JLN Options: Traders Sue Options Exchanges Over Fees

May 23, 2013

Commentary & Insight CBOE Celebrates 40 Years Last night the CBOE held a star-studded panel discussion at the exchange and later a dinner at a Chicago hotel in honor of its 40 anniversary, the 30th anniversary of the index options and the 20th anniversary of the introduction of the VIX. Today, they will have their annual meeting and Bill Brodsky cede the CEO role to Ed Tilly and Mr. Brodsky will assume the role of executive chairman [transcript of the meeting is listed below under “Exchanges” -JB]. The panel discussion featured the President of Barron’s as the moderator, as well as Mr. Brodsky, Myron Scholes, Thomas Peterffy, Larry McMillan and Buzz Gregory from Goldman Sachs. Steve Sears of Barron’s was supposed to be on the panel, but did not make it in due to the weather. Prior to the dinner, I had the opportunity to meet and shake hands with a hero of mine, Joe Sullivan. Later in the evening, Mr. Sullivan, the first president of the CBOE and the person considered most responsible for getting the CBOE and the whole options industry started, was honored with a standing ovation. Mr. Sullivan does not get out much, or regularly attend industry conferences, but does have an award named after him. The Joseph W. Sullivan Options Industry Achievement Award was established in May 2002 to recognize individuals who have made outstanding contributions to the growth and integrity of the U.S. options market. Not bad for a former Wall Street Journal reporter. Mr. Brodsky also received a standing ovation last night, signifying his years of contributions to the options industry and the CBOE. Both ovations were well deserved and gave me a chance to work my new knees during the dinner. The John Lothian Productions crew received a shout-out during the thank yous for the 40th anniversary video we produced for the CBOE. The CBOE did a nice job of putting the two events together and even had the Mayor of Chicago making the rounds at the cocktail party before the dinner. Congratulations to the CBOE on their 40 years. Congratulations to Bill Brodsky on a great run as CBOE CEO and best of luck to Ed Tilly as he moves into the role of CEO. ~John J. Lothian

Lead Stories

Traders Sue Options Exchanges Over Fees 
Jacob Bunge, The Wall Street Journal
Four of the biggest stock-options trading firms in the U.S. on Thursday sued exchanges over fees that the firms said were improperly collected for 7 1/2 years.
http://jlne.ws/11dD7pN Optimism Remains in Options as Stocks Drop  
Kaitlyn Kiernan, The Wall Street Journal
As stocks dropped for a second straight day Thursday, many options traders continued to bet that the market will climb in the weeks ahead.
http://jlne.ws/12QyMwM CBOE Begins Disseminating New Volatility Index On CME Group’s 10-Year U.S. Treasury Note Options Contract
Press Release (CBOE)
Chicago Board Options Exchange (CBOE) and CME Group (CME) have announced that, as part of an agreement between the exchanges, CBOE today began disseminating values for a new volatility benchmark index using futures options data on CME Group’s 10-year U.S. Treasury note contract.  The CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (ticker symbol VXTNY ) is the first volatility index based on U.S. government debt to be calculated and disseminated by CBOE.
http://jlne.ws/12Qyt52 Huge bullish trades in sector funds
optionMONSTER (via NASDAQ)
Investors are using options to adjust huge bullish positions in large sectors at low cost.
http://jlne.ws/12Qy2aW Global selloff hits equity indexes
optionMONSTER (via NASDAQ)
Stocks are falling today as a global selloff hits equity markets.
http://jlne.ws/12QyaY7 OptionsCity Expands Management Team, Renews Commitment to Customer Care
Press Release (OptionsCity)
OptionsCity Software (www.optionscity.com) announced today that Timo Pentner has joined the company as Executive Vice President of Services. Mr. Pentner will oversee all support, onboarding, and training operations in the U.S. and Europe.
http://jlne.ws/12QA8HR CME chairman takes credit for MF Global response
Lynne Marek, Crain’s Chicago Business
The chairman of CME Group Inc. said the futures exchange made the right decision when it declined to reimburse customers of the failed MF Global Inc. because those customers have recouped close to 99 percent of their $1.6 billion in lost funds through the bankruptcy process.
http://jlne.ws/12Qx3rp

Exchanges

CBOE to expand VIX trading hours later this year
Reuters
CBOE Holdings Inc will expand trading hours for futures on the CBOE Volatility Index later this year, after a technical glitch delayed the change, the company’s incoming chief executive said on Thursday.
http://jlne.ws/12Qwq10 London Stock Exchange Offers Single-Stock Options Trading
Andrew Rummer, Bloomberg
London Stock Exchange Group Plc (LSE) will introduce trading in single-stock options next month, offering 19 contracts on energy and mining companies listed in the U.K.
http://jlne.ws/12QwUEj CBOE Holdings, Inc. – Shareholder/Analyst Call  [transcript]
SeekingAlpha
Good morning, everybody. I’m Bill Brodsky, and we’re going to start the meeting in a minute. [Operator Instructions] Before we begin the meeting today, I just want to make one special recognition. We are very honored and delighted that CBOE’s first President and Founder, Joe Sullivan is with us today and it’s the first time Joe’s been with us in an annual meeting. Joe, we’re delighted to have you here.
http://jlne.ws/12QACxM

Regulation

FINRA Considering Rule to Require More Dark Pool Data Disclosure
Dave Michaels, Bloomberg
The Financial Industry Regulatory Authority, the private-sector regulator of U.S. brokerages, may ask brokers to distinguish trades that occur in dark pools from ones that don’t, Finra chief executive officer Richard G. Ketchum told reporters today.
http://jlne.ws/10lCqvE Finra Expands U.S. Stock-Market Surveillance
Jacob Bunge, Dow Jones Newswires (via Fox Business)
An industry-funded regulator Wednesday agreed to take on oversight of two more U.S. exchanges, a move that will improve its surveillance and expand its coverage to around 90% of daily stock trading.
http://jlne.ws/12Qx9PO

Strategy

ETF Bear Put Spread Options Strategy Explained
Justin Kuepper, ETF Database
Exchange-traded funds (“ETFs”) have become a very valuable tool for investors seeking exposure to all corners of the market. While they provide diversified exposure in a single U.S.-traded security, equity options can be used in conjunction with ETFs to create more complex trading strategies designed to achieve specific goals or targeted strategies.
http://jlne.ws/12Qzx96 Put-Write ETF Focuses on Income
Tom Lydon, ETF Trends
Yield generation has been a hot topic as investors look for alternative income sources in a low-rate environment. ALPS with Rich Investment Solutions recently launched an exchange traded fund that seeks to provide income thr ough a so phisticated options strategy.
http://jlne.ws/12QzJFl

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