VIX Manipulation Class Actions Recap; Goldman and Barclays personnel moves

May 16, 2018

VIX Manipulation Class Actions Recap; Goldman and Barclays personnel moves

May 16, 2018

Spencer Doar

Spencer Doar

Associate Editor

Observations & Insight

The Options Industry Leader Series 2018 – BOX’s Ed Boyle
Brought to you by the OCC

In this video from the 36th annual Options Industry Conference (OIC) at Amelia Island, Fla., Ed Boyle, CEO of BOX, talks about constraints placed on the market making community, forward-starting daily options and the impact of the OIC.

Watch the video here »


February 5 and 6 – “When the Wheels Came Off the Bus”
(Click for larger image)

Click for larger image

It’s VIX expiration day and things don’t seem newsworthy, which is nice.

As mentioned last week, we will occasionally be throwing in a slide from Trade Alert President Henry Schwartz’s “State of the Industry” presentation at the Options Industry Conference.

Today’s graph shows the bid-ask spread of a SPY Feb/Mar straddle compared to the bid-ask spread of SPY over the course of February 5 and 6. Notice anything that stands out?
Here are some other bits courtesy of the DataTrek newsletter – the new research firm from former Convergex-ers Nick Colas and Jessica Rabe – as its most recent edition covered volatility:
-The VIX averaged 17.4 in Q1.
-Since 1958, the S&P 500 averages 53 days of +/- 1 percent moves. In 2018, there have already been 32.
-The second half of the year is historically more volatile, as August and October have had the most VIX peaks since 1990.

SpiderRock President and Chief Investment Officer Eric Metz has joined the OIC
Institutional Advisory Council.

Enjoy the hearty amount of personnel stories today – seems to be the theme of today’s newsletter.

Also, if you missed the first Options Industry Leader Series video with Nasdaq’s Kevin Kennedy, you can watch that here.

Lead Stories

VIX Manipulation Class Actions – Part II: Venue and Consolidation
Foley & Lardner LLP
In our previous update, we informed you that Atlantic Trading USA LLC had filed the first class action complaint in Chicago federal court against various numerous unnamed market maker trading firms, alleging manipulation of the Chicago Board Options Volatility Index (VIX). Since then, a total of 18 similar class actions have been filed—12 in Chicago federal court and 6 in New York federal court.

****SD: Having trouble keeping track of all the lawsuits? Here’s your reference sheet.

Now traders are leaving Goldman’s equity derivatives business in London
Sarah Butcher – eFinancialCareers
Two days after the change of leadership at the top of Goldman Sachs’ securities division globally, and one day after it emerged that one of Goldman’s newly promoted female MDs in macro structuring has decided to quit for a start-up, we understand more senior traders are quitting the firm. This time, they’re in equities.

Barclays returns to Credit Suisse for another senior equities trader
Fareed Sahloul – Financial News London (SUBSCRIPTION)
Barclays has appointed a new head of derivatives trading in Europe and the Middle East, recruiting a second senior trader from the ranks of its rival Credit Suisse in as many weeks.
The UK bank said on Wednesday that Neil Staff is joining as global head of exotics trading and derivatives trading for the region. Staff will be based in London and report to Stephen Dainton, Barclays’ global head of equities.

A day in the life of Wall Street strategist Amy Wu Silverman of RBC
Graham Rapier – Business Insider
Volatility is back in financial markets, and that means busy days for RBC Capital Market’s head of derivatives strategy, Amy Wu Silverman.

Exchanges and Clearing

Deutsche Boerse to launch fintech accelerator
Clare Dickinson – Financial News London (SUBSCRIPTION)
Deutsche Börse is to launch an acceleration platform for financial technology firms, a move that comes as initiatives designed to help startups come to market fall out of favour.

Cboe, IHS Markit and BlackRock Join Forces to Launch First U.S. Corporate Bond Index Futures
Alliance expected to expand ecosystem around the iShares iBoxx $ High Yield Corporate Bond ETF and the iShares iBoxx $ Investment Grade Corporate Bond ETF
The futures are expected to provide liquid fixed-income instruments based on the performance of high yield and investment grade bond indices

****SD: Other non-options news out of Cboe today – Cboe Welcomes New Issuer Salt Financial to the Cboe ETF Marketplace

Regulation & Enforcement

CFTC puts new spin on spoofing cases
Alexander Campbell – (SUBSCRIPTION)
The US Commodity Futures Trading Commission can charge firms that fail to adequately supervise traders who engage in market manipulation or spoofing even if prosecutors are unable to prove intent.


State Street Report Examines How Buy-Side Manage Data and Analytics
John D’Antona Jr. – Traders News

****SD: Full study here.


Volatility Begins to Return
Helene Meisler – TheStreet
Volatility had quite a rise on Tuesday. And it arrived right on schedule — mid May. There is some ‘resistance’ at 15 on the VIX but I am still in the camp that says we’ll see more volatility in mid-May even if it backs off some from here.

SVXY: Is Short Volatility Ready To Fly Again?
Seeking Alpha
What can be said about the above other than, “Wow, what an ugly chart”? This is the six month view of the ProShares Short VIX Short-Term Futures ETF (SVXY). SVXY, along with its now defunct cousin the VelocityShares VIX Short Volatility ETN or XIV, were the poster children for the “Volmageddon” event that took place in early February.


Crypto Never Sleeps. Now DRW’s Big Trading Desk Doesn’t Either
Matthew Leising – Bloomberg
Firm says it’s first to offer non-stop buying and selling; Singapore expansion allowed for overnight U.S. coverage
Much like the market where it trades, the cryptocurrency desk at DRW Holdings LLC is going non-stop. Its Cumberland division will now buy and sell Bitcoin, Ether and about 30 other cryptocurrencies 24 hours a day, seven days a week, lead trader Bobby Cho said in an interview. A November expansion in Singapore allowed Chicago-based Cumberland to do business with customers non-stop on weekdays, but demand didn’t cease on Saturdays and Sundays, he said.

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