Observations & Insight
March 2019 Options Exchange Marketshare via OCC
Commentary: No Joking Matter
Chuck Mackie – Medium
There may be some cruel irony in the fact that the trial of Jitesh Thakkar commenced on April Fools Day, but I’m pretty sure he’s not laughing. Given the gravity of the charges brought against him and the sheer weight that the U.S. government is bringing to bear on him in a Federal courtroom in Chicago, he shouldn’t be. This is serious stuff.
Thakkar is being charged with spoofing of futures markets based upon software that his firm, Edge Financial, created for the notorious “flash crash trader,” Navinder Sarao. Sarao is a London-based futures trader who was arrested in April 2015 and charged with 22 counts, including one for wire fraud, ten for commodities fraud, 10 for commodities price manipulation and one for spoofing. Sarao pleaded guilty to two counts?ó?wire fraud and spoofing?ó?in November 2016, paying the government over $12 million and facing up to 30 years in prison. He was allowed to remain free, however, as he agreed to cooperate with prosecutors in exchange for a possible reduction in his sentence. His testimony against Thakkar is part of that deal.
****SD: This case will have repercussions for the whole of the trading industry – whichever way it goes.
US v. Jitesh Thakkar: An Exercise in Justice
Thom Thompson – John Lothian News
April 1, 2019 was the first day in the criminal trial U.S. v Thakkar, in which the government charges that Jitesh Thakkar aided and abetted spoofing in a manipulative and deceptive scheme carried out by another person. It is a serious allegation and everyone is taking it seriously. There are four prosecuting and three defending attorneys. If things run as scheduled, yesterday was just the first of a half-dozen or so days of testimony and arguments as the Federal Government endeavors to right the wrongs perpetrated by Thakkar, president of Edge Financial Technologies, a software development firm that programs applications for the trading industry.
****Other coverage from Bloomberg and Crain’s.
Breezy Quarter for Stocks Masks Biggest Bet on Unrest Since 2012
Yakob Peterseil – Bloomberg (SUBSCRIPTION)
In the grip of the biggest first-quarter advance for stocks in two decades, investors pumped billions into products that would pay off if the market calm snapped. Call it a hedge for the famously unloved rally, or a mistimed bet that the sleepy S&P 500 Index was poised for a shake-up. Whatever the reason, inflows into exchange-traded products that notch gains when the Cboe volatility gauge rises topped $2 billion through the end of March, according to data compiled by Bloomberg. That’s the most since the first quarter of 2012.
Forex traders fret as sleepy markets slow to calmest in years
Tommy Wilkes, Ritvik Carvalho – Reuters
The $5.1-trillion-a-day foreign exchange market is suffering more than most from central bank decisions to move in tandem and keep interest rates low for longer.
Main suspect in Deutsche stock manipulation case in custody in Indonesia
The main suspect in a massive 2010 stock manipulation by a unit of Deutsche Securities has been apprehended by authorities in Indonesia, a Seoul prosecution office said Tuesday.
****SD: Here is the quick take from FT Alphaville in 2010 in the wake of the 2.7 percent drop in the KOSPI over the course of a mere 10 minutes. The traders at fault for the selloff made roughly $40 million.
Traders Are Betting the Swiss Franc Will Keep Rallying
Vassilis Karamanis and Anooja Debnath – Bloomberg (SUBSCRIPTION)
Options signal most bullish franc sentiment since January; If ECB cuts rates, SNB stuck in ‘race to the bottom’: Nordea
The Swiss franc is defying predictions to weaken and traders are betting the rally will keep going. The franc is holding near the strongest level since 2017 against the euro and wagers on further gains in the options market have climbed to the highest this year. Concerns about the health of the global economy, Brexit turbulence and trade tensions are driving demand for havens such as the franc and Treasuries.
Q1 Asset Class Scorecard
Bounce. Bounce. 2019 continued to be the year of the bounce – with everyone now in on the act once managed futures finally decided to get in the game with its largest gains since January of 2018. Add it all up and you have everyone solidly in the black in what has become quite the Q1 turnaround from how things ended last year (everyone in the red), With more trade war action looming, an inverted yield curve, we can only wait and see what Q2 will bring.
Volatility Index Still Hasn’t Confirmed U.S. Stock Rally: Chart
Cormac Mullen – Bloomberg (SUBSCRIPTION)
Equity bulls cheered as the S&P 500 Index closed at its highest since October, but there may still be a small fly in the ointment — volatility.
Exchanges and Clearing
CME Group Averaged 19.1 Million Contracts Per Day in March 2019
CME Group, the world’s leading and most diverse derivatives marketplace, reached average daily volume (ADV) of 19.1 million contracts during March 2019, compared to 20.8 million contracts in March 2018. In addition, total daily exchange trading volume surpassed 20 million contracts on each of the final six trading days in March. Open interest (OI) at the end of March 2019 was 126 million contracts, up 9% from year-end 2018 and unchanged from March 2018. First-quarter 2019 ADV marked the third-highest quarterly ADV ever with 18.6 million contracts, down from a record 22.2 million contracts in the first quarter of 2018.
****SD: It’s no easy task to follow up on 2018’s banner volumes.
March sees Eurex well on track: Eurex Exchange up by 5 percent
Eurex Exchange, Europe’s largest derivatives exchange and part of Deutsche Boerse Group, has continued its upward trend in March. The number of traded contracts reached 203.3 million compared to 194.1 million in March 2018. This is an increase of 5 percent.
Proposal to amend the Exchange’s Pricing Schedule in Options 7, Section 2, which governs the pricing for Nasdaq participants using The Nasdaq Options Market
The Exchange proposes a number of changes to NOM pricing in Options 7, Section 2. Each change is discussed below.
****SD: Lots of rebate and fee adjustments.
Euronext updates on Oslo Bors VPS acquisition
-Euronext has received the declaration of non objection from its College of Regulators for the contemplated acquisition of up to 100% of the capital of Oslo B¯rs VPS
-Continuous support to Euronext offer with former Chair and Member of the Board of Oslo B¯rs Tom Vidar Rygh to join the Board of Directors of Oslo B¯rs VPS post-completion, subject to the usual regulatory approval
-Euronext extends its acceptance period to 6 may 2019 Amsterdam, Brussels, Dublin, Lisbon, London and Paris
OCC’s securities lending CCP activity dips in March
Securities Lending Times
OCC’s securities lending CCP activity was down 0.5 percent in new loans from March last year, with 117,521 transactions last month.
Regulation & Enforcement
BSE stock options: Sebi slaps Rs 50 lakh penalty on broker for fraudulent trade
Press Trust of India
Markets regulator Sebi has slapped a penalty of Rs 50 lakh on broker Mangal Mantri Trading for indulging in fraudulent trade practices in illiquid stock options on BSE.
ASX deploys Quantitative Brokers algos and TCA to derivatives market
Hayley McDowell – The Trade
The Australian Securities Exchange (ASX) has deployed execution algorithms and multi-broker transaction cost analysis (TCA) from Quantitative Brokers to its derivatives market.
Our Strongest Signal Indicator, Contango, and Its Relationship to Constant Implied Volatility
One of the best signals we track is short term contango. The Contango reading measures the slope of the at-the-money implied volatilities from short term expirations.
Industry Update on Consolidated Audit Trail Registration
On Wednesday, April 3, 2019, at 4:15 p.m. ET, the CAT NMS, LLC will be hosting a Consolidated Audit Trail webcast to discuss the recent updates to the CAT Reporting Technical Specifications for Industry Members published on March 29, 2019 and additional topics. The webcast will be recorded and playback will be available on the www.catnmsplan.com website.
Bitcoin jumps 20 percent, mystery order seen as catalyst
Tom Wilson, Tommy Wilkes – Reuters
Bitcoin soared to its highest in almost five months on Tuesday, pulling smaller cryptocurrencies up with it, after a major order by an anonymous buyer set off a frenzy of computer-driven trading, analysts said.
****SD: Is there any area of financial markets with as much “mystery” as crypto assets? Plenty are opaque, sure, but mysterious? I think crypto takes it. Just look at Quadriga.
Farms showing financial stress, producers express concern about future conditions
Producer sentiment weakened slightly in late winter, according to the March Purdue University/CME Group Ag Economy Barometer reading. The barometer, which is based on a survey of 400 U.S. agricultural producers, declined 3 points to a reading of 133, down from 136 in February.