Menu

Options on Unit 4 Agresso

89 comments / August 23, 2011

The options we’ve all been waiting for will finally be introduced this thursday the 24th, options on Unit 4. It’s a software company and part of the AMX index, and while it isn’t even that small it’s hard to imagine any demand for these options.

In the current market turmoil all market makers are busy trading the options with high turnover and lots of opportunity. Nobody is interested in quoting Unit 4 options every day. Without market makers the screens will be empty. Luckily there’s always All Options to rely on. When nobody is interested in quoting, Allard is sent to the kitchen again.

You won’t sign up for Unit 4, Brunel and Ten Cate with the idea of making any money there. It’s a dirty job, but All Options got to do it. Still not sure why.

,

Amstel Securities shuts down option brokerage

81 comments / August 21, 2011

The current market panic is offering great potential for traders. Earnings estimates for market makers can be doubled easily for the year. The other side of the trading eco system, the voice brokerage firms – have a lot more difficulty earning a living. During this period of ultra high volatility it’s difficult to arrange large trades, and mistakes will cost you, dearly.

We do have a casualty of the latest drop : Amstel Securities decided to shut down their option brokerage shop in Amsterdam and all six option brokers subsequently lost their job. A foreign client in European stock brokerage refused to settle a trade, a broker’s nightmare and terrible expensive to liquidate in this market. Word is the client committed fraud with the account opening procedure and at least three other (foreign) brokers have been victimized. The experienced brokers losing their job have a good reputation in the market, and it’s a pity their operation is axed in order to cut the fixed costs at Amstel Securities.

It’s easy to connect the dots between the downfall of Michel Visser’s hedge fund and the closure of European stock and option brokerage – but this seems to be completely unrelated with this story. Besides, the financial watchdogs have confirmed Amstel as well as Winterflood was in good faith in doing the trades in 2007for Visser’s hedge fund Mercurius.

Amstel Securities is way bigger than brokering European option and stock trades. Brokering in the European bond market isn’t affected and the company is doing well in Asia, with a headcount of over a hundred in three offices in Jakarta, Manilla and Singapore. Meanwhile, in small town Amsterdam only three serious brokers are left over (Aespen, AFS, IWB), of which Aespen has already downsized early this year. It’s a serious discussion wether or not small brokers can survive without a powerful client base such as their larger peers in London.

, ,

Financial Transaction Tax coined by Merkozy

33 comments / August 18, 2011

When markets spiral downwards, it’s only a matter of time before the usual suspects are identified. The short sellers, the speculators and evil traders in general are found guilty of driving down the market to fill their pockets. While this may be a common view among certain folks, one would expect politicians to have had some education or at least receive some sound financial advice.

After banning short selling in some European countries, masterminds Sarkozy and Merkel take one more step in their struggle against free markets. They seriously proposed a Financial Transaction Tax, also known as the Tobin Tax or the Robin Hood Tax. The idea is plain simple. Massive amounts of money are flowing across the globe 24 hours a day, so let’s confiscate a tiny bit nobody will miss and all government deficits will be solved. Everybody happy. Even better still, the volatility in the markets stem from trading so let’s cut down this evil practice. Life is easier with fixed prices.

It’s hard to battle such a belief. Economists will have a hard time taking this kind of fairy tales seriously. With this tax the financial infrastructure will be devastated. Market makers will be wiped off the map and tens of thousands will lose their job. The financial lobby will probably be in the trenches at this very moment.

The Financial Transaction Tax will never arrive, but the sheer thought of serious people proposing a financial mass destruction is weird. Luckily our own minister of finance will save us (and the market).

History repeating with failing Euronext

31 comments / August 10, 2011

For the second time in seven days Euronext fails at calculating correct expiry levels.

Nobody is perfect.  Organizations aren’t perfect either. However, when organizations fail consistently in performing simple yet important routine tasks – there’s something seriously wrong. Of course I’m referring to Euronext. Sometimes a little slow and always overcharging their customers, but previously it had a reputation of being reliable.

Less than two weeks ago it messed up the calculation of the expiry levels of the weekly AEX options. All market makers were left with unhedged positions and were hardly informed at all. Some had unexpected profits, some experienced unexpected losses. Retail investors didn’t have a clue what was going on either.

Fastforward seven trading days later. Volatile markets and Euronext can’t even handle heavy trading – they even shut down the market in warrants, turbo’s and speeders. During the expiration procedure of the daily options (the A9) the AEX index level wasn’t broadcasted between 15:45 and 15:55. Euronext notified market participants after the expiration procedure was finished (16:00).

Market services decided to recalculate the missing index levels. Shouldn’t be that hard after all, my grandmother can do it. The whizz kids came up with an expiry level of 283,33 – which was wrong. The true expiry level should have been one index point lower. After regular market close the official expiry level was adjusted to 283,28. Painful. Every call in the A9 is settled one euro too high, and every put one euro too low. And it seems Euronext doesn’t even know it.

As one trader describes it:

“Look, as liquidity provider we have the obligation to quote the options until 16:00. Therefore we calculate the AEX index levels ourselves on a continuous basis. That’s easy and very straightforward. We know what we are doing, and the expiry level should have been something like 282,34. For example our final quote in the 282 call was 30 – 40 cent. That was market consensus. The clowns at Euronext probably made calculation errors – so the 282 call ended at 1.28. Last time when they blew it in the AX5, we were lucky and made a lot of money. Today we lost a little because of Euronext. The problem is we can’t rely on the exchange anymore – neither can retail investors. “

,

Rearranging some deck chairs

9 comments / August 6, 2011

I confess, in the light of the current market crisis and US downgrade this isn’t the most spectacular news. Market makers have been competing for the primary market maker (pmm) licenses in a few stocks. This head to head competition is always interesting, as the market maker with the best quoting performance is selected. But then again, it’s like rearranging the deck chairs on the Titanic at the moment.

Recently Optiver has bitten the dust in a few stocks. It lost their positions in Ahold and Akzo to contender 323. That was quite a surprise. Apparently this was reason for Kaemingk to try a little harder. They won their play off in both Unilever and KPN with a wide margin from Caerus and All Options.

In the heavily traded ING options the game was played between Tibra and Nino. Again the much larger firm won and it wasn’t a photo finish either. Both Nino and Caerus had in the last month serious trouble with Euronext as the exchange wasn’t able to send them realtime underlying stock prices, and quoting during these hours was impossible. Weird, as both firms are located inside the exchange building.

The last battlefield was between Scrocca, Caerus, 323 and Leopark in Tom Tom. Nice to quote tight and for size when stock is suffering from a devastating profit warning. Anyway – the two spots are won by Scrocca and Leopark.

Good luck monday all of you.

, , , , , ,
Newer
Older