Big Three Stock Exchanges Sue SEC Over Trading-Fee Plan

Feb 18, 2019

Observations & Insight

The Spread – Alternative History – 2/15

It was a semi-slow week for options news, the big exception being the SEC’s surprise rejection of the OCC’s capital plan. In this episode, we wonder what could have happened in a different universe.
Watch the video and see the stories referenced here »

Lead Stories

Big Three Stock Exchanges Sue SEC Over Trading-Fee Plan
Alexander Osipovich and Dave Michaels – WSJ (SUBSCRIPTION)
In an unprecedented legal confrontation, the three biggest U.S. stock-exchange groups are taking on their own regulator to block an initiative that seeks to limit the fees they can charge for trading. Nasdaq Inc. and Cboe Global Markets Inc. on Friday sued the Securities and Exchange Commission in a federal appeals court to stop the regulator from carrying out the program, a day after the New York Stock Exchange filed a similar challenge.

****SD: Other sources: Pensions and Investments and the Financial Times

Oil Rally Finally Pulls Hedge Fund Optimists Off the Sidelines
Alex Nussbaum – Bloomberg via Yahoo Finance
Oil optimists look like they’re finally ready to take the driver’s seat in crude’s rebound. For the first time this year, a jump in bets that Brent crude prices will rise far surpassed the move by short-sellers, helping set the tone for money managers’ positioning on the global benchmark. Sentiment is now the most bullish since late October.

****SD: Reuters here. As expected, there is not a ton going on in today’s newsletter, as it is Presidents’ Day in the United States.

Europe to recognise LCH, ICE & LME as CCPs in ‘no-deal’ Brexit; ESMA has been making plans to prepare for a ‘no-deal’ scenario ahead of Brexit, with disruption to clearing being one of the biggest concerns.
Hayley McDowell – The Trade
UK clearinghouses LCH, ICE Clear Europe and LME Clear have been granted approval to continue providing clearing services in Europe in the case of a ‘no-deal’ Brexit, Europe’s financial regulator has confirmed.

Top Deutsche Bank Investor Sold Stock at Double Market Price
Young-Sam Cho, Daniela Wei, Hannah Dormido and Steven Arons – Bloomberg via Yahoo Finance
When HNA Group Co. became Deutsche Bank AG’s top shareholder in early 2017, the German lender’s shares were trading near two-year highs and the once-fledgling Chinese airline was voicing ambitions of turning into a big player on Wall Street. Then both firms ran into roadblocks.

****SD: The story is about a hedge that paid off.

Exchanges and Clearing

Market structure “strikes the right balance” – CME
James Thursfield – Global Investor Group (SUBSCRIPTION)
CME Group remains confident in existing market structure amid the debate about speed bumps

****SD: A roundabout way of saying, “ICE’s plans are unnecessary.”

Deutsche Boerse eyes FX “pay-off”
James Thursfield – Global Investor Group (SUBSCRIPTION)
Deutsche Boese anticipates growth in its foreign exchange derivatives as trades shift from OTC to exchange

Regulation & Enforcement

EBI may allow mutual funds & PMS in commodities at March board meet;
Tarun Sharma – MoneyControl
The Securities and Exchange Board of India (SEBI) may allow mutual funds and portfolio management services (PMS) in the commodities market at its upcoming board meet scheduled for the second week of March. The markets regulator has almost finalised regulations for their entry as a new participant.


Market Data, Reference Data and Blockchain
Jean-Paul Carbonnier, CarboKinetic – Tabb Forum
…In theory, blockchain could disrupt this value chain significantly. Let’s assume the global financial services industry were to embrace the technology head-on. All securities and derivatives transactions would be validated and recorded on a decentralized ledger. This ledger would be open to all market participants to access, and as a result, the information contained therein would be free of any licensing restrictions.

****SD: A pipe dream for the moment, but interesting nonetheless.

Google picks its Chicago office to house finance hub
Associated Press
Google officials say the company has selected Chicago as its new finance division hub with plans to have the capacity to double its workforce in the city by the end of the year.


Swedish Krona Set for Bumpy Ride on Volatile January Inflation
Love Liman and Vassilis Karamanis – Bloomberg (SUBSCRIPTION)
The krona, the worst-performing major currency this year, faces volatility on Swedish inflation data Tuesday as markets may be underestimating the risk for a surprise.

****SD: “One-week implied volatility in the cross is trading around 50 basis points below its one-year average, while the relative premium to own exposure into short-term risks stands below par, suggesting investors can hedge themselves through relatively under-priced option plays.”


Germany bans Wirecard ‘shorting’ as prosecutors probe FT journalist
Arno Schuetze – Reuters via CNBC
Germany’s financial watchdog has banned “short” selling of Wirecard shares due to volatility in the payments firm’s stock following reports in the Financial Times which are now the subject of an investigation by German authorities. Munich prosecutors said on Monday they were investigating a Financial Times journalist, confirming that they had widened a probe into a possible violation of securities trading rules.

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