Observations & Insight
Changing Interest Rate Trading Market Structure – Andy Ross, CurveGlobal
In this video from JLN’s Industry Leader Series, CurveGlobal CEO Andy Ross talks about the shift away from LIBOR and how CurveGlobal is changing the dynamics of interest rate derivatives trading.
Watch the video »
Kessler Topaz Loses Bid to Boot Ex-Partner From Chicago Options Leadership Team
Amanda Bronstad – Law.com
A federal judge has rejected Kessler Topaz Meltzer & Check request to remove its former partner, Kimberly Justice, from her leadership post in the multidistrict litigation over alleged manipulation of the Chicago Board Options Exchange Volatility Index.
Justice, a prominent plaintiffs attorney in multidistrict litigation, left Kessler Topaz, where she was co-chairman of the antitrust practice group, to open an office earlier this month in Conshohocken, Pennsylvania, for Freed Kanner London & Millen, a class action boutique based in the Chicago suburbs. That prompted Kessler Topaz, based in Radnor, Pennsylvania, to file an April 3 motion seeking to replace her, as co-lead counsel, with partner Sharan Nirmul.
Bored With Shorting VIX? New ETF Offers a Credit-Volatility Bet
Yakob Peterseil – Bloomberg (SUBSCRIPTION)
Tabula lists product tied to price swings in high-yield market; Premium of expected to actual vol powers short-equity trade
The short-volatility complex is coming to corporate debt ETFs. An exchange-traded fund that will test appetite for credit volatility as a standalone asset class arrived this month, smack in the middle of the calmest junk-bond markets since October.
Bank of America made a killing on clever trade to a Chinese billionaire
Alex Morrell – Business Insider
Bank of America followed its peers on Tuesday in reporting a big drop in equities-trading revenues, which were down 22%.
That’s in line with Citigroup and Goldman Sachs, both of which fell 24% in stock trading, but worse than JPMorgan Chase, which was down only 13%.
****JB: Short version, a Chinese billionaire hid his investment in Daimler using options and other strategies and then revealed that, practically overnight, he became Daimler’s largest shareholder. Bank of America and Morgan Stanley helped it happen and made a lot of money doing so.
How a pickup in inflation could drive volatility lower across financial markets, in one chart
Sunny Oh – MarketWatch
A pickup in price pressures that pushes inflation back toward the Federal Reserve’s 2% annual target could set up a Goldilocks environment for investors wary of volatility.
Analysts at Arbor Data Science found that the frequency of outsize market moves fall when inflation is neither too cold, which could spark recessionary concerns, nor too hot, which might lead the Fed to increase interest rates.
Emerging-market forex revenues eclipse ‘G10’ for first time
Tommy Wilkes – Reuters
Investment banks are now earning more from trading emerging-market currencies than from the major G10 markets, as wild swings in the likes of the Turkish lira contrast with relative calm in the dollar, euro and yen.
Crypto Latest: Former Merrill Lynch Banker Starts a Hedge Fund
Alastair Marsh – Bloomberg
Gerald Banks, who has structured derivatives for Merrill Lynch & Co. and managed part of a Russian oligarch’s sprawling empire, is now turning his hand to cryptocurrencies.
Banks, who previously changed his name from Guerman Aliev, is the chief investment officer of a new hedge fund based in Greenwich, Connecticut, that’s focused on digital assets such as Bitcoin. Cipher Technologies Management LP is registered with the Securities and Exchange Commission and the Commodity Futures Trading Commission and primarily trades crypto options and futures contracts, Banks said in an interview.
Stocks Near Records, but Investors Still Skittish
Asjylyn Loder and Gunjan Banerji – WSJ
As stocks climb toward record levels, nervous investors are hedging their bets.
U.S. stocks just enjoyed their best quarter in at least six years, but last year’s turbulence has left some skittish. Investors have poured a record amount of cash into so-called smart funds that try to protect against another downturn. They have also piled into exchange-traded products that offer insurance against market volatility and snapped up corporate debt in search of a sweet spot between profit and safety.
Exchanges and Clearing
The Stock Markets Closed for Good Friday
Connor Smith – Barron’s
U.S. stock exchanges were open when Tiger Woods started his incredible Masters run last week, but many traders will get a longer weekend this time around.
The New York Stock Exchange and Nasdaq will close this Friday in observance of Good Friday. The CME Globex futures and options exchanges, including equities futures and commodities like crude oil and gold, will also be closed for trading on Friday.
Eurex Exchange’s Quarterly Equity Derivatives Highlights
The first quarter of 2019 showed a clear continuation of the previous quarter with stock indices trending up and volatility trending down hovering around historic lows. There is ample cause to be cautious though. Europe still doesn’t know how Brexit will play out or how its effects and looming trade wars could affect the economy. Being cautious could explain the continued strong volume development of our equity options and futures segment in the first quarter 2019. The options segment showed a robust development versus the already strong first 2018 quarter with considerable growth rates in especially the Swiss, French, Dutch and Italian segment. Four Swiss equities Zurich Insurance Group, Nestlé, Novartis and UBS all lead the ranking in terms of traded contracts.
Euronext registered as a EU benchmark Administrator
Euronext, the leading pan-European exchange, today announced that four of its market operators have been registered by ESMA as Benchmark Administrators under the new EU Benchmark Regulation (BMR). This compliance with the provisions of the Benchmark Regulation confirms the quality of Euronext’s governance and control principles and rules, today acknowledged by key European regulators: the AFM in the Netherlands, AMF in France, CMVM in Portugal and FSMA in Belgium.
OCC’s 401(k) and Legacy Pension Plan Certified for Fiduciary Excellence
OCC, the world’s largest equity derivatives clearing organization, today announced that the company’s 401(k) plan and legacy pension plan have been certified as adhering to a global standard of excellence by The Centre for Fiduciary Excellence (CEFEX), an Fi360 company.
Currency Traders Should Get Ready for a Big Move in the Dollar
Cormac Mullen – Bloomberg
Currency traders should brace for a large move in the dollar, if past periods of low volatility are a guide.
Over the last 25 years, there have been three previous troughs in the JPMorgan Global FX Volatility Index. Each time, the U.S. Dollar Index has moved around 10 percent over the subsequent 6-months, according to data compiled by Bloomberg. The volatility gauge is currently trading at its lowest in 5 years.
****JB: See also Bloomberg’s story, Dollar Looks Poised to Wreak Havoc
BlackRock CEO Larry Fink says he sees a ‘risk of a melt up, not a melt down’ for markets (BLK)
Arjun Reddy – Markets Insider
As the S&P 500 approaches all-time highs, BlackRock CEO Larry Fink sees markets at risk of a “melt-up, not a melt down,” according to an interview with CNBC.
“Despite where the markets are in equities we have not seen money being put to work. We have record amounts of money in cash,” the CEO said.
How Market Momentum Is Painting a Bullish Picture
On this edition of “Options Insight,” Bloomberg’s Greg Bender discusses low market volatility option strategy with Bloomberg’s Abigail Doolittle on “Bloomberg Markets: The Close.”
A Last Dose of Volatility, Risk and Capital Ideas
John Authers – Bloomberg
I will be going back to my customary habit of staring at Bloomberg terminal screens, rather than reading books, on Wednesday. As far as I can tell, the markets have not been at their most exciting as things wind down ahead of the break for Easter and Passover. So here is one last update on the debate unfolding in my inbox about Peter Bernstein’s “Capital Ideas,” which we will be discussing Wednesday on the terminal, between 11 a.m. and 12:30 p.m. New York time. Be there or be a square.
Hedge funds realise going long has its rewards
Lindsay Fortado and Laurence Fletcher – Financial Times
Buying stocks and hoping they gain in price was once considered the poor cousin of hedge fund investing. But as the industry looks to recover from its first annual drop in assets since the financial crisis, high-flying fund managers are being forced to think again.
One of the hottest areas of growth for some of the world’s largest hedge funds, including CQS, DE Shaw, and Man Group, is now the long-only funds where the formula simply echoes that of the stockpicker more often found in the traditional asset management industry.