A proposal to change tax treatment of derivatives which is part of President Obama’s new budget could “kill” retail trading of equity options, the fund management industry is warning. The plan would require investors to pay taxes on unrealized derivatives gains. Investors who use options to protect against losses on stocks or to earn income by selling options to sell their stock at a certain price could be forced to pay a big capital gains tax on a stock they might have no interest in selling, The Financial Times reported.
The International Securities Exchange announced the name of its new, second options exchange: ISE Gemini. The new exchange will run “side-by-side” with ISE’s existing options exchange. It is schedule for launch in Q2 2013, pending SEC approval.
NYSE Liffe announced it would add options on the shares of investment company NSI N.V. (“NSI”) to its range of equity options on its Amsterdam derivatives market, beginning April 23. NSI is a closed-end real estate investment company that invests in offices and retail in the Netherlands and Belgium.
The SEC has proposed a rule called Regulation Systems Compliance and Integrity, which would require U.S. exchanges and some brokers to conduct coordinated trading tests to show they can recover from natural disasters or terrorist acts. The rule calls for exchanges to beef up their technology and instruct member firms to participate in tests to show they can sustain operations after a large disruption, Bloomberg reported.
The CFTC fined Interactive Brokers $225,000 for failing to maintain enough U.S. dollars in its customer accounts. This was the second time in a year the firm was fined by the agency. The CFTC alleged that between Sept. 21, 2011 and May 8, 2012, Interactive Brokers “improperly” covered its commodity futures and options customer obligations with Japanese yen and Swiss francs to “maximize its interest earnings,” according to MarketWatch.
CME Group announced it reached a daily volume record for its Short-Dated New Crop Corn options on Monday, April 8. Volume reached a record 7,733 contracts, surpassing the previous record of 6,505 contracts on January 4, 2013. Combined open interest for Short-Dated New Crop Corn and Soybean options surpassed 100,000 contracts for the first time on April 8, and ended trading with 101,472 contracts on Tuesday, April 9.
In its budget request for 2014, the SEC is seeking $1.7 billion to boost its staff by 15 percent. The money would support 5,180 positions, up from $1.4 billion in support of 4,504. The additional 676 positions the agency wants to create include 45 positions in the Division of Risk, Strategy and Financial Innovation, some of which would support the analysis of high-frequency trading data and market structure issues by the Division of Trading and Markets, Traders Magazine reported.
The SEC delayed a decision on whether to approve the BOX Options Exchange‘s request to begin offering a “jumbo” options contract based on the SPY ETF that is 10 times bigger than the standard SPY option. The agency put off its decision until May 5 after objections from BOX’s competitors including NYSE Euronext, Nasdaq OMX Group and CBOE Holdings. The exchanges argued that the new contract could confuse retail investors and render them second-class citizens, according to Traders Magazine. BOX first proposed the new derivative—which is geared to institutional investors—in February.
The CBOE Futures Exchange will almost double the trading hours for futures linked to the VIX as part of a move toward around- the-clock market access. Futures on the VIX will begin trading in a new 45-minute period that begins at 4:30 p.m. in New York, starting May 30, Bloomberg News reported. CFE will add five hours before the current 8 a.m. start in a second phase beginning June 17. CBOE said the first phase of expanded hours is designed to meet demand from U.S. customers for a post-settlement trading period, and the second phase is designed to allow European-based customers to trade VIX futures during their local trading hours.