Readings: Brokerage income, Futures trading, Suckers rally
- Business Standard: Brokerages` fee-based income looks uncertain
Diversification in their revenue streams has helped broking houses tide over a drop in trading volumes, but fee-based sources of income may take a hit in the next quarter if the current market lull continues.
“Volatile markets are opportunities for retail broking companies to gain market share. Whenever markets are steadily gaining, traders find it difficult to move from the existing broker since they might lose out on the trading opportunities.
. . . , given the market condition, analysts feel that fee-based income may get affected in the first quarter of FY09. Thomson data indicates that investment banking fees are down 32.7 per cent till March 14, 2008, as compared to the same period last year.
- Economic Times: Bleak futures ahead, traders hit quit option
There is palpable nervousness in the futures market as vegetable oils and sugar traders rush to the nearest exit before the government bolts the door. Money flowing into the major cash commodities has ebbed to a trickle as hedgers and punters unwind their positions to avoid getting locked into losses.
The open interest in sugar has dropped to 1, 21,550 tonnes in April. That is down 43% since February. Since India is expected to produce 26 million tonnes sugar in 2007-08, current trading volumes show that negligible quantities are being hedged on the exchange.
“The volumes being traded are so low that there is no way futures market prices can influence the much-larger physical market. Since market players have little interest left in futures, nobody cares about the prices,”
Monumental governmental stupidity!
Implied volatility, the measure that calculates expected price swings of an underlying asset and is used as a barometer of options prices, shows that many investors are betting the U.S. stock market will falter.
The implied volatility on options that lock in gains if the S&P 500 drops at least 10 percent in three months reached 24.67 on April 30, Bloomberg data show. That compared with 15.1 for options that pay out if the index rises at least 10 percent.
The 63 percent difference indicates the highest demand for options insurance since at least 2005, according to data compiled by Bloomberg.
When everyone’s buying insurance, chances are they aren’t going to need it. 
