Lead Stories

Nasdaq’s PHLX Options Market Has ‘Issues,’ Halts Some Trading
Jacob Bunge, NASDAQ
Nasdaq OMX Group Inc. ( NDAQ ) on Thursday halted trading in some stock-options contracts on its largest options exchange due to “system issues,” according to notices sent to traders.

NYSE Looks to Cull List of Penny Names
Peter Chapman, Traders Magazine
In a move intended to reduce quote traffic and the exchange operator’s administrative burden, NYSE Euronext is proposing to cut significantly the number of options subject to penny trading and to end the so-called “Penny Pilot” program.

5 Theories Behind the VIX Stagnation  
Adam Warner, Schaeffer’s Investment Research
The market goes up every day, and yet the CBOE Market Volatility Index (VIX) basically goes nowhere. We’re up about 4% just since May 2, yet the VIX is pretty much unchanged since then. VIX actually hit its highest high in nine sessions yesterday, and the S&P 500 Index (SPX) hit yet another new high?

VIX Contango Comet – Profitable Observations 
Stephen Aniston, Seeking Alpha
Some of the readers of my last article on volatility suggested that the trading model I outlined focused too much on the spot price of the VIX and not enough on the contango effect.

Investors’ Biggest Fear is Missing Out
Brendan Conway, Barron’s
You can usually count on derivatives strategists to tease out some nice insights on the state of market psychology.  Right now, this group’s view of indexes and exchange-traded funds suggests investors are fearful. But not in the way that’s been prevalent since the financial crisis.
*Missing out is probably a lot of people’s big fear – right after public speaking. — SR

Bloomberg Snooping Scandal Prompts Reaction from Goldman 
Ivy Schmerken, Advanced Trading
Wall Street firms like Goldman Sachs could look to reduce their reliance on the dominant data and analytics terminal in response to the firms’ reporters being allowed to spy on customer data.

Morning MoneyBeat: ‘Sell in May and Go Away’ Is Working, Seriously 
Steven Russolillo, The Wall Street Journal
The “Sell in May and go away” trade is alive, just not in the form people anticipated.
The stock market is still kicking, but the bond market is showing serious signs of fatigue. As our Heard on the Street colleagues noted earlier this week, May’s selloff has wiped out year-to-date gains for holders of U.S. Treasurys, German bunds and U.K. gilts.

CAST Issues Open Letter to Top Derivatives Exchanges  
The Wall Street Journal
Today CAST (Euronext: CAS) issued an open letter to the top eight derivatives exchanges in Europe and North America. This comes in the wake of two major software outages at the Chicago Board Options Exchange, one of the top derivatives exchanges in the world, which resulted in the late opening of stock options and the closure of the exchange for several hours.
*CAST reports that 6 out of 8 of the top exchanges have “managed to stay out of the headlines” in the past 12 months. — SR

Law Ministry clears ‘put’ and ‘call’ options in share purchase pacts [India]
Economic Times
NEW DELHI: Foreign investment in Indian firms is all set to get a boost as government has decided to move ahead with a proposal to allow “put” and “call” options in share purchase agreements to permit listed companies to buy or sell equity at a predetermined price in future.

Videocast: View of VIX before settlement


S&P Raises Outlook on CME Group to Stable From Negative  
Tess Stynes, The Wall Street Journal
Standard & Poor’s Ratings Services raised its outlook on CME Group Inc.’s (CME) investment-grade ratings to stable from negative on expectations that the exchange operator’s modestly weaker profitability and credit metrics should stabilize at current levels.

CME Group Announces Open Interest for WTI-Brent Crude Oil Spread Options Contract Exceeds 125,000 for First Time
Press Release (CME)
CME Group, the world’s leading and most diverse derivatives marketplace, today announced it reached a record in open interest for its NYMEX WTI-Brent Crude Oil Spread Option contract (BV) yesterday, May 14. Open interest in NYMEX BV reached 126,675 contracts, compared to 123,075 on May 13, 2013, the last record for this contract.


U.S. regulator sets final rules for swaps trading
Douwe Miedema, Thomson Reuters
The top U.S. derivatives regulator unveiled rules for swaps trading that could break open Wall Street’s dominance of the $630 trillion market, yet contain important concessions to the industry.


NASDAQ OMX Successfully Delivers SMARTS to Financial Conduct Authority (FCA) to Enhance Market Surveillance Capabilities
GlobeNewswire (via NASDAQ)
The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) and the Financial Conduct Authority (FCA), an independent body that regulates the financial services industry in the United Kingdom, today announced that the FCA has officially gone live with NASDAQ OMX’s SMARTS Integrity market surveillance platform to enhance its monitoring of transaction reports across the UK’s financial markets.


How to Trade This Market: Quickly 
Steven M. Sears, Barron’s
Options traders are profiting from the momentum by purchasing short-dated weekly calls that just keep going up.

A Rare Bird: The Tax-Efficient Alternative
Philip Guziec, Morningstar
Alternative investments may have appealing attributes for investors, but tax efficiency is rarely one of them. Whether the alternative strategy is attempting to arbitrage small price differences between stocks, or shorting companies in anticipation of an imminent price decline, the nature of many alternative strategies generally leads to frequent realization of short-term capital gains.
** This strategy uses both stocks and options. -JB

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