New Record Open Interest for Cboe S&P 500 Options Surpasses 20 Million Contracts
Matt Moran – Cboe Blog
While many investors are concerned that benchmark indexes for major investment classes are down year-to date, it appears more investors are using S&P 500 options to manage risk and enhance income
****SD: From one unnamed trader – “There is more trading in SPX call spreads. Look at SPX call open interest, which has been beefed up by the sheer quantity of multi-legged call trades that have been trading to hedge the other tail.”
Wild Trading Is Straining The Plumbing?
Jeff Malec, RCM Alternatives – Seeking Alpha
You have to hand it to the WSJ – they really know how to make the safety of Trillions of Dollars in derivatives trading across dozens of exchanges look pretty pedestrian.
****SD: Some needed perspective on margin practices after recent press coverage.
Matrix to launch forex late Q1
Louisa Chender – Global Investor Group (SUBSCRIPTION)
The Chicago-based derivatives broker also plans to expand services to Hong Kong and Singapore
****SD: JLN coverage of Matrix thus far – Saliba’s Execution Fight Gears Up from when Matrix acquired a minority partner and the video Back to the (Broker) Dealer’s Table from earlier in the year.
Are we in a new (higher) VIX regime?
RCM Alternatives Blog
Orange is the new black. Different is the new normal. Is 20 VIX the new 15 VIX?
****SD: Or is 25 the new 20?
Nasdaq (CCMP) Is on the Brink of a Bear Market
Lu Wang and Elena Popina – Bloomberg
Spiraling losses in tech shares have pushed the Nasdaq Composite Index to the precipice of becoming the first major U.S. stock gauge to enter a bear market since 2009.
Dragged down by its extra-heavy weighting in technology giants like Apple Inc. and Amazon.com, the benchmark fell for the fifth time in six days, briefly sliding 20 percent below its intraday record from August. Down 1.6 percent to 6,530 as of 12 p.m. in New York, it’s 19.3 percent below its record close. The Nasdaq narrowly averted bear-market declines in 2011 and 2016.
****SD: Check the fear gauge term structure at VIX Central. As of this writing, spot VIX is at levels not seen since February.
Broker Marex to acquire customer business of Rosenthal Collins
Commodities broker Marex Spectron said on Thursday it had signed an agreement to acquire the customer business of Chicago-based Rosenthal Collins Group LLC (RCG).
****SD: For more detail, see the press release. As of this writing we’re at levels
As Oil Prices Plunge, OPEC Output Is at Risk From Social Unrest
Javier Blas – Bloomberg
Oil’s plunge has taken prices below the level all but one OPEC country needs to square their 2019 budgets, increasing the risk of supply disruptions from economic dislocation and social unrest.
Ex-Goldman Sachs employee pleads guilty to insider trading
Brendan Pierson – Reuters
A former Goldman Sachs Group Inc (GS.N) employee pleaded guilty on Wednesday to engaging in insider trading based on non-public information about several companies that were clients of the investment bank, Manhattan federal prosecutors announced.
****SD: Here is the WSJ story regarding his arrest in May. The above piece doesn’t mention it, but some of his insider trading was bullish positions in call options (lessons never learned – the story earlier this week about the “romantic” insider trading case is the most recent other example).
Another Fed Factory Gauge Declines in Sign Growth Is Moderating
Scott Lanman – Bloomberg (SUBSCRIPTION)
Another Federal Reserve factory gauge fell this month, adding to signs the economy is cooling in the fourth quarter.
The Philadelphia Fed’s general business activity index, based on a survey of manufacturers in the region, dropped to 9.4 from 12.9, according to a report Thursday. That’s the lowest level since August 2016 and follows data earlier this week showing a gauge of factories in New York state declined to a 19-month low.
Exchanges and Clearing
CME eyes an about-face on board size. Instead of shrinking, how about expanding?
Lynne Marek – Crain’s Chicago Business
CME Group lost a shareholder vote last month aimed at shrinking its bulky board, but Chairman and CEO Terry Duffy is a man with a back-up plan.
Instead of buying out the rights of trader-shareholders to elect six directors, now he’s angling to expand the board.
NASDAQ seeks to amend price protections, paves way for new order rejection criteria
Andrew Saks-McLeod – FinanceFeeds
In a filing which was issued by the SEC yesterday, NASDAQ states that it proposes to amend the Order Price Protection within its options market in order to increase protection against risk.
Torben Munch steps down as Itiviti CEO
Itiviti, the leading global provider of multi-asset trading technology and financial infrastructure, today announced that Torben Munch, Chief Executive Officer, has decided to retire and will step down from his position at the end of the year.
Axioma appoints Managing Director, Marketing and Communications
Axioma has appointed Molly McGregor as Managing Director, Marketing and Communications. McGregor was previously Chief Marketing Officer of Hanweck, a provider of real-time risk analytics for the global derivatives markets, since 2016.
FIA Announces Five New Staff in London and Washington
FIA President and CEO Walt Lukken today announced five new staff members who have recently joined the FIA team.
Stuart Bailey is FIA’s new Vice President of Clearing Policy and Operations in the London office.
Steve Adamske is the new Vice President, Head of Communications and Public Affairs.
Kyle Glenn is FIA’s new Director of Government Relations in the Washington, D.C. office.
John Graham is FIA’s new Director of Regulation working in the London office.
Sabina Hussain is FIA’s new events manager working out of its London office.
Regulation & Enforcement
Stock Exchanges to Test Trading Minus Rebates Seen as Posing Conflict
Dave Michaels – WSJ (SUBSCRIPTION)
Securities regulators on Wednesday put in motion the biggest stock-market experiment in more than a decade: a pilot program trading stocks with lower fees and rebates.
****SD: Yes, it’s equities, but the takeaways from this pilot will inform a lot more than NMS stocks. SEC press release on the pilot here and the Financial Times here.
Wall Street Faces Fewer Fines in 2019 as SEC Democrat Departs
Benjamin Bain – BloombergQuint
Kara Stein’s pending exit could lead to stalemate for regulator; Republicans will soon have more leverage to block penalties
For Wall Street banks and other companies accused of malfeasance, the risk of getting slapped with a big fine by the U.S. Securities and Exchange Commission will soon drop significantly.
****SD: From Reuters – Republican frustrations grow as SEC chair proves frequent ally of Democrats
SEC Operational Status
In the event of a federal government shutdown, the SEC will remain open for a limited number of days, fully staffed and focused on the agency’s mission. Any changes to the SEC’s operational status will be announced here in accordance with the agency’s plan for operating during a shutdown. As that plan contemplates, we are currently making preparations for a potential shutdown with a focus on the market integrity and investor protection components of our mission.
****JB: As of 12:30 p.m. Central time Speaker of the House Paul Ryan said that President Trump has refused to sign a bill to keep the government open.
Sebi fines 3 entities for fraudulent trade in stock options
PTI via Times of India
Markets regulator Sebi has slapped a fine totalling Rs 15 lakh on three entities for executing fraudulent trades, which created artificial volume in the illiquid stock option segment on the BSE.
The regulator has levied a fine of Rs 5 lakh each on Positiveview Commercial, Oscar Infra, and Pravinchandra Gagaldas Sanghvi, according to Sebi orders.
The Business Case for Alternative Data
Adena Friedman, Nasdaq – LinkedIn
The power of alternative data lies in its unusual sources that unlock different insights. And it’s a growth market. In 2020, spending on this type of data could top $7 billion and grow at 21% annually. We believe the trend for unique and interesting data is long-term, says Nasdaq’s Adena Friedman, not only for investors but for others who have an appetite for finding value in both discovered and undiscovered data.
Software Reliability at Optiver: Test Driven Development
Joe Fourness – Optiver Tech Blog
Up to this point, much of the discussion around Software Reliability has focused on the macro level of our systems – software correctness, simple architecture and design, people, process and culture. One of the ways we achieve all of this at the micro level of our systems is through the practice of test-driven development (TDD).
Vela eyes exchange colocations in Asia
Louisa Chender – Global Investor Group (SUBSCRIPTION)
Technology firm Vela is extending its Direct Market Access platform to Asia
The State of AI in Capital Markets: Friend or Foe?
Tim Cave – TABB Forum
Images of empty trading floors have helped fuel the notion that traders are increasingly becoming redundant as artificial intelligence and machine learning take hold. But what do capital markets firms really think about these disruptive technologies? Are they seen as friend or foe? And to what extent is adoption already taking place?
USD Rates Volatility Is Waiting for the Business Cycle to Turn
Tanvir Sandhu – Bloomberg (SUBSCRIPTION)
A higher USD rates volatility regime may not happen before the yield curve re-steepens, which might not be seen until at least the second half of next year.
In the meantime, systematic short-volatility strategies may continue to harvest value from vol spikes, although returns may be lower than in recent years.
Using Options on Futures with Elevated Volatility to Trade the FOMC Announcement TabbFORUM
Russell Rhoads – TABB Forum
Taking a position in front of a Fed announcement is always risky. But one trader used options on futures to place a bet ahead of the most recent FOMC policy announcement on the direction of the equity market post-announcement. TABB Group head of derivatives research Russell Rhoads breaks down the trade.
Trader makes $21 million bet on bear market as S&P 500 slumps
Keris Lahiff – CNBC
…”Likely what’s going on here is that somebody with at least a billion dollars’ worth of S&P 500 exposure, concerned about further declines in the market, decided to spend a little bit over 2 percent of their total holdings to hedge against further declines,” he added.
2-year and 10-year yield curve – a key recession gauge – hits flattest in 11 years
Sunny Oh – MarketWatch
A widely watched measure of the U.S. Treasury yield curve’s slope reached its flattest levels since 2007 on Thursday, in the wake of the Federal Reserve’s two-day meeting.
Morning Coffee: The bank that lost its MDs and found some juniors to replace them. Morgan Stanley’s new friends
There is a paradox of cost cutting exercises, which is that they tend to over-deliver on the headcount reductions. If you fire 10% of your staff, then you will typically find that another 10% leave. This would be good news for cost cutting managers, except that the 10% who leave tend to include many of the ones that you wanted to keep. As soon as a headcount reduction is rumoured, sensible bankers will start feeling out the market to see what their options are if the worst comes to the worst. And once a resume is out there, it’s out there; strong revenue generators will always find a bid somewhere, and it’s likely that the external bid will seem a lot more attractive than hanging around in an office that appears to have developed sick building syndrome.
****SD: A daily roundup piece that ends up being a state of the union about the industry at year-end.
Greenspan: I’ve Never Seen Politics `Remotely Close’ to Today’s
****SD: Greenspan was born in 1926 — he would have been old enough to remember the end of Prohibition. That’s a way of saying “he’s seen a lot of politics.”
Trump, House GOP meet as funding deal suddenly appears shaky
Kevin Liptak and Allie Malloy – CNN
Washington (CNN)What was once a deal to avoid a holiday government shutdown was wobbling on Thursday as conservatives and President Donald Trump unleashed fury that the agreement doesn’t fully fund a long-promised border wall.
****JB: Bloomberg – Trump Hardens Border Wall Demands as Shutdown Deadline Nears. (As of 12:30 p.m. Central time Speaker of the House Ryan reported that President Trump has refused to sign a bill to keep the government open.)
China poised to buy more U.S. soybeans soon – sources
China is poised to buy another round of soybeans from the United States, two sources familiar with the matter said on Thursday, amid a truce in a trade war with the United States.
The Year in Money
Trade disputes, exploding global debt and volatile stock markets were just the beginning. Here are the numbers behind the defining moments for global markets and economies in 2018.
****SD: It’s that time of year again – we have our own 2018 highlights content in the pipeline. Speaking of “the season” – if you’re doing any last-minute shopping on Amazon (or ever plan on it), check out the WSJ’s Is It Really Five Stars? How to Spot Fake Amazon Reviews.