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STA Gives An Early Prediction on 2018’s 'Top 5'

Traders Magazine Online News, May 21, 2018

Jim Toes

Earlier this month the Securities and Exchange Commission (SEC) released its semi-annual regulatory agenda listing its priorities at the proposed rule stage, final rule stage and long-term priorities. Besides being evident on the wide range of responsibilities our industry’s chief regulator has even during a time when tolerance for new regulations is low and unwinding existing ones is high, the agenda is a very good resource for identifying issues and subsequent events that have or will impact market structure. While it is too early to finalize a 2018 'Top 5' list of events that effected market structure, our industry has experienced a lot this year and as we approach the halfway mark, now is a good time to reflect on some of these regulatory and non-regulatory events. Consistent with our approach we continue to work closely with Williams & Jensen and with our Committees to develop our thinking around these developments. We are actively engaged with The Hill, the Commission and FINRA, and seek your ideas and input.

Listed Options Market – Q1' 2018 & February 5th Activity

A record amount of contracts – nearly 1.4 billion – were cleared in the first of quarter of 2018, and on Feb. 5 the U.S. stock market experienced its largest ever decline for a single trading day with the Cboe Volatility Index, VIX, closing at 37, up over 250%. The operational performance of the listed options markets on Feb. 5 was sound and impressive, with the volumes lending credence that the breadth of investors who find these instruments attractive has broadened. These combined factors should capture the attention of regulators and be a positive catalyst for addressing some of the industry’s concerns on such micro-market structure issues as: the calculation on risk weighted assets (RWAs), concentration of clearing brokers and market makers, fragmentation and potential overly burdensome costs associated with CAT.

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