Breaking News

Record low VIX close; CAT delay?; Swaptions clearing

Lead Stories

VIX Closes at Another Record Low
Gunjan Banerji – WSJ
The CBOE Volatility Index, or VIX, hit a record low on Thursday, extending an historic calm streak as stocks reached new highs.
The stock volatility index fell to 9.19, closing below 10 for the seventh consecutive day. The VIX’s prior low was 9.31 in December 1993.

****SD: CBOE started offering the 8.5 strike on the VIX on Tuesday. Woof. CNBC on the VIX action here.

Trading Database Could Be Delayed Due to Data-Security Hitches
Dave Michaels – WSJ
U.S. exchanges overseeing the creation of a vast database of stock and options trades have discussed whether to delay its mid-November launch because the project’s contractor hasn’t met key data-security milestones, according to people familiar with the matter.

****SD: It’s a tall task. We’ll be talking about CAT for a while. In the words of Shane Swanson, the chief compliance officer of the Thesys subsidiary building the CAT, “You can’t fault anyone having concerns around these very stringent deadlines.”

Has Swaptions Clearing Begun?
Tod Skarecky – Clarus Financial Technology
We’ve written quite a bit about swaptions clearing in our blog. I was surprised to see that the first article was over 4 years old – back when the industry (and Gensler!) began talking about it…
In the most recent article in March 2016, Amir ended up wondering how quickly firms would take up swaption clearing.
Well, we know the answer to that: they didn’t.
But something is perhaps changing. Lets look.

****SD: Missed this the other day. I love swaptions in the wild. They’re like a rare Pokemon or something.

Fear or Greed? VIX and Margin Debt Readings Provide Contradictory Signals
As U.S. stocks continue to set record highs, taking global equity valuations along with them, two traditional measures of investor activity have hit levels that offer contradictory signals for market direction in the months ahead.

Fed Survey on Firm Uses of Equity Volatility
Russell Rhoads, CFA – CBOE Options Blog
Every three months the Federal Reserve conducts a survey titled, “The Senior Credit Officer Opinion Survey on Dealer Financing Terms”. This report comes in summary form as well as specific responses to 79 questions that are asked each quarter. Periodically there are some extra questions placed at the end of the survey, needless to say the academic in me got pretty excited when I saw questions 81 through 89 were titled Special Questions on Client Trading in Equity Volatility Products.

****SD: Rhoads takes a look at the results of a survey reported earlier. See Reuters’ Equity volatility schemes seen widely used -Fed survey

SEC: Investment Adviser Charged In Multi-Million Dollar Options Trading Scheme
The Securities and Exchange Commission today charged a Westchester, New York-based investment adviser with fraud stemming from lies to retail investors about the value of their investments in a Ponzi-like scheme.

****SD: When someone starts a sentence with “what’s cool about my fund is that i’m [sic] only…” when trying to solicit investments, I think that’s a bad sign.

Exchanges and Clearing

CME Group Expands Asia Pacific Footprint with Opening of Sydney Office
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the official opening of a new office in Australia.

CEO Interview: India’s biggest stock exchange tries to put regulatory probe in the past
Abhirup Roy, Devidutta Tripathy – Reuters
India’s National Stock Exchange is having a busy year with a regulatory probe into whether some brokers received early access to its servers, an investigation that has delayed its initial public offering (IPO) until at least next year.

Regulation & Enforcement

Cautious BoE in no rush to restrict algorithmic trading
The spread of ultra-fast trading in stock, bond and currency markets and accompanying “flash crashes” do not call for immediate action from regulators, a senior Bank of England official said on Friday.

Volcker Rule Objections Are Mostly Just Excuses
Kelvin To, Data Boiler Technologies – TABB Forum
From the scope of the rule to its proprietary trading ban, the Volcker Rule continues to face industry criticism. But many of these objections are just excuses. How can legitimate industry concerns be addressed without watering down the rule’s effectiveness? RiskTech offers a key.

Industry ill-prepared for November 1 LEI mandate – expert
Julie Aelbrecht – Global Investor Group
The financial services industry is ill-prepared for the mandatory use of legal identity identifiers under the third set of Emir requirements, which will come into force on November 1, a compliance expert has told FOW.


Interactive Brokers’ IBot gets to help traders manage their accounts
Maria Nikolova –
IBot can put traders where they need to be for a number of account management tasks, like depositing and withdrawing funds, viewing PortfolioAnalyst reports, accessing Activity Statements, and making changes to one’s market data subscriptions.

****SD: It starts with the simple stuff and before you know it we’ll be buying and selling contracts with Amazon’s Alexa.


If This Chart Is Right, the Stock Market’s Rampage May Be About to End
Helene Meisler – TheStreet
For one thing, the small caps are underperforming. Check out the biggest change in the Russell 2000 chart since late August when the small caps went on their rampage of outperformance.

Yen Traders Are Taking Out Some Insurance on Japan’s Election
Chris Anstey and Garfield Clinton Reynolds – Bloomberg
The same political party has run Japan for all but four years since 1955. That’s not stopping some yen traders from taking out a little bit of insurance on the outcome of the looming Oct. 22 election.

XIV Climbs To New Highs As VIX Breaks More Records
Mike Golembesky – SeekingAlpha
Last week the XIV broke back over the previous all-time high of 96.91. This move came after the XIV experienced the largest corrective move since September of 2016.
Although the previous highs were broken, the move up off of the August lows still has what can be viewed as an incomplete pattern. This potentially incomplete pattern is leaving the door open to several scenarios over the course of the next several weeks.

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Graduate of University of Minnesota School of Journalism and Mass Communication