LEAD STORIES
CME and CBOE chiefs sing same tune on M&A: No deals
By Ann Saphir, Reuters
After years of speculation about whether the two Chicago financial giants might tie the knot, the chiefs of both derivatives exchange operators have come out in unison: we're not interested. "For the foreseeable future, we don't see the need for large-scale M&A," CME CEO Craig Donohue said in an interview with Reuters on Thursday. "As we are thinking about the next five years, our focus is really on driving growth in our core business. That's really the next phase for us."
http://jlne.ws/dkDS0Z
For Hedge Fund Investors, Does Size Matter?
Reuters
More than ever, the biggest investors are entrusting their money disproportionately to the largest hedge funds. They may discover that bigger isn’t always better. The size fetish has meant that the share of industry assets held by firms with more than $1 billion under management has risen gradually from about 75 percent in 2006 to about 82 percent at the start of this year, according to Hedge Fund Intelligence. And the trend seems to be accelerating....Yet research by PerTrac suggests that older and larger managers tend to deliver lower absolute returns than smaller and younger ones. Smaller funds on average outperformed larger ones every year from 1996 to 2009, except for 2008.
http://jlne.ws/cRu3cl
EXCHANGES
CME predicts OTC opacity will remain
By Hal Weitzman in Chicago
The world’s biggest banks will continue to trade over the counter derivatives in much the same way as they did before the financial crisis, in spite of the recently enacted legislation on US financial reform, the CME Group said on Thursday.
http://jlne.ws/dgqcFO
India’s RBI Permits Currency Options Trading on Stock Exchanges
By V. Ramakrishnan, Bloomberg
July 30 (Bloomberg) -- The Reserve Bank of India allowed trading of currency options on stock exchanges, expanding the tools available for companies to hedge their currency risk, the central bank said today.
http://jlne.ws/cSDAh9
NYSE Euronext declares dividend of 30 cents
Forbes
http://jlne.ws/akkQ39
REGULATION
Analysis - CFTC eager to target manipulation with new tools
By Christopher Doering, Reuters
The nation's futures regulator may quickly seek to test its new powers under the Dodd-Frank Act to prevent market manipulation and disruptive trading practices, which could end decades of frustration for the agency caused by confusion over the law and a failure to prosecute traders. In its 36-year history, the CFTC has successfully prosecuted and won only one manipulation case in the futures markets, a dismal record that has rattled agency officials intent on boosting market integrity. The CFTC has had far more success enforcing violations such as fraud and Ponzi schemes.
http://jlne.ws/cIYbAs
SEC’s New Powers Affect Hedge Fund and Private Equity Advisors
By Michael S. Fischer, Investment Advisor
Alternative investment advisors who have business in the U.S. or, in some instances, even tangential relationships with U.S. investors will be required to register with the Securities and Exchange Commission (SEC) under newly enacted regulatory reform legislation, according to a statement issued by Kinetic Partners on Wednesday, July 21. The statement summarizes some of the most important aspects of the Dodd-Frank Wall Street Reform and Consumer Protection Act that affect hedge fund and private equity advisors, and lists key requirements advisors must focus on when registering with the SEC.
http://jlne.ws/bunj1M
TECHNOLOGY
The Applied Research Company Launches OptionFlash Private Label Online Option Calculator
Interactive Tool Enables Financial Websites to Attract New Breed of Trader from Growing Demographic
Chicago, IL (PRWEB) July 30, 2010 -- The Applied Research Company, a financial application design and consulting firm, today announced the launch of OptionFlash, an online option calculator that can be private labeled and embedded into any financial website. Developed with Adobe Flash technology, OptionFlash calculates theoretical value, implied volatilty and Greeks for index, equity, futures and forex options. An intuitive interface allows users to perform complex option analysis over a variety of scenarios. Results are displayed in attractive tables and graphs which are branded with the licensee's logo. A branded version of OptionFlash is available for an annual flat fee per domain. There is no end-user signup necessary and there are no per user fees. A free, ad-supported, linked version is also available.
http://jlne.ws/bnDuBa
This new online option calculator is from MarketsWiki Team member John Nelson and his company The Applied Research Company, Inc. -- John Lothian
BME to overhaul trading system
By Jeremy Grant, Financial Times
The Spanish stock exchange on Thursday said it would overhaul its trading system in an apparent sign that it is preparing for competition from the same alternative platforms that have ravaged the market share of its larger European rivals. Bolsa y Mercados Espanoles (BME) said the overhaul would allow trades to be done on a “sub-millisecond” basis, bringing it line with most of its global peers. The move would be completed at the end of next year. It would involve building on the exchange’s existing Smart system, already used by its Meff futures and options arm.
http://jlne.ws/9U30IF
OPTIONS EDUCATION
Shorting Volatility Without the Pain
Seeking Alpha
Investors have routinely watched the volatility indicators like the VIX to measure investor “fear” in the market via the implied volatility of the underlying index options. In recent years, they’ve been able to partake in spikes in volatility as a portfolio hedge via the exchange traded notes, otherwise known as ETNs VXX and VXN, which track volatility futures in the broader market and the NASDAQ. But what about when the VIX runs up in spectacular fashion and it’s evident to you at least, that there’s nowhere to go but down? In the past, you’d have to either short an existing long VIX ETF or buy puts, neither of which are appealing. Novice investors are often duped by the futures roll effect in the options, not to mention that most options expire worthless. Now though, there’s an inverse volatility ETF which allows you to buy when there’s blood in the street, if you will.
http://jlne.ws/9BEC8B
Friday, July 30, 2010
Thursday, July 29, 2010
July 29, 2010: CME Group profit rises 22% on trading volume boost
LEAD STORIES
CME Group profit rises 22% on trading volume boost
Crain's Chicago Business, July 29, 2010
(AP) —CME Group on Thursday said its second-quarter net income rose 22 percent as the financial exchange operator reported trading volume increases across all its derivatives and options platforms.
http://jlne.ws/9Ng4cW
CME Group profit rises 22% on trading volume boost
Crain's Chicago Business, July 29, 2010
(AP) —CME Group on Thursday said its second-quarter net income rose 22 percent as the financial exchange operator reported trading volume increases across all its derivatives and options platforms.
http://jlne.ws/9Ng4cW
CME Profit Gains 22% as Trading Soars in Currency, Interest Rate Contracts
Matthew Leising, Bloomberg
...In the near term, CME Group isn’t looking for mergers or acquisitions, Craig Donohue, chief executive officer, said on a conference call with analysts. “We have a very bullish view of our growth opportunities organically,” he said...The comment may quell speculation about a buyout by CME Group of CBOE Holdings Inc., which analysts have said is a strong acquisition target.
http://jlne.ws/9rVhFc
CBOE's Brodsky Says Options Exchange Can Expand Without a Merger Partner
By Nina Mehta, Bloomberg
Brodsky Says U.S. Options Exchange Can Grow Without Partner
CBOE Holdings Inc., operator of the largest U.S. options exchange that went public last month, has no need for a merger partner, Chief Executive Officer William Brodsky said.
http://jlne.ws/aPeHlW
REGULATION
Dodd-Frank Legislation: How the Law Might Really Impact the Capital Markets
Advanced Trading
The Dodd-Frank Wall Street Reform and Consumer Protection Act has now become law. Interestingly, a wide range of opinion still exists as to how the law will impact financial markets and, not surprisingly, there is still a great deal of spin coming from various parties that seem more intent on unsettling the public than explaining the law.
http://jlne.ws/cpg0Be
STRATEGY
State Street Creates Turbulence Indices
By Lee Barney, Money Management Executive, in Financial Planning
State Street Global Markets Wednesday unveiled seven new indexes designed to help institutional investors map out hidden market opportunities.
http://jlne.ws/d7Bfml
Hmmm....so turbulence indexes "go beyond the volatility index"? What's next, the "you-know-what just hit the fan" index? -- SR
OPTIONS EDUCATION
OIC launches the latest podcast, "Contract Adjustments" of its new weekly podcast series, Options Talk with OIC
http://www.optionseducation.org/
ETF Options Vs. Index Options
Jay Kaeppel, provided by Investopedia
Thursday, July 29, 2010
http://jlne.ws/dn5egL
Weekly Expiration: Looking At The Options Greeks
Posted on 7/29/2010 in Education by Zecco
The Options Insider
As mentioned in an earlier post, the CBOE has added weekly options covering a select group of stocks, ETFs, and indexes. So it might be a good idea to see how these new options behave over their short life span.
http://jlne.ws/b5vZmz
Wednesday, July 28, 2010
Interview: Jeanine Hightower of ISE
Jeanine Hightower is head of options business development at the International Securities Exchange. She spoke with Sarah Rudolph about forthcoming technology changes and products at ISE.
Q: How long have you had your present title?
A: Since the beginning of this year. Before that I held two other roles at ISE. I started six years ago as a relationship manager covering our market makers and EAMs [electronic access members, which are ISE’s non-market maker participants]. In the summer of 2006 I was promoted to director of business development, responsible for member relationships and business development, with a team reporting to me.
Before becoming head of business development, I had taken on responsibility for product management as well; then in January, I was promoted to head of options business development.
Q: How did you find your way to ISE?
A: When I started my career, I had not envisioned working for an options exchange, but was in the financial services industry working at Wheat First Butcher Singer, which eventually turned into Wachovia Securities. I was there for three years doing technology investment banking. Following that role, I became U.S. manager for customer accounts at Perfect Information, a UK-based document services and market data platform that was a competitor of FactSet. ISE was looking to augment their business development team and my skill set was a good fit for the position.
Q: What are your current responsibilities?
A: My team is responsible for managing member relationships, new business development, and product management. We attract business from new and existing members by way of regular contact to keep them informed of developments at ISE, seeking their feedback, addressing their needs and providing education on trading at ISE.
The product management group plans and delivers new features and order types to the market and tweaks and improves upon existing functionality offered at the exchange. I’m also part of the team that oversees the strategic development of the options business. We look at where we see ourselves competitively in the market and focus on market structure and pricing changes for ISE.
Q. Did you work on the ISE’s new front end?
A. We’ve had our PrecISE Trade front end in place since 2006, and I’ve headed that product since it was in development in 2005. We have about 500 users across more than 100 member firms. So far this year we have launched several key features in PrecISE, including a new order type for Reserve Spread Orders. These multi-legged options orders can have a part of the order displayed on the book with the balance hidden in reserve.
We continually upgrade the features offered through PrecISE. We have many key enhancements we’re looking to launch in the next 12 months. In fact, one of the important benefits of PrecISE is that we can immediately push out new innovations to the front end users. This minimizes the development work necessary for member firms and ensures that PrecISE users have immediate access to all new order types and functionality offered at ISE.
Q: What other new products and initiatives are you working on?
A: Step up and match order types for Facilitation and PIM Auctions. This order type will allow the contra side of an auction order to step up and match any price improvement responses.
We’re adding the ability for members executing complex options orders that include a stock component to allocate their stock on a post trade basis. Currently, that adjustment is possible with the option but not the stock leg.
We’re also working on additional new order types and order routing enhancements, as well as preparing for the introduction of our new trading system. The new system is scheduled to go live in November of this year and will allow us to grow our business to the next level.
Q: The ISE’s volume has been down slightly this year. What is behind that decrease and are there any specific steps the exchange is taking to build volume back up?
A: There has been a lot of talk about dividend trades. Including the volume in this type of trade skews the overall volume statistics to a degree. In June we would have seen our market share 1 percent higher at 21% rather than 20% if dividend trades were excluded. But the dividend trades are volume we really don’t seek to attract.
The area we have recently put a lot of focus on is improving our market quality. We are seeking to be on the NBBO more often, and our new modified maker-taker pricing scheme is certainly helping us achieve this. As a result of better market quality, we will be positioned to recapture some volume.
Q: What about the new DNR (Do Not Route) order type ISE just introduced?
A: The DNR order allows customers to better handle their executions. If ISE is not on the NBBO, a Customer order sent to us gets linked through intermarket linkage to an exchange with a quote at NBBO. Depending on the type of customer, orders sent to another exchange could incur a linkage fee. The DNR order prevents that from happening. When ISE receives an order and there is a better price at another market, we provide an auction in which members can match or improve upon that better price. If that doesn’t happen, an order tagged with DNR is cancelled rather than routed away. Customers have to opt in to this order type and there is flexibility to choose which orders will be treated this way.
Q: Will the new financial reform bill help speed SEC approval of the Eurex-ISE transatlantic link?
A: It’s too soon to tell, but we are very focused on moving forward with the Link and are working with our regulator to secure the necessary approvals.
As it relates to the broader effect of the bill on ISE, we are likely to be impacted more directly by the market structure issues currently under consideration at the SEC, such as flash orders, access fees, and sponsored access.
Q: What types of members are you focused on attracting?
A: As an exchange, our membership is limited to broker dealers. We cover all kinds of brokers, including interdealer brokers (IDBs), institutional participants, retail firms, market makers and routers. We don’t have a direct channel to the buy side because they have to come through a broker dealer to trade on the exchange.
Q: How long have you had your present title?
A: Since the beginning of this year. Before that I held two other roles at ISE. I started six years ago as a relationship manager covering our market makers and EAMs [electronic access members, which are ISE’s non-market maker participants]. In the summer of 2006 I was promoted to director of business development, responsible for member relationships and business development, with a team reporting to me.
Before becoming head of business development, I had taken on responsibility for product management as well; then in January, I was promoted to head of options business development.
Q: How did you find your way to ISE?
A: When I started my career, I had not envisioned working for an options exchange, but was in the financial services industry working at Wheat First Butcher Singer, which eventually turned into Wachovia Securities. I was there for three years doing technology investment banking. Following that role, I became U.S. manager for customer accounts at Perfect Information, a UK-based document services and market data platform that was a competitor of FactSet. ISE was looking to augment their business development team and my skill set was a good fit for the position.
Q: What are your current responsibilities?
A: My team is responsible for managing member relationships, new business development, and product management. We attract business from new and existing members by way of regular contact to keep them informed of developments at ISE, seeking their feedback, addressing their needs and providing education on trading at ISE.
The product management group plans and delivers new features and order types to the market and tweaks and improves upon existing functionality offered at the exchange. I’m also part of the team that oversees the strategic development of the options business. We look at where we see ourselves competitively in the market and focus on market structure and pricing changes for ISE.
Q. Did you work on the ISE’s new front end?
A. We’ve had our PrecISE Trade front end in place since 2006, and I’ve headed that product since it was in development in 2005. We have about 500 users across more than 100 member firms. So far this year we have launched several key features in PrecISE, including a new order type for Reserve Spread Orders. These multi-legged options orders can have a part of the order displayed on the book with the balance hidden in reserve.
We continually upgrade the features offered through PrecISE. We have many key enhancements we’re looking to launch in the next 12 months. In fact, one of the important benefits of PrecISE is that we can immediately push out new innovations to the front end users. This minimizes the development work necessary for member firms and ensures that PrecISE users have immediate access to all new order types and functionality offered at ISE.
Q: What other new products and initiatives are you working on?
A: Step up and match order types for Facilitation and PIM Auctions. This order type will allow the contra side of an auction order to step up and match any price improvement responses.
We’re adding the ability for members executing complex options orders that include a stock component to allocate their stock on a post trade basis. Currently, that adjustment is possible with the option but not the stock leg.
We’re also working on additional new order types and order routing enhancements, as well as preparing for the introduction of our new trading system. The new system is scheduled to go live in November of this year and will allow us to grow our business to the next level.
Q: The ISE’s volume has been down slightly this year. What is behind that decrease and are there any specific steps the exchange is taking to build volume back up?
A: There has been a lot of talk about dividend trades. Including the volume in this type of trade skews the overall volume statistics to a degree. In June we would have seen our market share 1 percent higher at 21% rather than 20% if dividend trades were excluded. But the dividend trades are volume we really don’t seek to attract.
The area we have recently put a lot of focus on is improving our market quality. We are seeking to be on the NBBO more often, and our new modified maker-taker pricing scheme is certainly helping us achieve this. As a result of better market quality, we will be positioned to recapture some volume.
Q: What about the new DNR (Do Not Route) order type ISE just introduced?
A: The DNR order allows customers to better handle their executions. If ISE is not on the NBBO, a Customer order sent to us gets linked through intermarket linkage to an exchange with a quote at NBBO. Depending on the type of customer, orders sent to another exchange could incur a linkage fee. The DNR order prevents that from happening. When ISE receives an order and there is a better price at another market, we provide an auction in which members can match or improve upon that better price. If that doesn’t happen, an order tagged with DNR is cancelled rather than routed away. Customers have to opt in to this order type and there is flexibility to choose which orders will be treated this way.
Q: Will the new financial reform bill help speed SEC approval of the Eurex-ISE transatlantic link?
A: It’s too soon to tell, but we are very focused on moving forward with the Link and are working with our regulator to secure the necessary approvals.
As it relates to the broader effect of the bill on ISE, we are likely to be impacted more directly by the market structure issues currently under consideration at the SEC, such as flash orders, access fees, and sponsored access.
Q: What types of members are you focused on attracting?
A: As an exchange, our membership is limited to broker dealers. We cover all kinds of brokers, including interdealer brokers (IDBs), institutional participants, retail firms, market makers and routers. We don’t have a direct channel to the buy side because they have to come through a broker dealer to trade on the exchange.
JLN Options - July 28, 2010 [NEWSLETTER]
Commentary/Story/ Q&A
Interview: Jeanine Hightower of ISE
Jeanine Hightower is head of options business development at the International Securities Exchange. She spoke with Sarah Rudolph about forthcoming technology changes and products at ISE.
Q: How long have you had your present title?
A: Since the beginning of this year. Before that I held two other roles at ISE. I started six years ago as a relationship manager covering our market makers and EAMs [electronic access members, which are ISE’s non-market maker participants]. In the summer of 2006 I was promoted to director of business development, responsible for member relationships and business development, with a team reporting to me.
Before becoming head of business development, I had taken on responsibility for product management as well; then in January, I was promoted to head of options business development.
Q: How did you find your way to ISE?
A: When I started my career, I had not envisioned working for an options exchange, but was in the financial services industry working at Wheat First Butcher Singer, which eventually turned into Wachovia Securities. I was there for three years doing technology investment banking. Following that role, I became U.S. manager for customer accounts at Perfect Information, a UK-based document services and market data platform that was a competitor of FactSet. ISE was looking to augment their business development team and my skill set was a good fit for the position.
Q: What are your current responsibilities?
A: My team is responsible for managing member relationships, new business development, and product management. We attract business from new and existing members by way of regular contact to keep them informed of developments at ISE, seeking their feedback, addressing their needs and providing education on trading at ISE.
The product management group plans and delivers new features and order types to the market and tweaks and improves upon existing functionality offered at the exchange. I’m also part of the team that oversees the strategic development of the options business. We look at where we see ourselves competitively in the market and focus on market structure and pricing changes for ISE.
Q. Did you work on the ISE’s new front end?
A. We’ve had our PrecISE Trade front end in place since 2006, and I’ve headed that product since it was in development in 2005. We have about 500 users across more than 100 member firms. So far this year we have launched several key features in PrecISE, including a new order type for Reserve Spread Orders. These multi-legged options orders can have a part of the order displayed on the book with the balance hidden in reserve.
We continually upgrade the features offered through PrecISE. We have many key enhancements we’re looking to launch in the next 12 months. In fact, one of the important benefits of PrecISE is that we can immediately push out new innovations to the front end users. This minimizes the development work necessary for member firms and ensures that PrecISE users have immediate access to all new order types and functionality offered at ISE.
Q: What other new products and initiatives are you working on?
A: Step up and match order types for Facilitation and PIM Auctions. This order type will allow the contra side of an auction order to step up and match any price improvement responses.
We’re adding the ability for members executing complex options orders that include a stock component to allocate their stock on a post trade basis. Currently, that adjustment is possible with the option but not the stock leg.
We’re also working on additional new order types and order routing enhancements, as well as preparing for the introduction of our new trading system. The new system is scheduled to go live in November of this year and will allow us to grow our business to the next level.
Q: The ISE’s volume has been down slightly this year. What is behind that decrease and are there any specific steps the exchange is taking to build volume back up?
A: There has been a lot of talk about dividend trades. Including the volume in this type of trade skews the overall volume statistics to a degree. In June we would have seen our market share 1 percent higher at 21% rather than 20% if dividend trades were excluded. But the dividend trades are volume we really don’t seek to attract.
The area we have recently put a lot of focus on is improving our market quality. We are seeking to be on the NBBO more often, and our new modified maker-taker pricing scheme is certainly helping us achieve this. As a result of better market quality, we will be positioned to recapture some volume.
Q: What about the new DNR (Do Not Route) order type ISE just introduced?
A: The DNR order allows customers to better handle their executions. If ISE is not on the NBBO, a Customer order sent to us gets linked through intermarket linkage to an exchange with a quote at NBBO. Depending on the type of customer, orders sent to another exchange could incur a linkage fee. The DNR order prevents that from happening. When ISE receives an order and there is a better price at another market, we provide an auction in which members can match or improve upon that better price. If that doesn’t happen, an order tagged with DNR is cancelled rather than routed away. Customers have to opt in to this order type and there is flexibility to choose which orders will be treated this way.
Q: Will the new financial reform bill help speed SEC approval of the Eurex-ISE transatlantic link?
A: It’s too soon to tell, but we are very focused on moving forward with the Link and are working with our regulator to secure the necessary approvals.
As it relates to the broader effect of the bill on ISE, we are likely to be impacted more directly by the market structure issues currently under consideration at the SEC, such as flash orders, access fees, and sponsored access.
Q: What types of members are you focused on attracting?
A: As an exchange, our membership is limited to broker dealers. We cover all kinds of brokers, including interdealer brokers (IDBs), institutional participants, retail firms, market makers and routers. We don’t have a direct channel to the buy side because they have to come through a broker dealer to trade on the exchange.
Lead Stories
Quick View: Indian exchanges feel the love
Jeremy Grant, FT Trading Room
When George Soros, the billionaire investor, makes a bet, the world generally takes notice. It is no different this time with news, first reported by my colleagues in India, that Soros is set to buy Dubai Holding’s 4 per cent stake in the Bombay Stock Exchange...The two will explore the idea of FTSE Group licensing the FTSE 100 Index to the NSE, while the NSE may licence the S&P CNX Nifty (the “Nifty 50”) to the LSE for issuing and trading options and other index contracts.
http://jlne.ws/b1Wfxf
London exchange, NSE set to tango
Hindustan Times
http://jlne.ws/cLnGOf
CBOE CEO Brodsky Keen on Organic Growth, not M&A
Ann Saphir, Reuters, July 27
CHICAGO - CBOE Holdings Inc, the smallest publicly traded U.S. financial exchange even after its $339 million initial public offering last month, is not seeking to bulk up through a merger, CEO William Brodsky said.
"I look at it and I say, 'is it bigness that's the answer, or is it growth that's the answer?'," Brodsky said Monday in an interview at the Chicago Board Options Exchange's headquarters, across the street from CME Group Inc's trading floor.
http://jlne.ws/9VvhDT
The CBOE's volatility indicator or VIX stands at 23.21, after trading in a 21.86 to 23.57 range.
Automated Trader
The clear-cut break and close below the 200-day moving average Monday, (at 23.37 Tuesday) bode well for risk appetite, but more followthrough may be needed to cement the trend, traders say. The 21.86 low seen earlier is the loweest level seen in the VIX since May 3 (19.61).
http://jlne.ws/9icGit
BAML tinkers with tradable volatility index for tail risk hedging
Clare Dickinson, Risk.net
Bank of America Merrill Lynch (BAML) has created an Investible Volatility Index to serve the growing institutional demand in the US market for tail risk hedging.
"During the credit crisis, we started to see an overwhelming need from our investor group for tail risk hedges," says Yuriko Mita, co-head of Derivatives Sales at BAML in New York. Tail risk is the risk of an asset or portfolio moving more than three standard deviations from its current price.
http://jlne.ws/al4QlG
TABB Group Sees Low-Touch Order Channels Accounting for 62% of Buy Side Firms’ Options Trading by 2011
Evolving Market Structure and Complexity Drive Adoption of Trading System Technology
Options Algorithms to Represent 28% of Total Trading by 2011
NEW YORK & LONDON--(Business Wire)--The increasingly complex options markets is resulting in growing demand for tools and systems that can help make options trading more efficient, especially as traders are continuing to adopt sophisticated trading strategies, says TABB Group in a new annual research study, “US Electronic Options Trading 2010: Algorithms, DMA and Crossing Networks.” The proportion of order flow moving through low-touch channels is projected to rise to 62% by 2011, as options traders turn to electronic trading systems to manage order flow.
http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20100726005523&newsLang=en
CBOE Slips As Firms Start Coverage; Shares Appear Pricey
By David Benoit Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--CBOE Holdings Inc. (CBOE) shares fell Monday--just over a month after the company went public--as several Wall Street analysts initiated coverage of the stock; most agreed that the exchange's dominant position in options is a key asset, but said competition and light trading volume will keep a lid on already pricey shares.
http://jlne.ws/cZdpuZ
Underwriters & Analysts Turn Back on CBOE (CBOE)
24/7 Wall St.
CBOE Holdings Inc. (NASDAQ: CBOE) was already trading as a busted IPO as the stock was already under its formal IPO pricing. The $29.00 price was up 13% in June when the deal came public but closed Friday at $27.15.
http://jlne.ws/cL323d
Nifty 6000 December calls see foreign institutional interest
By Divya Khanna, DNA
Mumbai: The positive rub-off of the European banks’ stress tests led to the US markets closing at a new high. The Vix, the Chicago Board Options Exchange’s fear gauge, wound up at a low of 23%, spurring confidence among global investors. On the domestic front, the Nifty has hit an all-time high open interest of more than $18.4 billion, which leads us to the conclusion that a large move is expected this week. The markets have been steadily rising since the last two weeks touching new highs backed with fairly large volumes, indicating the strength of the buyers.
http://jlne.ws/9m597s
When VIX and VXV Get Out of Whack
The Options Insider
Posted on 7/23/2010 in Trading & Technology by Zecco
Everyone seems to be watching the VIX these days, but there’s another market indicator I like to watch: the VIX/VXV ratio.
http://jlne.ws/9Xamip
OptionsXpress Broker-Dealer Targets More Advisers Over Time
By Brett Philbin Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--OptionsXpress Holdings Inc.'s (OXPS) brokersXpress, a broker/dealer for registered investment advisers and independent brokers, plans to double the number of advisers who use its services over the next three to five years. In an interview with Dow Jones Newswires, brokersXpress Chief Executive Barry Metzger says the unit, which works with 300 advisers, would like to boost that number to 600.
http://jlne.ws/d5PFtT
Exchanges
2nd UPDATE: Deutsche Boerse 2Q Net Dips; Derivatives Give Lift
By William Launder Of DOW JONES NEWSWIRES
FRANKFURT (Dow Jones)--German exchange operator Deutsche Boerse AG (DB1.XE) late Tuesday reported a slight drop in second-quarter net profit as strong derivatives trading revenue was offset by restructuring costs and lower net interest income. Deutsche Boerse further said that restructuring measures launched earlier this year would cost around EUR40 million less than originally planned, or under EUR200 million. That will help Deutsche Boerse finish the year below its previously targeted cost estimate for 2010 of no more than EUR1.21 billion, the company said.
http://jlne.ws/cuTho3
TMX Group 2Q Net Up But Below Analyst Views; TSX Volumes Down 21%
WSJ.com JULY 28, 2010
DOW JONES NEWSWIRES
TMX Group Inc.'s (X.T) second-quarter earnings came in slightly ahead of year-earlier results, but shy of analyst expectations, on a 3% improvement in revenue. Volume of securities traded on TMX's Toronto Stock Exchange, Canada's senior stock market, dropped 21%, though it saw a 40% improvement in derivative trading volumes on its Montreal Exchange. Still, derivatives-market revenue only grew 5% in the quarter, as the Boston Options Exchange, of which TMX holds a 54% stake, continued to struggle on a year-over-year basis. BOX reported a 39% decline in volume in the second quarter from the year-ago period.
http://jlne.ws/afnTXY
NASDAQ OMX Reports Strong Second Quarter 2010 Results
MarketWatch
NEW YORK, July 27, 2010 (GLOBE NEWSWIRE) -- The NASDAQ OMX Group, Inc. ("NASDAQ OMX(R)") reported strong results for second quarter of 2010. Net income attributable to NASDAQ OMX for the second quarter of 2010 was $96 million, or $0.46 per diluted share, compared with $61 million, or $0.28 per diluted share, in the first quarter of 2010, and $69 million, or $0.33 per diluted share, in the second quarter of 2009.
http://jlne.ws/dg6dgZ
Nasdaq OMX Profit Beats Street, IDCG Now On Line
by Advanced Trading
http://jlne.ws/9xoOL7
Nasdaq OMX to buy Australia's Smarts Group
NEW YORK - Nasdaq OMX Group Inc. said Tuesday it will buy Smarts Group, an Australia-based market surveillance business that helps exchanges monitor compliance with trading rules.
http://jlne.ws/afDw5f
Warsaw Exchange Purchase From NYSE May Start Alliance (Correct)
By Nina Mehta, Bloomberg, Jul 27, 2010
The Warsaw Stock Exchange’s purchase of a trading platform from NYSE Euronext may be the first step in an alliance as the Polish bourse prepares to go public, said Duncan Niederauer, the U.S. company’s chief executive officer. Central Europe’s biggest equity venue by value agreed to acquire a cash and derivatives trading platform provided by NYSE Euronext’s Technologies, the two bourses said July 12 in a statement. They didn’t disclose the financial terms.
http://jlne.ws/drogJ2
Tehran Exchange Begins Trading Futures to Attract Investors
By Ali Sheikholeslami and Nandini Sukumar, Bloomberg
The Tehran Stock Exchange, home of the world’s second-best performing equity index, began offering derivatives based on local banks to diversify and attract foreign investors. Four futures contracts were “symbolically” traded at an opening ceremony yesterday, Hassan Ghalibaf-Asl, the exchange’s managing director, said in a phone interview today. The exchange is introducing six futures contracts based on Parsian Bank and Karafarin Bank, which will expire in two, four and six months, he said. The exchange hopes to increase the number of companies covered by futures contracts to at least 10 by March...“Sukuk and options may be the next instruments in line to be available for Iran’s traders,” Hossein Khezli-Kharazi, general secretary of the country’s Securities & Exchange Brokers Association, said by telephone July 22. Sukuk are bonds that comply with Islam’s Sharia law.
http://jlne.ws/drxUeq
SGX, STOXX and Eurex to bring EURO STOXX 50 Futures to Asia
26 July 2010 - Singapore Exchange (SGX) and Eurex, Europe's largest derivatives exchange, announced today that they are partnering to launch the SGX EURO STOXX 50 Index futures and options on futures for the first time in Asia. The partnership is based on a license agreement between the global index provider STOXX Limited and SGX.
http://jlne.ws/8XggSu
Eurex and SGX in cross-listing deal
By Jeremy Grant in London
Eurex and SGX, the Singapore exchange, said on Monday they would launch an Asian version of Euro Stoxx 50 index futures and options on futures, highlighting how product cross-listing deals between exchanges in different regions are becoming increasingly popular.
http://jlne.ws/c0E5Oy
INTERVIEW: Direct Edge Plans IPO Next Year, Expansion Into Market Data And Connection Services
WSJ.com
By Jacob Bunge, Kristina Peterson of DOW JONES NEWSWIRES
Stock market operator Direct Edge is planning expansion into market data and connection services as part of its long-range growth plan, which could include an initial public offering next year, according to its top executive. http://jlne.ws/cf3yEC
NOM and PHLX Announce Final List of Issues to be Added to the Penny Pilot Program August 2, 2010
Options Trader Alert #2010 - 48
* Effective August 2, 2010, 75 issues will be added to the Penny Pilot Program for one cent increment quoting on The NASDAQ Options MarketSM (NOM) and NASDAQ OMX PHLXSM (PHLX®).
* Refer to the NASDAQ OMX Trader® website for the complete list of Penny Pilot issues.
http://jlne.ws/c1rWVF
The World Federation of Exchanges Publishes 2010 First Half Market Statistics
Earth Times News
PARIS - (Business Wire) Exchanges across the globe saw the value of their indexes drop an average of 11.5% in USD terms in the first six months of the year, according to figures released today from the World Federation of Exchanges (WFE).
http://jlne.ws/cZX6rs
Now an Exchange, Direct Edge Looks to Add Revenue and Cut Costs
Traders Magazine Online News, July 22, 2010
James Ramage
Now that Direct Edge has officially launched its exchange operations, it can explore a potential revenue stream that other exchanges have tapped.
http://jlne.ws/bbXOzR
Nasdaq pulls plug on Baltic marketplace initiative
by Sophia Morrell 22 July 2010
Nasdaq OMX has decided to discontinue plans to launch a single marketplace for Baltic equities to be traded in euros under a multi-lateral trading facility (MTF) framework.
http://jlne.ws/c64vgl
Regulation
Certain U.S. securities law changes under the Dodd-Frank Wall Street Reform Act
Lexology
...One potential trap for issuers relates to warrants, options or other rights to acquire securities that were issued pursuant to an unregistered offering prior to July 21, 2010, and which contemplate exercise or conversion pursuant to the registration exemption provided for in Rule 506 of Regulation D by a holder who continues to qualify as an accredited investor
http://jlne.ws/d55qUu
Financial-Revamp Bill To Ease Exchanges' Rule-Making Process
By Jacob Bunge
Of DOW JONES NEWSWIRES
The financial-revamp legislation signed Wednesday by President Barack Obama will make it easier for financial exchanges to make new rules for their markets and tweak trading fees. A provision in the 2,300-page bill tightens up the timeline for regulators to approve or deny rule filings by self-regulatory organizations, like exchanges, and is expected to let market operators move more quickly to match rivals' moves on fees.
http://jlne.ws/9LxlPC
A piece-by-piece guide to financial overhaul law
By DANIEL WAGNER (AP)
WASHINGTON — Two years after the global financial system nearly collapsed, a vast revamping of regulation has been signed into law. The measure targets the risky banking and oversight failures that led to the last crisis. The goal is to make another crisis less likely — and, if it does happen, less costly for taxpayers.
http://jlne.ws/coWeaG
SEC to hire 800 more staff for its extra roles
By Aline van Duyn in New York
The Financial Times
The Securities and Exchange Commission, the US market regulator whose role will increase sharply under sweeping financial reforms about to be signed into law, will need hundreds of new staff to carry out its expanded responsibilities. Mary Schapiro, who chairs the SEC, told a congressional committee on Tuesday that it would need to add “approximately 800 new positions over time” to handle the extra work envisaged under the Dodd-Frank legislation.
http://jlne.ws/a3crUl
Technology
High-Frequency Programmers Revolt Over Pay
Forbes.com
http://jlne.ws/9pOYvn
OptionsCity Introduces Metro 2.2
Chicago, July 27, 2010 – OptionsCity™ today announced the availability of OptionsCity Metro 2.2. This latest release includes major enhancements to the user interface to better cater to Equity Options traders, as well as additional price modeling functionality. In this release, OptionsCity also exposes additional API (Application Programming Interface) functionality for clients integrating their proprietary algorithmic trading engines.
Patsystems Launches ‘XConnect’ As New Asp Hubs Open Across Asia Pacific
Patsystems is pleased to announce its new fully-managed Application Service Provider (ASP) offering, XConnect, as it launches three new ASP hubs across Asia Pacific.
http://jlne.ws/bAavRG
Strategy
Options Trader Alert for iShares Russell 2000 Index (IWM)
NEW YORK (Market Intellisearch) -- iShares Russell 2000 Index options saw high put activity today. A total of 393,613 put and 107,277 call contracts were traded raising a high Put/Call volume alert. Today's traded Put/Call ratio is 3.67. There were 3.67 puts traded for each call contract.
http://jlne.ws/avle8V
Hungry Traders Make for Risky Traders: Study
CNBC
http://jlne.ws/d1xW4e
Options strategy: Using a short time spread
Question: What do you do when the market has you spooked and the only thing you are sure of is more volatility?
Answer: A short time spread
By Edward LaPorte, FuturesMag
Equity market volatility has elevated after the most recent concerns about a possible double-dip recession. Even an eternal optimist would be hard pressed to find good news for the stock market. Yet, many contrarian investors find solace in all the negative news and have made a living being long as the markets climb a wall of worry. Traders find themselves asking, “What strategy is appropriate given what is going on?”
http://jlne.ws/bUopse
Reacting to the Market's Reactions
Volatile volatility is here to stay, and a seemingly staid options strategy can offer solace.
By STEVEN M. SEARS, Barron's
THOUGH IT SEEMS THAT stock investors are once more on a punishment march through an economic desert, don't let the Dow Jones Industrial Average's violent fluctuations scare you. At least not too much. The back-and-forth action is just the latest reminder that volatile volatility is a central fact of the 2010 market. The onset of second-quarter earnings season has provided new data points for bulls and bears to support their views, but not much else has really changed.
http://jlne.ws/9ZTuqD
McCall’s Call: An Anti-Volatility ETF Solution
IndexUniverse.com
If the CBOE Volatility Index, better known as the VIX, is any indication of the volatility in stocks, the last three months have been tough for investors to handle from day to day. The VIX spiked in May to levels seen only once in the last eight years, suggesting daily moves in stocks will be well above average, and I share that view.
http://jlne.ws/bLgFt4
Options Education
Don’t Gamble On Binary Options
Gordon Pape, Forbes.com
There are lots of ways to lose your money in this world but here's one I hadn't encountered before: binary option Web sites. They have become popular over the past few years with new ones appearing all the time: anyoption.com, bulloption.com, spotoption.com, binaryoption.com, etc. etc.
http://jlne.ws/9UBoB9
THE OPTIONS INDUSTRY COUNCIL ANNOUNCES EQUITY OPTIONS SEMINAR LINEUP FOR FALL 2010
CHICAGO (July 27, 2010) - The Options Industry Council (OIC) announced today its back-to-school schedule for investors and financial advisors. Classroom-style seminars focusing on basic, intermediate and advanced options topics such as volatility will be offered at select locations across the US. These free educational seminars are taught by experienced instructors from the various options exchanges and OIC professionals with the goal of educating investors on the responsible use of options in different market environments.
http://jlne.ws/b1cc1d
Understanding Long and Short Put Spreads
OIC launches the latest podcast, "Understanding Long and Short Put Spreads" in its new weekly podcast series, Options Talk with OIC.
http://jlne.ws/ai4hAU
Fair Warning: LEAPS Can Go POOF!
Posted on 7/22/2010 in Education by Zecco in The Options Insider
I learned about one risk of buying LEAPS the hard way.
LEAPS (Long-Term Equity Anticipation Securities) are options that expire in a year or more. That means they generally have a lot of time premium built into them.
http://jlne.ws/966BJ7
Interview: Jeanine Hightower of ISE
Jeanine Hightower is head of options business development at the International Securities Exchange. She spoke with Sarah Rudolph about forthcoming technology changes and products at ISE.
Q: How long have you had your present title?
A: Since the beginning of this year. Before that I held two other roles at ISE. I started six years ago as a relationship manager covering our market makers and EAMs [electronic access members, which are ISE’s non-market maker participants]. In the summer of 2006 I was promoted to director of business development, responsible for member relationships and business development, with a team reporting to me.
Before becoming head of business development, I had taken on responsibility for product management as well; then in January, I was promoted to head of options business development.
Q: How did you find your way to ISE?
A: When I started my career, I had not envisioned working for an options exchange, but was in the financial services industry working at Wheat First Butcher Singer, which eventually turned into Wachovia Securities. I was there for three years doing technology investment banking. Following that role, I became U.S. manager for customer accounts at Perfect Information, a UK-based document services and market data platform that was a competitor of FactSet. ISE was looking to augment their business development team and my skill set was a good fit for the position.
Q: What are your current responsibilities?
A: My team is responsible for managing member relationships, new business development, and product management. We attract business from new and existing members by way of regular contact to keep them informed of developments at ISE, seeking their feedback, addressing their needs and providing education on trading at ISE.
The product management group plans and delivers new features and order types to the market and tweaks and improves upon existing functionality offered at the exchange. I’m also part of the team that oversees the strategic development of the options business. We look at where we see ourselves competitively in the market and focus on market structure and pricing changes for ISE.
Q. Did you work on the ISE’s new front end?
A. We’ve had our PrecISE Trade front end in place since 2006, and I’ve headed that product since it was in development in 2005. We have about 500 users across more than 100 member firms. So far this year we have launched several key features in PrecISE, including a new order type for Reserve Spread Orders. These multi-legged options orders can have a part of the order displayed on the book with the balance hidden in reserve.
We continually upgrade the features offered through PrecISE. We have many key enhancements we’re looking to launch in the next 12 months. In fact, one of the important benefits of PrecISE is that we can immediately push out new innovations to the front end users. This minimizes the development work necessary for member firms and ensures that PrecISE users have immediate access to all new order types and functionality offered at ISE.
Q: What other new products and initiatives are you working on?
A: Step up and match order types for Facilitation and PIM Auctions. This order type will allow the contra side of an auction order to step up and match any price improvement responses.
We’re adding the ability for members executing complex options orders that include a stock component to allocate their stock on a post trade basis. Currently, that adjustment is possible with the option but not the stock leg.
We’re also working on additional new order types and order routing enhancements, as well as preparing for the introduction of our new trading system. The new system is scheduled to go live in November of this year and will allow us to grow our business to the next level.
Q: The ISE’s volume has been down slightly this year. What is behind that decrease and are there any specific steps the exchange is taking to build volume back up?
A: There has been a lot of talk about dividend trades. Including the volume in this type of trade skews the overall volume statistics to a degree. In June we would have seen our market share 1 percent higher at 21% rather than 20% if dividend trades were excluded. But the dividend trades are volume we really don’t seek to attract.
The area we have recently put a lot of focus on is improving our market quality. We are seeking to be on the NBBO more often, and our new modified maker-taker pricing scheme is certainly helping us achieve this. As a result of better market quality, we will be positioned to recapture some volume.
Q: What about the new DNR (Do Not Route) order type ISE just introduced?
A: The DNR order allows customers to better handle their executions. If ISE is not on the NBBO, a Customer order sent to us gets linked through intermarket linkage to an exchange with a quote at NBBO. Depending on the type of customer, orders sent to another exchange could incur a linkage fee. The DNR order prevents that from happening. When ISE receives an order and there is a better price at another market, we provide an auction in which members can match or improve upon that better price. If that doesn’t happen, an order tagged with DNR is cancelled rather than routed away. Customers have to opt in to this order type and there is flexibility to choose which orders will be treated this way.
Q: Will the new financial reform bill help speed SEC approval of the Eurex-ISE transatlantic link?
A: It’s too soon to tell, but we are very focused on moving forward with the Link and are working with our regulator to secure the necessary approvals.
As it relates to the broader effect of the bill on ISE, we are likely to be impacted more directly by the market structure issues currently under consideration at the SEC, such as flash orders, access fees, and sponsored access.
Q: What types of members are you focused on attracting?
A: As an exchange, our membership is limited to broker dealers. We cover all kinds of brokers, including interdealer brokers (IDBs), institutional participants, retail firms, market makers and routers. We don’t have a direct channel to the buy side because they have to come through a broker dealer to trade on the exchange.
Lead Stories
Quick View: Indian exchanges feel the love
Jeremy Grant, FT Trading Room
When George Soros, the billionaire investor, makes a bet, the world generally takes notice. It is no different this time with news, first reported by my colleagues in India, that Soros is set to buy Dubai Holding’s 4 per cent stake in the Bombay Stock Exchange...The two will explore the idea of FTSE Group licensing the FTSE 100 Index to the NSE, while the NSE may licence the S&P CNX Nifty (the “Nifty 50”) to the LSE for issuing and trading options and other index contracts.
http://jlne.ws/b1Wfxf
London exchange, NSE set to tango
Hindustan Times
http://jlne.ws/cLnGOf
CBOE CEO Brodsky Keen on Organic Growth, not M&A
Ann Saphir, Reuters, July 27
CHICAGO - CBOE Holdings Inc, the smallest publicly traded U.S. financial exchange even after its $339 million initial public offering last month, is not seeking to bulk up through a merger, CEO William Brodsky said.
"I look at it and I say, 'is it bigness that's the answer, or is it growth that's the answer?'," Brodsky said Monday in an interview at the Chicago Board Options Exchange's headquarters, across the street from CME Group Inc's trading floor.
http://jlne.ws/9VvhDT
The CBOE's volatility indicator or VIX stands at 23.21, after trading in a 21.86 to 23.57 range.
Automated Trader
The clear-cut break and close below the 200-day moving average Monday, (at 23.37 Tuesday) bode well for risk appetite, but more followthrough may be needed to cement the trend, traders say. The 21.86 low seen earlier is the loweest level seen in the VIX since May 3 (19.61).
http://jlne.ws/9icGit
BAML tinkers with tradable volatility index for tail risk hedging
Clare Dickinson, Risk.net
Bank of America Merrill Lynch (BAML) has created an Investible Volatility Index to serve the growing institutional demand in the US market for tail risk hedging.
"During the credit crisis, we started to see an overwhelming need from our investor group for tail risk hedges," says Yuriko Mita, co-head of Derivatives Sales at BAML in New York. Tail risk is the risk of an asset or portfolio moving more than three standard deviations from its current price.
http://jlne.ws/al4QlG
TABB Group Sees Low-Touch Order Channels Accounting for 62% of Buy Side Firms’ Options Trading by 2011
Evolving Market Structure and Complexity Drive Adoption of Trading System Technology
Options Algorithms to Represent 28% of Total Trading by 2011
NEW YORK & LONDON--(Business Wire)--The increasingly complex options markets is resulting in growing demand for tools and systems that can help make options trading more efficient, especially as traders are continuing to adopt sophisticated trading strategies, says TABB Group in a new annual research study, “US Electronic Options Trading 2010: Algorithms, DMA and Crossing Networks.” The proportion of order flow moving through low-touch channels is projected to rise to 62% by 2011, as options traders turn to electronic trading systems to manage order flow.
http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20100726005523&newsLang=en
CBOE Slips As Firms Start Coverage; Shares Appear Pricey
By David Benoit Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--CBOE Holdings Inc. (CBOE) shares fell Monday--just over a month after the company went public--as several Wall Street analysts initiated coverage of the stock; most agreed that the exchange's dominant position in options is a key asset, but said competition and light trading volume will keep a lid on already pricey shares.
http://jlne.ws/cZdpuZ
Underwriters & Analysts Turn Back on CBOE (CBOE)
24/7 Wall St.
CBOE Holdings Inc. (NASDAQ: CBOE) was already trading as a busted IPO as the stock was already under its formal IPO pricing. The $29.00 price was up 13% in June when the deal came public but closed Friday at $27.15.
http://jlne.ws/cL323d
Nifty 6000 December calls see foreign institutional interest
By Divya Khanna, DNA
Mumbai: The positive rub-off of the European banks’ stress tests led to the US markets closing at a new high. The Vix, the Chicago Board Options Exchange’s fear gauge, wound up at a low of 23%, spurring confidence among global investors. On the domestic front, the Nifty has hit an all-time high open interest of more than $18.4 billion, which leads us to the conclusion that a large move is expected this week. The markets have been steadily rising since the last two weeks touching new highs backed with fairly large volumes, indicating the strength of the buyers.
http://jlne.ws/9m597s
When VIX and VXV Get Out of Whack
The Options Insider
Posted on 7/23/2010 in Trading & Technology by Zecco
Everyone seems to be watching the VIX these days, but there’s another market indicator I like to watch: the VIX/VXV ratio.
http://jlne.ws/9Xamip
OptionsXpress Broker-Dealer Targets More Advisers Over Time
By Brett Philbin Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--OptionsXpress Holdings Inc.'s (OXPS) brokersXpress, a broker/dealer for registered investment advisers and independent brokers, plans to double the number of advisers who use its services over the next three to five years. In an interview with Dow Jones Newswires, brokersXpress Chief Executive Barry Metzger says the unit, which works with 300 advisers, would like to boost that number to 600.
http://jlne.ws/d5PFtT
Exchanges
2nd UPDATE: Deutsche Boerse 2Q Net Dips; Derivatives Give Lift
By William Launder Of DOW JONES NEWSWIRES
FRANKFURT (Dow Jones)--German exchange operator Deutsche Boerse AG (DB1.XE) late Tuesday reported a slight drop in second-quarter net profit as strong derivatives trading revenue was offset by restructuring costs and lower net interest income. Deutsche Boerse further said that restructuring measures launched earlier this year would cost around EUR40 million less than originally planned, or under EUR200 million. That will help Deutsche Boerse finish the year below its previously targeted cost estimate for 2010 of no more than EUR1.21 billion, the company said.
http://jlne.ws/cuTho3
TMX Group 2Q Net Up But Below Analyst Views; TSX Volumes Down 21%
WSJ.com JULY 28, 2010
DOW JONES NEWSWIRES
TMX Group Inc.'s (X.T) second-quarter earnings came in slightly ahead of year-earlier results, but shy of analyst expectations, on a 3% improvement in revenue. Volume of securities traded on TMX's Toronto Stock Exchange, Canada's senior stock market, dropped 21%, though it saw a 40% improvement in derivative trading volumes on its Montreal Exchange. Still, derivatives-market revenue only grew 5% in the quarter, as the Boston Options Exchange, of which TMX holds a 54% stake, continued to struggle on a year-over-year basis. BOX reported a 39% decline in volume in the second quarter from the year-ago period.
http://jlne.ws/afnTXY
NASDAQ OMX Reports Strong Second Quarter 2010 Results
MarketWatch
NEW YORK, July 27, 2010 (GLOBE NEWSWIRE) -- The NASDAQ OMX Group, Inc. ("NASDAQ OMX(R)") reported strong results for second quarter of 2010. Net income attributable to NASDAQ OMX for the second quarter of 2010 was $96 million, or $0.46 per diluted share, compared with $61 million, or $0.28 per diluted share, in the first quarter of 2010, and $69 million, or $0.33 per diluted share, in the second quarter of 2009.
http://jlne.ws/dg6dgZ
Nasdaq OMX Profit Beats Street, IDCG Now On Line
by Advanced Trading
http://jlne.ws/9xoOL7
Nasdaq OMX to buy Australia's Smarts Group
NEW YORK - Nasdaq OMX Group Inc. said Tuesday it will buy Smarts Group, an Australia-based market surveillance business that helps exchanges monitor compliance with trading rules.
http://jlne.ws/afDw5f
Warsaw Exchange Purchase From NYSE May Start Alliance (Correct)
By Nina Mehta, Bloomberg, Jul 27, 2010
The Warsaw Stock Exchange’s purchase of a trading platform from NYSE Euronext may be the first step in an alliance as the Polish bourse prepares to go public, said Duncan Niederauer, the U.S. company’s chief executive officer. Central Europe’s biggest equity venue by value agreed to acquire a cash and derivatives trading platform provided by NYSE Euronext’s Technologies, the two bourses said July 12 in a statement. They didn’t disclose the financial terms.
http://jlne.ws/drogJ2
Tehran Exchange Begins Trading Futures to Attract Investors
By Ali Sheikholeslami and Nandini Sukumar, Bloomberg
The Tehran Stock Exchange, home of the world’s second-best performing equity index, began offering derivatives based on local banks to diversify and attract foreign investors. Four futures contracts were “symbolically” traded at an opening ceremony yesterday, Hassan Ghalibaf-Asl, the exchange’s managing director, said in a phone interview today. The exchange is introducing six futures contracts based on Parsian Bank and Karafarin Bank, which will expire in two, four and six months, he said. The exchange hopes to increase the number of companies covered by futures contracts to at least 10 by March...“Sukuk and options may be the next instruments in line to be available for Iran’s traders,” Hossein Khezli-Kharazi, general secretary of the country’s Securities & Exchange Brokers Association, said by telephone July 22. Sukuk are bonds that comply with Islam’s Sharia law.
http://jlne.ws/drxUeq
SGX, STOXX and Eurex to bring EURO STOXX 50 Futures to Asia
26 July 2010 - Singapore Exchange (SGX) and Eurex, Europe's largest derivatives exchange, announced today that they are partnering to launch the SGX EURO STOXX 50 Index futures and options on futures for the first time in Asia. The partnership is based on a license agreement between the global index provider STOXX Limited and SGX.
http://jlne.ws/8XggSu
Eurex and SGX in cross-listing deal
By Jeremy Grant in London
Eurex and SGX, the Singapore exchange, said on Monday they would launch an Asian version of Euro Stoxx 50 index futures and options on futures, highlighting how product cross-listing deals between exchanges in different regions are becoming increasingly popular.
http://jlne.ws/c0E5Oy
INTERVIEW: Direct Edge Plans IPO Next Year, Expansion Into Market Data And Connection Services
WSJ.com
By Jacob Bunge, Kristina Peterson of DOW JONES NEWSWIRES
Stock market operator Direct Edge is planning expansion into market data and connection services as part of its long-range growth plan, which could include an initial public offering next year, according to its top executive. http://jlne.ws/cf3yEC
NOM and PHLX Announce Final List of Issues to be Added to the Penny Pilot Program August 2, 2010
Options Trader Alert #2010 - 48
* Effective August 2, 2010, 75 issues will be added to the Penny Pilot Program for one cent increment quoting on The NASDAQ Options MarketSM (NOM) and NASDAQ OMX PHLXSM (PHLX®).
* Refer to the NASDAQ OMX Trader® website for the complete list of Penny Pilot issues.
http://jlne.ws/c1rWVF
The World Federation of Exchanges Publishes 2010 First Half Market Statistics
Earth Times News
PARIS - (Business Wire) Exchanges across the globe saw the value of their indexes drop an average of 11.5% in USD terms in the first six months of the year, according to figures released today from the World Federation of Exchanges (WFE).
http://jlne.ws/cZX6rs
Now an Exchange, Direct Edge Looks to Add Revenue and Cut Costs
Traders Magazine Online News, July 22, 2010
James Ramage
Now that Direct Edge has officially launched its exchange operations, it can explore a potential revenue stream that other exchanges have tapped.
http://jlne.ws/bbXOzR
Nasdaq pulls plug on Baltic marketplace initiative
by Sophia Morrell 22 July 2010
Nasdaq OMX has decided to discontinue plans to launch a single marketplace for Baltic equities to be traded in euros under a multi-lateral trading facility (MTF) framework.
http://jlne.ws/c64vgl
Regulation
Certain U.S. securities law changes under the Dodd-Frank Wall Street Reform Act
Lexology
...One potential trap for issuers relates to warrants, options or other rights to acquire securities that were issued pursuant to an unregistered offering prior to July 21, 2010, and which contemplate exercise or conversion pursuant to the registration exemption provided for in Rule 506 of Regulation D by a holder who continues to qualify as an accredited investor
http://jlne.ws/d55qUu
Financial-Revamp Bill To Ease Exchanges' Rule-Making Process
By Jacob Bunge
Of DOW JONES NEWSWIRES
The financial-revamp legislation signed Wednesday by President Barack Obama will make it easier for financial exchanges to make new rules for their markets and tweak trading fees. A provision in the 2,300-page bill tightens up the timeline for regulators to approve or deny rule filings by self-regulatory organizations, like exchanges, and is expected to let market operators move more quickly to match rivals' moves on fees.
http://jlne.ws/9LxlPC
A piece-by-piece guide to financial overhaul law
By DANIEL WAGNER (AP)
WASHINGTON — Two years after the global financial system nearly collapsed, a vast revamping of regulation has been signed into law. The measure targets the risky banking and oversight failures that led to the last crisis. The goal is to make another crisis less likely — and, if it does happen, less costly for taxpayers.
http://jlne.ws/coWeaG
SEC to hire 800 more staff for its extra roles
By Aline van Duyn in New York
The Financial Times
The Securities and Exchange Commission, the US market regulator whose role will increase sharply under sweeping financial reforms about to be signed into law, will need hundreds of new staff to carry out its expanded responsibilities. Mary Schapiro, who chairs the SEC, told a congressional committee on Tuesday that it would need to add “approximately 800 new positions over time” to handle the extra work envisaged under the Dodd-Frank legislation.
http://jlne.ws/a3crUl
Technology
High-Frequency Programmers Revolt Over Pay
Forbes.com
http://jlne.ws/9pOYvn
OptionsCity Introduces Metro 2.2
Chicago, July 27, 2010 – OptionsCity™ today announced the availability of OptionsCity Metro 2.2. This latest release includes major enhancements to the user interface to better cater to Equity Options traders, as well as additional price modeling functionality. In this release, OptionsCity also exposes additional API (Application Programming Interface) functionality for clients integrating their proprietary algorithmic trading engines.
Patsystems Launches ‘XConnect’ As New Asp Hubs Open Across Asia Pacific
Patsystems is pleased to announce its new fully-managed Application Service Provider (ASP) offering, XConnect, as it launches three new ASP hubs across Asia Pacific.
http://jlne.ws/bAavRG
Strategy
Options Trader Alert for iShares Russell 2000 Index (IWM)
NEW YORK (Market Intellisearch) -- iShares Russell 2000 Index options saw high put activity today. A total of 393,613 put and 107,277 call contracts were traded raising a high Put/Call volume alert. Today's traded Put/Call ratio is 3.67. There were 3.67 puts traded for each call contract.
http://jlne.ws/avle8V
Hungry Traders Make for Risky Traders: Study
CNBC
http://jlne.ws/d1xW4e
Options strategy: Using a short time spread
Question: What do you do when the market has you spooked and the only thing you are sure of is more volatility?
Answer: A short time spread
By Edward LaPorte, FuturesMag
Equity market volatility has elevated after the most recent concerns about a possible double-dip recession. Even an eternal optimist would be hard pressed to find good news for the stock market. Yet, many contrarian investors find solace in all the negative news and have made a living being long as the markets climb a wall of worry. Traders find themselves asking, “What strategy is appropriate given what is going on?”
http://jlne.ws/bUopse
Reacting to the Market's Reactions
Volatile volatility is here to stay, and a seemingly staid options strategy can offer solace.
By STEVEN M. SEARS, Barron's
THOUGH IT SEEMS THAT stock investors are once more on a punishment march through an economic desert, don't let the Dow Jones Industrial Average's violent fluctuations scare you. At least not too much. The back-and-forth action is just the latest reminder that volatile volatility is a central fact of the 2010 market. The onset of second-quarter earnings season has provided new data points for bulls and bears to support their views, but not much else has really changed.
http://jlne.ws/9ZTuqD
McCall’s Call: An Anti-Volatility ETF Solution
IndexUniverse.com
If the CBOE Volatility Index, better known as the VIX, is any indication of the volatility in stocks, the last three months have been tough for investors to handle from day to day. The VIX spiked in May to levels seen only once in the last eight years, suggesting daily moves in stocks will be well above average, and I share that view.
http://jlne.ws/bLgFt4
Options Education
Don’t Gamble On Binary Options
Gordon Pape, Forbes.com
There are lots of ways to lose your money in this world but here's one I hadn't encountered before: binary option Web sites. They have become popular over the past few years with new ones appearing all the time: anyoption.com, bulloption.com, spotoption.com, binaryoption.com, etc. etc.
http://jlne.ws/9UBoB9
THE OPTIONS INDUSTRY COUNCIL ANNOUNCES EQUITY OPTIONS SEMINAR LINEUP FOR FALL 2010
CHICAGO (July 27, 2010) - The Options Industry Council (OIC) announced today its back-to-school schedule for investors and financial advisors. Classroom-style seminars focusing on basic, intermediate and advanced options topics such as volatility will be offered at select locations across the US. These free educational seminars are taught by experienced instructors from the various options exchanges and OIC professionals with the goal of educating investors on the responsible use of options in different market environments.
http://jlne.ws/b1cc1d
Understanding Long and Short Put Spreads
OIC launches the latest podcast, "Understanding Long and Short Put Spreads" in its new weekly podcast series, Options Talk with OIC.
http://jlne.ws/ai4hAU
Fair Warning: LEAPS Can Go POOF!
Posted on 7/22/2010 in Education by Zecco in The Options Insider
I learned about one risk of buying LEAPS the hard way.
LEAPS (Long-Term Equity Anticipation Securities) are options that expire in a year or more. That means they generally have a lot of time premium built into them.
http://jlne.ws/966BJ7
Interview: Jeanine Hightower of ISE
Interview: Jeanine Hightower of ISE
Jeanine Hightower is head of options business development at the International Securities Exchange. She spoke with Sarah Rudolph about forthcoming technology changes and products at ISE.
Q: How long have you had your present title?
A: Since the beginning of this year. Before that I held two other roles at ISE. I started six years ago as a relationship manager covering our market makers and EAMs [electronic access members, which are ISE’s non-market maker participants]. In the summer of 2006 I was promoted to director of business development, responsible for member relationships and business development, with a team reporting to me.
Before becoming head of business development, I had taken on responsibility for product management as well; then in January, I was promoted to head of options business development.
Q: How did you find your way to ISE?
A: When I started my career, I had not envisioned working for an options exchange, but was in the financial services industry working at Wheat First Butcher Singer, which eventually turned into Wachovia Securities. I was there for three years doing technology investment banking. Following that role, I became U.S. manager for customer accounts at Perfect Information, a UK-based document services and market data platform that was a competitor of FactSet. ISE was looking to augment their business development team and my skill set was a good fit for the position.
Q: What are your current responsibilities?
A: My team is responsible for managing member relationships, new business development, and product management. We attract business from new and existing members by way of regular contact to keep them informed of developments at ISE, seeking their feedback, addressing their needs and providing education on trading at ISE.
The product management group plans and delivers new features and order types to the market and tweaks and improves upon existing functionality offered at the exchange. I’m also part of the team that oversees the strategic development of the options business. We look at where we see ourselves competitively in the market and focus on market structure and pricing changes for ISE.
Q. Did you work on the ISE’s new front end?
A. We’ve had our PrecISE Trade front end in place since 2006, and I’ve headed that product since it was in development in 2005. We have about 500 users across more than 100 member firms. So far this year we have launched several key features in PrecISE, including a new order type for Reserve Spread Orders. These multi-legged options orders can have a part of the order displayed on the book with the balance hidden in reserve.
We continually upgrade the features offered through PrecISE. We have many key enhancements we’re looking to launch in the next 12 months. In fact, one of the important benefits of PrecISE is that we can immediately push out new innovations to the front end users. This minimizes the development work necessary for member firms and ensures that PrecISE users have immediate access to all new order types and functionality offered at ISE.
Q: What other new products and initiatives are you working on?
A: Step up and match order types for Facilitation and PIM Auctions. This order type will allow the contra side of an auction order to step up and match any price improvement responses.
We’re adding the ability for members executing complex options orders that include a stock component to allocate their stock on a post trade basis. Currently, that adjustment is possible with the option but not the stock leg.
We’re also working on additional new order types and order routing enhancements, as well as preparing for the introduction of our new trading system. The new system is scheduled to go live in November of this year and will allow us to grow our business to the next level.
Q: The ISE’s volume has been down slightly this year. What is behind that decrease and are there any specific steps the exchange is taking to build volume back up?
A: There has been a lot of talk about dividend trades. Including the volume in this type of trade skews the overall volume statistics to a degree. In June we would have seen our market share 1 percent higher at 21% rather than 20% if dividend trades were excluded. But the dividend trades are volume we really don’t seek to attract.
The area we have recently put a lot of focus on is improving our market quality. We are seeking to be on the NBBO more often, and our new modified maker-taker pricing scheme is certainly helping us achieve this. As a result of better market quality, we will be positioned to recapture some volume.
Q: What about the new DNR (Do Not Route) order type ISE just introduced?
A: The DNR order allows customers to better handle their executions. If ISE is not on the NBBO, a Customer order sent to us gets linked through intermarket linkage to an exchange with a quote at NBBO. Depending on the type of customer, orders sent to another exchange could incur a linkage fee. The DNR order prevents that from happening. When ISE receives an order and there is a better price at another market, we provide an auction in which members can match or improve upon that better price. If that doesn’t happen, an order tagged with DNR is cancelled rather than routed away. Customers have to opt in to this order type and there is flexibility to choose which orders will be treated this way.
Q: Will the new financial reform bill help speed SEC approval of the Eurex-ISE transatlantic link?
A: It’s too soon to tell, but we are very focused on moving forward with the Link and are working with our regulator to secure the necessary approvals.
As it relates to the broader effect of the bill on ISE, we are likely to be impacted more directly by the market structure issues currently under consideration at the SEC, such as flash orders, access fees, and sponsored access.
Q: What types of members are you focused on attracting?
A: As an exchange, our membership is limited to broker dealers. We cover all kinds of brokers, including interdealer brokers (IDBs), institutional participants, retail firms, market makers and routers. We don’t have a direct channel to the buy side because they have to come through a broker dealer to trade on the exchange.
Jeanine Hightower is head of options business development at the International Securities Exchange. She spoke with Sarah Rudolph about forthcoming technology changes and products at ISE.
Q: How long have you had your present title?
A: Since the beginning of this year. Before that I held two other roles at ISE. I started six years ago as a relationship manager covering our market makers and EAMs [electronic access members, which are ISE’s non-market maker participants]. In the summer of 2006 I was promoted to director of business development, responsible for member relationships and business development, with a team reporting to me.
Before becoming head of business development, I had taken on responsibility for product management as well; then in January, I was promoted to head of options business development.
Q: How did you find your way to ISE?
A: When I started my career, I had not envisioned working for an options exchange, but was in the financial services industry working at Wheat First Butcher Singer, which eventually turned into Wachovia Securities. I was there for three years doing technology investment banking. Following that role, I became U.S. manager for customer accounts at Perfect Information, a UK-based document services and market data platform that was a competitor of FactSet. ISE was looking to augment their business development team and my skill set was a good fit for the position.
Q: What are your current responsibilities?
A: My team is responsible for managing member relationships, new business development, and product management. We attract business from new and existing members by way of regular contact to keep them informed of developments at ISE, seeking their feedback, addressing their needs and providing education on trading at ISE.
The product management group plans and delivers new features and order types to the market and tweaks and improves upon existing functionality offered at the exchange. I’m also part of the team that oversees the strategic development of the options business. We look at where we see ourselves competitively in the market and focus on market structure and pricing changes for ISE.
Q. Did you work on the ISE’s new front end?
A. We’ve had our PrecISE Trade front end in place since 2006, and I’ve headed that product since it was in development in 2005. We have about 500 users across more than 100 member firms. So far this year we have launched several key features in PrecISE, including a new order type for Reserve Spread Orders. These multi-legged options orders can have a part of the order displayed on the book with the balance hidden in reserve.
We continually upgrade the features offered through PrecISE. We have many key enhancements we’re looking to launch in the next 12 months. In fact, one of the important benefits of PrecISE is that we can immediately push out new innovations to the front end users. This minimizes the development work necessary for member firms and ensures that PrecISE users have immediate access to all new order types and functionality offered at ISE.
Q: What other new products and initiatives are you working on?
A: Step up and match order types for Facilitation and PIM Auctions. This order type will allow the contra side of an auction order to step up and match any price improvement responses.
We’re adding the ability for members executing complex options orders that include a stock component to allocate their stock on a post trade basis. Currently, that adjustment is possible with the option but not the stock leg.
We’re also working on additional new order types and order routing enhancements, as well as preparing for the introduction of our new trading system. The new system is scheduled to go live in November of this year and will allow us to grow our business to the next level.
Q: The ISE’s volume has been down slightly this year. What is behind that decrease and are there any specific steps the exchange is taking to build volume back up?
A: There has been a lot of talk about dividend trades. Including the volume in this type of trade skews the overall volume statistics to a degree. In June we would have seen our market share 1 percent higher at 21% rather than 20% if dividend trades were excluded. But the dividend trades are volume we really don’t seek to attract.
The area we have recently put a lot of focus on is improving our market quality. We are seeking to be on the NBBO more often, and our new modified maker-taker pricing scheme is certainly helping us achieve this. As a result of better market quality, we will be positioned to recapture some volume.
Q: What about the new DNR (Do Not Route) order type ISE just introduced?
A: The DNR order allows customers to better handle their executions. If ISE is not on the NBBO, a Customer order sent to us gets linked through intermarket linkage to an exchange with a quote at NBBO. Depending on the type of customer, orders sent to another exchange could incur a linkage fee. The DNR order prevents that from happening. When ISE receives an order and there is a better price at another market, we provide an auction in which members can match or improve upon that better price. If that doesn’t happen, an order tagged with DNR is cancelled rather than routed away. Customers have to opt in to this order type and there is flexibility to choose which orders will be treated this way.
Q: Will the new financial reform bill help speed SEC approval of the Eurex-ISE transatlantic link?
A: It’s too soon to tell, but we are very focused on moving forward with the Link and are working with our regulator to secure the necessary approvals.
As it relates to the broader effect of the bill on ISE, we are likely to be impacted more directly by the market structure issues currently under consideration at the SEC, such as flash orders, access fees, and sponsored access.
Q: What types of members are you focused on attracting?
A: As an exchange, our membership is limited to broker dealers. We cover all kinds of brokers, including interdealer brokers (IDBs), institutional participants, retail firms, market makers and routers. We don’t have a direct channel to the buy side because they have to come through a broker dealer to trade on the exchange.
July 28, 2010: Indian Exchanges Feel the Love
LEAD STORIES
Quick View: Indian exchanges feel the love
Jeremy Grant, FT Trading Room
When George Soros, the billionaire investor, makes a bet, the world generally takes notice. It is no different this time with news, first reported by my colleagues in India, that Soros is set to buy Dubai Holding’s 4 per cent stake in the Bombay Stock Exchange...The two will explore the idea of FTSE Group licensing the FTSE 100 Index to the NSE, while the NSE may licence the S&P CNX Nifty (the “Nifty 50”) to the LSE for issuing and trading options and other index contracts.
http://jlne.ws/b1Wfxf
London exchange, NSE set to tango
Hindustan Times
http://jlne.ws/cLnGOf
Quick View: Indian exchanges feel the love
Jeremy Grant, FT Trading Room
When George Soros, the billionaire investor, makes a bet, the world generally takes notice. It is no different this time with news, first reported by my colleagues in India, that Soros is set to buy Dubai Holding’s 4 per cent stake in the Bombay Stock Exchange...The two will explore the idea of FTSE Group licensing the FTSE 100 Index to the NSE, while the NSE may licence the S&P CNX Nifty (the “Nifty 50”) to the LSE for issuing and trading options and other index contracts.
http://jlne.ws/b1Wfxf
London exchange, NSE set to tango
Hindustan Times
http://jlne.ws/cLnGOf
EXCHANGES
2nd UPDATE: Deutsche Boerse 2Q Net Dips; Derivatives Give Lift
By William Launder Of DOW JONES NEWSWIRES
FRANKFURT (Dow Jones)--German exchange operator Deutsche Boerse AG (DB1.XE) late Tuesday reported a slight drop in second-quarter net profit as strong derivatives trading revenue was offset by restructuring costs and lower net interest income. Deutsche Boerse further said that restructuring measures launched earlier this year would cost around EUR40 million less than originally planned, or under EUR200 million. That will help Deutsche Boerse finish the year below its previously targeted cost estimate for 2010 of no more than EUR1.21 billion, the company said.
http://jlne.ws/cuTho3
TMX Group 2Q Net Up But Below Analyst Views; TSX Volumes Down 21%
WSJ.com JULY 28, 2010
DOW JONES NEWSWIRES
TMX Group Inc.'s (X.T) second-quarter earnings came in slightly ahead of year-earlier results, but shy of analyst expectations, on a 3% improvement in revenue. Volume of securities traded on TMX's Toronto Stock Exchange, Canada's senior stock market, dropped 21%, though it saw a 40% improvement in derivative trading volumes on its Montreal Exchange. Still, derivatives-market revenue only grew 5% in the quarter, as the Boston Options Exchange, of which TMX holds a 54% stake, continued to struggle on a year-over-year basis. BOX reported a 39% decline in volume in the second quarter from the year-ago period.
http://jlne.ws/afnTXY
TECHNOLOGY
High-Frequency Programmers Revolt Over Pay
Forbes.com
http://jlne.ws/9pOYvn
STRATEGY
Options Trader Alert for iShares Russell 2000 Index (IWM)
NEW YORK (Market Intellisearch) -- iShares Russell 2000 Index options saw high put activity today. A total of 393,613 put and 107,277 call contracts were traded raising a high Put/Call volume alert. Today's traded Put/Call ratio is 3.67. There were 3.67 puts traded for each call contract.
http://jlne.ws/avle8V
OPTIONS EDUCATION
Don’t Gamble On Binary Options
Gordon Pape, Forbes.com
There are lots of ways to lose your money in this world but here's one I hadn't encountered before: binary option Web sites. They have become popular over the past few years with new ones appearing all the time: anyoption.com, bulloption.com, spotoption.com, binaryoption.com, etc. etc.
http://jlne.ws/9UBoB9
Tuesday, July 27, 2010
July 27, 2010: CBOE CEO Brodsky Keen on Organic Growth, not M&A
LEAD STORIES
CBOE CEO Brodsky Keen on Organic Growth, not M&A
Ann Saphir, Reuters, July 27
CHICAGO - CBOE Holdings Inc, the smallest publicly traded U.S. financial exchange even after its $339 million initial public offering last month, is not seeking to bulk up through a merger, CEO William Brodsky said.
"I look at it and I say, 'is it bigness that's the answer, or is it growth that's the answer?'," Brodsky said Monday in an interview at the Chicago Board Options Exchange's headquarters, across the street from CME Group Inc's trading floor.
http://jlne.ws/9VvhDT
CBOE CEO Brodsky Keen on Organic Growth, not M&A
Ann Saphir, Reuters, July 27
CHICAGO - CBOE Holdings Inc, the smallest publicly traded U.S. financial exchange even after its $339 million initial public offering last month, is not seeking to bulk up through a merger, CEO William Brodsky said.
"I look at it and I say, 'is it bigness that's the answer, or is it growth that's the answer?'," Brodsky said Monday in an interview at the Chicago Board Options Exchange's headquarters, across the street from CME Group Inc's trading floor.
http://jlne.ws/9VvhDT
The CBOE's volatility indicator or VIX stands at 23.21, after trading in a 21.86 to 23.57 range.
Automated Trader
The clear-cut break and close below the 200-day moving average Monday, (at 23.37 Tuesday) bode well for risk appetite, but more followthrough may be needed to cement the trend, traders say. The 21.86 low seen earlier is the loweest level seen in the VIX since May 3 (19.61).
http://jlne.ws/9icGit
BAML tinkers with tradable volatility index for tail risk hedging
Clare Dickinson, Risk.net
Bank of America Merrill Lynch (BAML) has created an Investible Volatility Index to serve the growing institutional demand in the US market for tail risk hedging.
"During the credit crisis, we started to see an overwhelming need from our investor group for tail risk hedges," says Yuriko Mita, co-head of Derivatives Sales at BAML in New York. Tail risk is the risk of an asset or portfolio moving more than three standard deviations from its current price.
http://jlne.ws/al4QlG
EXCHANGES
NASDAQ OMX Reports Strong Second Quarter 2010 Results
MarketWatch
NEW YORK, July 27, 2010 (GLOBE NEWSWIRE) -- The NASDAQ OMX Group, Inc. ("NASDAQ OMX(R)") reported strong results for second quarter of 2010. Net income attributable to NASDAQ OMX for the second quarter of 2010 was $96 million, or $0.46 per diluted share, compared with $61 million, or $0.28 per diluted share, in the first quarter of 2010, and $69 million, or $0.33 per diluted share, in the second quarter of 2009.
http://jlne.ws/dg6dgZ
Nasdaq OMX Profit Beats Street, IDCG Now On Line
by Advanced Trading
http://jlne.ws/9xoOL7
Nasdaq OMX to buy Australia's Smarts Group
NEW YORK - Nasdaq OMX Group Inc. said Tuesday it will buy Smarts Group, an Australia-based market surveillance business that helps exchanges monitor compliance with trading rules.
http://jlne.ws/afDw5f
Warsaw Exchange Purchase From NYSE May Start Alliance (Correct)
By Nina Mehta, Bloomberg, Jul 27, 2010
The Warsaw Stock Exchange’s purchase of a trading platform from NYSE Euronext may be the first step in an alliance as the Polish bourse prepares to go public, said Duncan Niederauer, the U.S. company’s chief executive officer. Central Europe’s biggest equity venue by value agreed to acquire a cash and derivatives trading platform provided by NYSE Euronext’s Technologies, the two bourses said July 12 in a statement. They didn’t disclose the financial terms.
http://jlne.ws/drogJ2
TECHNOLOGY
OptionsCity Introduces Metro 2.2
Chicago, July 27, 2010 – OptionsCity™ today announced the availability of OptionsCity Metro 2.2. This latest release includes major enhancements to the user interface to better cater to Equity Options traders, as well as additional price modeling functionality. In this release, OptionsCity also exposes additional API (Application Programming Interface) functionality for clients integrating their proprietary algorithmic trading engines.
STRATEGY
Hungry Traders Make for Risky Traders: Study
CNBC
http://jlne.ws/d1xW4e
OPTIONS EDUCATION
THE OPTIONS INDUSTRY COUNCIL ANNOUNCES EQUITY OPTIONS SEMINAR LINEUP FOR FALL 2010
CHICAGO (July 27, 2010) - The Options Industry Council (OIC) announced today its back-to-school schedule for investors and financial advisors. Classroom-style seminars focusing on basic, intermediate and advanced options topics such as volatility will be offered at select locations across the US. These free educational seminars are taught by experienced instructors from the various options exchanges and OIC professionals with the goal of educating investors on the responsible use of options in different market environments.
http://jlne.ws/b1cc1d
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