Observations & Insight
Market Outlook with Cboe’s Ed Tilly: Regs, Crypto and Liquidity
In this video, Cboe Chairman and CEO Ed Tilly addresses the SEC’s commentary on market data offerings, what’s next for crypto products, and the need to alter regulations that are hindering index options liquidity.
Watch the video »
Wall Street’s ‘fear index’ surges to 9-month high as Dow drops nearly 800 points
Mark DeCambre – MarketWatch
A popular gauge of volatility on Wall Street, known as the fear index, on Thursday jumped to its highest level since February as stocks tanked on the back of mounting global-growth fears.
****JB: This as of noon ET.
The sell-off started with a mysterious plunge overnight that caused the exchange to halt futures
Thomas Franck – CNBC
CME Group says it had to intervene with multiple 10-second pauses to prevent a steeper decline in equity futures. Speculation for the swell in volume and plunge in futures included the news of the arrest of the CFO of the Chinese telecom company Huawei. Traders also speculated that the selling could be attributed to a large fund or funds liquidating a position.
Dash to Acquire eRoom Securities; eRoom Securities will be rebranded as Dash Prime, bringing unmatched scale, technology and service to the professional trading community.
Dash Financial Technologies
Dash Financial Technologies, the industry’s leading capital markets technology and execution provider, today announced it has signed a definitive agreement to acquire eRoom Securities, LLC.
A Hedge-Fund Tragedy in One Act; A hubristic high-roller does worse for clients than Bernie Madoff.
Gregg Opelka – WSJ (SUBSCRIPTION)
“Not being the worst stands in some rank of praise,” observes an increasingly befuddled King Lear in the second act of Shakespeare’s play of the same name. As his thankless daughters Regan and Goneril vie to see who can out-downsize dad with draconian cuts to his traveling entourage, the lame-duck king takes a bean-counting approach. Goneril offers 50 servants, Regan 25. He’ll go with Goneril. Lear’s simplistic yet irrefutable math has played out in a peculiar parallel in the hedge-fund world over recent weeks.
****SD: The author is a musical theater composer-lyricist. So you end up with passages like the following: “While Mr. Madoff was a true crook, Mr. Cordier’s crime was one of Icarian arrogance. Lulled into fatal overconfidence by years of successfully dodging volatility bullets, he finally flew too close to the sun on the twine-and-wax wings of his own hubris.”
Bitcoin Derivatives That Cost $1 Million Will Soon Be Worthless
Gregor Stuart Hunter – Bloomberg (SUBSCRIPTION)
The biggest-ever bet on Bitcoin options is about to expire worthless. Purchased for almost $1 million on LedgerX’s trading platform just days after Bitcoin peaked a year ago, the call options have a strike price of $50,000 and an expiry date of Dec. 28, 2018. For the contracts to retain any value at expiry, Bitcoin would need to rally more than 1,200 percent.
****SD: The story is a guy bought these calls while selling a ton of his bitcoin holdings ó he says it was a profitable trade.
Goldman Sees This Year’s Volatility Spike Carrying Over to 2019
Gregory Calderone – Bloomberg (SUBSCRIPTION)
Love it or hate it, volatility has come roaring back into the U.S. equity market. And it’s likely to persist in the year ahead, according to Goldman Sachs.
Volatility has more than doubled this year from near historic lows in major exchange-traded funds tracking U.S. equity indexes and sectors, bringing it closer to long-term averages, Goldman derivative strategists Katherine Fogertey and John Marshall wrote in a note. Overall, single-stock options prices imply a continuation of those levels in 2019, which are “not extreme by any means,” they wrote.
U.S Equities: ‘Sell All’ Battle Cries Heard Across Markets Ahead of U.S. Open
Dani Burger – BloombergQuint
Before a single share moves in regular U.S. trading hours, investors are braced for an ugly New York open, lashed once again by a litany of punitive forces.
They’re rushing to hedge sinking S&P 500 futures, while oil is tumbling as OPEC struggles to agree on an output cut.
“So much for a pause in the action,” Stephen Innes, head of Asia-pacific trading at Oanda Corp. wrote to clients. “‘Sell All’ battle cries are ringing out across trading floors again.”
Here are the charts that show the grim open awaiting the U.S. market.
Unwanted exercise and ‘pin risk’: A primer for EUA options expiry’s other risks
There are currently hundreds of millions of tonnes in open interest across ICE and EEX’s Dec-18 EUA options, with a sizeable portion of that ‘in the money’ based on the underlying futures trading around EUR20.
****SD: Recall the story we had yesterday about carbon options from Bloomberg – Carbon Last-Gasp Bullish Bets Hit Record Before Key Brexit Vote
Exchanges and Clearing
Court Grants MIAX’s Motion to Stay Entire Nasdaq Litigation
Miami International Holdings, Inc. (MIH), the parent holding company of the MIAX Options and MIAX PEARL exchanges (MIAX), today announced that the United States District Court for the District of New Jersey has granted MIAX’s motion to stay the litigation filed by Nasdaq against MIAX. The Court determined that it was appropriate to stay the entire case at this time pending the Patent Trial and Appeal Board’s (PTAB) previously granted Covered Business Method Review of all six patents-in-suit.
Oslo Bors and LSEDM end linked derivatives order book partnership; The linked derivatives order book partnership between LSEDM and Oslo Bors has been in effect since 2009.
Hayley McDowell – The Trade
Norway’s Oslo Bors and the London Stock Exchange Derivatives Markets (LSEDM) have decided to end their linked derivatives order book partnership after almost 10 years in operation.
LSE to close equity derivs business
Louisa Chender – Global Investor Group (SUBSCRIPTION)
The London Stock Exchange is closing its equity derivatives business next year
UBS to act as a Spot FX Intermediary for eligible counterparties on Cboe FX
Cboe FX Markets, a Cboe Global Markets, Inc. (Cboe: CBOE) company and a leading platform for institutional foreign exchange (FX) trading globally, today announced that UBS has agreed to act as a Central Credit Intermediary for eligible counterparties on Cboe FX who might have limited bilateral credit relationships, enabling them to access a wider pool of liquidity.
Vela to facilitate electronic access to Eurex EnLight
Eurex, Europe’s largest derivatives exchange, and Vela, a global leader in trading and market access technology, have teamed up to facilitate electronic access to Eurex EnLight, the new selective request-for-quote (RfQ) platform, via Vela’s Metro Trading Platform.
This further supports market participants seeking to trade via Eurex EnLight as Vela’s technology solution will be a new alternative to the existing ways of accessing the RfQ platform. With this development, market participants can expect further operational efficiencies, regulatory compliance with data reporting tools and best execution, improvements to accessing liquidity, and a reduction in quote response times on the platform.
MSE gets Sebi approval for weekly options on currency products
PTI via Economic Times
Metropolitan Stock Exchange (MSE) Thursday said it has received market regulator Sebi’s approval to launch weekly options on US dollar-Indian rupee (USD-INR) and other new currency products. The move will enable market participants to reduce their cost of hedging significantly.
OCC Named 2018 “Clearing House of the Year”
OCC, the world’s largest equity derivatives clearing organization, today said it was honored to be named the 2018 “Clearing House of the Year – The Americas” by FOW Magazine. The announcement took place on December 4 at the FOW International Award gala dinner in London, which honored achievements that have supported the advancement of the global derivatives industry.
Regulation & Enforcement
Cboe Investors Just Want Names In VIX Manipulation MDL
Reenat Sinay – Law360 (SUBSCRIPTION)
Chicago Board Options Exchange investors continued to urge an Illinois federal court to approve expedited discovery in multidistrict litigation against Cboe Global Markets Inc. and related entities over alleged manipulation of…
BNP Paribas Moves to Real-time Margin Calculations with FIS Margin Advisor
FIS, a global leader in financial services technology, today announced that BNP Paribas has selected FIS’ Cleared Derivatives Margin Advisor, an innovative solution that enables sell-side firms, investment funds and institutional investors to better assess and calculate initial margin requirements on cleared derivatives portfolios.
Markets Carry Trade Regains Oomph With Emerging Markets Dodging Fed Squeeze
Paul Wallace – Bloomberg
Central bankers have juiced up carry returns through hikes; Emerging-market currencies bolstered by high reserve buffers
The hunt for higher yields is all set to return to emerging markets in 2019 as central banks zealously guard their interest-rate advantage over the Federal Reserve.
Traders Starting to Doubt Fed Will Raise Rates Even Once in 2019
Liz McCormick – BloombergQuint
Eurodollar futures curve prices in less than one rate hike Global equity selloff and trade tensions erode confidence
Traders of U.S. interest-rate futures are rapidly losing confidence that the Federal Reserve will raise rates even once more next year and are also beginning to have some doubts if they’ll notch rates higher this month.
The Bloomberg 50: The People Who Defined Global Business in 2018
What does Black Panther director Ryan Coogler have in common with Ben van Beurden, chief executive officer of Royal Dutch Shell? Or Representative-elect Alexandria Ocasio-Cortez with Michael Gelband, co-founder and CEO of ExodusPoint Capital Management? A place on the second annual Bloomberg 50, our look at the people in business, entertainment, finance, politics, and technology and science whose 2018 accomplishments were particularly noteworthy.