JLN Options: VIX Bets at Record as Volatility Sinks to Five-Year Low

Mar 19, 2012

Lead Stories

VIX Bets at Record as Volatility Sinks to Five-Year Low
Bloomberg
By Nikolaj Gammeltoft, Cecile Vannucci and Matt Robinson – Mar 19, 2012
Investors are piling into securities that protect against losses in equities at the fastest rate ever after the Standard & Poor’s 500 Index climbed to the highest level in almost four years. Demand to hedge gains pushed up the number of shares available for trading to records last week in four of the five largest exchange-traded funds and notes that track U.S. stock volatility, data compiled by Bloomberg show. For the iPath S&P 500 VIX Short-Term Futures ETN, the biggest of the securities, outstanding stock reached 100.1 million on March 16, up 51 percent since March 9 and more than fourfold since Dec. 30.
http://jlne.ws/yN60ga

ISE’s Katz sets sights on second options market
Business Recorder March 19, 2012
The International Securities Exchange has revived plans to build a new US stock-options market, ISE chief Gary Katz said on Tuesday, opening a new front in ISE’s battle against bigger rivals NYSE Euronext and CBOE Holdings Inc. Katz had put ISE’s aspirations for a second options exchange on the back burner last year, he said in an interview with Reuters, after Deutsche Boerse AG agreed to buy the parent of the Big Board in a deal that would have created a powerhouse in the US options trading industry by putting three US options markets under one roof.
http://jlne.ws/FPTSl6

FX OPTIONS: Market snapshot – Daily overview
Mon, Mar 19 2012, IFR Markets
EUR/USD implieds remain well above realised in the front end of the curve and with spot recovering ground since faltering at 1.3000 barriers, they certainly have more downside potential. 1mth atm tests Fridays 11mth base at 9.25 and is still 1.0 above hourly realised, while 3mth is 10.2 and 0.75 over realised. 1mth r/rev below 1.0 (EUR puts).
http://jlne.ws/FWurt5

Traiana Signs Up Six Banks To Clearing Network
WSJ.com
LONDON (Dow Jones)–Six major banks have signed up to ICAP PLC-owned (IAP.LN) Traiana’s clearing network, helping it to steal a march on its rivals as the foreign-exchange industry prepares for a long-awaited overhaul of regulations governing derivatives trading. Citigroup Inc. (C), Bank of America Merrill Lynch (BAC), Deutsche Bank AG (DB), JP Morgan Chase & Co. (JPM), Morgan Stanley (MS) and UBS AG (UBS) have signed up to the service, known as Harmony CCP Connect, Traiana said Monday. Traiana, which provides port-trade services like credit checks and financial messaging, and helps to connect banks with trading exchanges, said Harmony CCP Connect made the clearing process simpler by providing a direct line to the clearer.
“Traiana has the connections in place to the clearing houses, clients and counterparties… [and] ties into our existing FX systems and processes,” Andrew Coyne, head of FX prime and e-commerce product at Citigroup, said in a release.
Clearing houses LCH.Clearnet Group Ltd., IntercontinentalExchange Inc. (ICE), CME group Inc. (CME) and Singapore Exchange Ltd. (S68.SG) are among those to have said they will use Harmony CCP Connect.
Announced last year, Harmony CCP Connect offers trade routing, affirmation, matching, allocation and reporting for centrally cleared foreign-exchange options and non-deliverable forwards, between institutions and clearing houses, as required by the U.S. Dodd Frank Act and the European Union’s European Markets Infrastructure Regulation.
http://jlne.ws/xhxFWV

U.S. Stock Options With Biggest Changes in Implied Volatility
By Bloomberg News – Mar 19, 2012
The following are the U.S. stock options that had the biggest percentage changes in implied volatility from the previous trading day as of 11:30 a.m. in New York. This {OSCH } search was limited to options that are more than 10 days from expiration, have trading volume of at least 200 contracts and have strike prices within 5 percent of the underlying security’s price.
http://jlne.ws/FPT3oY

Instinet Announces Latest Version of Newport EMS
Traders Magazine Online News, March 19, 2012
Agency-only broker Instinet has announced a new version of its Newport execution management system that includes an extension in pairs trading capability and spread trading.
The new version of Newport, 3.12, also improves over the previous iteration by enhancing order ticket layout and functionality to better serve single-stock traders. Among the improvements are the ability to retain field entries, making it easier to send child orders at varying price levels, as well as the ability to cancel and revise child orders directly from the order ticket….
Pairs trading capabilities have been extended to support securities that trade in different currencies, allowing users to trade and monitor levels normalized to a single currency. Spread trading functionality now includes the ability to access the NYSE Amex Options Complex Order Book and the NYSE Arca Options Complex Order Book, bringing the total number of COBs available from Newport to five.
http://jlne.ws/FPXCmC

Exchanges

Deutsche Boerse To Legally Challenge EU Rejection Of NYSE Merger
By Ulrike Dauer Of DOW JONES NEWSWIRES
FRANKFURT (Dow Jones)–Deutsche Boerse AG (DB1.XE) will legally challenge the European Union’s prohibition of its planned merger with NYSE Euronext (NYX) at the EU Court in Luxembourg, the German exchange operator said Monday. In a brief statement, the exchange said it holds the opinion that several aspects of the EU decision were “inaccurate.” Further information wasn’t immediately available. It wasn’t clear either whether NYSE Euronext will join the legal challenge. The exchange groups had to take a decision on such a challenge within two months and 10 business days of the European Commission’s Feb. 2 formal notification that it would block the $18 billion combination, or by April 26. On Feb. 1, the EU Commission decided to reject the merger on antitrust grounds, saying that the combined businesses would dominate Europe’s on-exchange derivatives trading, giving the proposed company a 93% market share in that region. 
http://jlne.ws/FPWa4Y

Global Exchange Body Weighs New Structure
By Jacob Bunge Of DOW JONES NEWSWIRES
The world’s largest financial exchanges are looking to revamp their global trade group in an effort to sharpen the focus provided by a patchwork of often conflicting lobby groups as an unprecedented wave of regulation courses through the industry. Officials from NYSE Euronext (NYX), CME Group Inc. (CME), Hong Kong Exchanges & Clearing (0388.HK) and Nasdaq OMX Group Inc. (NDAQ) will discuss Monday a planned restructuring of the World Federation of Exchanges, a 51-year-old group better known for its research activities than for lobbying. The globalization of trading, planned market reforms and the recent collapse of a series of cross-border mergers has galvanized exchanges to seek a more unified voice among policymakers, regulators and academics, though the heavy-lifting of lobbying is expected to be left to more regionally focused groups.
http://jlne.ws/xuH6NS

NYSE Euronext Co
oling Off

Barrons.com
Sandler O’Neill is lowering its earnings estimate for the securities-exchange operator, citing weaker trading volume this quarter.
NYSE Euronext (NYX: NYSE)
By Sandler O’Neill ($29.73, March 16, 2012)
NYSE Euronext recently reported official February volumes. Average daily trading volume for three out of the four main transaction businesses trailed our initial forecasts. And volumes in early March continue to trend lower in the U.S. while European volumes are up slightly on a sequential basis. Based on downward revisions to volume assumptions for the quarter, we are reducing our first-quarter earnings-per-share estimate by $0.03 to $0.47 and our full-year 2012 estimate to $2.43 from $2.54. Our revised estimate is $0.15 below the current consensus estimate for 2012 EPS of $2.58.
http://jlne.ws/FQNpm0

Strategy

Using A Simulated Investment Account On The Road To Wealth
Rocco Pendola, Seeking Alpha
March 19, 2012
In this article, I dig deeper into a topic I’ve covered before on Seeking Alpha – using a simulated investment account. I discuss some of the reasons why investors should consider using one. I also get into the logistics of simulating trading. Finding a reliable way, just from a practical standpoint, to sim trade represents a major obstacle.
http://jlne.ws/FPQZi1

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