Observations & Insight
MLex has a (paywalled) story titled CFTC’s Giancarlo cites threat from China futures markets in bid for more money. Obviously it is a futures story, but I see it as indicative of the overall “threat” posed by the ongoing development of Chinese derivatives markets.
Check out this Bloomberg/Saxo Bank chart of yuan denominated oil futures trading and you’ll see why Giancarlo said what he did. (Besides, the usual rhetoric about needing money to protect investors hasn’t worked for the CFTC’s budget so maybe some fear-mongering will.) Also see this Reuters story from May – China’s crude oil futures boom amid looming Iran sanctions. ~SD
The newest CFTC Talks podcast is out. It’s a shorter, “FlashCast” episode focused on a single subject and features John Coughlan of the CFTC’s Market Intelligence Branch.
FIA updated its FCM tracker tool. Check it out here.
According to CLS data, currency trading volumes rose 2.6 percent in July on last year, although July volumes were 13.7 percent lower than the previous month of June. CLS said the average daily traded volume of currencies submitted to it reached $1.638 trillion in July, up from $1.596 trillion in the same month in 2017, Reuters reported.~SR
Traders Pile Into Bets That Stock Rally Will Continue; Tax cuts and a robust U.S. economy boosted corporate profits in the three months through June
Gunjan Banerji – WSJ (SUBSCRIPTION)
With U.S. stock benchmarks mere points away from fresh records, some traders are piling into bets that share prices will rally higher and volatility will remain muted. The S&P 500 and the technology-heavy Nasdaq Composite hit their second-highest close in history on Tuesday. Options investors and traders are wagering the gains will continue. They have been scooping up bullish call options on the S&P 500, contracts that would pay out if the stock index took another leg higher, according to Credit Suisse . Call options give the right to buy shares at a later time if they hit a designated price.
****SD: Initially heralded as a year that would be “different,” 2018 seems more and more like 2017, with long equity, short vol being the strategy du jour (tous les jours).
Tesla options bulls reap windfall on Musk’s going private tweet
Saqib Iqbal Ahmed – Reuters
Tesla Inc’s options activity surged on Tuesday after Chief Executive Elon Musk tweeted he was considering taking the company private and some quickly executed trades netted massive paper profits as shares in the electric car maker rallied as much as 9 percent.
****SD: The role Elon Musk’s twitter feed plays continues to strike me as remarkable. I don’t believe Donald Trump’s tweets – price action-related as they occasionally are – have ever caused a trading halt in a listed name/ETP. At the time of the breaking news, IHS Markit analyst Sam Pierson commented: “[Tesla’s] short interest equates to 20.7% of outstanding shares, down from a YTD peak of 23% observed in June. The short value is higher than any S&P 500 stock, only Under Armor has a higher percentage of outstanding shares short with 24%.”
Volatility slump stokes flames for post-summer blow up
Jamie McGeever – Reuters
Financial market volatility is slumping across the board to historically – or, dangerously – low levels, potentially fanning the flames for a repeat of February’s “volmageddon” explosion that sparked a 10-per-cent correction in U.S. and world stocks.
New Chinese forex crackdown to hit corporate hedging; Despite new reserve requirement, dealers say ‘maturity’ in risk management is here to stay
Blake Evans-Pritchard – Risk.net (SUBSCRIPTION)
Dealers fear a move by the Chinese authorities to reinstate a deposit requirement on foreign currency derivatives could slow a recent pick-up in hedging from local corporates, despite warnings from regulators that firms need to do more to brace for future market volatility.
Sterling/dollar risk reversals at 17-month low, signal more weakness
Nine-month and one-year sterling/dollar risk-reversals fell on Wednesday to the lowest since early-March 2017, as investors rushed to protect themselves from further weakness in the British currency.
Exchanges and Clearing
NSE says working on a structure to address SGX issue
New Delhi: Locked in arbitration proceedings with SGX, the National Stock Exchange on Wednesday said it is working on a “structure” to address the issues and more clarity is likely to emerge in the next two-three weeks.
SGX reports market statistics for July 2018
…Total Derivatives volume was 16.9 million, down 5% month-on-month (m-o-m) and up 19% year-on-year (y-o-y).
Presentation By HKEX Chief Executive Charles Li And Group Chief Financial Officer John Killian On 2018 Interim Results Announcement
…Strong growth in trading volumes: Cash Market headline ADT +67% YoY, Futures and Options ADV +58% YoY, LME chargeable ADV +11% YoY
Dalian Commodity Exchange Holds Training For Corn Options Instructors
To strengthen the corn options training on member units, promote teaching staff construction and guarantee the steady listing and operation of corn options, Dalian Commodity Exchange (DCE) held the training on corn options instructions lately. A total of 100 trainees from 100 units attended the training, including futures companies, risk management subsidiaries of futures companies, spot companies and other financial institutions.
Tradeweb On Track For Record Year Of Trading Activity
…Credit and Equities Derivatives Volumes Climb: Global equity derivatives ADV is up 351.55% and global credit derivatives volume is also up 80.16% year-over-year on the Tradeweb platform.
Redline Trading Solutions Breaks 180 Nanosecond Tick-to-Trade Barrier
Redline Trading Solutions
Redline Trading Solutions, the premier provider of high-performance market data and order execution solutions, today announced the production deployment of its hybrid software and FPGA-based market data and order execution gateway solution.
The art of designing markets. Part III
This is the third article in a series of topics related to the market design of electronic marketplaces. The first article discussed the most common execution models in electronic derivatives markets, while the second covered the various components of an order-generating process that define its arrival time. It thus gave an overview of the three steps market participants need to generate and submit an order to an exchange whereby connectivity drives the third step. We explained that for all participants timing matters but that ‘timing’ means different things to different market participants. Today, we are looking at the electronic connectivity of market participants who are not members of an exchange (i.e. indirect participants), typically institutional investors, but also retail investors.
Morgan Stanley sees two ‘broken legs’ for stocks, heralding ‘significant market correction’
Ryan Vlastelica – MarketWatch
For years, one of the primary factors lifting the U.S. stock market has been the fact that some of the economy’s biggest, fastest-growing names just kept rising.
The strength of growth stocks, in particular some large technology and internet plays, has been a boon for momentum investors, who bet that recent outperformers will continue to do better than the overall market over the medium term. This trade has been one of the easiest ways for investors to make money, but analysts are increasingly concerned that its era may be drawing to a close.
A big shift to the S&P 500 may change the way you invest in tech
Stephanie Landsman – CNBC
The S&P 500 is about to undergo a major structural change that may alter which technology stocks you own.
Facebook and Google’s parent Alphabet will move out of the index’s technology sector and to a newly formed communication services sector in about six weeks. The goal is to make tech appear less dominant in the S&P 500.
Crypto pukes, again; Somebody pass the mop.
Jamie Powell – FT Alphaville
Ah, the crypto.
After the gyrations of early June, it all went pretty quiet recently as bitcoin, and its fellow tokens, began to recover from their lows.
****SD: First, great title. Second, with all these gyrations you’d think there would have been more activity on LedgerX. After all, the exchange did have a “record” July. While open interest seems to be building (4,000+ contracts) and Monday had 400+ trades, yesterday saw only 21 swaps trade. Oh, and the reason attributed to the puking? See Bloomberg’s SEC Postpones Decision on Bitcoin ETF Listing to September
Private Banks Are the New Hedge Funds
Yakob Peterseil – Bloomberg
Who needs hedge funds when a $2.4 trillion private bank is offering global macro trades to navigate late-cycle markets — mimicking fast-money strategies with leverage to boot.
UBS Group AG’s wealth management arm, the world’s largest, is pitching just that to billionaire clients.