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New NYSE Options Pricing Pyramid Promotes Derivative Driven Market Melt-Up
Last Monday, Tyler Durden of Zero Hedge noted that
the ISE had instituted special rebates for specific option liquidity
providers in an attempt to bolster volumes and capture market share ~ "Let
The Churn in QQQQ, Citi and Bank of America Hit Infinity...." And
the NYSE didn't miss a beat; responding in kind with an extremely
aggressive option pyramid pricing scheme.
NYSE Euronext's U.S. Options
Exchanges Announce New Pricing and FeeNew York, April 5, 2010 - NYSE
Euronext’s U.S. options exchanges, NYSE Arca and NYSE Amex options,
announced new rate changes for each market center that became
effective April 1, 2010. NYSE Arca options is introducing higher
posting credits in premium tier products, tiered customer rebates in
non-premium penny pilot issues and a reduction in the LMM rights
fees. NYSE Amex options is introducing a reduced electronic broker
dealer rate, a reduced electronic firm rate, tiered pricing for firm
proprietary manual trades and the implementation of the Professional
Customer designation.
In an effort to dredge a moat around
market share for Amex & Arca, the NYSE has implemented a new Penny Pilot
"Premium Tier" pricing schedule for the options of 15 specific issues.
Liquidity providers transacting serious size across these anointed
sticker symbols ... AAPL, BAC, C, DIA, EEM, FAZ, GDX, GE, GLD, IWM,
QQQQ, SPY, UNG, USO & XLF ... will (yet again) enjoy
additional rebates as the NYSE attempts to [1] stave off competition
from other options exchanges and [2] further buoy an anemic equity
market, which continues to plow forward on phantom volume at 3 am on Sunday night (like the
accelerator of a Toyota Camry beneath a sleep-driving Ambien junkie
approaching a raised drawbridge with both eyes closed shut, one hand on
the wheel and the other on his sixth bear claw).
NYSE Arca Fee Changes
NYSE Amex Fee Changes
For a complete explanation of the new NYSE
Arca options rates and fees: http://www.nyse.com/futuresoptions/nysearcaoptions/1159439190411.htmlFor a complete explanation of the new NYSE
Amex options rates and fees: http://www.nyse.com/futuresoptions/nyseamex/1228420271739.html
An explanatory webinar with Q&A was
scheduled for 4:30 - 5:30 pm EST on April 6th: NYSE Options Explains New
Fee Structure and Complex Order Book
Once released, we will provide a link
to the recorded session.
While seemingly everyone continues to
sing "Oh where, oh where has NYSE volume gone? Oh where, oh where can
it be?" ... derivatives markets across the globe continue to belt out
record volumes, like Aretha Franklin with her finger caught in a cookie
jar. And while seemingly everyone remains fixated on shrinking equity
volumes, seemingly every exchange group remains fixated on expanding the
breadth of their derivative offerings (options, futures and futures
options).
New products. New marketplaces. Longer
trading hours. Fractional reserve leverage, fictionally
collateralized in the event of extreme(-ly cyclical, recurrent)
dislocation. Structured chaos, neatly packaged for professional speculation alongside power law PowerPoint slides and presented to the public
under the pretext of prudent portfolio management. And you thought
fictional reserve 'backed' leverage was reserved for mark-to-make-believe FASB 157 bullshit bank holdings
and silver market short-side chicanery ? Hah!
As if anyone is going to have their contracts settled when
financial markets finish climbing their spiral staircases in
search of the highest ledges possible to LEAP from
....
As digital cash flows across 21st
century capital markets with the speed of a Mahwah server farm fart, increasingly
inter-connected exchanges continue to roll out new derivative product
offerings. With so many market participants discussing inflation
expectations, deflationary data and central bank exit strategies, the NYSE Liffe U.S.
stepped up to the plate today by pitching new
interest rate futures contracts and futures options to be launched Q3 /
Q4 2010 on the Eurodollar and 2-year, 5-year, 10-year & 30-year US
Treasuries.
Is volume merely hiding in plain sight, dark pools and
structured notes ?
As 21st century capital markets continue
to evolve, 'volume' will continue to progressively migrate away from
U.S. equities toward derivatives and foreign bourses. Between the obvious overhang of CFTC position limits and the cross-pollination of inter-continental routing
capabilities, the Chaebol-ization of supra-national financial
exchanges appears to be reaching critical mass.
Supra-national exchanges haven't
forsaken America or equities. They are merely employing Wayne Gretzky's
approach to offense and skating towards where the puck is going to be.
So, I'll ask you, rather tongue-in-cheek: where is volume going to be?
" A speculator is a man who observes the future, and acts
before it occurs " ~ Bernard Baruch
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Mmmmm....bear claws....
AWESOME! I was waiting for that, it will reduce spreads
20 Broad is either a Roach motel or Hotel California. In terms of pre-1987 crash days when volume was real volume; it's a parking garage with wax figures dressing up for the cameras. The server farms co-locate and are inversely proportional to real interest as flash-trading rebates enable schemes of circle-jerk liquidity. Did they not notice the Syndication-Over Iceberg we hit in September 2008 that ended the confidence factor essential to floating the boat? It seems like just yesterday, or as brother Ray would put it, "Time has stood still... since we been apart."
FAZ is Direxion 3X BEAR on Russell 1000 Financial index. Interesting.
Yea, so if your a die hard bear you can short the FAZ and be
happy, or short the SDS or QID.
So the volume in derivatives traded has continued to increase markedly since the recession? If that is the case, then that is a principal example of the moral hazard created by the bank bailouts.
I think the explosive growth of derivative product offering breadth and foreign futures markets is more an outgrowth of the credit & sovereign debt crises; where 'we' are within them and larger cycles. Not necessarily the product of banksta moral hazard so much as a symptom of the end of Pax Americana and / or signal of a transitionary baton-pass to ChIndia / BRICK et cet.
Whether it be horizontal integration, moat-making or just good ol' fashioned "smart money" in the Baruch sense of the term (market operators, not Jesse Livermore 'tape operators' but capital market(s)-makers) ... exchange members tend to be just a wee bit ahead of the bell curve. With the CFTC being pressured to institute position limits and turn just a fraction of an eye towards the OTC mkts (and rightfully so), NYSE Euronext, NASDAQ OMX, the CME (+DJ, +Bovespa, + BMV, + BSE, and their other future vassals, er, partners), etc., would be horrifically lax stewards of capital were they not making a drastic bee-line for foreign markets.
Call it basic diversification, colonial conspiracy, good business or prescient policy ... bottom line is that 'volume' hasn't vanished (especially when considering simple seasonality, that this remains a bear market bounce, and (gulp) the Real Dow of S&P 500 priced in gold). Bond markets stand about a dozen times as tall as equity markets and each are laughably dwarfed by currency markets.
One area of 'cash mgmt' that has remained outside public purview is structured notes. There are many upstart funding shops providing intermediary pairing for custom designed structured notes, which match specific corporate funding needs with institutions (primarily HF's) scaling up the FI risk curve in search of yield grab. Might make an interesting case study for those hanging round ZH who are much more capable than I to examine.
hmmm, do you think there is anything we can do about it?
http://www.youtube.com/watch?v=rdt6wcK1cSQ