JLN Options: Scam insurance: CME offers to hold deposits of futures brokers’ customers

Jul 24, 2012

Lead Stories

Scam insurance: CME offers to hold deposits of futures brokers’ customers
Kaja Whitehouse, New York Post
Terry Duffy is sick and tired of futures customers getting ripped off.
The head of the nation’s largest futures exchange yesterday suggested all customer funds stay on deposit at his Chicago Mercantile Exchange or other clearinghouses to protect the cash from brokers going bust.

In Scary Markets, Big Risks Can Still Be a Big Draw
Jonnelle Marte, The Wall Street Journal
Betting on fear can be a real horror show.
Returns this year for exchange-traded funds and notes that track the Chicago Board Options Exchange Market Volatility Index—more commonly known as the VIX, or “fear index”—have been downright scary.

Emerging Stocks Drop Most in 8 Months on China Concerns
Saeromi Shin and Sridhar Natarajan, Bloomberg/Businessweek
Emerging-market stocks fell as the benchmark index posted the biggest drop in eight months amid renewed concern Europe’s debt crisis is worsening and as a Chinese central bank adviser warned of slowing growth…
The IShares MSCI Emerging Markets Index exchange-traded fund, the ETF (EEM) tracking developing-nation shares, lost 2.6 percent, the most in a month. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM), a measure of options prices on the fund and expectations of price swings, soared 15 percent, the biggest climb since Nov. 25.

BSE-100 derivatives to take on Nifty-50 (India)
Palak Shah, Business Standard
Competition among stock exchanges is rising, ahead of the launch of MCX-SX. To make its derivatives segment more attractive, the Bombay Stock Exchange (BSE) has decided to take on the country’s most popular financial product, the Nifty 50 index of the rival National Stock Exchange (NSE).
BSE is launching derivatives for the BSE 100 index, which market players say is being pitched against the Nifty. The cost of trading the BSE 100 will be lower than the NSE’s index.

Traders divided on prospects of just-launched CNX Nifty options (India)
Devangi Gandhi, The Financial Express
Traders are divided on the likely near-term popularity of the recently-launched CNX Nifty options on the Singapore Exchange (SGX) even as the Nifty futures on the SGX have seen a substantial increase in participation in the last three months.

OptionMonster Daily Volatility Report with Jamie Tyrrell of Group1 Trading:


NSE to exclude 51 securities from F&O segment (India)
The National Stock Exchange has decided to remove 51 securities from futures & options segment as the exchange revised eligibility criteria for stocks.


With new U.S. swaps definitions, the horse is finally put before the cart
Bora Yagiz, Reuters
The definition of swaps finalized by the U.S. futures regulator is the linchpin in an overhaul that will change the swaps market landscape markedly and offer the promise of lower risk.
In an effort to bring the over-the-counter (OTC) swaps into the regulatory fold for the first time since they appeared in 1981, the Commodity Futures Trading Commission (CFTC) issued a set of final rules this month defining a “swap” under the Dodd-Frank Act, section 721. These rules complement the agency’s other final rule on end-user exemptions as well as those adopted by the Securities and Exchange Commission on “security-based swaps” and “security-based swaps agreements.” They also delineate the jurisdiction for mixed swaps between the agencies.


A Better Volatility Mousetrap
Brendan Conway, Barron’s
The search for assets that profit from volatile markets has led many investors to products tied to the VIX volatility index. But those offerings are mostly trading vehicles that serve extremely poorly as long-term holdings. They’re ill-suited because many are specifically designed to fall over long periods.

Is a Bigger Selloff in Stocks Ahead?
Ron DeLegge, NASDAQ
A decline in global stocks triggered a brief selloff in the U.S. stock market, but stocks came roaring back. The S&P 500 recovered from intraday losses of1.8% and the Dow Jones Industrial Average and Nasaq (Nasdaq: ^IXIC) followed suit. 
How much longer can U.S. stocks defy gravity? Is a larger selloff still looming?

One Of The Safest Available Trades?
Eric Stalee, Seeking Alpha
Over the past few years there has been an emergence of many leveraged and inverse ETFs/ETNs that track various assets as well as complex ETF/ETN products (which are often leveraged or inverse leveraged as well) that track the VIX.
From the start I will say the majority of these trading instruments are designed to track gains or losses in their underlying for one day.

Easy Gains From XIV
Barath Balu, Seeking Alpha
A couple of comments on a previous article I wrote asked if shorting TVIX would be an effective way to profit from its inherent decay. The answer is no: the volatility and decay associated with VIX ETPs are already priced into options contracts and borrowing costs. What traders can do is go long on XIV, an ETN which tracks the inverse return of VIX futures.

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