Shorties Options Will Stand Tall
A new, shorter options contract introduced last week will give investors more flexibility in hedging event-specific risks.
Steven M. Sears, Barron’s
Most people will tell you they’re long-term investors. They think they are able to ignore the distractions that make others panic and sell. They think they buck the trends, and have the equanimity to buy when others are selling and sell when others are buying.
***First Weeklys, now shorties, a tool to hedge against volatility-producing market events.– SR Vix volatility index depicting bear market behavior
Jeff Greenblatt, Futures
I have good news and bad news. I know most of you will ask for the bad news first, so let’s get it out of the way. The VIX closed the week at 16.41. Really, no kidding! I wish I was making that up. How could we possibly be at a low after the market got crushed again and have the VIX reading be more representative of a top?
http://jlne.ws/UPfJfs Risk-on markets soar as fiscal cliff talks positive
Anthony Lazarra, Futures
Many “risk-on” asset classes are soaring this morning as better than expected housing data and Obama’s stated confidence on striking a deal to avert the so-called “fiscal cliff” scenario is giving stock bulls a reason to start buying again.
http://jlne.ws/UPhitV Learning to Love Volatility
Nassim Nicholas Taleb, The Wall Street Journal
Several years before the financial crisis descended on us, I put forward the concept of “black swans”: large events that are both unexpected and highly consequential. We never see black swans coming, but when they do arrive, they profoundly shape our world: Think of World War I, 9/11, the Internet, the rise of Google.
http://jlne.ws/Q4WG3X What Traders Hope For, Fear in ‘Fiscal Cliff’ Talks
Patti Domm, CNBC
Wall Street’s bull stands between Washington and the “fiscal cliff,” and traders increasingly fear it will get run over.
Stocks have sold off more than 5 percent since election day on concerns that President Barack Obama and a divided Congress will not be able to strike a deal on taxes and spending that would avoid the U.S. economy hitting the $600 billion cliff.
http://jlne.ws/UPgvJC Sub-penny Pricing Undermines Public Markets, Report Asserts
Tom Steinert-Threlkeld, Traders Magazine
A global group of investment professionals Monday raised concerns that the “incentive to display orders in public markets is being undermined” by off-exchange practices, such as sub-penny pricing.
The CFA Institute, based in London, said in a report that brokers’ internal pools of orders now represent roughly 18% of consolidated volume in the United States. More directly, the institute said such internalization – where there is no pre-trade pricing posted — likely now handles nearly 100% of all retail order flow.
http://jlne.ws/UPgjtR US ‘dark pool’ trades up by 50% in 3 years
Philip Stafford, Financial Times
Trading of US equities on off-exchange “dark pools” has grown by nearly a half in three years to account for nearly a third of total market volume, according to a new survey published on Monday.
http://jlne.ws/UPeTPR VelocityShares is pleased to present the October 2012 Tail Risk Report.
ExchangesCME Strengthens Clearinghouse Ahead of Swaps Rules
Jacob Bunge, The Wall Street Journal
One of the world’s largest derivatives clearinghouses has bolstered its firewall against any client’s collapse, raising its credit line by two-thirds to $5 billion as new regulations push more business its way.
CME Group Inc., CME which runs Chicago’s big futures exchanges and the New York Mercantile Exchange energy-trading platform in New York, is expected to be a prime beneficiary of regulators’ efforts to reduce systemic risk and boost transparency in the financial system by forcing more trades to be cleared.
RegulationIndustry welcomes Dodd-Frank FX exemption
Richard Henderson, The Trade
The investment community has welcomed an exemption on foreign exchange forwards and swaps from clearing and exchange trading rules which will be applied to other derivatives products under impending Dodd-Frank Act rules.
http://jlne.ws/UPfr8k The Next Round of Derivatives Regulation
The New York Times
In the weeks ahead, federal regulators will finalize rules that, done right, will bring long-overdue transparency and oversight to the multitrillion-dollar derivatives market. The big banks that control derivatives trading, however, are lobbying to dilute the rules.
TechnologyThe mirage of error-free trading
Richard Henderson, The Trade
With high profile trading errors forcing trading desks to re-think algo strategies, how will firms know when an algo is ready?
While fat-finger errors may be less frequent than a decade ago for sales traders due to increased monitoring, the increase of algo errors has dramatically raised the stakes for traders dealing with large volumes.
http://jlne.ws/UPfotb Differences in Data Delivery Fair
Peter Chapman, Traders Magazine
You get what you pay for.
In September, the Securities and Exchange Commission fined NYSE Euronext $5 million for disseminating New York Stock Exchange market data to paying customers before it went out over the public feed. In the wake of that event, exchange executives noted that the public feed is naturally slower and that those wanting their data faster expect to pay up.
http://jlne.ws/UPgDsr Technology Fragility Threatens Markets
Greg MacSweeney, Advanced Trading
Despite disaster recovery and business continuity plans that were implemented after Sept. 11 and then enhanced following the Northeast blackout in 2003, Hurricane Sandy has upped the DR/BC bar once again.