OCC tech upgrade; Robinhood’s free options trading; 50 Cent’s losses

Dec 13, 2017

Lead Stories

Tech Upgrade Commands CFO’s Focus; Amy Shelly of Options Clearing Corp. faces several challenges in replacing the organization’s outdated platform.
David McCann – CFO Magazine
The privately held financial-market utility that settles and clears transactions for all 15 U.S. option exchanges and 3 futures exchanges has a problem: Its technology is woefully outdated.

****SD: Lots for OCC to consider: Roll it out piecemeal or all at once? Finance the project how? Buy or build? For more, see JLN’s piece earlier this year – Cloudy with clearing: What the next clearing house looks like

***SR: Amy Shelly is our MarketsWiki Page of the Day today.

Robinhood Is Making Even More Trades Free, Taking on the Options Market
Julie Verhage – Bloomberg
Robinhood Financial LLC is seeking to do for options what it did for stocks: make trading free.
The Palo Alto, California-based startup, which operates online as a brokerage like ETrade Financial Corp., announced Wednesday that it is offering free stock-options trading. Robinhood said it has more than 3 million customer accounts after three years in operation. It is working to keep attracting users whose uninvested cash generates interest for the firm, and who may graduate to its for-pay services.

****SD: Whoa. Back when it launched, Robinhood’s FAQ page listed options as a product the company was looking into and wanted to offer, but I always thought that was a pipe dream. Of course, this is not ever going to be the go-to spot for pros. Those trading with size will gladly continue to pay their commissions. But for the millennials dreaming of one contract options trades, the time has come!

Trader ’50 Cent’ lost $197 million betting on market meltdown
Joe Ciolli – Business Insider (SUBSCRIPTION)
The mysterious investor known as “50 Cent” has had a tough year betting on stock market turbulence — but it hasn’t been for a lack of trying.
The trader has consistently purchased bite-sized chunks — usually costing around 50 cents — of options contracts betting on a spike in the the CBOE Volatility Index. Also known as the VIX, the gauge is a measure of expected price swings in US equities that serves as a barometer for investor nervousness. It generally climbs as stocks fall, so purchases of VIX contracts translate to bearish wagers on the S&P 500.

****SD: Losing steam after at one point having one million contracts outstanding – now more like 200k. And of course, this “loss” is in some broader portfolio hedging context.

SEC May Soften Stance on U.S. Trading Database, SIFMA Says
Yalman Onaran – Bloomberg
Regulator may allow reporting of proxy client data to CAT; Broker-dealers must start contributing data in November 2018
A group lobbying on behalf of big banks and brokers said it’s hopeful that regulators will soften their stance on how investor data is collected for the Securities and Exchange Commission’s far-reaching new market-surveillance system.

Trading Ingenuity: Low Latency and Beyond
Ian Grieves, Vela – TABB Forum
The quest for low latency – speed – has been the name of the game in trading over the past decade. But trading ingenuity today demands more than speed. While low latency remains a key factor, today’s smart trading firms have more complex goals. Clever beats fast in the trading race. What do firms need to do with the additional capabilities around speed in order to stay ahead of their competition?

Exchanges and Clearing

Deutsche Boerse outage: Xetra and Eurex face ‘issues’
Will Martin – Business Insider
Two of the trading platforms at Deutsche Boerse opened late on Wednesday morning after experiencing “issues.”
Deutsche Boerse’s Xetra trading platform experienced disruptions due to technical problems, the company said on its website, but did not provide any further information about what the issues were. A notice announcing the disruption has since been removed from the site.

Cboe Launches Cboe Gemini Bitcoin Futures Index (XBTX), New Strategy Benchmark Index
Cboe Global Markets, Inc., one of the world’s largest exchange holding companies, today announced it has created the Cboe Gemini Bitcoin Futures Index (ticker symbol: XBTX), a new strategy performance benchmark index designed to replicate a constant one-month position in Cboe XBTSM Bitcoin Futures (ticker symbol: XBT). XBT futures began trading on Cboe Futures Exchange (CFE) on Sunday, December 10. More than 5,000 XBT futures contracts (single counted) have been traded since launch.

MCX seeks Sebi nod for schemes to boost gold options volume
Business Standard News
The Multi Commodity Exchange (MCX) has sought approval from the Securities and Exchange Board of India (Sebi) for introducing liquidity enhancement schemes for its recently launched gold options contracts.

Regulation & Enforcement

Goldman Sachs Plans MiFID Venue for Bonds, ETFs, Derivatives
Will Hadfield – Bloomberg
Goldman Sachs Group Inc. will deal in bonds, derivatives, equities and exchange-traded funds through a new type of venue in time for the start of Europe’s MiFID II laws, one of the most wide-ranging trading plans by a bank under the new rules.

FIA publishes MiFID II ETD scenarios
FIA has published a series of MiFID II ETD (Exchange Traded Derivative) reporting scenarios. The scenarios cover 58 ETD examples and are a guide on how to report under the revised MiFID II rules. The document should not be considered as either definitive or endorsed by regulators.

Hong Kong’s SFC To Allow Investment In US Bitcoin Futures
Adam Reese – ETH News
The Hong Kong Securities and Futures Commission (SFC) issued a circular on December 11 indicating that with the proper licensure, financial intermediaries will be allowed to offer certain American-issued bitcoin futures on the Hong Kong market.


Rival Systems New Options Algorithmic Design Functionality
Rival Systems
Rival Systems (Rival), an award-winning provider of trading and risk management software, announced the roll-out this week of new options algorithm design functionality in its Rival Trader platform. The new functionality allows traders to easily design, test and execute options algorithms for futures and equity options with global market data and execution capabilities.

RJ O’Brien Taps Fidessa for its Algo Suite Ahead of MiFID II
Jeff Patterson – Finance Magnates
The passage of MiFID II is weeks away and venues are quickly moving to shore up their compliance requirements ahead of the January 3 implementation date. Consequently, US futures broker, RJ O’Brien has entered into an agreement with Fidessa, focusing on the group’s futures and options capabilities.


LEAPS: Some Factors to Consider
Sage Anderson – tastytrade blog
One unique group within the world of options is Long-Term Equity Anticipation Securities, often referred to by the acronym “LEAPS.” These are options with expiration dates greater than one year from the day of trade initiation.

****SD: How does “LEAPS” come from Long-Term Equity Anticipation Securities? It’s better than LTEAS, but the question stands.


Bitcoin fever exposes crypto-market frailties
Jemima Kelly, Anna Irrera – Reuters
As bitcoin raced to another record high on Tuesday, one of the biggest providers of digital currency wallets, Coinbase, went down under the weight of traffic, leaving many of its more than 10 million customers unable to access their funds.

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