JLN Options: Options Week in Review Feb. 21, 2013

Feb 21, 2013

The Securities and Exchange Commission and the FBI began investigating suspicious options trading that occurred just before Berkshire Hathaway announced a $23 billion acquisition of  H.J. Heinz Co.   David Weidner pointed out in The Wall Street Journal that “prescient” trading in the options markets in advance of market-moving announcements has been common for years, but that regulators have been disinclined to respond, saying that these types of trades are difficult to investigate and that insider trading is hard to prove. The SEC’s move to freeze the assets of a Swiss trading account linked to the trades was one of the fastest enforcement actions ever filed by the agency, The Wall Street Journal reported.  And two federal shareholder lawsuits were filed the day after the takeover was announced claiming that the deal undervalues Heinz and resulted from “an unfair sales process” that locked in Warren Buffet‘s Berkshire Hathaway and 3G Capital as the only possible buyers, USA Today reported.

After remaining at historic lows since the beginning of the year, the VIX jumped 19.25% to close at 14.68 on Wednesday, in response to equity market sell-offs.  The message from the FOMC that the Federal Reserve might withdraw its quantitative easing measures brought a measure of fear back into the markets, Wall Street Sector Selector reported.

The NASDAQ OMX Group, along with BNY Mellon, launched options on U.S. Treasury Securities at NASDAQ OMX PHLX on February 19, TheStreet.com reported.  The options on 10- and 30-year securities will compete with those offered by the CME Group, which traded a record 1.17 million options on Treasury futures on Feb. 1.

Eurex announced it would start trading futures and options based on MSCI indices on March 11. The indexes will include the MSCI World, MSCI Europe, MSCI All Countries Asia Pacific ex-Japan and futures on the MSCI Frontier Markets. Other derivatives on regional and country-specific MSCI emerging markets indices will be launched in July.

Alger B. “Duke” Chapman, who was chairman and CEO of the Chicago Board Options Exchange from 1986 to 1997, died Monday in Little Rock, Ark., of congestive heart failure at age 81. He had had a 50-year career in the financial services industry.

The Netherlands could become a big player in global equity options trading. In January, the Amsterdam-based pan-European trading platform, The Order Machine (TOM), began trading options based on the AEX-Index. It is using its own smart order router to compare prices, putting it in competition with NYSE Liffe Amsterdam. TOM launched a handful of single stock options a year ago and then expanded that to all major Dutch stocks in October.

optionsXpress, Inc. announced that it replaced its tiered commission structure for futures and futures options with new pricing of $3.50 per contract. Clients will now have access to optionsXpress’s trading platform and package of tools, education, and support for futures trading at a lower cost, the company said in a press release.

The International Securities Exchange received the “Most Innovative Exchange Technology – Options” Award at the Wall Street Letter 2013 Institutional Trading Awards for technological enhancements to its PrecISE Trade and Optimise, as well as for the introduction of Implied Order Functionality and other improvements.

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