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In a letter to BK Gupta, a DGM at market regulator SEBI (Securities and Exchange Board of India) dated January 14, 2015, an unnamed whistle-blower blew the lid off what he alleged was massive technical manipulation of the National Stock Exchange (NSE). Claiming to be based out of Singapore and working for a hedge fund, the whistle-blower said that the manipulation allowed some players to procure unfair advantage over others.
The letter, which was also copied to Sucheta of Moneylife has been published by the news portal here. The whistle-blower says that the system is being manipulated to benefit a few select firms which can then make several crore rupees in illegal profits. The letter goes into painful technical detail to explain the entire alleged manipulation.
With the letter in their possession, Moneylife did not publish immediately. They decided to verify facts before putting it out.
Nearly five months after they received the letter, and having run it through several stakeholders of the stock exchange but with no proof forthcoming, they decided to ask the SEBI and management of the NSE what action they had taken following the whistle-blower’s letter.
Sucheta Dalal’s first email to the SEBI Chairman UK Sinha, copied to NSE’s CEO Chitra Ramakrishnan and Vice-Chairman Ravi Narain was sent on June 11, says . She also followed it up with a reminder on June 15. Since no response followed, Moneylife published an article on the whistle-blower’s account on June 19.
On July 21, NSE filed a lawsuit against Moneylife for defamation seeking damages of Rs. 100 crore.
While the NSE was mum initially,even after the report was published, what seemed to have irked them into going after the journalists is the pressure from all sides, including parliamentarians and the Union government, to investigate the matter further. In fact, the whistle-blower himself says in his letter, “The most shocking aspect is that when the matter came to knowledge of NSEs management team they have chosen to hush up the matter under the carpet rather than coming out in open against the same.”
says that the lawsuit amounts to harassment by the NSE. “If they were really bothered about the defamation, they should have responded to our repeated queries. And if they didn’t respond, then the lawsuit is only meant to harass us financially and gag us from writing about it,” says Sucheta , speaking to The News Minute.
She also says that it is easy for big corporate houses to file defamation suits seeking massive amounts in damages as it does not cost them much. The litigation costs and the effort to fight the cases can however drain out smaller media organizations.
More importantly, she says that this not just Moneylife’s battle to fight.
Just last month, Essar group had filed a lawsuit against The Caravan magazine seeking Rs. 250 crore in damages for publishing an article exposing the business practices of the group. Essar had refused to answer a detailed questionnaire sent to the magazine before publishing.
“This is not just about us, it is about freedom of expression of the media,” says adding, “Because of the power of ads and PR, we work under a lot of pressure. Business groups have the power of hundreds of crore rupees worth of ad-spend. To write against them is not easy, yet we are doing it. But there are has been very little help forthcoming from others,” says .
- See more at: Moneylife
The letter, which was also copied to Sucheta of Moneylife has been published by the news portal here. The whistle-blower says that the system is being manipulated to benefit a few select firms which can then make several crore rupees in illegal profits. The letter goes into painful technical detail to explain the entire alleged manipulation.
With the letter in their possession, Moneylife did not publish immediately. They decided to verify facts before putting it out.
Nearly five months after they received the letter, and having run it through several stakeholders of the stock exchange but with no proof forthcoming, they decided to ask the SEBI and management of the NSE what action they had taken following the whistle-blower’s letter.
Sucheta Dalal’s first email to the SEBI Chairman UK Sinha, copied to NSE’s CEO Chitra Ramakrishnan and Vice-Chairman Ravi Narain was sent on June 11, says . She also followed it up with a reminder on June 15. Since no response followed, Moneylife published an article on the whistle-blower’s account on June 19.
On July 21, NSE filed a lawsuit against Moneylife for defamation seeking damages of Rs. 100 crore.
While the NSE was mum initially,even after the report was published, what seemed to have irked them into going after the journalists is the pressure from all sides, including parliamentarians and the Union government, to investigate the matter further. In fact, the whistle-blower himself says in his letter, “The most shocking aspect is that when the matter came to knowledge of NSEs management team they have chosen to hush up the matter under the carpet rather than coming out in open against the same.”
says that the lawsuit amounts to harassment by the NSE. “If they were really bothered about the defamation, they should have responded to our repeated queries. And if they didn’t respond, then the lawsuit is only meant to harass us financially and gag us from writing about it,” says Sucheta , speaking to The News Minute.
She also says that it is easy for big corporate houses to file defamation suits seeking massive amounts in damages as it does not cost them much. The litigation costs and the effort to fight the cases can however drain out smaller media organizations.
More importantly, she says that this not just Moneylife’s battle to fight.
Just last month, Essar group had filed a lawsuit against The Caravan magazine seeking Rs. 250 crore in damages for publishing an article exposing the business practices of the group. Essar had refused to answer a detailed questionnaire sent to the magazine before publishing.
“This is not just about us, it is about freedom of expression of the media,” says adding, “Because of the power of ads and PR, we work under a lot of pressure. Business groups have the power of hundreds of crore rupees worth of ad-spend. To write against them is not easy, yet we are doing it. But there are has been very little help forthcoming from others,” says .
- See more at: Moneylife
market-volatility-means-more-than-just-the-vix
source : marketwatch.com
When trading in stocks is volatile, it can turn away investors who are concerned that wide swings will endanger their returns. That’s been the case over the last month, during which the Dow Jones Industrial Average DJIA, +0.42% the S&P 500 Index SPX, +0.40% and the Nasdaq Composite Index COMP, +0.43% all fell about 8%, sending them into correction territory from their 52-week highs.
Perhaps the most widely cited gauge of volatility is the CBOE Volatility Index VIX, -8.27% which saw the biggest weekly jump in its history during the week ending Aug. 21. In fact, volatility in August set trading records for options and futures at CBOE.
But the VIX is really a measure of how much volatility is expected, rather than a reflection of current volatility, which some investors feel is deceptive. If the S&P 500 swings up 50 points, for example, then down 100 points, then finishes flat, that was a relatively volatile trading day -- but that will not be reflected in the VIX at the end of the day.
Getty Images
How will you ride out the storm of volatility?
Investors concerned with volatility, therefore, frequently consider measures such as trading volume, the size of intraday swings and the standard deviation of price performance. For an explanation of each those and other concepts, along with trend data, read on. As those indicators show, recent volatility in the stock and bond markets has indeed been significant when compared to recent years.
Let’s be clear about what the VIX measures
FactSet
What does the VIX actually measure? Not past volatility in the market, actually.
A jump in the VIX is a reaction to a bad market, not the cause. That’s why it’s often referred to as “implied” volatility: The VIX measures trading on cash options for the S&P 500 over the next 30 days.
The long-term average for the VIX is around 20, it has remained mostly beneath that level since 2012 save for the occasional spike.
A higher VIX -- it has been above 25 since late August -- means traders are scrambling with options plays because they believe there will be significant market swings over the next month. That’s why it’s often referred to as the “fear index.”
High volume, high volatility
Volume is one way to look at volatility, since high volume and high volatility often go hand-in-hand — especially in mature bull markets, which tend to climb a low-volume “wall of worry” as they rise.
Over the last 12 months, trading volumes for stocks and options jumped notably both times the VIX passed above 30: during the Ebola scare in October, and during the most recent correction.
Average daily trading volumes in August were nearly 18% higher than in July, according to Barclay’s. And average August trading volume for U.S. equities was 50.8% higher than during the same month last year, Barclays said, with options volume 33.2% higher.
Look out for big swings
A simple way to gauge volatility is to look at how the intraday high and low of an index compares to the previous day’s closing price.
During the recent correction, the S&P 500 saw six trading days in a row where the range of the index was 2% or more off its previous close. (On Aug. 24, the S&P 500 saw its largest point swing by percentage, 5%, since August 2011.)
The S&P 500 is on track to have an above-average number of trading days where the index closes up or down by at least 1% in 2015, according to Nicholas Colas, chief market strategist at Convergex Group. So far this year, the S&P 500 has had 43 trading days where the index has closed up or down 1% or more.
With 80 more trading days in the year, the S&P 500 only has to log 11 additional 1% or more days to reach the long-term average of 54, according to Colas. The last time that yearly average was exceeded was during the notably volatile years of 2007 through 2011.
Smoothing out the swings
The Average True Range, or ATR, is another way of smoothing out swings in the market. One problem with the VIX, according to Randy Frederick, managing director of Schwab Center for Financial Research, is that it doesn’t capture a big intraday point swing if the S&P finishes relatively close to where it started the day.
Frederick prefers to use the ATR of the S&P 500, which looks at the past 20 trading days and takes the average of the greater of either the current high and the current low, or the high or low compared with the previous close.
With the ATR jumping during the recent correction, the average 20-day trading range for the S&P 500 was more than 30 points, for an intraday swing of about 1.5%. Across all the trading days in 2015, the S&P 500 has averaged a 1.2% swing.
“If you compare this to a chart of the VIX, you’ll see that the VIX doesn’t always capture big moves in the market, since it is a forward looking volatility estimate,” Frederick said. “The ATR shows actual price moves.”
How deviant is the market?
FactSet
The standard deviation of price performance ia another way to gauge volatility, according to Dan Greenhaus, chief strategist at BTIG. “It doesn’t tell a meaningfully different story,” Greenhaus said in an email, “but rather than the VIX, which is implied, SD is realized. Its real.”
Investors can look an index like the S&P 500 and examine their Bollinger Bands, which show relative volatility with a simple 20-day moving average, and two outer lines showing two standard deviations away from that average. The wider the spread between the outer bands, the higher the volatility. Volatility is at its most extreme when the actual price ventures outside those outer bands.
During the recent correction, the gap between those outer bands widened significantly to a degree not seen since 2008. The S&P 500 closed outside the lower band four trading sessions in a row from Aug. 20 to Aug. 25.
The problem with high-yield bond spreads
B. of A. Merrill Lynch, FRED
Market volatility can also be seen in the fixed income markets, according to John Canally, chief economic strategist for LPL Financial.
Canally, who follows the spread on high-yield corporate bonds, said that when fears start showing up in fixed-income markets, and low-rated firms like energy companies are finding it more difficult to borrow cheaply, that raises the risk of default and sows volatility.
The spread on high-yield corporate debt has been steadily creeping up since mid-2014 and hit a high not seen since late-2012 during the recent correction, according to a Bank of America Merrill Lynch indicator that follows high-yield credit spreads.
Stress in the high-yield bond market is at its highest level in five years, mostly due to low oil prices that have shaken the energy industry.
And it’s bleeding into investment-grade bonds
Citi Research
Tightening credit is also spreading to investment grade corporate bonds and could adversely affect business decisions, said Tobias Levkovich, chief equity strategist at Citi Research, in a recent note. A drying up of cheap debt could affect capital plans at companies and shareholder return programs that have been financed with cheap money.
The strategist calls those tightening trends in investment-grade credit since mid-2014 the “equity market bears’ strongest argument against stocks.”
“Admittedly, such funding rates are still below levels seen in 2011 when Greek sovereign debt generated fears of another financial crisis, but a rising cost of capital needs to be monitored given its ultimate ramifications on growth and earnings potential,” Levkovich noted.
source : marketwatch.com
When trading in stocks is volatile, it can turn away investors who are concerned that wide swings will endanger their returns. That’s been the case over the last month, during which the Dow Jones Industrial Average DJIA, +0.42% the S&P 500 Index SPX, +0.40% and the Nasdaq Composite Index COMP, +0.43% all fell about 8%, sending them into correction territory from their 52-week highs.
Perhaps the most widely cited gauge of volatility is the CBOE Volatility Index VIX, -8.27% which saw the biggest weekly jump in its history during the week ending Aug. 21. In fact, volatility in August set trading records for options and futures at CBOE.
But the VIX is really a measure of how much volatility is expected, rather than a reflection of current volatility, which some investors feel is deceptive. If the S&P 500 swings up 50 points, for example, then down 100 points, then finishes flat, that was a relatively volatile trading day -- but that will not be reflected in the VIX at the end of the day.
Getty Images
How will you ride out the storm of volatility?
Investors concerned with volatility, therefore, frequently consider measures such as trading volume, the size of intraday swings and the standard deviation of price performance. For an explanation of each those and other concepts, along with trend data, read on. As those indicators show, recent volatility in the stock and bond markets has indeed been significant when compared to recent years.
Let’s be clear about what the VIX measures
FactSet
What does the VIX actually measure? Not past volatility in the market, actually.
A jump in the VIX is a reaction to a bad market, not the cause. That’s why it’s often referred to as “implied” volatility: The VIX measures trading on cash options for the S&P 500 over the next 30 days.
The long-term average for the VIX is around 20, it has remained mostly beneath that level since 2012 save for the occasional spike.
A higher VIX -- it has been above 25 since late August -- means traders are scrambling with options plays because they believe there will be significant market swings over the next month. That’s why it’s often referred to as the “fear index.”
High volume, high volatility
Volume is one way to look at volatility, since high volume and high volatility often go hand-in-hand — especially in mature bull markets, which tend to climb a low-volume “wall of worry” as they rise.
Over the last 12 months, trading volumes for stocks and options jumped notably both times the VIX passed above 30: during the Ebola scare in October, and during the most recent correction.
Average daily trading volumes in August were nearly 18% higher than in July, according to Barclay’s. And average August trading volume for U.S. equities was 50.8% higher than during the same month last year, Barclays said, with options volume 33.2% higher.
Look out for big swings
A simple way to gauge volatility is to look at how the intraday high and low of an index compares to the previous day’s closing price.
During the recent correction, the S&P 500 saw six trading days in a row where the range of the index was 2% or more off its previous close. (On Aug. 24, the S&P 500 saw its largest point swing by percentage, 5%, since August 2011.)
The S&P 500 is on track to have an above-average number of trading days where the index closes up or down by at least 1% in 2015, according to Nicholas Colas, chief market strategist at Convergex Group. So far this year, the S&P 500 has had 43 trading days where the index has closed up or down 1% or more.
With 80 more trading days in the year, the S&P 500 only has to log 11 additional 1% or more days to reach the long-term average of 54, according to Colas. The last time that yearly average was exceeded was during the notably volatile years of 2007 through 2011.
Smoothing out the swings
The Average True Range, or ATR, is another way of smoothing out swings in the market. One problem with the VIX, according to Randy Frederick, managing director of Schwab Center for Financial Research, is that it doesn’t capture a big intraday point swing if the S&P finishes relatively close to where it started the day.
Frederick prefers to use the ATR of the S&P 500, which looks at the past 20 trading days and takes the average of the greater of either the current high and the current low, or the high or low compared with the previous close.
With the ATR jumping during the recent correction, the average 20-day trading range for the S&P 500 was more than 30 points, for an intraday swing of about 1.5%. Across all the trading days in 2015, the S&P 500 has averaged a 1.2% swing.
“If you compare this to a chart of the VIX, you’ll see that the VIX doesn’t always capture big moves in the market, since it is a forward looking volatility estimate,” Frederick said. “The ATR shows actual price moves.”
How deviant is the market?
FactSet
The standard deviation of price performance ia another way to gauge volatility, according to Dan Greenhaus, chief strategist at BTIG. “It doesn’t tell a meaningfully different story,” Greenhaus said in an email, “but rather than the VIX, which is implied, SD is realized. Its real.”
Investors can look an index like the S&P 500 and examine their Bollinger Bands, which show relative volatility with a simple 20-day moving average, and two outer lines showing two standard deviations away from that average. The wider the spread between the outer bands, the higher the volatility. Volatility is at its most extreme when the actual price ventures outside those outer bands.
During the recent correction, the gap between those outer bands widened significantly to a degree not seen since 2008. The S&P 500 closed outside the lower band four trading sessions in a row from Aug. 20 to Aug. 25.
The problem with high-yield bond spreads
B. of A. Merrill Lynch, FRED
Market volatility can also be seen in the fixed income markets, according to John Canally, chief economic strategist for LPL Financial.
Canally, who follows the spread on high-yield corporate bonds, said that when fears start showing up in fixed-income markets, and low-rated firms like energy companies are finding it more difficult to borrow cheaply, that raises the risk of default and sows volatility.
The spread on high-yield corporate debt has been steadily creeping up since mid-2014 and hit a high not seen since late-2012 during the recent correction, according to a Bank of America Merrill Lynch indicator that follows high-yield credit spreads.
Stress in the high-yield bond market is at its highest level in five years, mostly due to low oil prices that have shaken the energy industry.
And it’s bleeding into investment-grade bonds
Citi Research
Tightening credit is also spreading to investment grade corporate bonds and could adversely affect business decisions, said Tobias Levkovich, chief equity strategist at Citi Research, in a recent note. A drying up of cheap debt could affect capital plans at companies and shareholder return programs that have been financed with cheap money.
The strategist calls those tightening trends in investment-grade credit since mid-2014 the “equity market bears’ strongest argument against stocks.”
“Admittedly, such funding rates are still below levels seen in 2011 when Greek sovereign debt generated fears of another financial crisis, but a rising cost of capital needs to be monitored given its ultimate ramifications on growth and earnings potential,” Levkovich noted.
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