Observations & Insight

The tasty nation adds an entree, tastyworks: Tom Sosnoff and the tastytrade crew are “going to murder passive investing”
Spencer Doar – JLN

Editor’s note: This story contains language that some readers might find offensive. Also, the subject matter contains a plethora of non-capitalized proper nouns, which are the actual names of the firms.

The team behind retail brokerage thinkorswim, and more recently the financial news network tastytrade, is once again hoping to take the retail broking industry by storm with the opening of their new brokerage, tastyworks.

Launched on January 3, the low-commission offering is the next logical step in fulfilling the goals the group has had since thinkorswim was founded 17 years ago, despite the fact that the plan “was never to open another brokerage firm,” according to Tom Sosnoff, co-founder of thinkorswim and tastytrade, and 30-plus-year options trader.

TD Ameritrade bought thinkorswim in 2009 for $606 million, but the group behind it lives on in the “tasty nation.”

The new brokerage, tastyworks, is now part of tastytrade, which includes the web-based financial network founded in 2011 that is geared towards self-directed individual investors with a focus on derivatives. New tastyworks customers will trade on a platform based off of what the tastytrade team developed in 2013, an options trading system called dough. So while tastyworks is a new brokerage, it is quite familiar to many.

To read the rest of the story, click here.

****SD: Random factoid: tastytrade’s offices are riddled with all sorts of displays, monitors and TVs. That makes sense as they are a financial media network. However, there is no cable subscription – every single screen is tuned to their content.

Lead Stories

NYSE MKT stock exchange to end floor trading -regulatory filing
John McCrank – Reuters via Yahoo
Exchange operator NYSE, which includes the New York Stock Exchange and is owned by Intercontinental Exchange Inc, will end floor trading on its NYSE MKT exchange as part of a transition to a new technology platform. After the action, expected in the second quarter, all trading on the NYSE MKT exchange, which lists and trades around 250 small-cap companies, will be automated, including opening, re-opening, and closing auctions.

****SD: Annnd another one bites the dust.

Rising Currency Volatility Keeps Stock-Watchers on Edge
Inyoung Hwang – WSJ
While tranquility still reigns in the stock market, turbulence in currencies is rising — a worrying sign to some analysts that volatility in one market will bleed into the other. Global equities have climbed since the U.S. presidential election in November, leading to a decline in the CBOE Volatility Index, known as the VIX.

Here’s how much ETFs are dominating on the trading floor
Ryan Vlastelica – MarketWatch
Stock traders have become ETF traders. In a sign of how fast exchange-traded funds have become the dominant security traded on Wall Street, only one of the 15 most heavily traded issues on the stock market in 2016 was actually a stock. The rest were ETFs, which trade like stocks but, like mutual funds, have a variety of holdings.

****SD: Huge amount of daily options volumes too.

Where Have All the Arbitrageurs Gone?
Tracy Alloway – Bloomberg
“Take this money,” the markets shout. “We don’t want it,” market participants yell in response. Where once unusual market dislocations would lure a host of traders eager to profit from the temporary distortions, a deluge of post-financial crisis changes is now dissuading them from doing so. With balance sheets at the big dealer-banks under pressure and hedge funds unable or reluctant to put on trades, odd dislocations in the markets can now persist indefinitely.

Goldman Sachs’s risk appetite measure is at its highest point in history
Ben Moshinsky – Business Insider
The measure Goldman Sachs uses to calculate market optimism, or appetite for taking risk, hit its highest ever point last month as stock and commodities prices rallied in December.

The Nasdaq just had its best start to a year in more than a decade
Victor Reklaitis – MarketWatch
It’s been a happy new year so far for the stock market’s tech-laden index. The Nasdaq Composite has gained 2.76% in its first five trading days of 2017, marking the gauge’s best start to a year since 2006, when it jumped 5.14%. This is according to a markets data group at Dow Jones.

****SD: Lots of index record stories.

A Double Record for FTSE 100 Completing 9th All-Time High
Sofia Horta E Costa – Bloomberg
For the U.K.’s megacap stocks, the post-Brexit pound is a gift that keeps on giving.

Brief history of round numbers in the Dow
Clive Lambert – Tradingfloor.com
The chatter for weeks now has been “Dow 20K”, and it’s got tantalisingly close a number of times only to fail at the final hurdle. It hauled itself to within 34 points on December 14 before selling off sharply. It climbed to within 20 points on December 20, 21, 27 and 28, each time selling off again. Friday’s high for the “cash” index was 19,999.6. Doesn’t get much closer than that.

Exchanges and Clearing

Record Volume and Open Interest in 2016 for CBOE Index Products
Matt Moran – CBOE Options Hub
CBOE index products continue to attract growing interest from investors who wish to manage the income and volatility in their portfolios.

CBOE Holdings Announces Pricing of Senior Notes Offering
CBOE Holdings, Inc. (NASDAQ: CBOE) announced today that it priced an underwritten public offering of $650 million of its 3.650% Senior Notes due 2027. The offering is expected to close on January 12, 2017, subject to customary closing conditions. CBOE Holdings estimates that the net proceeds from the offering will be approximately $643 million, after deducting the underwriting discount and estimated offering expenses.

Nadex Ends 2016 with Another Record Quarter
Acesswire via Yahoo
Nadex’s total binary option trades and volume up over 70% year-to-year versus Q4 2015.

****SD: Article about the perception problem binary options have can be found in regulation below.

Macro Calendar, VSTOXX U.S. Availability To Drive Liquidity
Georgia Reynolds, EMEA Reporter – Eurex
The year ahead will be one of politically driven volatility for the EURO STOXX 50 Volatility Index, while making the benchmark tradeable in the U.S. will also prove positive for its liquidity, according to strategists.

SGX reports market statistics for December 2016
Total Derivatives volume was 13.3 million, down 20% month-on-month and down 8% year-on-year.

Nasdaq Announces New Multicast IP Addresses for ISE Gemini Proprietary Data Feeds
In support of the ISE Nasdaq Technology Migration, ISE Gemini will introduce new IP addresses for the New York metro area data center for the following data feeds:

****SD: Gotta say it is weird to look at OCC’s options exchange marketshare and see ISE, GEM and MCRY listed under Nasdaq. Not that the list won’t be changing more soon…

Regulation & Enforcement

Cutting and running: The euphoria and the damage
Andrew Saks-McLeod – FinanceFeeds
It will no doubt come as very good news indeed that the binary options business is beginning to be suffocated by the global regulator and government level discourse against it, as well as the public awakening, in that the shadow cast over our industry by it is likely to disappear, however the damage done will take time to repair


FIA publishes due diligence questionnaire for IT outsourcing and procurement
FIA’s e-Trading Working Group has produced a Due Diligence Questionnaire for IT Outsourcing and Procurement which aims to provide a standard form for firms to request information from their vendors as part of MiFID II regulatory requirements.

itarle Onboards Tom Middleton as its Head of Quantitative Services
Finance Magnates
itarle UK Ltd, an independent provider of multi-asset best execution technology, has made a new senior hire, securing veteran Tom Middleton as the newest Head of the Quantitative Services Department, per a company statement.

Blockchain: Do You Trust the Trust Machine?
Jean-Paul Carbonnier, CarboKinetic – TabbForum
Blockchain, or distributed ledger technology, can be described as a ‘trust’ mechanism. But it’s not that simple. If we’re just looking to process a transaction that both parties agree to, it’s ideal – cut out the middleman. But what happens when things go wrong?

****SD: Hey look – it’s a crypto skeptic!


Fed, not earnings, will lift volatility
Georgio Stoev – Tradingfloor.com
It was a quiet week going into the new year. The bluechip-heavy Dow Jones Index kept dancing near 20,000 points, but not to no avail. The broader, small-cap Russell 2000 seems to be losing momentum, judging by its directional movement indicator (DMI). Investors could look at the tech-heavy Nasdaq 100 for some opportunities.

How to Play the Next Big Alibaba Rally
Steven M. Sears – Barron’s
On Wall Street, each new trading year brings with it a mystical reset button that enables sell-side banks to reassert investment themes as if they were doing it for the first time.

****SD: Folks sure do love playing the BABA.

The Options Market Isn’t Too Worried About Retail Woes — Maybe It Should Be
Luke Kawa – Bloomberg
Retail stocks have been thrashed over the past month, yet there’s one corner of the market where investors are showing themselves somewhat unperturbed by the damage. Options traders remain largely sanguine about the near-term prospects for American retailers. They’ve sent the ratio of bearish bets to bullish ones on the industry tumbling by half despite struggles at some high-profile companies, the perpetual threat from Amazon.com Inc. and heavy short interest in an exchange-traded sector fund.


On/Off Ramp, Pt 4: Exiting a Trade (‘Tis Time to Say Goodbye)
The Ticker Tape
OK, you’ve set your objectives, initiated a position, perhaps traded around it or even added to it, and now you’ve decided it’s time to say goodbye. When is it time to close the trade? And how should you close it?


We’re All Low-Skilled Workers Now
Patrick Watson – Mauldin Economics
The news headlines after last Friday’s jobs report proved it again: Life is hard (and getting harder) for low-skilled workers. Illegal immigrants take their service industry jobs. Robots take their manufacturing industry jobs. According to the media, many low-skilled workers have simply given up. They’re dropping out of the labor force, going on welfare, overdosing on drugs. Their lives are terrible, and everyone wants to help. Here’s an idea how to help low-skilled workers: Stop calling them “low-skilled” workers!

****SD: Really happy to see this today. The “low-skilled” thing has bothered me for a while. As a kid that grew up loving to watch construction, taking auto mechanics and basic electrical maintenance classes, and helping my dad do handyman stuff around the house — I never considered those sorts of things low skilled. It’s unjust and unfair to pin less educated with less skilled and match highly skilled with simply being smarter than most (or having graduated from institution/s of higher learning). And let’s be real, when the zombie apocalypse comes would you rather have a welder in your crew or an insurance adjuster?

Agricultural producers’ economic sentiment soars post-election
CME Group
Producer sentiment about the agricultural economy soared on the heels of November’s presidential election, according to the December Purdue/CME Group Ag Economy Barometer report released January 10th.

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