Futures market fail at TOM

24 comments / December 2, 2013

So far for the dogs and gods, back to trading. The alternative exchange TOM has captured a large market share in the options market. Especially in the short term index options, Euronext Liffe lost more than half of their flow to their rival.

Futures underlying for options

Monthly options on the AEX index are usually priced with the corresponding future contract as reference price and as a hedge for traders. The volume in the future market is substantial, so there’s a lot of opportunity to grab for Willem Meijer and his firm. Even on very quiet days the volume rarely drops below 15.000 future contracts traded.

Future market at TOM deserted

The index future market on TOM opened on November 11th this year. The FTI futures are called XNLF at The Order Machine. However, what a surprise. The experiment with futures turned out to be a failure, with an open interest of only 69 contracts after three weeks. This means the real process of price discovery still happens at Euronext Liffe and the trading doesn’t migrate as easily as the option market did.

Latency issue

Playing copycat works as long as latency isn’t relevant, and connection with all traders worldwide is not required. Suppose this is a painful experiment for TOM. Apparently they can’t be seen as a serious exchange. Maybe the automatic order flow from the Binck and Alex customers is making them lazy. At least some razor sharp competition is still lacking among exchanges.

In contrast – the DeGiro online broker is routing everything to the good old Euronext Liffe. Charging their customers a fraction of the Binck fees.

Tim vd Vliet on trading

30 comments / December 1, 2013

As a follow up on last post, just found this youtube video of my pal Tim van der Vliet, the trader who turned yogi. Also starring Ewald Engelen, and English subtitles are embedded. No matter to which extent you (dis)agree with the opinions shared in the video, you must admit this is a professional piece of work.

If you are in a hurry, on 1:42 nostalgic photos of the RD crowd.

Trader turned yogi style

63 comments / November 22, 2013

With the shut down of the open outcry trading in Amsterdam end of 2002, a lot of young men suddenly lost their job. Their game of trading didn’t exist anymore. Trading options on the screen turned out to be a whole new ball game. Time for a career switch. Some retired, other traders found a new profession. Teacher (economics), risk manager, selling beds, selling coffee machines or cleaning windows. And some people in the energy trading business of course.

Last weekend in our largest newspaper, De Telegraaf, a story of another career move (link, NL). Former market maker Tim van der Vliet turned into a writer, a spiritual writer to be more specific. He started as a local in the pit, together with Bodo Groen (currently director of Park Frankendael (link, NL). He made 200k profit on 9/11 with his long gamma and long vega position. Keep in mind this wasn’t a safe company profit, he was trading with his own money.

Fear of losing his fortune

According to the story, he was terrified of losing his 600k fortune. Not much later he indeed lost it all. The good part was the fear of losing was worse than the loss itself. Lost it on a single day, according to the Telegraaf headline. In reality he stayed vega long, gamma long and delta short – and in a time of sinking volatiles this was killing. Lost everything between December 2002 and April 2003. That’s the same period as the open outcry finally migrating to the screen, so it’s also the tale of a pit trader who failed on screen.

Source Capital

Tim joined the Swiss algo firm Source Capital, the research desk. Yes, the very same company discussed in the comments on this website recently. Worked with some of the best brains in the business, passed his CFA exams and after five years sold his stake in the company for a tidy sum. Well done, exit trading and enter zen writing.

Spiritual awakening

He writes in English, he self published his book Spiritual Awakening (the easy way) in 2010, was picked up by Hay House Publishing – a kind of new age publisher. Available at Amazon. The book was republished, and this year his book is being translated into Dutch. Published by Lev (Bruna).

Mysticism, new age and spiritual books – not really my cup of tea. But the guy is apparently good in what he’s doing, and is a friendly chap. I may give it as a Sinterklaas present to my mother-in-law. And borrow it back to read what he has got to say. Could also attend his guru presentations, but really – that’s a bridge too far.

A Dutch rogue trader

43 comments / November 12, 2013

There’s a new movie coming up about a rogue trader, not surprising after all those Adoboli’s and Kerviel’s last years. Even better, it’s a Dutch movie, not surprising with all the Dutch trading firms ruling the global markets (ok, just kidding). Had the opportunity to have a coffee with the guys behind “Onbeperkt” (“Unlimited”).

Their knowledge about financial markets is pretty limited, but director Tom van Blommestein has been interviewing a dozen traders in the last couple of weeks to get a clear picture. After all it won’t be a movie about trading, but about a (former..) trader. Matthijs van de Sande Bakhuyzen will play the lead role and scenario by Philip Rolig. Shooting will start in a few weeks.

It’s a graduation project by the Nederlandse Filmacademie. Will be broadcasted on national television and shown on film festivals around the world. The guys still need some financing for their film, and started a crowdsourcing item on Cinecrowd. Somehow they only need a tiny ~~300k~~ 3k – of which only 1k is still left. With all you billionaire traders reading this, consider donating a few bucks.

One day there will be subtitles. But not yet.

CFTC charges DRW

19 comments / November 8, 2013

Just two months ago DRW Trading sued the CFTC – in order to avoid being charged with rigging a certain future market. A technical story of different margin / collateral treatment of OTC derivatives versus listed futures in the fixed income world. Not really my cup of tea, but here are more details and background documentation.

Watchdog not scared

Either way, Donald R Wilson (DRW) failed in scaring off the watchdog CFTC. Today they charge him and his company with banging the close in this future market. And pocketing $20m. Well, “marking” the close would be a better term, because nobody ever traded against them in the close.

The market prices did not reach the level that DRW had hoped for and expected. Rather than accept that reality, DRW allegedly executed a manipulative strategy to move the market price in their favor by “banging the close,” which entailed placing numerous bids on many trading days almost entirely within the settlement window, none of which resulted in actual transactions as DRW regularly cancelled the bids.

“DRW couldn’t accept reality”

According to the CFTC mister Wilson and his firm couldn’t accept the reality of the market prices. Not a line I would expect from an agency such as the CFTC, a nasty thing to say to trader. Full official CFTC charge here, a short but good read. An alternative good read is Bloomberg’s Matt Levine :

CFTC Sues Firm That Sued CFTC to Stop CFTC From Suing It.

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