BofA survey shows investors bracing for steep falls in stocks; CFTC stance on position limits

May 15, 2019

Observations & Insight

Philanthropy Q&A: Bryan Harkins, Cboe Global Markets
MarketsMedia
Bryan Harkins, Executive Vice President and Co-Head of Markets Division at Cboe Global Markets, won the Philanthropy Award at the 2019 Markets Choice Awards. The Philanthropy Award was one of three ‘Positive Change’ Awards sponsored by Instinet. Markets Media caught up with Harkins to learn more about his motivations and his vision for his annual benefit event, Wall Street Rides FAR.
bit.ly/2VrreQH
****SD: Bryan hits some nails square on the head.

Harkins: “I’m incredibly grateful to work in such a generous industry…To me, philanthropy is being self-aware of those bestowed opportunities and giving back in whatever way you can.”

The trading world has its image problems, so showing the industry’s charitable colors is even more important.

Also from Harkins: “There are countless wonderful charities out there. They are all vying for dollars to support their causes. When you have your unique idea, leverage your network and be relentless in channeling that passion towards building your idea and soliciting support.”

Charity fatigue is real.

Speaking of good causes, CME Group and Chicago Mayor Rahm Emanuel just awarded $5,000 scholarships to 25 students to help fund their education at a four-year college or university after completing an associate degree at City Colleges of Chicago.

Rahm Emanuel is one of the many influential people who have spoken at our MarketsWiki Education World of Opportunity Event series. Make a note: our MWE WOO series is coming back to Chicago in July! If you have students or interns at your firm over the summer, free up some time for them the week of July 15th.

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Global ETD Volumes in April
FIA
FIA released its global derivatives volume report for April. According to the FIA, global options volumes came in at 1.17 billion contracts, with overall exchange-traded derivatives volumes of 2.63 billion contracts. Futures volumes were down 10.3% MoM but up 8.6 percent YoY. Options volumes were more resilient than futures volumes – they were down 4.8% MoM but up 21.6% YoY. Meanwhile, overall volumes were down 7.9% MoM and up 14 percent YoY. You can go to this link to subscribe to the FIA’s data reports.

Lead Stories

BofA survey shows investors bracing for steep falls in stocks; Record share of fund managers have hedged against decline in equities
Philip Georgiadis – Financial Times (SUBSCRIPTION)
Investors are increasingly positioning for a sharp fall in equity markets over the next three months, as trade tensions between the US and China test the runs of gains in global stocks.
/on.ft.com/2Q3JD5b

****SD: Reuters covers BAML’s survey here.

CFTC’s Berkovitz puts his weight behind position limits; New rule on speculative commodity trades will be proposed within weeks
Stella Farrington – Risk.net (SUBSCRIPTION)
Dan Berkovitz, a Democratic member of the US Commodity Futures Trading Commission, has voiced his backing for a new rule on speculative position limits, which the agency is expected to consider before the end of June. “Although we do not yet have a proposal in front of us, I can tell you that I strongly support meaningful position limits to prevent excessive speculation in commodity markets,” Berkovitz said at the Energy Risk USA conference in Houston on May 14.
bit.ly/2VtdcOy

****SD: See the last section of Berkovitz’s comments from his address that we had in yesterday’s newsletter here.

Market Technicals Stoke Volatility as Key Levels Approach
Amrith Ramkumar – WSJ (SUBSCRIPTION)
Recent stock-market gyrations have carried major indexes near closely watched technical levels, exacerbating swings in both directions as investors weigh the latest updates on trade policy.
/on.wsj.com/2LLj5r1

****SD: S&P really likes coming home to roost around 2800 these past few quarters.

What gets Goldman Sachs’ top quant excited
eFinancialCareers
Michael Steliaros, Goldman Sachs’ Global Head of Quantitative Execution Services, has given a short but opinion-filled interview with Quantminds in which he was asked what’s hot and what’s not in the quant world.
Steliaros’s top pick for a game-changing development is the availability of massive computing power via the cloud; he suggests that Goldman’s growing and high-flying algo team are now able to carry out calculations that were simply impossible “even two or three years ago”. He also, interestingly, suggests that the increasing market share of indexed and passive investors has begun to affect how liquidity evolves over the course of a day, and that dealing with these changes is the key challenge for him and his employees.
bit.ly/2HpZabD

****SD: The video referenced in the piece can be found on YouTube here.

Exchanges and Clearing

Johannesburg Stock Exchange launches new clearing platform from Nasdaq
GlobeNewswire
On April 29, the Johannesburg Stock Exchange (JSE) successfully went live with a new real-time clearing platform for the JSE’s Equity Derivatives and Currency Derivatives market.
bit.ly/2w2eu8V

Cboe Global Markets Plans Listing of Options on Uber Technologies, Inc. (UBER), on Thursday, May 16
Cboe Investor Relations
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today said it plans to list options on Uber Technologies, Inc. (UBER), a ride-share company, on Thursday, May 16, once the underlying stock has been certified as meeting all of Cboe’s applicable exchanges’ listing criteria.
bit.ly/2VCLiF0

****SD: I see a future where options on recent IPOs get rolling a bit earlier than the week-ish it takes now. I can see why mainstreet investors might be chomping at the bit – these rideshare IPOs have been a roller coaster.

First ‘Speed Bump’ Coming to U.S. Futures Markets
Alexander Osipovich – WSJ (SUBSCRIPTION)
A futures exchange is set to blunt the advantages of ultrafast traders by imposing a split-second delay on some trades.
Intercontinental Exchange Inc., known as ICE, can launch the first “speed bump” in U.S. futures markets after the Commodity Futures Trading Commission didn’t block the proposal.
/on.wsj.com/2LLthzD

****SD: For excellent commentary on why this move by ICE, and latency protections in general, could be beneficial, see our recent video with CTC’s Steve Crutchfield – The Thorny Speed Bump Question.

Euronext publishes Q1 results
Euronext
Euronext, the leading pan-European exchange in the Eurozone with 1,300 listed issuers, today announces its results for the first quarter of 2019.
bit.ly/2HxrlVY

Regulation & Enforcement

Robinhood must repay an investor who lost money when the platform locked him out of his account
FINRA
bit.ly/2VqFtFu

****SD: The only place I could find any commentary on the ruling was a reprint of an FT story on a Reddit thread.

Sebi fines individual Rs 5 lakh for non-genuine trade in illiquid stock options
Press Trust of India
Regulator Sebi on Wednesday imposed a fine of Rs 5 lakh on an individual for carrying out manipulative trades in the illiquid stock options segment on the BSE
bit.ly/2HpX1g5

Technology

Samsung Futures Signs Agreement to Provide Connectivity to Korea Exchange (KRX), Expanding the TT Platform into Korea
Trading Technologies
Samsung Futures, a leading Korean institutional futures commission merchant (FCM), and Trading Technologies International, Inc. (TT), a global provider of high-performance professional trading software, infrastructure and data solutions, today announced that Samsung has signed an agreement to offer connectivity to the Korea Exchange (KRX) via the TT platform. In doing so, Samsung will be the first FCM to connect to KRX on the TT platform, extending TT’s connectivity into Korea for the first time.
bit.ly/2Q5SVNT

TopstepTrader Teams Up with TradeStation to Bring Funding Opportunity to Futures Traders
PRNewswire via Yahoo
TopstepTrader, a financial technology firm based in Chicago, IL that evaluates futures traders’ performance in real-time simulated accounts, today announced a strategic agreement with TradeStation Technologies, Inc., the software technology affiliate of the award-winning* TradeStation online trading broker-dealer and futures commission merchant. The collaboration enables futures traders of all skill levels to participate in a simulated TradeStation trading environment with the opportunity to earn a Funded Account by TopstepTrader and keep the first $5,000 in profits and 80% thereafter.
/yhoo.it/2Hsj4Tq

Strategy

How to protect your money from this stock market’s wild volatility
Mark Hulbert – MarketWatch
There’s a surprisingly easy and profitable trading strategy to use during extraordinary stock-market volatility like now.
/on.mktw.net/2LJN5Dm

*****SD: VIX impact on the Wilshire? Who uses the Wilshire?

State Street Not Buying More Stocks After $3 Trillion Drop
Ksenia Galouchko – Bloomberg via Yahoo
Thinking of buying the dip? One of the world’s biggest money managers says the stock market hasn’t slumped enough to make it purchase more equities.
According to State Street Global Advisors, U.S. President Donald Trump’s latest tariff spat with China has spooked investors so much that they’re unlikely to buy stocks until a deal is reached.
/yhoo.it/2VEPxQ5

Miscellaneous

Next recession: Why the stock and bond markets will do the unthinkable
Akin Oyedele – Business Insider (SUBSCRIPTION)
It takes a certain brand of persistence to maintain the same prediction for two decades and counting.
Just ask Albert Edwards, a global strategist at Societe Generale, who is well known for his bearish views and his longstanding Ice Age prediction for the global economy.
bit.ly/2LJ3l7W

ESMA Says Market Risk Remains High But Stable Date
Mondovisione
The European Securities and Markets Authority (ESMA) today publishes its latest risk dashboard for the European Union’s securities markets, covering the first quarter of 2019. It finds that the risk landscape in Q1 2019 remains largely unchanged compared to the fourth quarter of 2018.
bit.ly/2Vu5Dak

TP ICAP Commodity Brokers Save Company From a Dire Quarter
Will Hadfield – Bloomberg (SUBSCRIPTION)
The world’s biggest interdealer broker was bailed out in its first quarter by the businesses that it hopes will secure the company’s future.
TP ICAP Plc’s bad quarter in its main broking business was offset by a 7% revenue increase in its energy and commodity operations, while its institutional services division, which matches trades for hedge funds, grew sales by 33%. Lower volatility and hence smaller volumes in rates and equities pulled revenue in global broking down 6% to 333 million pounds ($430 million).
/bloom.bg/2LKRNB4

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