JLN Options: OptionsXpress cases put CBOE under SEC microscope

Apr 19, 2012

Lead Stories

OptionsXpress cases put CBOE under SEC microscope
Crain’s Chicago Business
By Lynne Marek
(Crain’s) — Two cases that the U.S. Securities and Exchange Commission brought against OptionsXpress this week are at the root of the federal agency’s investigation of CBOE Holdings Inc., according to unnamed sources involved in situation. CBOE Holdings, parent to the Chicago Board Options Exchange, disclosed earlier this year that the SEC has been investigating the company’s “compliance with its obligations as a self-regulatory organization under the federal securities laws.”
The agency has been reviewing whether CBOE officials had improper contact with OptionXpress while that firm was under SEC scrutiny on the charges brought this week.

Interactive Brokers’ Peterffy Sees ‘Gradual’ Move Toward Retirement
The head of Interactive Brokers Group Inc. (IBKR) said he plans a gradual move toward retirement from the U.S. brokerage and trading firm, though he has no immediate plans to step down. Thomas Peterffy, chairman and chief executive, said in an interview that he plans to hand off more duties to colleagues over the next several years, but expects to remain on the board of the company he founded in 1977 even after a successor is named.
Peterffy, 67, helped pioneer electronic trading and built Interactive Brokers into the busiest discount brokerage in terms of trading activity, and one of the biggest options trading houses in the world.

From the article: Its market-making division is one of the biggest traders of options contracts in the world, last year carrying out about one in every 10 trades.

SEC Discloses New Charges On OptionsXpress, Former CFO – WSJ.com
The Securities and Exchange Commission said it charged a Chicago-based securities dealer affiliated with online brokerage firm optionsXpress with violating securities laws when it continued trading after delisting from the Chicago Board Options Exchange and deregistering with the SEC, apparently to avoid an audit.
The SEC instituted administrative proceedings against OX Trading LLC, optionsXpress, and optionsXpress’s former Chief Financial Officer, Thomas E. Stern, alleging that OX Trading operated as an unregistered dealer from October 2009 to November 2010 and illegally transacted in securities while not a member of a national securities association or national exchange from March 2009 to November 2010.

SEC Accuses OptionsXpress of Violating Registration Requirements
By Joshua Gallu, Bloomberg
The U.S. Securities and Exchange Commission accused OptionsXpress Inc., its former chief financial officer Thomas E. Stern and an affiliated dealer of violating registration requirements in order to avoid an audit. The action filed today in administrative court in Washington is the second against OptionsXpress and Stern this week. They were named in an April 16 enforcement case accusing them of engaging in a scheme to allow illegal short sales.

Naked or Not? optionsXpress’s Short Selling, Step by StepTom Steinert-Threlkeld, Securities Technology Monitor
The SEC this week charged online brokerage optionsXpress that specializes in options and futures as well as its former chief financial officer, three other optionsXpress officials and a customer with conducting “an abusive naked short selling scheme.”
optionsXpress, now a subsidiary of The Charles Schwab Corporation, said its trades were neither novel nor exotic. And not shams, as the SEC contends.
Here is a step by step rundown on how the SEC says the ‘scheme’ executed by optionsXpress, involved ‘naked’ short selling, with failure to deliver the securities involved in the trades.
Then, a step by step rundown of why optionsXpress contends it always delivered on its end of the trades.


VIX futures advance with volatility index
Chris McKhann, optionmonster.com
The CBOE Volatility Index rebounded into the close, ending the day up 1 percent to 18.64 as the S&P 500 gain slipped a few points in the final minutes of trade. The volatility index had made a couple of trips above 19 during the day but fell to 18.20 in the last two hours. Then, in the last 15 minutes, the SPX fell and the VIX bounced.


CBOE Risk Management Conference in Wicklow Ireland
September 5 – 7, 2012
The Ritz-Carlton Powerscourt, County Wicklow, Ireland
RMC comes to Europe! Hosted by the Chicago Board Options Exchange, the highly acclaimed Risk Management Conference (RMC), now in its 28th year in the U.S., announces it is making its European debut.  RMC is the leading educational forum where institutional users of equity derivatives come to learn about new products, strategies and tactics to manage risk exposure and enhance yields.

The Options Tweeters You Need to Follow Now
by Adam Warner
I’m going to start a new Stephen Colbert-tinged feature here: “Who’s Snubbing Me Now?” Today’s winner? Content farm and slide-show exhibitionist Business Insider, with their “Top 105 Financial Tweeters You Better Follow or Else You’ll Never Succeed in This Business… Son” list from earlier in the week. Or whatever they called it.  But I really can’t take it at all personally, because as best I can tell, they snubbed the entire options space. Yes, I hear the word “VIX” on financial TV about 16 times per hour, but apparently that hasn’t spawned an options tweeter worth following. In all fairness, though, the televised VIX-perts rarely actually come from the options industry — so at least it’s not inconsistent.

* Adam Warner was kind enough to mention @jlnoptions as one of the options tweeters to follow.

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