Observations & Insight
Spencer Doar – JLN
Our video of the day is of Maura Cunningham’s MarketsWiki Education talk in New York. She is the founder and executive director of Rock The Street, Wall Street, a nonprofit focused on financial literacy for young women. Why is this important? Two out of three women report knowing little about finance. Moreover, 80 percent of teachers self report feeling incapable of educating young people about personal finance.
All eyes are on Apple right now. According to the OIC, NYSE’s new FANG+ index options have traded 11 contracts today. Now would be the time for that new offering to get some traction. The FANG+ futures on ICE have captured some more volume this earnings season.
Today is “National Avocado Day” in the U.S., so we have that going for us, which is nice. According to the USDA, U.S. avocado use has tripled since the early aughts, meaning the average American eats more than 7 pounds of avocados a year. In the last five years, annual imports have grown to nearly 2 billion pounds, which accounts for 80 percent of domestic availability.
Former Target manager sticks to volatility strategy that made him millions as ‘three-headed horseman’ looms over market
Shawn Langlois – MarketWatch
It’s been a good year for Seth Golden. Not 2017 good, but still, the former Target manager, whose success story went viral a year ago, claims he’s up about 24% since the beginning of 2018. That’s a far cry from last year, when he nearly doubled his portfolio, and before that, when he reportedly turned $500,000 into $12 million over a stellar five-year stretch.
****SD: He’s baaaaack. Fading the spikes continues to be good to folks, but keep in mind that in the case of Mr. Golden, his returns are “claims.”
Are Derivatives Ready for Low Touch?
Christopher Monnery, Fidessa – TABB Forum
The growth of electronic trading in derivatives, including the rise of algo usage and the evolution of the agency algo space, over the past 5 years is an accelerated version of the story within equities. But we are at an inflection point: Are we truly about to see the ‘equitification’ of derivatives trading?
FX Options Volatility Set To Rise As Currencies Wobble?
Erik Norland – CME
Europe appears to be on the verge of a political meltdown. German Chancellor Angela Merkel’s coalition government nearly collapsed in the first week of July. Italy is governed by a populist left-right coalition that promises tax cuts and spending increases to the displeasure of bond investors. Spain recently changed the governing coalition without even holding a new election. In Britain, Prime Minister Theresa May has reached several important Brexit agreements by herself but seems unable to win over the backing of her own cabinet much less the Parliament or the European Union. Britain looks like its heading towards a ‘hard’ Brexit – or maybe no Brexit at all.
****SD: No volatility despite the world seeming on the brink? I thought 2018 was supposed to be different…
Triple-Leveraged ETFs Store Up Trouble for $8.5 Billion Fund
Jakob Peterseil – Bloomberg
‘Tail wagging the dog’ could turn up in gold miners funds – MRA; Phenomenon was blamed for February’s VIX futures surge
Trouble in the leveraged ETF complex could spark a fresh volatility explosion that hits commodity investors in its wake, according to Macro Risk Advisors.
Dash Financial Technologies Adds Stino Milito as Co-COO
Dash Financial Technologies, the industry leader in order routing transparency, visualization and customization solutions, today announced the addition of Stino Milito as Co-COO. Reporting directly to CEO Peter Maragos, Milito will be responsible for product strategy and leading Dash’s Institutional buy-side team, a growing group that works with the firm’s asset management and hedge fund clients to help craft highly-tailored trading solutions.
How old calibration techniques can be applied to exotics pricing
Nazneen Sherif – Risk.net (SUBSCRIPTION)
Knock-out options on dividend swaps – as the name suggests – are not easy to price.
For starters, a knock-out option ceases to exist, or ‘knocks out’, if the underlying goes above a certain value. Dividend swaps are equally complex products that pay dividend payments on an underlying equity or equity index in exchange for a floating payment.
****SD: Depending on when I click the link, this appears to be unpaywalled… Odd.
The master strategist: How Tidjane Thiam brought a revolution to Credit Suisse
Peter Lee – Euromoney Magazine
It took an outsider to turn around Credit Suisse, to force executives and shareholders to accept that they had been following a false dream of a trading-dominated business that could somehow avoid blow-ups and produce acceptable returns. Tidjane Thiam has shrunk those businesses but also given them a chance to live on now as the servants of a revived wealth management operation with a focus on the richest entrepreneurs in emerging markets. His three-year battle to reduce risk, cut costs, raise capital, deal with regulators and identify and grow more promising business will be a case study in bank restructuring.
****SD: There’s a bit of everything in this longform. I think the “shifting the business” chart says it all: Credit Suisse shrunk it’s market activity from 52 percent of the business to 35 percent in Thiam’s tenure.
Exchanges and Clearing
Chris Topple takes on CEO role at Euronext London
Euronext today announces that the Supervisory Board has approved unanimously the appointment of Chris Topple as CEO of Euronext London, Head of Global Sales and a member of the Managing Board of Euronext N.V., subject to all relevant shareholder and regulatory approval.
The art of designing markets. Part II
Market design recognizes that well-functioning markets are more than the confluence of supply and demand. They depend on detailed rules. Market designers try to understand the rules and procedures as well as the workings and requirements of particular markets well enough to fix problems or to build completely new markets when they seem promising.
NYSE Cuts Jobs at Chicago Exchange, CEO John Kerin Departs
Crain’s Chicago Business
Regulation & Enforcement
SEC consults on NYSE’s proposal to remove FINRA membership requirement for registered broker-dealers
The United States Securities and Exchange Commission (SEC) is inviting comments on a rule change proposed by the New York Stock Exchange LLC (NYSE).
SS&C to buy Eze Software for $1.45 billion
Financial software maker SS&C Technologies Holdings Inc (SSNC.O) said on Tuesday it would buy Eze Software from TPG Capital for $1.45 billion in cash, to expand its offerings to buy-side investment firms.
Phillip Capital Contracts with Trading Technologies to Distribute the TT Platform
Phillip Capital Inc., a Chicago-based self-clearing futures commission merchant (FCM) and broker dealer, and Trading Technologies International, Inc. (TT), a global provider of high-performance professional trading software, today announced that Phillip Capital has contracted with Trading Technologies to make the TT futures trading platform available to Phillip Capital’s global client base of professional traders. With this agreement, Phillip Capital’s customers are now able to leverage TT’s innovative technology, including Autospreader, ADL, charting and analytics, options functionality and TT’s suite of APIs, to trade all TT-supported markets through TT’s global low-latency network.
RVX Index – Waze of the Future
Rick Rosenthal – Cboe Blog
After making 23 new highs and rallying over 10% in 2018, last Friday’s Russell 2000 price action was telling a story which caught my attention. The Russell 2000 Index experienced a sharp -2% sell off and broke through the 50 day moving average on higher than normal volume. Was this simply profit taking?
Cboe’s VIX Index is often times referred to as the “fear gauge” as a measure for the 30 day expected volatility in the S&P 500. Similarly, Cboe’s Russell 2000 Volatility Index uses the same methodology used to calculate the RVX Index. The recent movement in RVX might offer some clues towards short term price movements in the U.S. small-cap stocks.
Volatility Trading Styles
Jonathan Kinlay – Seeking Alpha
Volatility trading has become a popular niche in investing circles over the last several years. It is easy to understand why: with yields at record lows, it has been challenging to find an alternative to equities that offers a respectable return.
Michael Lewis’ audiobook “The Coming Storm”: Is public weather data at risk of privatization?
Thu-Huong Ha – Quartz
A battle is quietly being waged over the United States’ weather data—and its ability to predict its future.
In his first exclusively audio story, Michael Lewis dives into the wonk-filled world of weather forecasting: the researchers who collect and study the data; the citizens who benefit from, or actively ignore, forecasts; and the powers that threaten the entire flow of information.
S&P is doing something it hasn’t done since Eisenhower was president
Keris Lahiff – CNBC
The S&P 500 is about to do something it hasn’t done in a midterm election year since Dwight D. Eisenhower occupied the Oval Office. It’s on track to end July in the green after a positive April, May and June.
That’s a rare bullish sign, according to Jeffrey Saut, chief investment strategist at Raymond James.
Over 600 Public Comments Flood the SEC Website For The CBOE Bitcoin ETF
John P. Njui – Ethereum World News
****SD: How many of the letters are totally wacko though?
Finance Journals Rarely Publish Articles with low T-stats
Tommi Johnsen – Alpha Architect
Coined by Rosenthal in 1979, the term file drawer problem refers to the notion that journal editors are biased toward accepting articles that include statistically significant results over those with nonsignificant results. The competition for increasing the citation count and improving journal impact numbers is considerable and primarily driven by the fact that articles with significant results are more likely to be cited. As a result, the research report that lacks significant results is likely to be deposited in a file drawer, forever hidden from the light of day, rather than submitted for publication. (see here and here for in-depth coverage on this topic).
BOJ seeks to make its ammunition last longer as options dwindle
Leika Kihara, Stanley White – Reuters
The Bank of Japan pledged to keep its massive stimulus in place but made tweaks to reduce adverse effects of its policies on markets and commercial banks, reflecting the central bank’s view that its inflation target remains stubbornly out of reach.