Observations & Insight
Options Industry Leader Series: On-Screen Risk, Open Outcry Trading and Liquidity – BOX
In this video from the Options Exchange Leader Series, BOX CEO Ed Boyle talks about protecting liquidity providers and developing BOX’s complex order book and regulatory tools.
Watch the video »
Cboe Celebrates Medal of Honor Recipients with Opening Bell-Ringing Ceremony
Congressional Medal of Honor recipients and representatives from the Congressional Medal of Honor Foundation joined Cboe on Friday, June 7, for a special opening bell-ringing ceremony. Now in its 20th year, the Congressional Medal of Honor Foundation preserves the legacy of the Medal of Honor and supports the Congressional Medal of Honor Society and Medal of Honor recipients. The Medal of Honor is the highest award for valor that can be bestowed upon an individual serving in the Armed Forces.
Challenges slow Mexico’s billion-dollar oil hedge this year -sources
Devika Krishna Kumar, Stefanie Eschenbacher and Marianna Parraga – Reuters
The world’s biggest and most secretive financial oil trade is facing unusual roadblocks this year. Mexico typically buys as much as $1 billion worth of financial positions to protect its revenues from oil sales for the coming year against price fluctuation. It is the most widely anticipated hedging deal in oil markets, and can make or break an investment bank’s dealbook.
****SD: “Stricter rules, including a near-total ban on proprietary trading for banks in the United States, have dampened risk appetite for operations such as the oil hedges the Mexican finance ministry aims to buy, banking sources said. Last year, at least two firms that executed the hedge for Mexico were caught off-guard after oil prices crashed in the fourth quarter. That wrong-footed the companies… ‘The Maya hedges almost blew them up,’ one banking source said of the firms that executed the trades.”
Cboe Seeks to Add ‘Speed Bump’ to Stock Exchange; Proposed delay could undermine fast traders that zip orders via microwave from Illinois to New Jersey
Alexander Osipovich – WSJ (SUBSCRIPTION)
Cboe Global Markets Inc. is proposing to hit the brakes on high-frequency trading by introducing a split-second delay to one of its stock exchanges, according to a new regulatory filing. The proposal, which was filed on Friday, makes Cboe the latest U.S. stock exchange operator to embrace “speed bumps,” even though its executives had earlier criticized such delays.
****SD: It’s just for EDGA (equities), but you can see what this might portend for the marketplace at large. The trend is broadening – first IEX, then ICE and Eurex, and now Cboe. I had a chance to speed with Eurex Executive Board Member Randolf Roth about that exchange’s plans for latency protection in some of its regional options markets. We’ll have more on that shortly. Cboe’s press release regarding EDGA can be found here.
Gold risk reversals hit highest since 2011 on call demand
Omkar Godbole – FXStreet
Risk reversals on gold (XAU/USD), a gauge of calls to puts on the yellow metal, rose to their highest level since September 2011 on Monday, indicating investors are adding bets to position for further strength prolonged strength in the safe-haven metal.
Citadel Crushed It in May, Widening Lead Over Fund Rivals
Katia Porzecanski – Bloomberg (SUBSCRIPTION)
Griffin’s flagship funds gain 2.4% last month, 12.6% in year; Cohen’s Point72 posts returns of 1% in May, 8.65% in year
Ken Griffin’s good year keeps getting better. In a month that saw stock markets roiled by the escalating U.S.-China trade war and global growth concerns, the billionaire’s three equity businesses led profits for Citadel’s flagship hedge funds, which gained 2.4%, according to a person with knowledge of the matter. The firm’s commodities and quantitative strategies were also top performers.
****SD: There is a reason Griffin can buy a $240 million NYC penthouse the he likely won’t spend much time in.
Futures broker R.J. O’Brien is on an international binge; The 105-year-old firm is banking on expansion to survive in a dog-eat-dog environment.
Lynne Marek – Crain’s Chicago Business
Chicago futures broker R.J. O’Brien & Associates is a survivor, outlasting and outsizing local rivals over its 105-year history. Now its future hinges on international expansion.
Exchanges and Clearing
Euronext now controls 97.7% of Oslo Bors VPS capital
Euronext, the leading pan-European exchange, announces today that it now controls, through direct ownership, irrevocable commitments and acceptances of its offers of 14 January 2019 and 31 May 2019, 97.7% of the total issued and outstanding share capital of Oslo Bors VPS.
SGX reports market statistics for May 2019; Significant growth in volumes across derivatives products, following increased demand for risk management as a result of the ongoing US-China trade war
Singapore Exchange (SGX) today released its market statistics for May 2019. The US-China trade war remains a dominant theme in global financial markets. Total derivatives traded volume grew 46% year-on-year (y-o-y) to 24.2 million contracts, as global investors managed overall Asian exposures and macro risks. Amid market uncertainty, the month of May saw broad-based declines across most Asian equity indices. In Singapore, total securities market turnover value was up 5% month-on-month (m-o-m) to $23.1 billion.
European regulators investigate Nasdaq and BME over pricing; Probe comes amid rising tensions between venues, brokers and regulators over the way stock market price data is sold
Samuel Agini – Financial News
Two of Europe’s biggest exchange operators, Nasdaq and Spain’s Bolsas y Mercados EspaÒoles, have been investigated by competition regulators over concerns they are charging too much for stock market data, Financial News can reveal.
Regulation & Enforcement
Rewrite of Bank Rules Makes Little Progress, Frustrating Republicans; Many efforts to retool postcrisis financial rules remain unfinished; Republicans want faster action
Andrew Ackerman and Gabriel T. Rubin – WSJ (SUBSCRIPTION)
Trump-appointed regulators came into office saying they would pare back Wall Street’s postcrisis rulebook. More than two years into the administration’s tenure, most of the work remains unfinished, particularly for the biggest banks.
Wall Street Game Plans the Market Reaction to a Fed Rate Cut
Joanna Ossinger – Bloomberg (SUBSCRIPTION)
Morgan Stanley, JPMorgan among banks dusting off history books; Goldman says ‘few precedents’ for current market situation
With expectations for Federal Reserve interest rate cuts increasing among investors and economists alike, some of the biggest U.S. banks are mapping out the implications for financial markets.
Volatility Fear Drives Investors to Bond ETFs; Some in the industry say investors are looking at ETFs as a risk-management tool because of their flexibility and convenience
Gerrard Cowan – WSJ (SUBSCRIPTION)
As Investors see increased volatility on the horizon, many believe that bond-focused ETFs can help guide them through the storm.
Citigroup Says S&P 500 Heading for a `Full Scale Bear Market’
Eric Lam – Bloomberg (SUBSCRIPTION)
Trump is likely to put tariffs on all China goods: Citigroup; Good news is Fed could still ride to rescue, strategists say
The U.S. tariffs on Mexico might be off, but Citigroup Inc. strategists warn that trade tensions are set to climb, roiling financial markets from stocks and bonds to commodities.
Red Kite’s Mr. Copper Backs New Metals Fund as Partners Exit
Mark Burton – Bloomberg (SUBSCRIPTION)
Trinity fund will be run by ex-Tamarisk trader George Daniel; New investment comes after scaling back physical trading
After Red Kite co-founder David Lilley left London’s best-known metals hedge fund last year, there’s been mounting speculation that business partner Michael Farmer might call time on a career that’s spanned six decades. Instead, Farmer, 74, is putting capital into a new hedge fund run by one of Red Kite’s senior traders.
Trump seems unwilling to let the stock market trade below this level
Scott Gamm – Yahoo Finance
Forget the “Powell put.” There seems to be a “Trump put” that’s preventing the stock market from trading too low for too long. Binky Chadha, Deutsche Bank’s chief equity strategist, looked back at the past 17 months of trading, starting with the initial tariff threat in January 2018, and found that trade tensions escalated typically when the S&P 500 (^GSPC) was above 2,650.