VIX Lawsuit; Volumes; Dash Video
Observations & Insight
Dash CEO on Buy-Out and SEC Fee Pilot
In March, Dash Financial Technologies co-founders Peter Maragos and David Karat, in partnership with the private equity firm Flexpoint Ford, acquired Dash in a management-led buyout. In this video, Dash CEO Maragos describes the thought process behind the buyout, the outlook for the firm’s equities and options businesses, and issues with the SEC’s proposed fee pilot.
President Trump teased the jobs report in the early morning, tweeting: “Looking forward to seeing the employment numbers at 8:30 this morning.” Princeton Economics Professor Alan Krueger (former chairman of the Council of Economic Advisors) said on Bloomberg today that he could not recall a previous instance of a President hinting at the contents of the jobs report like this. For more see Bloomberg’s Trump Roils Jobs Day With Thumbs-Up Tweet Before Data Release.
As of this writing, the VIX is back under 14 and the S&P 500 is back up over 2730.
There will not be an episode of “The Spread” published at its usual time. However, there will be one early next week filmed on location in London. We will be at FIA IDX next week. Anybody who wishes to link up, feel free to email me at email@example.com.
Also, MarketsWiki Education World of Opportunity 2018 is open for registration.
Can tZero and BOX Digital Markets change the face of capital markets?
Jim Kharouf – John Lothian News
It would not be an understatement to say that Patrick Byrne thinks big – really big – like a quadrillion dollar market.
The Overstock founder and CEO has been building the firm’s tZero subsidiary, a distributed ledger platform, since 2016 in an attempt to disrupt today’s capital market structure. Last week’s announced deal with BOX Digital Markets, a sister company to BOX Options Exchange, to create a Securities and Exchange Commission regulated market that lists and trades security tokens may do just that. The partnership could dramatically change how capital is raised across multiple asset classes and kickstart the clear rules from the SEC that govern so-called security tokens.
JPML Eyes Sending VIX Suits To Ill. Despite Judge Shortage
Lauraann Wood – Law360 (SUBSCRIPTION)
The Judicial Panel on Multidistrict Litigation seemed unmoved Thursday by a request from investors alleging an unlawful manipulation of the Chicago Board Options Exchange’s volatility index to consolidate similar suits in New York rather than Illinois given the number of bench vacancies on Chicago federal court.
****SD: Ugh. So pretty much this means it will take an extra long time for these cases to see the light of day? I never thought I’d be looking forward to reading court docs so much…
Global Futures and Options Data – Q1 2018
Global futures and options data, based on the number of contracts traded and/or cleared at 80 exchanges worldwide, from Jan. 1 to March 31, 2018.
****SD: Global options volume was 3,307,367,833 contracts, up 35 percent from Q1 2017. However, consider that Q1 last year was kind of a light quarter, and Q1 2018 was super duper heavy. So that 35 percent increase is a bit misleading.
Investors Return to Hedging in Volatile Times
Gunjan Banerji – Barron’s
Traders leery of sharp declines after a wild few months in the U.S. equity markets could spring for stock hedges through options.
Many investors dropped their stock protection last year and in early 2018, tired of burning cash on a strategy that expired worthless and ate away at their portfolios. As major U.S. stock indexes continued to rally, individual investors and institutional investors jumped in to ride the surge higher without any hedges. Because many compare their returns to stock indexes like the S&P 500, allocating money toward hedges that don’t pay out makes them underperform in the short term.
Goldman Sachs Banker Arrested for Insider Trading
Dave Michaels – WSJ (SUBSCRIPTION)
A banker at Goldman Sachs Group Inc. was arrested Thursday and charged with insider trading after authorities alleged he traded ahead of mergers and acquisitions that he learned about while working at the bank.
Woojae “Steve” Jung, 37 years old, earned about $140,000 from illegal trades in both stocks and bullish call options, the Securities and Exchange Commission said in a separate civil lawsuit filed in federal court in Manhattan.
Brokerage Commissions Down for Eighth Year
John D’Antona – MarketsMedia
U.S. equity brokerage commissions have fallen again this last year – marking the eighth straight year of falling profits. Traders both on the sell-side and buy-side are not surprised as the underlying fundamentals surrounding trading haven’t changed much since 2009 – lower volumes, low volatility, more low-touch or electronic trading versus high-touch methods and a reduced spend on research.
Russell Index Annual Reconstitution
Rick Rosenthal – Cboe Blog
Considering there’s approximately $8.5 trillion in assets benchmarked to the Russell U.S. Indexes, the Russell Reconstitution is a major event. Each year Russell Indexes are reconstructed to accurately reflect the U.S. equity market and its segments (market cap. & style). Designed to capture changes, the reconstitution accounts for new companies introduced via IPOs, market values of companies increasing/decreasing, share adjustments, etc.
Exchanges and Clearing
Best May in History Recorded at MGEX
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), announces another historical month with 180,836 contracts recorded for May of 2018. With an 11% increase between the now best and second-best May, recorded in 2014, 2018 has proven to be an all-around steady year for MGEX.
Total electronic volume for the month came in at 159,621 contracts while total open interest remained consistent with 67,609 contracts as of the close on Thursday.
BOX Options Exchange Fee Change – June 2018
Effective June 1, BOX Options Exchange (“BOX”) is making the following changes to the BOX Fee Schedule.
Wedbush Securities Appoints Rich Jablonski and Gary Wedbush Co-Presidents
Wedbush Securities, a leading financial services and investment banking firm headquartered in Los Angeles, California, today announced the appointment of Rich Jablonski and Gary Wedbush as Co-Presidents of the Firm, together responsible for all aspects of Wedbush Securities’ management and the strategic direction, development, and growth of all client services.
****SD: From the LA Times – Ed Wedbush, fixture of L.A. finance, steps down from his troubled firm
**SR: Ed Wedbush is the MarketsWiki Page of the Day today.
Regulation & Enforcement
Britain proposes guidelines on brokers swapping market talk
Huw Jones – Reuters
Traders must be clear about what information they can share with others in the market to avoid new rigging scandals, a British industry body said on Friday.
The Next EU-U.S. Battleground: Clearinghouses
Tom Fairless – WSJ (SUBSCRIPTION)
The European Union is dialing back a threat to force major clearinghouses in London to relocate to continental Europe after Brexit, in a move that could cool a lengthy, politically charged battle over a jewel in the City of London’s crown.
SPY vs. VIX: Backtesting Comparable Strategies
Sage Anderson – tastytrade blog
We already know that SPY and VIX are inversely correlated – as SPY goes up, VIX usually goes down, and vice versa.
However, that information doesn’t tell us how trading strategies in each respective symbol have performed over time – particularly a side-by-side comparison of SPY and VIX.
TVIX: Volatility Is Still On The Move
Volatility got a shot in the arm this week with a little help from Italy. And, thanks to that, the VelocityShares Daily 2x VIX Short-Term ETN (TVIX) got the boost that I was looking for over the past couple of weeks. Of course, this also applies to other popular long volatility ETPs such as the iPath S&P 500 VIX Short-Term Futures ETN (VXX) and the ProShares Ultra VIX Short-Term Futures ETF (UVXY). The move over 6 in TVIX on Tuesday should have provided enough upside for anyone who entered this ETP in the low to mid 5s (or even in the high 4s for some) to close out with a tidy profit. A particular catalyst for volatility spikes can never be known ahead of time, but the conditions that make periods of time more favorable for moves of magnitude can be identified.
Healthcare investors weigh bets as election risks loom
Lewis Krauskopf – Reuters
If 2016 is any guide, pharmaceutical, biotech and other healthcare stocks could be in for a rough summer and fall heading into another round of U.S. elections.
JPMorgan Dethrones Citigroup to Become Biggest Currency Trader
John Ainger, Anooja Debnath and Lananh Nguyen – Bloomberg (SUBSCRIPTION)
JPMorgan Chase & Co. won the title of world’s largest currency trader by market share, ending Citigroup Inc.’s four-year run at the top, according to a Euromoney Institutional Investor Plc survey that featured a new methodology.
LNG and the Importance of the Henry Hub Benchmark
Russell Blinch – CME Group OpenMarkets
Unlike solid forms of energy coaxed from the earth — such as crude oil and coal — the odorless vapor known as natural gas is positively invisible.
Goldman Tops 2017 Commodity Revenue in Just 4 Months
Jack Farchy and Sridhar Natarajan – Bloomberg (SUBSCRIPTION)
Goldman Sachs Group Inc. has shaken off its commodities woes, making more money in the sector in the first few months of this year than it did in all of 2017, according to people familiar with the matter.