Feb 1, 2012

Lead Stories

CHICAGO (February 1, 2012) – The Options Industry Council (OIC) announced today that 335,399,999 total options contracts changed hands in January, which is down 11.38 percent compared to January of last year when 378,480,506 contracts were traded. Although volume is down compared to last year, January 2012 is the third highest January by volume on record. Average daily volume for the month came in at 16,770,000 contracts, 11.47 percent less than the 18,942,025 contracts traded during January 2011. Equity options volume (options on individual stocks and ETFs) in January saw 313,363,017 contracts exchanged, 11.68 percent less than in January 2011 when 354,795,514 contracts were traded. On average, 15,668,151 contracts were traded each day throughout January compared to last year when an average of 17,739,776 contracts were traded daily, representing an 11.68 percent decrease.

OCC Cleared Contract Volume Declined 12% in January
CHICAGO (February 1) OCC announced today that total cleared contract volume January reached 337,222,938 contracts, a 12 percent decline from the January 2011 volume of 381,558,077 contracts. Despite this decline, January 2012 is now the third highest January volume on record.
Options: Exchange-listed options trading in January reached 335,399,999 contracts, an 11 percent decline from January 2011. Equity options trading volume fell 12 percent from the previous January with 313,363,017 contracts. Index options trading decreased 7 percent from the previous January with 22,036,982 contracts. Average daily options volume for the month of January was 16,770,000 contracts.
Futures: Futures cleared by OCC reached 1,822,939 contracts in January, a 41 percent decline from January 2011. Equity futures volume reached 301,804 contracts, an 82 percent increase from the previous January. Index and other futures volume fell 48 percent from January 2011 with 1,521,113 contracts. OCC cleared an average of 91,147 futures contracts per day during the month of January.
EU Blocks “Near-Monopoly” of D.Boerse-NYSE Merger
By Reuters February 01, 2012
EU regulators have blocked the tie-up of exchange operators Deutsche Boerse and NYSE Euronext to stop them taking a stranglehold on the European futures market. Deutsche Boerse and NYSE Euronext, which unveiled the $7.4 billion plan to create the world’s biggest stock exchange as long ago as February last year, said they would unwind the deal, the sector’s fourth failed tie-up attempt in a year.

NYSE Says Appeal of EU’s Deutsche Boerse Ruling Is an Option
Businessweek February 01, 2012
By Nandini Sukumar
Feb. 1 (Bloomberg) — NYSE Euronext Chief Executive Officer Duncan Niederauer said the exchange operator is considering whether to appeal against European regulators’ veto of its merger with Deutsche Boerse AG.
An “appeal is an option going forward,” Niederauer said in a phone interview today, while he’s in “no rush” to make a decision. Both exchanges said today that they will focus on standalone strategies and are negotiating to terminate the takeover deal.

Press Release
CHICAGO (February 1) OCC announced today the retirement of Bill Navin, Executive Vice President, General Counsel and Chief Legal Officer of OCC. Mr. Navin joined OCC in July 1999, but was previously OCC’s outside counsel at Schiff Hardin & Waite. As a Schiff partner, Mr. Navin represented OCC since its inception in 1973.
“Bill has truly been part of our team since the very beginning. We sincerely appreciate his years of guidance, dedication, and leadership and wish him the best in his retirement,” said Wayne Luthringshausen, OCC Chairman and CEO. OCC also announced that James E. Brown has joined OCC as Executive Vice President and General Counsel to succeed Mr. Navin. Mr. Brown comes to OCC from Schiff Hardin LLP, where he has served since 1983. http://jlne.ws/waIgq0

Market Volatility: What Do ETFs Have To Do With It?
January 31st at 3:04pm by Tom Lydon, ETF Trends
Exchange traded funds have been accused of being the reason for some of the wild market swings that occur. Are these funds the real culprit behind market volatility?
ETFs have gained popularity over the years, due to their diversification benefits and low cost. The flexibility to trade a basket of stocks throughout the day is enticing for many. According to Investment Company Institute data, there are more than 1,110 ETFs trading in the U.S., up from about 200 that traded in 2005, reports Scott Cendrowski for CNN Money. Furthermore, ETFs now account for 30% of trading volume on U.S. exchanges.
VIX, VIX ETFs Fail at Resistance (VXX, XIV, TVIX)
Wall Street Sector Selector
After making a push higher and challenging significant resistance at 20, VIX, the CBOE S&P Options Volatility Index, commonly known as the “fear index,” fell back as stock prices held up under renewed selling pressure. Stock prices tend to move inversely to VIX and the VIX is widely viewed as a reliable predictor of stock market prices.

Interactive Brokers Group Reports Brokerage Metrics for January 2012
GREENWICH, Conn., Feb 01, 2012 (BUSINESS WIRE) — Interactive Brokers Group, Inc., an automated global electronic broker and market maker, today reported its Electronic Brokerage monthly performance metrics for January. Highlights for the month included:
— 418 thousand Daily Average Revenue Trades (DARTs), flat to prior year and 12% higher than prior month.
— Ending customer equity of $27.1 billion, 19% higher than prior year and 8% higher than prior month.


Nasdaq Profit Ahead of Expectations
Advanced Trading (By Reuters) February 01, 2012
Nasdaq OMX Group Inc’s quarterly profit declined due to a number of expenses, but when stripping out the one-time charges, the Nasdaq stock market parent beat analysts’ expectations.
Nasdaq earned $82 million, or 45 cents per diluted share, in the fourth quarter, down from $137 million, or 69 cents per share, a year ago. Excluding one-time items, it earned 63 cents a share, compared to 55 cents in the year prior quarter. Revenue rose 6 percent to $422 million. Analysts on average expected the New York-based company to earn 61 cents per share, excluding items, on $417.16 million in revenue.
Total market share of U.S. equity options was 27.2 percent, compared to 31.4 percent in the fourth quarter of 2010.
The Spanish Stock Exchange Traded €69.99 Billion In January
Date 01/02/2012
* The number of equity trades in January reached 3.8 million, up 38% from the previous month of December
* Trading in Options on Stocks reached 2.97 million contracts, slightly above the figure posted in January 2011
* Corporate Debt trading reach
ed €392.02 billion, down 31.5% year on year. However the number of trades increased more than fivefold compared to the same month in 2011.

For Exchange CEOs, a Misjudgment and New Goals
A year ago, Duncan Niederauer took the biggest gamble of his career: He would be remembered either as the gutsy executive who turned the New York Stock Exchange into the crown jewel of the world’s biggest exchange company, or as the man who handed control of the storied Big Board to foreigners.
Now, it turns out he will be neither.
The European Union officially nixed the planned merger of NYSE Euronext and Deutsche Börse on Wednesday, torpedoing a deal that would have put the 52-year-old Mr. Niederauer in the driver’s seat of a company trading more shares and derivatives than any other.

The Rationale Behind NYSE’s & Deutsche Boerse’s Desire To Merge
By Jacob Bunge, Deal Journal – WSJ
European antitrust regulators just nixed the NYSE Euronext/Deutsche Boerse merger, warning that combining the exchanges’ European derivatives businesses would have created competition concerns.
Here’s a refresher on what the companies had hoped to achieve with the deal:
DERIVATIVES POWERHOUSE: The combination would have created a European futures and options market to rival U.S.-based CME Group in terms of trading activity. Together exchanges run by NYSE Euronext and Deutsche Boerse account for about 93% of regional derivatives traded on-exchange, a concentration that proved too high for EU antitrust regulators.


SEC Charges Jeffrey and Robert Wolfson With Short Selling Violations
Citybizlist Washington DC
The Securities and Exchange Commission today charged two brothers living in Chicago and New York with naked short selling for failing to locate and deliver shares involved in short sales to broker-dealers.
Short sellers sell borrowed shares in hopes of profiting from declining prices. While short selling is legal, SEC rules require short sellers to locate shares to borrow before selling them short, and they must deliver the borrowed securities by a specified date. Market makers are excepted from the locate requirement when selling short in connection with bona-fide market making activities in the security for which the exception is claimed. Naked short selling occurs without having borrowed the securities to make delivery…
According to the SEC’s order, the Wolfsons engaged in two types of transactions from July 2006 to July 2007 in violation of Regulation SHO. The first type of transaction – a “reverse conversion” or “reversal” – involves selling stock short and simultaneously selling a put option and buying a call option on the stock.


Bloomberg Open Sources Its Market Data Distribution Technology
By Greg MacSweeney, Wall Street & Technology
The market data provider’s Open Market Data initiative allows any developer to use API without restrictions.
Following up on its 2009 release of Bloomberg’s Open Symbology (BSYM), a system to identify securities across global asset classes, Bloomberg LP is opening its market data interfaces to anyone, without cost or restriction.
The market data provider’s application programming interface (API), known as BLPAPI (Bloomberg LP API), is already used by Bloomberg, its clients and other technology providers to build connections between financial firms’ applications and Bloomberg’s market data and applications. The company hopes the release will spur innovation and increase collaboration. Today any technology professional, or even students at a university, can access BLPAPI to quickly build connections to market data feeds.
“We are essentially taking the programming interface that we use extensively already and we are putting an MIT-style license around it,” said Shawn Edwards, chief technology officer of Bloomberg LP in an interview.”
SunGard Extends its SaaS-based Valdi Market Access Offering to Ljubljana Stock Exchange, Slovenia
Ljubljana, Slovenia (PRWEB press release) February 01, 2012
SunGard has extended its SaaS*- based, Valdi market connectivity service with the addition of the Ljubljana Stock Exchange (LJSE). SunGard’s Valdi Market Access Service helps exchange members and their direct market access (DMA) clients access and trade on global exchanges from any Valdi workstation or FIX application. SunGard’s Valdi will help Slovenian institutions and remote exchange member firms access and trade LJSE-listed products simply and more cost-effectively.


Strategy sees retailers trapped in range
Chris McKhann, tradeMONSTER
As shares of the SPDR Retail Fund trade near their highs, a near-term combination strategy dominates the unusual option activity today.
The XRT exchange-traded fund is up 0.75 percent to trade at $55.57. It has closed higher than this a few of times in the last week but is just under the fund’s intraday high of $56.44 set in July. Shares have been trending higher in the last five months from a 52-week low of $43.50. The big trade of the day consisted of 20,000 options, already more than its total daily average. optionMONSTER’s systems show that 10,000 February 55 puts and 10,000 February 56 calls changed hands for $0.74 and $0.70 respectively. Both appeared to have traded at the bid prices, so this appears to be a short strangle looking for shares to remain range-bound.
Mastering Volatility
By Ronald Delegge, ETFguide.com
From the February 2012 issue of Research Magazine
Although the u.s. stock market took has taken investors for a wild ride over the past year, it has largely remained unchanged. It’s enough to drive risk-adverse clients up a tree. After reaching a 50-year high in volatility, the S&P 500 (SPY) delivered flat performance in 2011 while the Dow Jones Industrial Average (DIA) gained 5.5 percent.
What can advisors do to hedge volatility? How can they calm their client’s nerves? Are VIX ETPs the answer?

Put the Fire Back in Amazon Shares
Generate some decent income from the online retailer’s weakened stock with a sensible options trade.
Investors disappointed by Amazon.com’s latest earnings report can use a simple options strategy to enhance returns. By selling calls against existing shares, investors can get the options market to pay them for waiting for the stock to recover from a sales miss that has sent the shares down almost 9%, to $176.98, in midmorning trading Wednesday. After the closing bell Tuesday, Amazon (ticker: AMZN) reported revenue for the fourth quarter that was below analysts’ estimates. And though profit exceeded expectations, concerns remain that Amazon is spending too much money to develop hot products like the Kindle Fire tablet.

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