| March 09, 2016 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Manipulation or Brilliant Trade? The Curious Case of Don Wilson
Matthew Leising -Bloomberg
When Don Wilson spotted a chance in 2010 to take another bite at a trade that had mostly eluded him as a younger man, he never expected he'd be defending his actions six years later in a Manhattan federal courtroom.
bloom.bg/1UScJBM
***A Note From Don Wilson of DRW
After a week as JLN guest editor, I've returned for one more day as one of today's headlines hits a personal note. I will keep the commentary brief, and let the publicly available facts speak for themselves.
I am more baffled now than I was two-and-a-half years ago when these charges were brought against my firm and me. At the time, I didn't know about the existence of the NFA report, or that the CFTC had evidence of our efforts to transact with MF Global when it accused us of cancelling orders to avoid transacting - both of which are described in today's Bloomberg article. Now that we know more facts, I have to wonder: what were the Commissioners told before authorizing the Complaint? Are the Commissioners even aware of the position the government's proposed "expert" has taken, namely that unmatched bids and offers in illiquid markets do not contribute to price discovery? (Click HERE to see the CFTC expert witness report.) The lack of transparency in this case is eye opening.
There has been other interest in this case, when the complaint was first filed and more recently. Take a look to get a fuller picture of what has occurred.
Big Trader Strikes Back Against CFTC - Wall Street Journal
Exchanges Clash With Regulators Over Market-Manipulation Case - Wall Street Journal
Firm Sues to Stop CFTC From Calling It a Bunch of Cheaters - Bloomberg View
Enjoin This! - Streetwise Professor
| | | | | | Lead Stories | | | Strategy Trading Blessing to Options Industry Volumes
Alicia Reilly - TABB Forum
New technology that gives the trader the ability to execute complex orders - two or more option legs with or without stock - simplifies the execution process and may prevent a further decline in options volume. Last year, complex trading emerged as the dominant source of options volume, accounting for 60%-65% of total volume. This was up from around 50% in 2014, according to sources. This may have been a result of investors recognizing that trading complex strategies could reverse the recent shrinking of the sector. We have noticed a cycle of momentum as many traders who use a complex strategy are increasingly seeking to roll those strategies. Thus, a position is created which involves opening 1,000 contracts that become 2,000 contracts when those contracts are closed in the front month and re-opened further along the calendar spread.
goo.gl/IJprwd
FX Option Volumes Flat Despite Brexit Vote
Shanny Basar - Markets Media
The upcoming Brexit referendum has not affected the volume of sterling foreign exchange options against the euro or US dollar according to an analysis of US swap data repositories by Clarus Financial Technology. The UK government has announced that a referendum on the UK's membership of the European Union will be held on 23 June in which voters will decide whether to remain or leave.
goo.gl/mz4Jjy
****SD: Another hiccup in the theory that volatility = volume. Here is the piece from Clarus.
OCC News March/April 2016
OCC
The latest edition of OCC News is out! Read stories about OCC's development and strategy for 2016, the renewal of OCC's liquidity program with CalPERS and OIC taking options education to Capitol Hill and check out a sneak peek of the 2015 annual report.
goo.gl/U6mXou
Hedge funds back off bets on China devaluation
Patrick Graham - Reuters
Two of the three types of hedge funds which bet heavily on a sharp devaluation of China's yuan last year have backed off the trade, leaving only some ultra-bearish "Black Swan" investors holding long-term bets, fund managers and bankers said. Hedge fund sales desks at four of Wall Street's biggest banks told Reuters that many U.S. players had made money betting against China by the time Beijing took aggressive steps to prop up the currency in early January.
reut.rs/1Yw2G5B
Hedgers Can Trigger Sell-off In Crude Price
Hellenic Shipping News Worldwide
Transactions in the commodity market from August 2015 till year end clearly suggest that the situation won't be different in the coming months of 2016. Further five months of crude oil prices showing weakness and instability, as November, December and January itself turned out to be a disastrous month for oil bulls. The prospects of a second half-year price rebound have evaporated and there is a clear indication that the market fundamentals is not supportive for the crude oil price to show some stability. WTI crude oil itself tasted the previous bottom of $27 in February 2016, creating a record of 12 years low. The real rout in the crude oil started during last November when in spite of glut of the commodity in the US, it wasn't ready to apply any production cut.
goo.gl/MrvuQf
| | | | | | Exchanges | | | ICE Said to Start Lining Up Financing for LSE Bidding War
Manuel Baigorri, Dinesh Nair and Aaron Kirchfeld - Bloomberg
Intercontinental Exchange Inc. is lining up financing for a bid for the London Stock Exchange Group Plc, according to people familiar with the matter, as it prepares to go head to head with Deutsche Boerse AG to win control of the U.K. company. ICE, which is working with Morgan Stanley and Moelis & Co. to explore a takeover of LSE, is in discussions with banks to fund a formal offer in the coming weeks, the people said, asking not to be identified as the deliberations are private. Talks are at an early stage, no final decision has been made on the timing or size of the bid, and ICE could still decide against an offer, they said.
bloom.bg/1R4HLR4
****SD: I can almost hear the swords being sharpened for battle. But that might just be because of the Game of Thrones trailer I watched his morning. (The following are some random stories that connect GoT and investing: Lessons in leadership for advisers from 'Game of Thrones', The financial lessons of 'Game of Thrones' and Winter is Coming: Lessons from Game of Thrones on Investing. None of them are quite as good though as RCM's Star Wars comparison from a ways back.)
Reuters Reports Deutsche Boerse London Stock Exchange Targeting Cost Savings In Excess Of EUR 300 Million
Press Release
Reuters reports that Deutsche Boerse and the London Stock Exchange are targeting cost savings of more than EUR 300 million, once a merger of the two exchanges is completed, sources familiar with the matter said today.
goo.gl/IMV0CA
Deutsche Boerse reshuffles Eurex leadership
The Trade News
Deutsche Boerse has appointed Thomas Book and Erik Muller to lead its derivatives exchange and clearing house respectively, as it looks to finalise restructuring its markets and products division. Book will lead the exchange as part of his new role as head of derivatives market trading at Deutsche Boerse. He was previously CEO of Eurex Clearing.
goo.gl/Ry835k
LME Clear in talks with non-LME exchanges
Futures & Options World - Let's Talk Derivatives
Adrian Farnham, LME Clear chief exec since January, said talks are underway
The London Metal Exchange's clearing house is in talks with other commodity exchanges about clearing their business, a move that would see LME branch out from metals for the first time. LME Clear, which went live in September 2014, has been until now clearing only the metals contracts traded on LME's screens or in its iconic pit so a move to clear for exchanges other than the LME would be a big step for the nascent clearing house. Adrian Farnham, chief executive of LME Clear, told FOW: "We have had a couple of markets come to us and ask us to provide them with clearing services. We are in discussions with them at the moment and we are hopeful of reaching agreement."
goo.gl/mcIGa1
****SD: No word as to what exchanges.
Sebi allows cross-currency futures in multiple pairs
Business Today
Markets regulator Sebi on Wednesday allowed stock exchanges to introduce cross-currency futures and exchange traded cross-currency option contracts in multiple currency pairs. The cross currency futures will be available in various pairs, including Euro (EUR)-US Dollar (USD), Pound Sterling (GBP)-USD and USD-Japanese Yen (JPY). On the exchange traded option contracts front, Euro-Rupee (INR), GBP-INR and JPY-INR have been added to the existing USD-INR pair, Sebi said in a circular.
goo.gl/NRYDDk
BSE to launch auto-cancellation of reversal trades
Economic Times
To ensure safety of the securities markets, top stock exchange BSE will introduce a mechanism to automatically cancel reversal trades executed on its equity derivatives segment from next week.
goo.gl/99d3cA
Israeli Binary Options Provider iTrader Expands to FX
Dan Magen - Finance Magnates
Israeli binary option provider iTrader, famed for sponsoring soccer club Bietar Jerusalem up until July 2015, has launched a new foreign exchange venture under the same brand, called iTraderFX. Traders can now choose whether to use iTrader's binary options platform via the company's existing site or they can trade in forex with the iTraderFX web or mobile platform.
goo.gl/DGRf7H
Data Technical News #2016
Nasdaq
Nasdaq would like to remind its trading participants and direct data feed subscribers that Daylight Savings Time will begin in March. In the United States, Daylight Savings Time will begin on Sunday, March 13, 2016, at 2:00 a.m. ET. In the European Union, Daylight Savings Time (or Summer Time) will begin on Sunday, March 27, 2016, at 1:00 a.m. GMT.
goo.gl/DhjpIB
| | | | | | Regulation & Enforcement | | | EU regulators publish tougher rules for derivatives trades
Huw Jones - Reuters
Banks and companies will have to set aside billions of euros to back derivatives trades from September under new European Union rules designed to make the $550 trillion market safer. The tougher rules apply to derivatives like interest rate or credit default swaps that are traded privately or over-the-counter (OTC), and not passed through a clearing house.
reut.rs/24R43Qs
****SD: From the story: "This still leaves swathes uncleared and subject to the new rules, including commodity derivatives and equity options. Dwyer said the regulators have given equity options a longer phase in period so that EU and U.S. regulators have more time to iron out differences in their rules." And the most nightmarish quote: "Firms will need to revise thousands of their legal documents so they comply with the final rules."
Ex-JPMorgan Broker Gets Five Years for Gambling Funds Away
Bloomberg
A former JPMorgan Chase & Co. broker who said he stole millions of dollars from customers because his brain was "hijacked" by an addiction to sports gambling was sentenced to five years in prison. Michael Oppenheim, who at one point had about 500 clients and almost $90 million under management at JPMorgan, got so deeply in debt that, according to his lawyer, even his bookie expressed sympathy for him.
bloom.bg/1p6ajTV
****SD: Oppenheim turned to options trading with the goal of paying back some clients, but ended up "losing as much as $2.7 million in one day."
Money Returning to Investors Harmed by Unregistered Broker
SEC.gov
The Securities and Exchange Commission today announced that a Cyprus-based company has agreed to pay $11 million to settle charges that it illegally sold binary options to U.S. investors. A judge signed a court order late yesterday authorizing the distribution of this money to harmed investors through a Fair Fund.
1.usa.gov/1XcXYZ9
Federal Court Orders Banc de Binary Ltd., ET Binary Options Ltd., BO Systems Ltd., BDB Services Ltd. & Oren Shabat Laurent to Pay More than $9 Mln in Restitution & a Civil Monetary Penalty for Violating the CFTC's Ban on Off-Exchange Binary Options
CFTC
The Order, entered on February 26, 2016, stems from a CFTC complaint filed June 5, 2013 (see CFTC Press Release 6602-13) and amended May 6, 2014 (see CFTC Press Release 6923-14), charging the Defendants with violating the CFTC's ban on off-exchange options trading by offering commodity option contracts to U.S. customers for trading, as well as soliciting, accepting orders and funds from, or confirming the execution of orders from U.S. customers. Through the Banc de Binary website, customers buy or sell binary "call" or "put" options that allow them to predict whether the price of a certain "asset" will go "up" or "down" at a future date and/or time, with a specified payout structure.
1.usa.gov/1XcYHJM
SEC reports of impersonators aiming for fees from ex Banc de Binary clients due an $11 million settlement
LeapRate
The US Securities and Exchange Commission (SEC) today confirmed LeapRate's earlier report (from February 26) that it had reached an $11 million settlement with unregistered binary options broker Banc de Binary. However the SEC noted that some impersonators claiming to be affiliated with the SEC or other government agencies have recently been contacting harmed investors in the Banc de Binary case, asking them to pay a fee to facilitate their settlement payout. The SEC's Office of Investor Education and Advocacy today issued an investor alert warning investors about phony communications that may appear on official-looking documents purportedly from the SEC, offering paid legal services to investors who are fraud victims.
/goo.gl/xxtvN3
****SD: "Just make the check out to cash. Oh, you didn't know that's how the SEC operates? Standard government protocol."
SEC Ups Effort with Whistleblower Awards, Enforcements and New Appointments
Steven Hatzakis - Finance Magnates
It was a busy day for the United States Securities and Exchange Commission (SEC) as the agency cranked out several announcements reflecting the multitude of efforts underway for one of the busiest financial market regulators tasked with policing the US stock exchanges.
goo.gl/qdzZWW
| | | | | | Technology | | | Rival Systems Reduces Latency By 25 Percent, Widening Gap With Competition
Press Release
Chicago-based Rival Systems (Rival), a trading software company established last year, announced today that the latest version of its platform further reduces latency by 25 percent. The significant speed increase improves on a platform already widely regarded as the fastest in the industry.
goo.gl/pgiJXw
Why Nobody Can Build an Email Killer
Vijith Assar - NY Magazine
The most compelling tribute to the late Ray Tomlinson might simply be that, by the time he passed away on March 5, it would have been impossible to call for a moment of silence using the medium he pioneered. Tomlinson was best known as the inventor of email, first prototyped in 1971; 45 years later, it's still the most important instrument shared across industry, our personal lives, government. The contents of certain emails and the precise nature of their exchange may even still have a role in determining who ends up becoming the next president of the United States.
nym.ag/24R3YMR
****SD: This and the following are not options stories, but there is much relevance.
Be afraid: Many companies can only deal with "simple" digital security problems
Joon Ian Wong - Quartz
Most corporate information security executives believe their teams can only handle "simple" incidents, like deactivating a lost phone or scanning a computer for a virus. This reflects a steady loss of confidence among corporate infosec pros in their ability to keep up with modern threats, according to a new global survey by ISACA, a non-profit group that certifies security professionals, and the RSA Conference, a series of events by security vendor RSA.
goo.gl/meuwsB
****SD: From the article: "There's a skills gap in the infosec space, with most survey respondents saying it takes between three and six months to fill a vacancy. And even when a hire is made, respondents most frequently said that less than a quarter of those are actually qualified for the job." No wonder that when I have occasionally had to troubleshoot security issues with helpdesks it's about as useful as googling it myself.
| | | | | | Strategy | | | High Volatility Is Going To Return Says MKM Partners
ValueWalk
Investing in high volatility market environment: The August 2015 market crash was profound for several reasons, causing Jim Strugger, MKM Partners managing director of derivatives strategies, to conclude "a transition into a high-volatility regime had begun." Now with numerous volatility events over a short period of time in the rear view mirror, investors should adjust their risk management approach to this new volatility regime.
goo.gl/2Dg7jt
An Overview Of Financial Market Operators
Seeking Alpha
Financial Market Operators can provide exposure to an interesting side of financials.
An often overlooked subsector, investors use their services on a day-to-day basis.
The market is undergoing consolidation and can provide some lucrative investment opportunities.
goo.gl/a1cVXv
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