Goldman’s Trading Floor Is Going Open-Source. Kind of.; CAT – Moving the Ball Forward

Apr 3, 2019

Observations & Insight

Why The Mayor Matters
Jim Kharouf – JLN
In 2016, London grabbed global attention by electing Sadiq Khan as mayor, the first British-Pakistani to take the reins of the most powerful financial hub in the world. Yesterday, Chicago broke barriers as well, electing Lori Lightfoot, an African-American woman, to take the top job for another global financial hub.
What it shows is that cities around the world are reaching well beyond traditional candidates, where local politics play far greater roles with far greater impact on our lives than national politics often do.
Lightfoot, a lawyer who has never held office and was a partner with the powerful law firm of Mayer Brown, inherits a host of problems from 589 homicides in 2018 to Chicago’s dismal finances. Those are just a couple of challenges she inherits from her predecessor Rahm Emanuel, who decided not to run for re-election after two terms.


US v Thakkar: “MasterChief” Day
Thom Thompson – John Lothian News
The second day in US v Jitesh Thakkar and Edge Financial Technology began Tuesday morning with defense attorney Renato Mariotti’s cross examination of Navinder Sarao, the prosecution’s headline witness. Sarao, a cooperating witness, is awaiting sentencing for convictions on two criminal charges in a separate case, which could include up to 30 years jail time. The government is waiting to see how cooperative (effective?) Sarao turns out to be as a supporting player on Team USA and will condition his sentencing recommendations on his cooperation. Finishing up a few hours of cross examination, Mariotti struggled a bit to flesh out Sarao’s role as the mastermind. Sarao, for his part, struggled not to show impatience with the tedium of these proceedings that are so important for him and his prospects for freedom. Thakkar, the defendant, took notes and looked on.

Lead Stories

Goldman’s Trading Floor Is Going Open-Source. Kind of.
Getting Goldman Sachs Group Inc.’s view on how much a derivative should cost once required a trading account at the elite Wall Street firm. Soon anyone with a GitHub account will be able to do it. Goldman later this month plans to release on GitHub, the popular developer-collaboration site, some of the code that its own traders and engineers use to price securities and analyze and manage risk. A few lines of code can spit out an analysis that once would have meant a chain of phone calls, emails and spreadsheets.

****”It’s a risk worth taking. The upside of opening up, for us just like it was for Google, is too compelling.”~Adam Korn, Goldman managing director

CAT: Moving the Ball Forward
Ivy Schmerken – TABB Forum
After several years of setbacks and delays, the Consolidated Audit Trail, the order-tracking system for all U.S. stock and option trading activity, is pushing ahead with equities testing starting in December and a go-live date of April 2020.

****SD: Moving ahead without a delay? Wow. Updated CAT specs are to be released on April 29.

Fear and Greed Both AWOL as U.S. Stocks Approach Record Highs
Luke Kawa – Bloomberg (SUBSCRIPTION)
Just one in 10 stocks stand at 52-week highs in S&P 500; VIX levels remain subdued after best quarter in a decade
As U.S. stocks continued to climb toward a record, a major benchmark surpassed an ominous level for volatility watchers.
The S&P 500 topped 2,875 for the first time in six months, a level the index initially passed 16 months ago — one day before a record blowup in the Cboe Volatility Index. A look under the market’s hood might calm any jitters.

Q1 Crypto Derivatives Review
skew. – Medium
We love numbers at skew so let’s wrap up Q1 with a review of the main trends in crypto derivs (initially published on Twitter on the 27th of March).

****SD: skew. has also been analyzing the surge in crypto prices via its Twitter account. ZeroHedge is the only place I’m seeing that puts the tweets all together – What’s Behind Bitcoin’s Surge: Derivative Traders Believe They Know The Answer.

Pound Investors Skeptical May and Corbyn Will Dispel Brexit Fog
Charlotte Ryan – Bloomberg (SUBSCRIPTION)
The pound’s recovery on U.K. Prime Minister Theresa May seeking help from opponent Jeremy Corbyn to solve Brexit has yet to convince fund managers to bet on a big relief rally.

Exchanges and Clearing

Miami International Holdings Reports March 2019 Trading Results for MIAX Exchange Group
Miami International Holdings, Inc. (MIH) today reported the March 2019 trading activity for its three fully electronic options exchanges – MIAX Options, MIAX PEARL and MIAX Emerald (together, the MIAX Exchange Group). The MIAX Exchange Group collectively executed over 36.1 million equity option contracts in March for a combined average daily volume (ADV) of 1,720,918 contracts, representing a total U.S. equity options market share of 9.89%.

Intercontinental Exchange Reports March Statistics
Intercontinental Exchange, Inc., a leading operator of global exchanges and clearing houses and provider of data and listings services, today reported March trading volume and related revenue statistics, which can be viewed on the company’s investor relations website at in the Monthly Statistics Tracking spreadsheet.

****SD: NYSE options marketshare was 18.9 percent in March.

EEX to introduce new suite of commodity products in power, freight and emissions derivatives
On 3 June 2019, the European Energy Exchange (EEX) will expand its product range on the derivatives market with new power futures, freight futures and options as well as further maturities in emissions options. Clearing and settlement of the new products and maturities will be carried out by European Commodity Clearing (ECC).

The Future of Clearing
The World Federation of Exchanges
The WFE has published a joint report with Oliver Wyman examining the post-crisis developments that have shaped the current clearing landscape, along with forward-looking recommendations on how to build the CCP of the future.

ASX Monthly Activity Report – March 2019

Regulation & Enforcement

White House Nominates Allison H. Lee for SEC Seat; Former enforcement lawyer would join regulator as it considers stricter rules for brokers
Dave Michaels – WSJ (SUBSCRIPTION)
The White House on Tuesday said it would nominate a former enforcement attorney for a vacant seat on the Securities and Exchange Commission, ensuring the agency will have a full lineup as it seeks to impose stricter regulations on stockbrokers in the coming months.

****The Hill here and FT here.


Vela’s DMA Platform Further Expands into APAC
Vela, a leading independent provider of trading and market access technology for global multi-asset electronic trading, announced today that its multi award-winning fully-hosted and managed Direct Market Access (DMA) Platform is now available in the Japan Exchange Group (JPX) site in the Tokyo region. With a tier 1 investment bank among one of the first major clients at this co-location space, this access further strengthens Vela’s presence in APAC and is part of its wider expansion plans in the region to enable clients to trade additional markets, locally and globally.

OpenGamma Raises $10m Of Growth Funding
OpenGamma, a leader in derivatives analytics, announced today that it has raised $10 million in funding led by early-stage fintech and B2B software venture capital firm Dawn. The funding round includes participation from existing investors Accel, CME Ventures and ex-SunGuard CEO and prolific fintech angel investor Cristóbal Conde.


Fresh Look at Gamma Scalping
Sage Anderson – tastytrade blog
Because options positions typically involve directional risk, there are different tactics traders can use to help minimize such exposure. Even before trade deployment, traders can minimize directional exposure by selecting position structures that are closer to “delta-neutral” at the time they enter the market. Delta-neutral refers to an option position in which the delta component of the risk exposure is flat, or at least minimal.

Perspectives on Risk
Talton Capital Management
Risk and reward are the central concepts of investing.
There is a lot to unpack in such an innocuous seeming statement.
First it is absolutely true that it is the focus on risk that separates good investors from poor ones. No matter how good your edge is, if you go bankrupt through poor risk control you won’t be able to capture the money. Successful trading is a long term game.


Tabula launches Global Credit Volatility Premium ETF
etf express
European fixed income ETF provider Tabula Investment Management (Tabula) has launched the Tabula JP Morgan Global Credit Volatility Premium Index UCITS ETF, offering a passive vehicle for capturing the difference between realised and implied volatility in Credit Default Swap (CDS) index options markets.

****SD: Isn’t it nuts the type of things everyday investors can get a piece of with the ETF wrapper nowadays?

Active Fund Managers Get Blown Up Again After Hot Start to 2019
Sarah Ponczek – Bloomberg
For active managers who spent the year’s first two months rediscovering their super powers, March was kryptonite. Stock-picking mutual funds have watched it all turn tragic over the last four weeks, with two-thirds trailing benchmarks, upending the strongest start to a year since the bull market began. Blame it on a loss of nerve. In a market that kept trudging upward, they bailed on the winners.

Fed Risks Fomenting Financial Bubbles in Zeal to Lift Inflation
Rich Miller – Bloomberg (SUBSCRIPTION)
The Federal Reserve risks stoking the same sort of asset bubbles that Chairman Jerome Powell has linked to the last two recessions with its new-found eagerness to fan inflation. The Fed’s surprise pivot away from any interest rate increases this year has boosted prices of stocks, high yield bonds and other risky assets in spite of nagging investor concerns about slowing global economic growth. Financial conditions, at least as measured by the Chicago Fed, are at their easiest since 1994. And they could well get looser.

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