Presidential Tweets Drive Volatility in Interest-Rate Options; Options’ Hidden Costs: Understanding Options Market Data Fees

May 5, 2020

Lead Stories

Presidential Tweets Drive Volatility in Interest-Rate Options; Options market shows more sensitivity to announcements by the president on the social-media platform than in September
Julia-Ambra Verlaine – WSJ
President Donald Trump’s tweets are increasingly driving swings in the $25 trillion market for using options to bet on U.S. interest rates. Interest-rate options markets are 60% more sensitive to tweets from President Trump than back in September, according to JPMorgan Chase & Co. analysts who launched a proprietary index tracking what drives volatility in the options contracts.
/jlne.ws/3fnymJe

****JJL: Extraordinary popular delusions and Madness of Tweets!

Options’ Hidden Costs: Understanding Options Market Data Fees
John D’Antona Jr. – Traders Magazine
Market data for options is commonly believed to be less expensive than equities. While exchange fees can be lower, they do not represent the entire picture. Options trading often involves infrastructure costs that can offset the savings gained from lower exchange fees. To add needed clarity to the total costs involved in options trading, this article explains the hidden costs of options trading.
/jlne.ws/35DsirI

Exchanges and Clearing

Adjustment of New World Development Structured Products, Futures and Options
HKEX
Hong Kong Exchanges and Clearing Limited (HKEX) has announced the arrangements for the adjustment to New World Development Company Limited (New World Development) structured products, futures and options to account for New World Development’s share consolidation.
/jlne.ws/2A4mLid

NYSE Eyes ‘Safe’ NY Floor Reopening as Research Shows Value of Open Outcry; NYSE COO Michael Blaugrund looks ahead to a potential reopening of the exchange’s iconic New York trading floor, and describes why NYSE believes it’s appropriate to reopen the Arca Options floor earlier, and the role of DMMs in reducing volatility.
Max Bowie – Waters Technology
The New York Stock Exchange (NYSE) is focusing on preparations to reopen its New York trading floor as soon as it is safe to do so, and will use the upcoming reopening of its NYSE Arca Options floor in San Francisco as a blueprint for reopening the NYSE floor, though reopening plans will differ because of the specific circumstances affecting each city during the coronavirus pandemic.
/jlne.ws/2YzfLE4

Miami International Holdings Reports April 2020 Trading Results and Market Share Records for MIAX Exchange Group; Rules Become Effective to List Proprietary Commercial Real Estate Index Products
Miami International Holdings, Inc. (press release)
Miami International Holdings, Inc. (MIH) today reported April 2020 trading results for its three fully electronic options exchanges – MIAX, MIAX PEARL and MIAX Emerald (together, the MIAX Exchange Group). The MIAX Exchange Group collectively executed over 63.8 million equity option contracts in April for a combined average daily volume (ADV) of 3,038,841 contracts, representing a total U.S. equity options market share of 12.37%.
/jlne.ws/3divT0H

Cboe Global Markets Reports April 2020 Trading Volume
Cboe
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today reported April monthly trading volume.
/jlne.ws/2xGt62q

Regulation & Enforcement

NYSE Arca, Inc. Letter of Acceptance, Waiver, and Consent No. 2017-04-00071
NYSE Arca
During the period between March 1, 2015 to May 31, 2018 (the “Relevant Period”), UBS Securities LLC violated: (i) NYSE Arca Options Rule 6.77A1 by busting and adjusting trades in a manner that circumvents other Exchange Rules; (ii) NYSE Arca Options Rule 11.12 by failing to comply with its due diligence and best execution obligations with respect to its handling of a customer orders; (iii) NYSE Arca Options Rules 6.683 and 9.174 and NYSE Arca Rules 2.28 and 11.16 by failing to create, maintain, and preserve accurate records of cancellations or adjustments to customer orders and for failing to create, maintain, and preserve accurate records of order receipt and order transmission times for orders manually routed for execution; and (iv) NYSE Arca Options Rule 11.185 by failing to establish and maintain adequate supervisory systems and written procedures that were reasonably designed to ensure compliance with NYSE Arca Options Rules. Consent to a censure, a $490,000 fine, and an undertaking.
/jlne.ws/2W763ad

Technology

Two quants use options pricing tools to model Covid-19 New tool aims to gauge wider cost of virus control measures
Rob Mannix – Risk.net
A pair of prominent finance quants have built a pandemic model that borrows techniques from machine learning and option pricing. And they think it can help politicians decide when to lift lockdowns.
/jlne.ws/2A1yi1C

OCC Selects Axoni to Modernize Securities Lending Infrastructure
OCC
OCC, the world’s largest equity derivatives clearing organization, today announced that it has selected Axoni, a technology firm that specializes in multi-party workflows and infrastructure, to develop and implement a distributed ledger technology solution to replace its existing securities lending infrastructure. Today’s announcement marks another milestone for OCC’s transformation as this new, innovative technology addresses fundamental challenges in the securities lending industry and will benefit OCC’s clearing member firms by increasing efficiency and reducing reconciliation and associated costs.
/jlne.ws/3c2Vt9Q

*****MR: You can read the Forbes story on this development here.

Miscellaneous

Coronavirus blew up summer internships, forcing students and employers to get creative
Lauren Lumpkin – Washington Post
Dan Papscun had it all mapped out: By now, he figured, he’d have an internship lined up for the summer. He’d be settling into his new apartment in Glover Park. He’d be polishing up story pitches to send his new editor.
/jlne.ws/2SEgKyT

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