JLN Options: Nasdaq To Launch New Stock-Options Trading Venue

May 4, 2012

LEAD STORIES Nasdaq To Launch New Stock-Options Trading Venue
By Kaitlyn Kiernan OF DOW JONES NEWSWIRES (via The Wall Street Journal)
Nasdaq OMX Group Inc. (NDAQ) will launch a new stock-options trading venue that aims to capture more business from individual investors, the company was set to announce Friday.
The new exchange, expected to launch in June pending approval from the Securities and Exchange Commission, will be known as Nasdaq OMX BX Options. The exchange would make Nasdaq the first exchange operator with three options-trading venues and give the New York company a tool in its effort to bolster its share of U.S. equity-derivatives trading, a market that has seen declining volume this year after reaching a record in 2011.
http://jlne.ws/K7lh2V
** Press release from NASDAQ linked in Exchanges section below — JB ISE Introduces Implied Order Functionality
Press Release
The International Securities Exchange (ISE) announced today that it has introduced Implied Order functionality*. With Implied Orders, ISE will significantly enhance the execution of multi-legged strategy orders by enabling greater interaction of the complex order book with the regular order book. The result will be an increased fill rate for multi-legged strategy orders as well as tighter spreads and increased liquidity on the regular order book.
Gary Katz, ISE’s President and CEO, said, “The launch of Implied Orders is a milestone accomplishment for ISE and will deliver measurable improvements in the execution quality of both our complex and regular order books. I am extremely proud of the technology team that designed and developed this very sophisticated functionality, which is a first in the U.S. options industry. Implied Order functionality truly provides our customers with a uniquely innovative, industry-leading platform for trading multi-legged strategy orders.”
http://jlne.ws/IMkvb6 CME: Eyes Global Futures, Options Market Dominated By 3 Firms In 10 Years
By Alex MacDonald of DOW JONES NEWSWIRES (via Fox Business)
In ten years there will be three major futures and options exchange groups around the world, each dominating one of three key geographic regions: North America, Europe, and Asia, an executive of U.S.-based CME Group Inc. (CME) said Friday.
“It’s going to be a world of partnerships rather than ownership,” said Dennis Chookaszian, a board member of the Chicago-based company that owns a variety of different exchanges and trading platforms for trading futures and options.
http://jlne.ws/IJZIIs NYSE: Market Maker Incentives Possible In Options Trading, Too
by Brendan Conway, Barron’s
NYSE Arca’s idea of letting exchange-traded fund issuers pay market-makers for sounder markets in thinly traded ETFs could eventually come to the options market, too, according to NYSE Euronext (NYX) executives.
Amy Farnstrom, co-chief executive of the Arca exchange’s options market, said it was “not outside the realm of possibility” to see a concept like the ETF plan we wrote about here being transplanted to options. The idea in ETFs is to spruce up the often dormant markets for new and thinly traded niche products. In options, the issue arose as issuers asked to list options on underlying products that don’t trade very much, added Paul Finnegan, the other co-chief executive of NYSE Arca options. ”Two thousand shares a day [trading] is just not going to cut it,” he said regarding the underlying products where the exchange can’t or won’t list options contracts.
http://jlne.ws/Kmz0pv Emerging Stocks Set for Worst Slump Since 2008 on Global Economy
By Christine Harvey and Jason Webb, Bloomberg
An index of emerging-market stocks is headed for its longest string of weekly declines since 2008, led by energy companies, as concern that a global slowdown will crimp consumer demand weighs on commodities.
The MSCI Emerging Markets Index dropped 1.1 percent to 1,013.44 by 11:21 a.m. in New York, pushing the gauge down 0.6 percent in the week, the seventh straight weekly slump. Russian coalmaker OAO Mechel (MTL) tumbled for a sixth day in New York trading, while OAO Novatek (NVTK), the nation’s second-largest gas producer, fell 21 percent in London this week. Moscow’s Micex Index slipped to the lowest level this year, while Brazil’s Bovespa Index fell 1.3 percent, set for a second weekly drop.
Economic reports from around the world this week have bolstered concerns the world is headed for recession, with Chinese and U.S. service-sector growth slowing and Europe’s jobless rate at a 15-year high. U.S. employers added fewer jobs than economists forecast last month, data today showed, aiding oil’s slump below $100 a barrel in New York for the first time since February. Metals prices slid in London.
http://jlne.ws/JxQPuL

EXCHANGES

NASDAQ OMX Plans to Launch Retail Market for U.S. Equity Options
Press Release
The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) today announced at the Options Industry Conference that it will launch NASDAQ OMX BX OptionsSM (BX OptionsSM) in June 2012, pending SEC approval. BX OptionsSM will reward retail customers who wish to access liquidity and provide market makers with additional opportunities to provide liquidity, initially with a price/time trading system.
BX OptionsSM will complement the exchange group’s established U.S. options venues with unique enhancements that include a hybrid allocation model, directed order flow for market participants and a new multi-faceted price improvement auction. Additionally, customers utilizing the new market will benefit from innovations known to both NASDAQ OMX PHLX (PHLX) and the NASDAQ Options Market (NOM) like microsecond trading speeds, bulk quoting, rapid fire risk protection and low latency protocols. In order to facilitate an inexpensive and easy connection for options trading customers, BX OptionsSM will leverage the same architecture, data center and world-class INET technology as other NASDAQ OMX platforms.
http://jlne.ws/JYX6W2 Exchange Fatigue
by Peter Chapman, Traders Magazine
With Nasdaq’s recent announcement that it planned to launch a third options exchange, the number of options exchanges could climb from nine to 12 this year. That has some brokers grumbling.
“Now we have nine exchanges,” Jon Werts, head of broker-dealer execution services at Bank of America Merrill Lynch, said at the annual conference of the New York chapter of the Security Traders Association. “Some would argue the industry doesn’t need that many. I would be one of them.”
http://jlne.ws/IPqN6y Miami International Securities Exchange Expands its Princeton, NJ Office Space and Completes Build-Out of its National Operations Center
Press Release
Miami International Securities Exchange, LLC (“MIAX”) announces the expansion of its headquarters located at 7 Roszel Road in Princeton, New Jersey by approximately 12,700 square feet and the extension of its lease term until at least 2020. With the expansion, MIAX now occupies a total of approximately 27,000 square feet of Class A space at its Princeton headquarters. This additional space is being utilized to house MIAX’s technology development center and recently completed, state-of-the-art National Operations Center (the “NOC”) for t he MIAX Options Exchange, a fully-electronic options exchange planning to commence operations in late September 2012, subject to SEC approval.
http://jlne.ws/JICFLC

REGULATION

CFTC Said to Delay Derivatives Exchange Rule Opposed by CME
By Silla Brush, Bloomberg
The U.S. Commodity Futures Trading Commission will delay a final vote on a rule governing derivatives exchanges amid internal dissent that it may restrict CME Group Inc. (CME), owner of the world’s largest futures exchange, according to four people briefed on the matter.
The rule, proposed in 2010, sought to require at least 85 percent of a contract’s trading to occur on a central market. The agency will meet on May 10 to approve a series of other exchange requirements, the CFTC said. The commissioners will delay the provision setting percentage levels, said the people, who spoke on condition of anonymity because the rulemaking process is not public. Under the proposal, an exchange would be forced to de-list a contract if it didn’t meet the 85 percent level.
http://jlne.ws/K6lPWC

STRATEGY

OIC Announces Latest Study Findings Showing Collar Strategy Improves Performance And Reduces Risk
Press Release
The Options Industry Council (OIC) today announced that new research shows collar strategies provide portfolios with greater downside risk protection than standard multi-asset diversification programs, significantly reducing volatility, drawdowns and, in certain market environments, providing enhanced returns relative to a stand-alone investment.
In contrast to earlier studies which concentrated on equity markets, Edward Szado and Thomas Schneeweis of the University of Massachusetts provide extensive analysis of the performance of collar strategies over a diverse set of asset classes including equities, currencies, commodities, fixed income, and real estate in their recent research, Option-Based Risk Management in a Multi-Asset World. The research covers the period from June 1, 2007 to December 30, 2011, capturing both the financial crisis as well as the following market recovery.
http://jlne.ws/J5dsYB Options In Focus: CBOE Volatility Index
By CHRIS TYLER, Investor’s Business Daily
With an hour remaining in Thursday’s session and the S&P 500 off about 0.8% near session lows and through 1400 in front of Friday’s closely watched Labor Department’s nonfarm payrolls release, you might think the CBOE Volatility Index would be showing some sympathetic concern. You’d also be dead wrong and maybe somewhat amazed as this strategist admittedly is.
As the market’s most notorious gauge of investor sentiment and one well correlated in its tendency to perk up during times of market unease or uncertainty, Thursday’s strong sounding 5.75% bid is really anything but. In fact, at a level of 17%, the index is squarely in historically neutral territory spanning a 10-point wide zone from 12 to 13% to about the 20 to 22% area.
http://jlne.ws/JZ1Bjk Why Some Have More ‘Luck’ In Options Than Others
By: Kevin Matras, Zacks Investment Research
Why do some people have more ‘luck’ when buying options than others?
Better yet, why do some people have better luck with stocks than with options?
I believe a lot of that has to do with fully understanding how options work.
Believe me, options are not rocket science. But there are a few more things to consider than when buying a stock.
http://jlne.ws/IBHo1R

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