This roundup includes the latest developments at Sebi, Luma, the London Stock Exchange, and Calamos, among others.

The Securities and Exchange Board of India (Sebi) has laid down new measures to strengthen the country's equity index derivatives framework for increased investor protection and market stability on the recommendation of Expert Working Group (EWG) on derivatives.

The recommendations of the EWG include the need for derivatives market to provide better price discovery, help improve market liquidity and allow investors to manage their risks better

EWG on derivatives was formed by Sebi to review the existing regulatory measures for investor protection; ensure orderly development and strengthening of equity derivatives market; identify measures to assist stock exchanges; and suggest measures for investor protection and market stability.

According to the regulator, the recommendations of the EWG include the need for derivatives market to provide better price discovery, help improve market liquidity and allow investors to manage their risks better.

Effective from 1 February 2025, Sebi will collect upfront option premium from options buyers 'to avoid any undue intraday leverage to the end client and to discourage any practice of allowing any positions beyond the collateral at the end client level'. The upfront margin collection requirement will also include net options premium payable at client level.

The regulator will also remove the calendar spread treatment on the expiry day and the offsetting positions across different expiries will not be available on the day of expiry for contracts expiring on that day; and will also introduce intraday monitoring of position limits "to address the risk where on the expiry day, due to large volumes of trading, there is a possibility of undetected intraday positions beyond permissible limits during the day.

In addition, the regulator will recalibrate the minimum contract size in tune with the growth of market to ensure that an inbuilt suitability and appropriateness criteria for participants will be maintained as intended and increase the tail risk coverage on the day of options expiry 'to avoid the heightened speculative activity around options positions and the attendant risks'.

SEC charges Merrill Lynch for ignoring client instructions

The US Securities and Exchange Commission (SEC) has charged Harvest Volatility Management and Merrill Lynch, Pierce, Fenner & Smith Inc. for exceeding clients’ designated investment limits over a two-year period beginning in March 2016, which resulted in clients paying higher fees, being subjected to increased market exposure, and incurring investment losses.

As part of the separate settlements, Harvest and Merrill have agreed to pay a combined US$9.3 million in penalties and disgorgement to resolve the SEC’s claims. 

According to the SEC's orders, Harvest was the primary investment adviser and portfolio manager for the Collateral Yield Enhancement Strategy (CYES), which traded options in a volatility index with the aim of generating incremental returns.

The SEC’s orders find that, starting in 2016, Harvest allowed scores of accounts to exceed the exposure levels that investors designated when they signed up to the CYES strategy, including dozens of accounts that exceeded the limit by 50% or more.

Merrill and Harvest received larger management fees when investors’ exposure levels climbed above pre-set levels and exposed investors to greater financial risks. The SEC order as to Merrill finds that it introduced its clients to Harvest and received part of Harvest’s management and incentive fees, as well as trading commissions. It also found that Merrill was aware that investors’ exposure to CYES was exceeding pre-set exposure levels and failed adequately to inform affected CYES investors, most of whom had existing advisory relationships with Merrill.

The SEC’s orders also found that Harvest and Merrill neglected to adopt and implement policies and procedures reasonably designed to ensure that they disclosed all material facts to their clients and alerted them to the excessive exposure.

Arete Wealth partners with Luma

Arete Wealth, a full-service Broker-Dealer (BD) and Registered Investment Advisory Firm (RIA), has partnered with Luma Financial Technologies (Luma) to streamline the process of buying and managing structured products and annuities for their clients.

In addition to integrating Luma's technology into their network, Arete Wealth will also introduce e-applications through Luma's platform for the first time.

With the digitalisation of the application process for annuities Arete Wealth aims to streamline and expedite transactions, significantly reducing administrative tasks and will help its advisors to enhance efficiency and optimise workflows with faster processing and real-time updates, financial professionals can focus more on strategic planning and client engagement, according to said Joshua Rogers, CEO and founder of Arete Wealth.

Integrating Luma's cutting-edge technology into our advising platform will not only broaden our investment offerings but also streamline processes and enhance the investment experience for both our clients and advisors,' said Rogers.

'Our goal is to enhance access and transparency in the alternative investment space, empowering advisors with the tools necessary to better understand, objectively analyse, purchase, and manage products on behalf of their clients,' said Donald Pogan, chief product officer at Luma Financial Technologies.

LSEG launches data warehouse

London Stock Exchange Group (LSEG) has launched DataScope Warehouse, a cloud- based ready -to- use enterprise data solution to provide customers with access to group's fixed income and equity data records.

The solution supports Structured Query Language (SQL), enabling users to explore and query the pricing and reference database.

LSEG customers will be able to access via a direct share the full database of record for fixed income, bank loans and legal entity data, as well as coverage of global equities, derivatives and funds from more than 180 exchanges worldwide, including in emerging markets.

LSEG Pricing Data Service provides independent and evaluated pricing covering over 2.8 million fixed income securities and derivatives. LSEG Reference Data provides global coverage of more than 80 million active and matured financial instruments across an extensive range of asset classes.

DataScope Warehouse initially will be delivered via Snowflake cloud infrastructure with more cloud providers scheduled to be rolled out through 2025.

Calamos debuts new laddered structured protection ETF

Calamos Investments has launched the Calamos Laddered S&P 500 Structured Alt Protection ETF (CPSL), the first-ever laddered structured outcome fund in the US market – the product is available on the Cboe BZX Exchange.

With a net expense ratio of 0.79%, CPSL provides competitive exposure to the upside return of the S&P 500, paired with protection from most of the downside risk, given the capital preservation floor of the underlying funds.

The new CPSL offer investors access to the entire suite of Calamos S&P 500 Structured Protection ETFs through a single fund - CPSL is equally invested in each of the four currently available S&P 500 Structured Protection ETFs within the Calamos series.

CPSL will invest in each of the future ETFs as they are launched each month, ultimately holding 12 ETF allocations by June 2025. The fund rebalances semi-annually to provide an equally weighted portfolio.

'Our Structured Protection ETFs stayed strong amid recent market volatility,' noted John Koudounis, Calamos Investments president and CEO. “Responding to investor demand, CPSL will deliver a smart, systematic single-ticker solution, granting access to our 100% downside protection S&P 500 ETFs in a laddered format.'

Within the fund, the underlying ETFs will automatically roll at the conclusion of their individual outcome periods which can serve as a long-term option for maintaining exposure to the company's large-cap investment strategy.

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