JLN Options: Options Week in Review March 14, 2013

Mar 14, 2013

The latest trial in the long-running patent infringement case pitting the Chicago Board Options Exchange (CBOE) against the International Securities Exchange (ISE) ended on its opening day Thursday, in what appeared to be a victory – for now – for the CBOE. The ISE had accused CBOE of infringing an automated-trading patent, but the trial was canceled after the judge barred ISE from presenting evidence of pre-suit damages to the jury because ISE had failed to comply with a federal “marking statute,” requiring it to make its patent claim public, according to a Bloomberg story. The fight over the patent originally began with a complaint filed in federal court in Manhattan in 2006, but the case was transferred to Chicago after the CBOE counter-sued there, seeking a finding of non-infringement. CBOE released a statement Thursday with the headline “CBOE Wins in ISE Patent Suit,” which said that “By its action, ISE now concedes that CBOE does not infringe ISE’s patent, based on several recent decisions in CBOE’s favor.”  ISE released a statement saying that it “plans to immediately file an appeal to the Federal Circuit to reverse these rulings.”

A report conducted by the World Federation of Exchanges found that the global exchange traded derivatives market has “had more than the wind knocked out of its sails” in the past year.  The number of exchange traded derivatives contracts fell 15% worldwide in 2012, compared to increases of 11% in 2011 and 25% in 2010. The recent low volatility coupled with low interest rates have taken a toll on the markets, TABB Forum reported. However, new regulations and industry consolidation may allow for “unprecedented” innovation in product offerings as well as a change in market dynamics.

CBOE Holdings and S&P Dow Jones Indices announced they had extended their licensing agreement giving the CBOE exclusive rights to list options based on certain indices calculated and published by S&P Dow Jones Indices through 2032. CBOE also has non-exclusive rights to list these options through 2033. The amendment to the agreement allows the CBOE to continue its exclusive trading of its flagship S&P 500 index options contract (SPX), the most actively traded U.S index option.

New mini options tied to 10 shares of stock rather than the standard 100 shares will launch on shares of Apple, Amazon.com, Google, the SPDR Gold Trust ETF, and the SPDR S&P 500 ETF.  Eight of the 11 equity options exchanges will launch the mini options on Monday, March 18: BATS, ISE, NYSE Euronext’s Amex and Arca exchanges, Nasdaq Options Market, BOX and CBOE Holdings CBOE and C2 exchanges, the Wall Street Journal reported.  Nasdaq OMX PHLX and BATS will offer the contracts for free.

Investors are still gobbling up low-volatility ETFs despite the VIX dropping to its lowest level since 2007, according to ETF Trends. The PowerShares S&P 500 Low Volatility Portfolio, which tracks 100 of the least volatile stocks in the S&P 500, increased 18.1% over the past year, compared to the S&P 500 index which gained 16.2%.

NYSE Euronext and CBOE got exclusive (or “semi-exclusive,” since there are two of them) rights to list options on Russell Investments‘ stock indexes, the two exchange operators and the indexing company announced. The dual-listing partnership will begin in April, and they will allow NYSE Amex Options, NYSE Arca Options and the Chicago Board Options Exchange to list options tied to Russell indexes, including contracts on the benchmark Russell 2000 index of small-cap stocks.

The National Stock Exchange of India said it would introduce new strikes on an intra-day basis, according to a new scheme it plans to introduce for stock option contracts. It will also determine the step value — the difference between two strikes — based on the volatility in the underlying stock rather than on the underlying price of the stock, Business Standard reported.

John Lothian Newsletter

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past Options Newsletters

Pin It on Pinterest

Share This Story