Observations & Insight
Saliba’s Execution Fight Gears Up
Spencer Doar – JLN
Anthony Saliba returned to the broker-dealer business in September 2017 by starting Matrix Executions. He had sworn he would never would come back to the space. Saliba had already conquered the challenge as CEO of LiquidPoint – which at its peak handled a fifth of American options flow. Liquidpoint would eventually become apart of Dash Financial Technologies in 2017.
Saliba competes with Dash, fighting a battle with a company that can trace part of its history directly back to him.
Now, he has another vote of confidence in his year old venture as Mishkin, Anderson and Gray Securities (MAGS), operator of market making firm Simplex Trading, made him an offer he couldn’t refuse to become minority owners in Matrix. The deal is pending FINRA approval.
****SD: In case you missed the news yesterday.
The Tel Aviv Stock Exchange Will Launch A Volatility Index – VTA35 Index: With The Launch Of The VTA35 Index, TASE Is Aligning Itself With Leading Index Providers Around The World Who Calculate Volatility Indices
The Tel Aviv Stock Exchange published today (November 25, 2018) a proposal to calculate and disseminate a new index – the “VTA35” Index, which represents implied volatility level in options on the TA-35 Index traded on the Stock Exchange.
****SD: We had a little tidbit about this earlier in the week, but this press release fleshes things out a bit. I wanted to poke through the public comments on TASE’s website, but I can’t for the life of me find them. But maybe Google Translate (the public comments section is in Hebrew) is obfuscating what I’m looking for… (I’m guessing that TASE had some relevant conversations about this new offering when the Cboe RMC conference was in Tel Aviv in early November.)
U.S., China Exploring Deal to Ease Trade Tensions
Bob Davis and Lingling Wei – WSJ (SUBSCRIPTION)
The U.S. and China, looking to defuse tensions and boost markets, are exploring a trade deal in which Washington would hold off on further tariffs through the spring in exchange for new talks looking at big changes in Chinese economic policy, said officials on both sides of the Pacific.
****SD: One step back, one step forward – are we really any closer to a deal? It feels more like global leaders are just doing the foxtrot – they move but end up going nowhere.
Economic forecasts strike blow to Theresa May’s Brexit deal
Dan Sabbagh and Richard Partington – The Guardian
Theresa May’s campaign to sell her Brexit deal to sceptical MPs and a divided country ran into further difficulties when a string of official economic forecasts concluded that the UK would be better off remaining in the European Union.
The Bank of England said on Wednesday that GDP would have been at least 1% higher in five years’ time if the UK had voted to remain, while an official Whitehall analysis concluded that in all Brexit scenarios, including May’s final deal, the UK would be worse off.
****SD: Am I overly cynical or is this the least surprising Brexit news ever? For the other side of the coin, see Bloomberg’s ECB Says Euro-Area Financial System Can Withstand No-Deal Brexit. For another general EU take, see the FT’s ECB warns eurozone increasingly vulnerable to financial shocks
More Trading Will Be ‘Taken Over by Machines,’ Quant Chief Says
Krystal Chia – BloombergQuint
Gresham’s Kerson says role of systematic trading set to expand; Industry now ‘teaching the machine how to make that decision’
Quantitative trading is on the march and machines are likely to handle a much greater share of dealing in assets in the years to come, diluting or replacing the role now played by human beings, according to Scott Kerson, head of systematic strategies at Gresham Investment Management LLC.
****SD: What else is new?
OPEC Meeting Can’t Reverse Larger Trend to Lower Oil Prices
Meghan L. O’Sullivan – Bloomberg
Some of us are starting to associate turkey with low oil prices.
Just four years ago, on Thanksgiving Day in 2014, OPEC held a meeting in Vienna, the outcome of which set off a dramatic slide in oil prices. The price of Brent crude dropped $6 a barrel, or 8 percent, in just the 24 hours after OPEC announced the outcome of its meeting. This Thanksgiving, there was no OPEC gathering, but on Friday, the Brent price still slid nearly $4, or 6 percent, to its lowest mark in a year. Although the price has since stabilized, we cannot rule out a further slip in the weeks or months ahead.
****SD: According to QuikStrike’s CME OPEC Watch Tool (the probabilities are calculated using oil options) there is a 70.07 percent chance the December 6 meeting will result in a small production cut and a 29.93 percent chance it will result in little or no change.
Caution Flags Still Waving: Volatility Haunts Market Despite Powell Speech
JJ Kinahan – The Ticker Tape
After Powell’s more dovish words, markets seem to remain a bit nervous ahead of the G20 meeting this weekend. Stay tuned this afternoon for Fed minutes, which could provide more perspective on monetary policy heading into the end of the year.
****SD: It takes a special type of person to accept a position where people cling to every slight change in the wording of your public comments.
Innovation steps to the fore at FIA Asia conference
Sean McMahon – SmartBrief
The role of technology in financial markets continues to evolve, numerous speakers at the Futures Industry Association’s 14th Annual Asia Derivatives Conference in Singapore shared their thoughts on the road ahead.
With so much focus on new technologies like distributed ledger, artificial intelligence and machine learning, some speakers stressed the importance of realizing how little some aspects of market infrastructure have advanced.
****SD: From the piece: “Chip Dempsey, SVP and chief commercial officer at OCC, pointed out that while some technology use cases are aimed at tackling new problems, his firm is constantly working to solve for one of the biggest challenges in markets: trust.” (The author of this piece is one of the few people in the industry — along with JLN videographer Mike Forrester — to see me have an allergic reaction. We went out to an Italian joint at FIA Boca and I got Parmesan cheese in my eyes — it was just floating around in the place’s atmosphere. That’s why one of the most watched episodes of The Spread — when I’m in a pool — features me wearing sunglasses. I was still so puffy it looked like I’d gone the distance with Apollo Creed.)
Exchanges and Clearing
Commodity options turnover fell 66% as traders switched to equities: Sebi
Dilip Kumar Jha – Business Standard
The Multi Commodity Exchange of India (MCX), India’s largest commodity derivatives trading platform that enjoys nearly 90 per cent of market share, and National Commodities and Derivatives Exchange (NCDEX) have witnessed a 66 per cent decline in their turnover during the last two months in the recently launched ‘options’ segment as traders switched to equity markets for assured returns.
Another Amazon Finance Exec Leaves for a CFO Post
Finance VP Jason Wornick joins online trading platform Robinhood, becoming the third finance leader in the past month to exit the company for a CFO role.
Regulation & Enforcement
Get ready for a derivatives trading meltdown next autumn
Peter Rippon – Financial News London
The cost of derivatives trading in Europe is set for a financially crippling 10-fold increase under new regulation.
These so-called uncleared margin rules, which have already hit a number of larger companies based on the size of their portfolios, will pull in other pension funds and asset managers at an exponential rate each September until 2020.
****DS: If OTC trading becomes prohibitively expensive, that has to bode well for exchange traded derivatives, right?
Deutsche Bank headquarters raided in Panama Papers probe
Ivana Kottasova – CNN
Deutsche Bank’s head office and other locations in Frankfurt were raided by 170 police officers and tax investigators on Thursday as part of a money laundering probe.
****SD: What does this portend for the struggling bank? In short: nothing good. Its stock is down some five percent today on the news. But that’s nothing new – the five year chart of Deutsche bank’s stock is like the inverse of the S&P over that same time period. It traded at north of $40 at the start of 2014 and is under $10 now.
Interactive Brokers adds Implied Volatility “Percentile”and “Rank” data points to TWS platform
Maria Nikolova – FinanceFeeds.com
Online trading services provider Interactive Brokers Group, Inc. has introduced more enhancements to its TWS platform. In the latest (beta) version of the solution, the broker has added 24 new data points that traders can display as columns in their Portfolio, Watchlists and Scanners.
Software Reliability at Optiver: Design
David Kent – Optiver
When errors occur in our environment, we aim to learn everything we can from them so we can improve our processes, system, and culture. However, a common response to errors betrays a misunderstanding of where they come from: why wasn’t this caught in testing?
Bloomberg Adds Indian Derivatives Datafeeds
Wei-Shen Wong – WatersTechnology (SUBSCRIPTION)
Subsidiaries of NSE and BSE expect an increase in liquidity for Indian derivatives products.
Taking the Pulse of Dr. Copper for 2019
Erik Norland – CME Group
Copper prices are often said to reflect the health of the global economy because of the metal’s use in every major facet of industry, hence the moniker “Dr. Copper.” Between January 2016 and the end of 2017, prices soared 72% as China’s pace of growth picked up and the rest of the world economy boomed. For 2018, however, copper prices had fallen 18% by late November amid concerns over trade wars, U.S. fiscal and monetary policy, Brexit, the Italian debt situation and a possible slowdown in China. Here’s a look at copper’s demand-and-supply conditions as we enter the last year of the decade.
Fed Says Millennials Are Just Like Their Parents. Only Poorer
Jeremy Herron and Luke Kawa – Bloomberg
Millennials, long presumed to have less interest in the nonstop consumption of goods that underpins the American economy, might not be that different after all, a new study from the Federal Reserve says.
Their spending habits are a lot like the generations that came before them, they just have less money at this point in their lives, the Fed study found. The group born between 1981 and 1997 has fallen behind because many of them came of age during the financial crisis.
****JB: It’s not options but it is interesting.