businessweek
Nasdaq OMX Group Inc. (NDAQ) (NDAQ) will use rules from another electronic options market it owns to hasten the introduction of its third equity derivatives venue, the company told regulators. Nasdaq OMX BX Options will utilize trading rules from Nasdaq Options Market, the firm told the Securities and Exchange Commission in a rule filing that didn’t say how the venue will differentiate itself from other markets. The exchange, slated to start trading in late June, must win approval before it can be introduced.

UPDATE: CBOE’s CEO Sees Compliance Review Continuing
-CBOE CEO: SEC compliance investigation ongoing, new compliance hires seen
-Steps taken to refocus staff on compliance obligations, CEO says
-CBOE reported a profit of $33.4 million, up 2% from a year earlier
(Updates with CEO comments on compliance investigation.)
CHICAGO (Dow Jones)–The top executive of the Chicago Board Options Exchange said Tuesday that a reorganization of its compliance department would continue as federal regulators continue to investigate the CBOE’s role as a market regulator. CBOE Holdings Inc. (CBOE) has held companywide “educational seminars” focused on regulatory compliance and it is sharing results of an internal compliance investigation with the Securities and Exchange Commission, according to William Brodsky, chief executive and chairman.

Europe Puts at Record Versus S&P 500 Before Elections: Options
By Cecile Vannucci and Nikolaj Gammeltoft, Bloomberg
Traders have never paid so much to protect against European stock losses relative to the U.S. as investors prepare for weekend elections in France and Greece. Implied volatility for three-month contracts closest to the level of the Euro Stoxx 50 Index was 54 percent higher yesterday than the Standard & Poor’s 500 Index, according to data compiled by Bloomberg. The gap widened from a 2012 low of 18 percent on March 13, the data show.

CBOE holds lead as biggest U.S. options market
By Ann Saphir, Reuters
CBOE Holdings Inc, which runs the oldest U.S. stock-options market, handled more contracts than any other U.S. options exchange operator in April, figures from the OCC clearinghouse showed Tuesday. Some 86.6 million contracts changed hands at the Chicago Board Options Exchange during the month, more than at any of its five competitors and giving it a 27.1 percent market share, the figures on OCC’s website showed.

Quick View: OTC fight heads to Chicago
By Telis Demos and Hal Weitzman in Chicago, FT.com
The selection of Chicago as the site of this year’s International Swaps and Derivatives Association annual meeting, just a few “L” train stops away from the city’s listed derivatives exchanges, may be just a coincidence.
But ISDA taking its issues to the mid-west city neatly encapsulated the challenge faced by the New York dealer-dominated world of privately-negotiated, bilateral derivatives. That is; how to maintain its position in financial markets against Chicago’s futures and options exchanges while an onslaught of regulation, technology and capital stringency possibly shifts the ground away from them.

OCC announces Cleared contract Volume Declined 5% In APRIL, Securities Lending Volume rose 34%
CHICAGO (May 1, 2012) OCC announced that cleared contract volume reached 321,989,037 contracts in April, a 5 percent decrease from the April 2011 volume of 338,562,433 contracts.
Based on Futures Industry Association data released in April, OCC’s first quarter cleared volume of 1,068,689,268 contracts accounted for 57 percent of all listed derivatives contracts cleared in the U.S. during that period. Options: Exchange-listed options volume reached 319,640,606 contracts in April, a 5 percent decrease from April 2011. Year-to-date options trading volume is down 7 percent from 2011 with 1,380,749,815 contracts.

CHICAGO (May 1, 2012) – The Options Industry Council (OIC) announced today that 319,640,606 total options contracts changed hands in April, 4.71 percent less than the 335,425,947 contracts traded in April 2011.
Average daily trading volume in April was 15,982,030 contracts, 4.71 percent lower than the 16,771,298 contracts in the same year ago period. Year-to-date volume for April stood at 1,380,749,815 contracts, which is 7.04 percent lower than the 1,485,309,264 contracts traded at the same point last year.

ISE Moves Ahead With Plan For New Options Exchange
The International Securities Exchange is drafting rules and legal documents as it seeks to launch the company’s second stock-options exchange by the end of 2012, according to its chief executive. A junior options market is a chief goal for the ISE as the firm has ceded trading business to rivals running multiple venues, such as CBOE Holdings Inc. (CBOE), NYSE Euronext (NYX) and Nasdaq OMX Group Inc. (NDAQ).
“It is a very high priority at the ISE to get this done,” said Chief Executive Gary Katz in an interview.
The fiercely competitive U.S. options exchange market is already split between nine platforms, with two others set to be added as well as ISE’s planned launch. Market leader CBOE Holdings Inc. (CBOE) and NYSE Euronext (NYX) each run two exchanges, while Nasdaq OMX Group Inc. (NDAQ) plans to add a third platfor
m this year. Miami International Holdings Inc., a start-up staffed by former Philadelphia Stock Exchange officials, is also working on a new options exchange.

ISE Premium Hosted Database Launches with Comprehensive Tick Data and Analytics
Hosted Solution Provides Straightforward Access to over 200 Terabytes of Data
NEW YORK, April 30, 2012 – The International Securities Exchange (ISE) announced today that it has launched the ISE Premium Hosted Database (ISE PhD). ISE PhD is a fully managed historical tick database that offers full OPRA data including all quotes and trades from all exchanges, U.S. equities level one data, pre-computed implied volatilities and Greeks, full corporate action histories, and ISE Open/Close trade data.
http://jlne.ws/IPpmJh (PDF)

BOX Options Exchange gets approval to self-regulate
* BOX expects to start using exchange license in mid-May
* New self-regulatory organization board to be elected
* BOX, as SRO, eliminates need to be regulated by rival
The BOX Options Exchange said on Monday that it has won approval from U.S. security regulators to act as its own self-regulatory organization, freeing it from the need to pay a rival to provide key regulatory services.
BOX, which has been seeking its SRO status with the U.S. Securities and Exchange Commission since at least 2008, expects to start using its own exchange license in mid-May. Being an SRO eliminates the need for BOX to be regulated by rival exchange operator Nasdaq OMX Group Inc, which has been providing regulatory oversight of its options market.

Wipro Treasurer: May Increase Use Of Currency Options Due To Recent Rupee Volatility
MUMBAI (Dow Jones)–Wipro Ltd. (507685.BY), India’s third-largest software exporter by sales, may increase the use of options in its hedging book given the volatility in the Indian rupee over the past few months, a senior executive said. The comments from Manoj Jaiswal, corporate treasurer and head of investor relations, give a glimpse of the company’s hedging strategy that currently is predominantly focused on forward contracts.
Currency options give the holder the right, but not the obligation, to buy or sell a particular currency at a predetermined price during a specified period. That makes options more flexible, especially at times of high exchange-rate volatility, than forwards, which are obligatory.

ETFs: Industry’s death greatly exaggerated
The Globe and Mail
Last year wasn’t kind to the exchange-traded fund industry. ETFs — baskets of stocks and other assets that resemble mutual funds but trade throughout the day on stock exchanges — used to be praised for their low cost and simplicity, since they generally tracked established indexes.
Yet, new funds were widely ridiculed last year for appealing to an ever-narrower base of investors and piggy-backing on the latest trends (leveraged bets on the CBOE volatility index, anyone?). And the enormous losses caused by an alleged rogue trader at UBS were pinned to the use of exotic “synthetic” ETFs, putting the entire industry on the defensive for offering products that were too complex and, well, money-losers.


CBOE 1Q Profit Up 2% In Quieter Quarter For Options Trade
CHICAGO (Dow Jones)–The parent of the Chicago Board Options Exchange saw its first-quarter profit rise 2% amid slower dealing in U.S. stock options, topping expectations. Lackluster volatility pressured business at CBOE Holdings Inc. (CBOE), though the company captured a larger share of the market after changing up its trading fees in January.
The exchange’s trading volume totaled about 4.9 million million contracts per day in the first quarter, down 4% from a year earlier. The CBOE is the biggest U.S. options exchange in terms of trading activity, according to figures compiled by industry clearinghouse OCC.

CBOE profits rise despite slower trading
By Vivianne Rodrigues and Arash Massoudi in New York, FT.com
CBOE Holdings, which operates the Chicago Board Options Exchange, said first-quarter earnings were slightly better than expected, but a drop in trading volume weighed on the company’s revenue. The Chicago-based company, which also operates smaller exchange for futures, equities and second options-trading platforms, said first-quarter earnings excluding some special items were 37 cents a share, compared with 36 cents in the same period of 2011.

April Trading at CBOE Futures Exchange Up 103% Over Year Ago
Press Release
Average Daily Volume for Month is Second-Highest All-Time
The CBOE Futures Exchange, LLC (CFE) today announced that trading volume during April 2012 totaled 1,692,624 contracts, an increase of 103 percent from the 834,892 contracts traded in April 2011. April 2012 ranks as the third busiest month in CFE history and marked the seventh time that total monthly volume surpassed the one million contract benchmark at CFE.

TMX Group Welcomes SEC Approval of BOX as National Securities Exchange and Self-Regulatory Organization
TMX GROUP INC. Press Release
TMX Group Inc. welcomed the recent decision by the U.S. Securities Exchange Commission to grant BOX Options Exchange LLC (BOX) a national securities exchange license. The license enables BOX to act as its own self-regulatory organization (SRO), which it expects to begin doing in mid-May.

BATS Global Markets Reports One of the Best U.S. Equities Months in Seven-Year History
Press Release
Strong European Market Share, Spanish Market Share Gains Continue Following Successful Chi-X Europe Technology Transition; BATS Options Reports 3.1% Market Share, Up From 2.4% One Month Ago
KANSAS CITY, Mo. and LONDON — BATS Global Markets (BATS), a leading operator of securities markets in the U.S. and Europe, today reported one of its strongest months on record for U.S. equities market share, which reached 11.5% in April, up from 10.6% one year ago and 10.9% in March while BATS Options market share grew to 3.1%.

NASDAQ OMX Stockholm lists options on XACT OMXS30(TM)
Press Release
For the first time options will be listed on an exchange traded fund (ETF) on NASDAQ OMX Stockholm. Starting today standardised options can be traded on the exchange-traded fund XACT OMXS30.
– XACT OMXS30(TM), which was listed in 2000, is today among the most traded securities on NASDAQ OMX Stockholm, says Henrik Norén, Head of XACT. Trading in ETFs in Sweden has increased exponentially, from a turnover in 2001 of almost 1.8 billion SEK to just over 220 billion SEK last year. The fact that NASDAQ OMX Stockholm lists options on our exchange traded fund XACT OMXS30(TM) is further evidence of the popularity of our ETFs. The options will now open the possibility for further investment strategies with an ETF as base, which we believe will lead to an even greater interest for our largest ETF, says Henrik Norén.

ICE Brent futures and options average 616,720 contracts/day in Apr, up 43%
London (Platts)–The IntercontinentalExchange Wednesday reported average daily volumes for ICE Brent crude futures and options totaled 612,720 contracts in April, a 43% increase on the 428,433 contracts reported for April last year.

ISE Reports Business Activity for April 2012
· ISE was the second largest equity options exchange in April with market share of 18.3%, excluding dividend trades.
· Dividend trades made up 4.5% of industry volume in April 2012.
The International Securities Exchange (ISE) today reported average daily volume of 2.6 million contracts in April 2012. This represents a decrease of 10.7% compared to April 2011. Total options volume for the month was 52.0 million contracts. ISE was the second largest U.S. equity options exchange in April with market share of 18.3%*.
http://jlne.ws/IHoIJN (PDF)

ISE Receives Award for “Most Proactive Exchange for ETF Options/Derivatives”
at 8th Annual Global ETF Awards NEW YORK, May 1, 2012 – The International Securities Exchange (ISE) announced today that it received the “Most Proactive Exchange for ETF Options/Derivatives” award at the 8th Annual Global ETF Awards Dinner and Workshop on April 26, 2012. This is the second year in a row that ISE has received this honor. Hosted by exchangetradedfunds.com, the Global ETF Awards are awarded to ETF industry participants for outstanding achievements in 2011. Winners were selected by ETF industry professionals representing over 520 organizations worldwide.
http://jlne.ws/JLFcCt (PDF)

NASDAQ OMX Launches New Options Based on MSCI Indexes
MSCI Emerging Markets and EAFE Index Options are the Only Cash-Settled Options Available in the U.S. on These Major Global Indexes
NEW YORK, May 1, 2012 (GLOBE NEWSWIRE) — The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) announced today the launch of MSCI Emerging Markets (Symbol: EEMIQ) and MSCI EAFE (Symbol: EAFEQ) Index Options, which will be the latest U.S. options listings offered at NASDAQ OMX PHLX. They are the first and only listed cash-settled options available in the U.S. on these major global indexes.Beginning today, these listings are available to investors who seek direct exposure to a previously untapped market with a cash-settled options offering that exactly tracks the performance of the index. NASDAQ OMX PHLX market participants will be among the first to trade this offering and may use MSCI EM and MSCI EAFE Index Options to track the performance of the index, employ additional trading strategies for cash-settled index options and gain more opportunity to hedge.

Nasdaq Aims At Popular Emerging-Markets Trading
By Brendan Conway, Barrons.com
If you were to combine all the money investors have plunked into the iShares MSCI Emerging Markets Index Fund (EEM) and the Vanguard MSCI Emerging Markets (VWO), you’d end up with the second largest U.S. ETF, at $92 billion. It would displace today’s number two, the SPDR Gold Trust (GLD), currently at $69 billion. The combined fund’s size would rank behind only the $103 billion SPDR S&P 500 ETF (SPY).
All this by way of previewing what could be some new competition in one of this fertile area’s offshoots: The options market. There is a deep and liquid market for put and call options on the iShares EEM fund, where a range of investors go for portfolio insurance, speculative positions and everything in between. These contracts are routinely on the list of the most heavily traded options in the entire U.S. That’s where Nasdaq OMX Group (NDAQ) comes in.

Options Exchange Marketshare for April 2012
Courtesy of the OCC

April 2012 Total Options Marketshare:
AMEX- 14.66%
BATS- 3.14%
BOX- 3.87%
CBOE- 27.11%
C2- 1.32%
ISE- 16.27%
NSDQ- 5.65%
NYSE Arca- 9.83%
OMX PHLX- 18.15%

April 2011 Total Options Marketshare:
AMEX- 14.18%
BATS- 3.41%
BOX- 2.65%
CBOE- 25.70%
C2- 1.04%
ISE- 17.37%
NSDQ- 4.56%
NYSE Arca- 9.96%
PHLX- 21.14%

April 2012 Equity Options Marketshare:
AMEX- 15.81%
BATS- 3.39%
BOX- 4.18%
CBOE- 21.64%
C2- 1.38%
ISE- 17.50%
NSDQ- 6.11%
NYSE Arca- 10.61%
OMX PHLX- 19.38%

April 2011 Equity Options Marketshare:
AMEX- 15.09%
BATS- 3.64%
BOX- 2.82%
CBOE- 21.08%
C2- 1.11%
ISE- 18.32%
NSDQ- 4.86%
NYSE Arca- 10.60% PHLX- 22.48%

SEC approves BOX as national securities exchange
Automated Trader
BOX granted self-regulatory organization (SRO) approval from U.S. Securities and Exchange Commission
“After years of hard work, we are excited to act as our own SRO and no longer be regulated by a competitor.”
Boston – BOX Options Exchange has announced that it has received SEC approval of its application for registration as a national securities exchange and thus, act as its own self-regulatory organization (SRO). BOX expects to start using its own exchange license in mid-May. Being an SRO eliminates the need for BOX to rely on Nasdaq OMX Group Inc., which has been conducting the regulatory oversight of its options market.

Boston, April 30, 2012 – BOX Options Exchange announces it has received SEC approval of its application for registration as a national securities exchange and thus, act as its own self-regulatory organization (SRO). BOX expects to start using its own exchange license in mid-May. Being an SRO eliminates the need for BOX to rely on Nasdaq OMX Group Inc., which has been conducting the regulatory oversight of its options market.“After years of hard work, we are excited to act as our own SRO and no longer be regulated by a competitor,” said Tony McCormick, BOX CEO. “We are anticipating greater efficiencies, and the ability to directly file for new products and contracts that will enhance the experience for our customers.”

UPDATE: NYSE Euronext Profit Hit By Trading Slump, Failed Merger
–Net profit down 44% amid slower trading, merger-related expenses
–Transaction revenue down 25% as investors keep to sidelines
–4.3 million shares repurchased during first quarter 2012
By Noemie Bisserbe and Jacob Bunge Of DOW JONES NEWSWIRES
NYSE Euronext (NYX) said Monday that tough economic conditions will keep the exchange operator under pressure as it reported a 44% net profit decline in the first quarter, driven by a drought in trading.Revenue from trading fees fell by one-quarter from the year-earlier period as investors remain on the sidelines of stock markets in the U.S. and Europe, while currency losses and charges from the failed merger with Germany’s Deutsche Boerse AG (DB1.XE) also weighed on results. “We knew and expected this would be a challenging quarter for us, given the difficult environment,” said Duncan Niederauer, chief executive of NYSE Euronext, on a conference call Monday.

Chicago aims for share of OTC derivatives
By Hal Weitzman in Chicago and Telis Demos in New York, The Financial Times
Chicago’s trading community is stepping up its attempt to wrest control of over-the-counter derivatives markets from New York-based dealer banks.
New York’s vice-like grip on over-the-counter derivatives may loosen with the implementation of rules stemming from the Dodd-Frank Act, which overhauled US markets in the wake of the financial crisis. Stricter capital requirements are also making it harder for big banks to take on customers’ risk. That could give an edge to the already highly regulated market for exchange-traded futures, which is primarily based in Chicago, to take share from privately negotiated swaps, which the dealers in New York control.

CME Cutting Staff, Moving Operations to Ireland
Tommy Fernandez, Securities Technology Monitor
Facing lower revenue as a result of calmer markets and growing operations costs, the Chicago Mercantile Exchange said in a earnings call conference that it has reduced its headcount by 35 to 2,702, will cut even more jobs via a “voluntary incentive plan,” and will also move some operations to its new facility in Belfast, Ireland.

CME Group Cuts Staff, Plans ‘Exit Incentive Plan’
CME Group, whose first-quarter profit missed Wall Street expectations, said Thursday it has cut staff and plans more slimming this year as it tries to reduce costs and shore up income.
By Reuters CHICAGO, April 26 — CME Group Inc, whose first-quarter profit missed Wall Street expectations, said Thursday it has cut staff and plans more slimming this year as it tries to reduce costs and shore up income.
“We continue to look for efficiencies wherever we can,” Chief Financial Officer James Parisi said on a conference call.

CBOE Oil Volatility Index falls to five-year low
NEW YORK (Reuters) – The Chicago Board Options Exchange’s Oil Volatility Index fell to its lowest level in nearly five years on Thursday at 24.99 percent. The index represents implied volatility in U.S. crude oil futures and is a mathematical measurement of traders’ perceptions of risk in the oil markets. The index is based on trade in the U.S. Oil Fund, which is invested in the U.S. crude oil futures market on the New York Mercantile Exchange over various months, but heavily weighted towards the prompt month.

UPDATE: CME’s CEO Transition Moves Up As Profit Slumps 42% – WSJ.com
–CME moves up transition to new CEO Gill
–First-quarter profits fall 42% on slower trading, tax adjustment
–Average daily trading down 11% from prior-year period
By Mia Lamar and Jacob Bunge Of DOW JONES NEWSWIRES
A “formal handoff” of chief executive duties at CME Group Inc. (CME) is likely to take place before the futures exchange company’s annual shareholder meeting next month, current CEO Craig Donohue said Thursday. Donohue said his successor, current CME President Phupinder Gill, has already taken on some responsibilities and will move into the position well ahead of the year-end transition outlined when Donohue announced his retirement in mid-March.
“This will be my last earnings call,” Donohue said Thursday on a conference call with analysts. CME is slated to hold its annual shareholder meeting May 23.

CME Group 1Q Net Falls 42% On Year-Ago Tax Boost, Trading Slump
CME Group Inc.’s (CME) first-quarter profit slumped 42% as it faced comparison with a year-earlier period that was boosted by a tax adjustment and quieter trading volumes. Like its fellow exchanges, the world’s largest futures market operator grappled with slower trading in the first quarter as more investors headed for the sidelines of stock and derivatives markets in the U.S. and Europe. Average daily volume at CME totaled 12.3 million contracts in the first quarter, down 11% from a year-earlier period that hosted exceptionally strong trading volume amid unrest in the Middle East and a natural disaster in Japan.

CBOE listed futures to replicate private swaps
By Hal Weitzman in Chicago and Telis Demos in New York
The owner of one of the US’s biggest options exchanges has struck a deal with a large proprietary trading firm to launch listed futures contracts that replicate privately negotiated over-the-counter equity-based swaps. The move by the futures exchange operated by the Chicago Board Options Exchange and DRW Trading, a Chicago-based trading firm, comes as banks and investors are shifting some OTC derivatives to listed markets, ahead of rules stemming from the Dodd-Frank Act and capital requirements that are making it harder for banks to take on customers’ risk.

CBOE Holdings 2011 Annual Report

SECP approves regulations for index option contracts at KSE
Tariq Khattak, Pakistan Observer
Islamabad—In line with its efforts to strengthen the capital market in Pakistan by further developing the derivatives market segment and providing investors with more diversified range of investment/hedging alternatives, the SECP has approved the Regulations Governing Index Option Contracts of the Karachi Stock Exchange (KSE). These regulations have been framed in line with best international practices to provide a framework for the launch of trading in cash-settled index option contracts.

Deutsche Boerse Profit Falls as Trading Volume Declines
Businessweek By Nandini Sukumar
Deutsche Boerse AG (DB1), the German exchange blocked from buying NYSE Euronext by European regulators in February, reported first-quarter profit dropped 31 percent as trading volumes faltered. Net income slipped to 146.2 million euros ($193 million) from 214.1 million euros in the first quarter of 2011, the Frankfurt-based exchange said in an e-mailed statement.


U.S. options exchanges sound alarm on new tax rules
* Tax rules meant to crack down on dividend-tax avoidance
* Exchanges, others fear new rules overreach
By Patrick Temple-West and Ann Saphir, Reuters
WASHINGTON, April 26 (Reuters) – Options exchanges and other financial players worried about proposed new tax rules on U.S. dividend tax withholding for foreign investors will vent their objections at a public hearing held by the U.S. Internal Revenue Service on Friday. In January, the IRS and the Treasury Department published the proposed rules – expected to kick in on Jan. 1, 2013 – that would put withholdings for foreign investors on dividend-equivalent swap payments on a par with stock dividends.

Margaret Williams Promoted to New Role of Deputy Chief Regulatory Officer
CHICAGO, April 27, 2012 /PRNewswire/ — CBOE Holdings, Inc. (NASDAQ: CBOE) today announced that Margaret Williams has been promoted to the new role of Deputy Chief Regulatory Officer of the Chicago Board Options Exchange (CBOE). Williams will perform this role for CBOE, C2 Options Exchange (C2) and CBOE Stock Exchange (CBSX).
Williams, a 26-year veteran and Vice President of CBOE’s Regulatory Services Division, will continue to report to Timothy Thompson, Chief Regulatory Officer and Senior Vice President, Regulatory Services Division.
In this new position, Williams will help to set the strategy for the exchanges’ key regulatory areas and will serve as a regulatory liaison to the Securities and Exchange Commission (SEC). Among her responsibilities in this new role, she will oversee training of exchange regulatory staff, establish and monitor internal controls for the Regulatory Services Division, ensure that rule filings and policy changes are fully integrated into exchange regulatory and business systems, and manage development requirements for exchange surveillance systems.

Chicago Board Options Exchange Promotes Regulatory Officer
CHICAGO (Dow Jones)–The parent of the Chicago Board Options Exchange promoted a long-serving offical to deputy chief regulatory officer as a federal investigation into its compliance functions continu
Margaret Williams, previously vice president of CBOE’s Regulatory Services Division, will take on the new role as the biggest U.S. options exchange continues to shuffle its market regulation division following the departure last month of two veteran officials. CBOE Holdings Inc. (CBOE) in late February disclosed that the Securities and Exchange Commission had opened an investigation into the exchange operator’s supervision of traders on its markets. The investigation focused on CBOE’s role as a self-regulatory organization, supervising market activity and carrying out examinations of registered trading firms.

CBOE beefs up self-regulation amid SEC probe
CBOE Holdings Inc. is beefing up its self-policing team amid a Securities and Exchange Commission probe into its self-regulatory compliance, appointing a deputy chief regulatory officer to oversee internal controls and surveillance. Margaret Williams, who was promoted to the new role on Friday, has been vice president of CBOE’s regulatory services division and will add the new responsibilities to her job, a CBOE spokesman said.

Could Volcker Affect the Russell Rebalance?
James Armstrong, Traders Magazine Online News
Russell Investments begins the process of rebalancing its indexes at the end of next month, and the industry is already starting to wonder if this year’s rebalance will see increased speculative activity, or if the impending Volcker rule will mean less liquidity coming from proprietary trading desks. In the last two years, the Russell rebalance has been relatively orderly on reconstitution day, meaning buys and sells have been able to pair off without too much market dislocation—at least when compared to the large order imbalances seen during the financial crisis. This year’s June 22 rebalance, however, could be affected by the Volcker rule’s requirement that banks divest themselves of their prop desks, according to Phil Mackintosh, global head of trading strategy for Credit Suisse.
“If all other things were equal, I would say this year would probably continue that trend, and the trade would get closer to being matched, but I think Volcker is the elephant in the room,” Mackintosh said.


Neutrinos to Give High-Frequency Traders the Millisecond Edge
Eighty some years after Wolfgang Pauli first postulated its existence, the lowly neutrino is now on the cusp of being harnessed to facilitate automated high-frequency trading through earth itself. That is, if this weakly-interacting, electrically-neutral subatomic particle can be successfully time-encoded and pointed from one financial center to another. The idea is that by sending neutrino-based buy-and-sell messages via a 10,000 km shortcut through earth; high-velocity traders could handily beat their competitors.
Most neutrinos are leftover relics of thermal reactions that took place during the Big Bang, some 13.7 billion year ago. Today, however, they’re artificially generated inside nuclear reactors, or in particle accelerators like those at Europe’s CERN outside Geneva, or the U.S.’ Fermilab, near Chicago…
In theory, options trading would provide the most leverage with this neutrino technology, says Haug.

SunGard’s Valdi Adds Support for International Options Exchanges
With options trading volumes increasing, SunGard’s Valdi Options Risk Manager now offers firms the ability to manage their overall position risk on options exchanges globally,
By Ivy Schmerken, Wall Street & Technology
For firms looking to manage overall position risk on options exchanges worldwide, SunGard’s Valdi Options Risk Manager, now supports options traded on international exchanges, the company announced today. According to Russ Chrusciel, head of Valdi Options U.S. for SunGard’s Capital Markets business, in today’s release, “Valdi Options Risk Manager offers a cost-effective, easy-to-deploy solution to help options traders expand their global footprint and focus on their core options trading activities.”

Azul Systems Announces OEM Agreement with OptionsCity for High-Performance Trading and Market-Making Platforms
Press Release
Azul Systems, Inc., the award-winning leader in Java runtime scalability, announced today that it has signed an OEM agreement with Chicago, IL-based OptionsCity Software, a financial technology company that provides real-time electronic trading solutions on the world’s leading derivatives markets. OptionsCity will integrate Azul’s Zing into Freeway, its server-based, multi-asset algorithmic trading platform, as well as Metro, its fully-configurable, high-performance market making and electronic trading platform. This agreement aligns with OptionsCity’s goal to deliver the lowest latency across its trading platforms, which recently broke the 100 micro-second barrier for round trip execution.

GFI Group to provide FENICS Professional to Union Bank
(Press Release)
Leading US commercial bank chooses GFI FENICSSM for FX Options business
New York, April 30, 2012 – GFI Group Inc. (NYSE: “GFIG”) announced today that California based Union Bank has upgraded their existing agreement with GFI FENICSSM to include the full suite of FENICS Professional Pricing and Analytic tools. Union Bank will utilize FENICS Professional for FX options price discovery, portfolio management and downstream STP (straight-through processing) of trades into its back office system. Union Bank traders and sales team will have access to FENICS Professional’s Sales Module allowing them to build, price, and communicate the details of FX Options structures with speed and efficiency.

Chicagoan Saliba Joins Heritage Board
Washington, D.C., April 27, 2012—Chicago financier Anthony J. Saliba has been named to The Heritage Foundation’s board of trustees, the prominent think tank announced. Saliba joins a group of 23 other business leaders, ambassadors and policymakers who serve the policy research institute as trustees, Board Chairman Thomas A. Saunders said.
“We’re delighted to have the benefit of Tony’s expertise and passion for the conservative cause,” said Heritage President Edwin J. Feulner, himself a Chicago native. “Tony is as comfortable encouraging downcast men at the local homeless shelter as he is rubbing shoulders with Chicagoland’s captains of industry.”
Saliba is an executive managing director of BNY ConvergEx Group, an investment technology firm. He is also chief executive officer of LiquidPoint, a company he started 13 years ago and was bought by ConvergEx in 2004.

TD Ameritrade Launches Customized Thinkpipes Options Platform for RIAs
New technology gives advisors analytics and streaming market data
By John Sullivan, Advisorone
In a debut of sorts at IMCA’s annual conference in National Harbor, Md. on Tuesday, TD Ameritrade demonstrated its new thinkpipes platform for AdvisorOne. Thinkpipes is an “advanced, highly customizable trading platform for advisors that is designed to meet their trading needs for equities or exchange-traded funds (ETFs), as well as those looking to start or expand their use of options strategies,” said Bob Mahoney, director of technology product management for TDAI. The platform is based is based on its thinkorswim technology, the options trading platform acquired by TD Ameritrade in 2009 and integrated into other company offerings in August of last year.

NYSE Euronext’s strategy to fill its Liquidity Centers
The markets are soft as NYSE Euronext’s Basildon data center undergoes a transformation and the firm rolls out its global liquidity center strategy
by Ambrose McNevin – DatacenterDynamics
Two of the world’s largest stock exchanges reported soft financial results this week as both Nasdaq and Deutsche Borse missed analyst revenue estimates. A third, NYSE Euronext, reports its results on Monday.
The company’s data center strategy has been placed at the heart of its business as the company builds out a network of liquidity centers across the globe.
When it opened in 2010 NYSE Euronext’s Basildon data center represented a huge strategy play for the stock exchange operator. Unlike Nasdaq it decided to not to rely solely on third party data centers from which host its exchanges.

NYSE Receives Credible Cyber Threat Against Website
Fox Business
The New York Stock Exchange has received a credible threat to disrupt its external website as part of an apparent cyber attack attempt against a number of U.S. exchanges, FOX Business has learned…
In addition to NYSE, the group claims it will put “into a profound sleep” the websites of the Nasdaq Stock Exchange, BATS, the Chicago Board of Options Exchange (CBOE: 26.66, +0.28, +1.06%) and the Miami Stock Exchange.


Barclays VIX Note Vexes Investors Not Savvy on Volatility
By Matt Robinson and Margaret Collins, Bloomberg
Ian Mathers reckoned stocks were due for a slide as the Standard & Poor’s 500 Index approached a three-year high in February. So the 34-year-old Medevac pilot and day trader bought an exchange-traded note from Barclays Plc (BARC) that’s designed to profit when stock prices get more volatile. Mathers didn’t realize the note tracks a different volatility index from the widely followed S&P 500 VIX benchmark, and could produce much different results. The confusion cost him 6 percent of his investment over two days.

An Options Trade Bernard Baruch Would Have Liked
By STEVEN M. SEARS, Barrons.com
Use call spreads to minimize risk and extend profits on two high-flying stocks.
Bernard Baruch, the legendary investor who avoided the Great Crash of 1929, credited his good fortune with a simple investment habit: He sold stocks when they were rising, even if it meant selling too soon. That simple piece of advice is often hard for most investors to follow because no one wants to miss the chance to make more money — especially on a hot stock.
But a well-placed call option neatly solves the problem and reduces risk.

Why Options Get a Bad Rap
By Fred Ruffy, TheStreet
Barron’s options reporter Steven Sears made a bold trade recommendation to the masses. In the latest issue, Sears’ Striking Price column suggested that bullish investors sell put spreads on the SPDR 500 Trust (SPY). The idea is to collect a bit of premium by writing puts on the “Spiders”, but also hedge the bet by buying a lower-strike put. It’s a position that has a high probability of success, but could also wipe an investor out if market conditions suddenly change.

Shopping at the Stock Dog House
By STEVEN M. SEARS, Barrons.com
Here are some bullish options trades on companies that have underperformed ahead of earnings results.
Corporate earnings reports are supposed to provide investors with a window into a stock. So far, not much has happened based on the results of the first-quarter earnings season. The option seems to be overpricing puts and calls, perhaps in anticipation that stocks will react strongly to financial results and management guidance. But many stocks still seem stuck in trading ranges despite the anticipation in the options market of a new leg to the journey.” http://jlne.ws/IhsQAt

Scramble on Apple option positions
By Vivanne Rodrigues and Arash Massoudi in New York, FT.com
Active trading in equity options written on Apple was focused on the chances of its shares staying above $600 for the next month, with solid volume seen in contracts that will become profitable should the stock reach a new record high. Shares in Apple jumped as much as 10.3 per cent on Wednesday to a high of $618 in the wake of its fiscal second-quarter earnings report that easily surpassed expectations, allaying market fears that the world’s largest company by market value was facing a slowdown from its stellar growth rates.

Options Education

OIC Presents New Research on Option Based Risk Management in a Multi-Asset World
What: OIC invites you to the official release of new research on “Option Based Risk Management in a Multi-Asset World,” by the University of Massachusetts at the 30th Annual Options Industry Conference.
Building on our previous collar study, “Loosening Your Collar: Alternative Implementations of QQQ Collars,” this new research analyzes collar strategies across a wide range of asset classes, including equity, currency, commodity, fixed income and real estate during the financial crisis and subsequent market recovery.
When: Thursday, May 3th, 5:30pm CST
Where: The Roosevelt Hotel New Orleans, Chamber 3, 123 Baronne Street, New Orleans, LA


2012 NASDAQ OMX Analyst/Investor Day
NEW YORK, Apr 30, 2012 (GlobeNewswire via COMTEX) — The NASDAQ OMX Group, Inc. (“NASDAQ OMX(R)”) NDAQ -2.03% will hold its 2012 Analyst/Investor Day on Thursday, May 10, 2012. NASDAQ’s senior executive team will conduct an in-depth discussion of the company’s operations, objectives, and strategy. Analysts and investors who wish to attend should RSVP to investor.relations@nasdaqomx.com
Analysts and investors not attending the event in person are invited to view the live webcast at http://ir.nasdaqomx.com/events.cfm
What: NASDAQ OMX Analyst/Investor Day
When: Thursday, May 10, 2012 from 8:00 a.m. to 1:00 p.m. Eastern Time
Where: The Grand Hyatt New York Hotel, 109 East 42nd Street at Grand Central Terminal, New York City.

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