What should we make of this? The CBOE VIX, the barometer of choice for those monitoring market volatility, dropped like a stone between Xmas and New Year. And the trend has continued in the days since…
This is a guest post for FT Alphaville by Theo Casey, a columnist at Futures & Options World, blogging on the back of FOW’s European Equity Options conference in Amsterdam.
The year is 2017. Read more
Are volatility-linked exchange-traded products (ETPs) getting too big for the Vix futures market? Are they comprising the price discovery role of Vix futures? Are they the reason why implied volatility curves have become steeply elevated?
As it turns out, Barclays Capital’s equity strategy team apparently thinks yes, it is possible (H/T the FT’s Ajay Makan). Read more
Holy cow! Index Universe – self-described defenders of the ETF industry — have admitted there may be an issue with these products affecting the underlying assets, after all.
The case in point is the TVIX ETN, which started behaving oddly (ballooning in size) at the beginning of February. Note our stories about the matter here and here. Read more
Agencies who investigated MF Global before its collapse will give different accounts of when they first became concerned about its trades, when they appear before a Congressional hearing later on Thursday, the FT reports. Terry Duffy, chief executive of CME Group, said that MF Global seemed to be in “full compliance” with segregating its customers’ funds until the day before its collapse, only for CME and CFTC auditors to be told on 2am on the day the broker filed for bankruptcy that some funds had been transferred. The CBOE said it was receiving data from the broker in August, while Finra said it had been watching MF Global’s trades in euro sovereign debt since May. A”turf war” may meanwhile be opening between Chicago and New York prosecutors on bringing criminal charges over the collapse, Reuters says. Read more
By Theo Casey, a columnist at Futures & Options World, blogging live from FOW’s European Equity Options conference in Amsterdam.
Presenting the best trading idea of the conference… Read more
During last summer’s US economic slump, the CBOE S&P 500 implied correlation index hit a couple of intraday record highs before starting a consistent (if jumpy) downward trend through the end of the year, as equity markets recovered and the tin hats came off.
Since then the index been somewhat erratic, which is unsurprising given the big event-driven moves we’ve seen this year: Read more
The head of CBOE, one of the leading US options exchanges, said on Thursday that the exchange could compete with the new options market that could emerge from the proposed tie-up between the NYSE Euronext and Deutsche Börse, reports the FT. The merger would create the largest US options market, combining NYSE Euronext’s three markets and the International Securities Exchange, owned by Deutsche Börse’s Eurex derivatives unit, with a market share approaching 40%. Chicago-based CBOE, which went public last year, had a market share of 26% in Wednesday trading. In CBOE’s fourth-quarter earnings call, CEO Bill Brodsky emphasised the value of CBOE’s proprietary products such as Vix volatility index options. CBOE reported a 3% drop in 4Q revenue to $117.4m, as the daily average volume of contracts traded declined 2% to 4.26m a day. Read more
Michael Bloomberg, mayor of New York, on Thursday welcomed the proposed merger of Deutsche Börse and NYSE Euronext, unveiled on Wednesday, calling the deal “very good for New York”, reports the FT. His endorsement came as the US and European bourses watched for US reaction to the dominance of the German group in the proposed tie-up. Separately, the FT reports that Robert Menendez, a US senator, called for “conditions” on any global exchange tie-up to address cybersecurity concerns, citing recent hacking attacks against Nasdaq OMX. In an analysis, the FT examines the recent wave of exchange tie-ups and potential obstacles including anti-trust issues. Read more
A hat tip to Bloomberg for alerting us (again) to another request from the CBOE to the SEC.
Having recently asked for permission to list same-day options, the CBOE is now seeking to alter the terms under which credit default options (like credit default swaps but standardized, exchange-traded, and cleared by the OCC) can be traded. Read more
Things, it seems, are still looking a bit funny in the world of VIX futures.
Pragmatic Capitalism, for example, wondered on Thursday why it was that volatility futures were refusing to revert to the mean. It’s a point that has also been picked up by the Vix and More blog. Read more
The fear gauge. The chaos barometer. The weathercock of mild investor perturbation. Vix, Chicago’s almighty options volatility index, has been going down of late — having breached 17 on Wednesday, indicating that anxiety in equities is at its lowest since May 2008.
Except — maybe Vix doesn’t indicate anything useful at all. Read more
CME Group, the world’s largest derivatives exchange, is in talks to take over the Chicago Board Options Exchange in a deal that would value the largest US options market at up to $5bn, according to Crain’s Chicago Business, reports Reuters. No formal bid is on the table, however, and further talks are on hold until after Wednesday. Bloomberg meanwhile reports that CBOE may have to resolve legal challenges to its ownership structure before being sold. Read more
The Chicago Board Options Exchange plans to launch a family of volatility indices for commodities, after the introduction this week of a volatility index for oil prices. The move will replicate its widely-followed “Wall Street fear gauge” – the S&P 500 Vix index. The new index, known as Oil Vix, measures the market’s expectation of the volatility of crude oil prices over the next 30-day period. It comes as oil prices suffer unprecedented swings, which has intraday ups and downs of more than $10, as traders react nervously to conflicting signals over demand and supply. Read more
The Chicago Board Options Exchange, the US’s biggest options exchange, took a big step towards an initial public offering on Monday by striking a $1bn settlement to end a long-running legal dispute with members of the Chicago Board of Trade. Under the terms of the deal, the CBOT members will receive an 18% stake in the CBOE and a cash payment of $300m. Given that the CBOE is valued at about $4bn, the settlement is worth more than $1bn. CBOE members will vote on the settlement on June 11 Read more
America’s biggest options exchange took a critical step closer to going public on Wednesday when the SEC ruled in its favour in a dispute with the world’s largest futures exchange. The SEC upheld a decision by the Chicago Board Options Exchange, one of the last big members-only exchanges, that would exclude former members of the Chicago Board of Trade – acquired by the Chicago Mercantile Exchange last year – from claiming a share of the CBOE once it demutualises. The wrangle has held up the CBOE’s plans to demutualise, which would pave the way for an IPO or for the exchange to be purchased. While a significant victory for the CBOE, the SEC’s ruling will not put the issue to rest. Attention now turns to Delaware, where former CBOT members – with the CME’s support – are suing the CBOE to have their trading rights converted into shares. Proceedings were halted in August, pending the SEC decision. Read more
The CME Group on Thursday intensified the battle over the future ownership of the rival Chicago Board Options Exchange by lifting a cap on its legal expenses and buying disputed purchase rights. The CBOE’s plans for an IPO that could value the group at more than $3bn have been effectively blocked by the simmering dispute with the CME, which argues that some members of the Chicago Board of Trade, which it purchased in July, are entitled to a payout from any sale or IPO of the options exchange through their control of so-called CBOE exercise rights. Read more