JLN Options: Nasdaq looks at changing its structure

Jan 13, 2012

Lead Stories

Nasdaq looks at changing its structure
By Telis Demos in New York and Jeremy Grant in London
The Financial Times
Nasdaq OMX’s board of directors is discussing the possibility of changing Nasdaq’s leadership structure, which could include Robert Greifeld being named chairman in addition to chief executive, people briefed on the discussions said. The discussion comes as NYSE Euronext and Deutsche Börse’s deal appears at risk of being called off due to strong opposition from antitrust regulators in Europe. It is likely to stoke anticipation that Mr Greifeld may be trying to clear a way for a potential merger to capitalise on his rivals’ failure by seeking the ability to offer up the chief executive role to a merger partner as an inducement to complete a deal.  http://jlne.ws/xufByg

DB-NYSE tie-up hits another hurdle

By Jeremy Grant, FT.com
Plans by Germany’s Deutsche Börse and US-based NYSE Euronext to create the world’s largest stock and derivatives exchange hit a significant hurdle after Europe’s antitrust regulators decided to recommend that the deal be blocked. While no official announcement was made, people familiar with the matter said that regulators argued that a combination of the Börse’s Eurex derivatives exchange with NYSE’s London-based Liffe derivatives arm would create a business that would stifle competition in exchanged traded derivatives in Europe.
http://jlne.ws/xgT22u

More Stock-Market Volatility Coming This Year: Chart of the Day
By David Wilson, Bloomberg
Jan 12, 2012 11:01
Stock investors shouldn’t get used to the relative calm that markets are now showing, according to Andrew Garthwaite, a global equity strategist at Credit Suisse Group AG. Volatility is likely to rise this year, Garthwaite wrote yesterday in a report. He attributed the outlook to excessive borrowing in developed economies, which ensures that investors will be “abnormally sensitive” to shifts in economic growth and government policy, he added.
The CHART OF THE DAY compares the volatility of the Standard & Poor’s 500 Index and the performance of the Chicago Board Options Exchange Volatility Index, or the VIX, since the beginning of last year. The VIX indicates the level of concern among investors about future share-price swings.
http://jlne.ws/xg3BiR
Nikkei 225 January Options Settle at 8,470.71, Traders Say
Bloomberg
By Yoshiaki Nohara – Jan 12, 2012 6:22 PM CT
Japan’s Nikkei 225 January options settled at 8,470.71, traders said.
http://jlne.ws/xPGevO

Opening View: DJIA Down On Its Luck After JPMorgan Earnings, Bank of America Report
NASDAQ.com
Equity option activity on the Chicago Board Options Exchange ( CBOE ) saw 1,314,706 call contracts traded on Thursday, compared to 752,333 put contracts. The resultant single-session put/call ratio arrived at 0.57, while the 21-day moving average was 0.68.
http://jlne.ws/z8CSe4

Exchanges

Housing Derivatives Market
by Jann Swanson, Mortgage News Daily
Company Outlines Model behind New Housing Derivative
Jan 6 2012,
The Chicago Board Options Exchange (CBOE) will soon permit futures trading in housing through a derivative based on the Radar Logic Composite Price.  According to information released by Radar Logic, a New York City real estate data and analytics company, this derivative will allow institutions both to hedge against downturns in housing prices and to allocate portions of their investment portfolios to housing assets without the search, transaction, and maintenance costs association with purchasing physical properties.  Or, as the background information the company released today says, “RPX futures will allow you to invest in residential real estate without having to mow the lawn.”
http://jlne.ws/xSep6z
Kansas City Board of Trade Clearing Corp. Elects Officers, Directors for 2012
Kansas City, Missouri News
Friday, January 13, 2012
The Clearing Corp. reconciles all futures and options trades at the Kansas City Board of Trade and guarantees the financial integrity of all trades.
Michael L. Dean, Cargill, Inc., was elected president of the Kansas City Board of Trade Clearing Corp., a wholly owned subsidiary of the Kansas City Board of Trade.
http://jlne.ws/wZB7Xj

Regulation

Prediction Markets Look To Gain Regulatory Acceptance in USOpalesque, Friday, January 13, 2012
Should investors have the right to hedge their portfolios based on election results in the U.S.? Some might say the ability to hedge political risk currently exists to some extent through existing futures contracts on stock indices, interest rates and currencies. Others say the ability to bet on election results is damaging to democracy, while still different voices defend the need for small business executives to hedge political outcomes.
Enter the North American Derivatives Exchange (NADEX), which is petitioning the CFTC to allow regulated trading based on U.S. presidential elections and control of the U.S. House and Senate. The system offers new potential for hedgers and speculators, but also has raised important questions. Is an election prediction market just raw gambling? Can the process be corrupted by politicians to influence the results of public opinion or an election? How does the market making process ensure enough liquidity so that the market cannot be whipsawed? These questions were put to Dan Cook, spokesperson for the emerging Chicago-based futures exchange that is apparently targeting retail investors. Last year the exchange traded near 1 million contracts in energy, stock indices and currencies – a far cry from the nearly three billion contracts traded at market leader CME.
http://jlne.ws/xeOrDh

U.S. SEC tightens leash on exchanges post ‘flash crash’
Reuters
By Jonathan Spicer, Herbert Lash and Sarah N. Lynch
Fri Jan 13, 2012 11:16am IST
NEW YORK/WASHINGTON (Reuters) – The May 2010 “flash crash” was bad for almost everyone involved in the stock market, but for the U.S. Securities and Exchange Commission, it was a disaster.
With $1 trillion in shareholder equity wiped out in a matter of minutes – however temporarily – alarmed investors demanded answers.
Embarrassingly, the heads of the New York Stock Exchange and Nasdaq Stock Market got into a spat on television, blaming each other for the mess, and the SEC realized that it didn’t have the information to explain what caused the scariest few minutes in recent Wall Street history.
The regulators had to seek the data from the exchanges, delaying a much-anticipated report on the crash by nearly five months. The unwelcome lapse in oversight laid bare the SEC’s limited ability to track the inner workings of the marketplace when it matters most.
http://jlne.ws/xo6iKK

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