Observations & Insight
Dan Gramza – The Path to Electronic Trading
Dan Gramza sat for an interview with John Lothian News for the MarketsWiki Education The Path to Electronic Trading video series. Gramza tells the story of how he got started in trading with stock options in 1974. In 1980, he moved to the Chicago Board Options Exchange and traded delta neutral strategies. He realized he had not eliminated risks, but changed them. He moved to the Chicago Board of Trade on a rice membership to trade price. Then he started working for exchanges, including the SGX, teaching how to trade. He explains the difference between being a floor trader and an upstairs trader.
$1 Billion in Bitcoin Options Expire Friday. Here’s What It Means
Robert Stevens – Decrypt
Almost a billion dollars worth of Bitcoin options contracts, a little under half in existence, are set to expire on Friday, per data from Skew analytics. And Ethereum isn’t far behind. About $450 million worth of ETH options contracts expire on the same day. This could potentially introduce a whole lot of crypto back into the market as traders look to dump or HODL. Here’s what to expect.
Volatility Rampant in Stock Market Where Optimism Still Abounds
Elena Popina, Sarah Ponczek and Lu Wang – Bloomberg
The threats to the bullish case for stocks keep piling up.
Days after Congress all but ended its pursuit of a bipartisan Covid relief package, a lineup of Federal Reserve speakers warned that no new stimulus could doom the nascent economic recovery. The resurgent virus has sparked fresh restrictions in Europe, while the U.S. death toll topped 200,000 as investors speculate a vaccine remains months away.
Trump’s Election Tweets to Spark Rates Volatility, JPMorgan Says
Joanna Ossinger – Bloomberg
Donald Trump’s election-related tweets are likely to drive a jump in volatility in the world’s biggest funding market, according to the JPMorgan Chase & Co. analysts who created the Volfefe Index.
Named after Trump’s inscrutable “covfefe” tweet from May 2017, the index attempts to gauge the impact of Trump’s tweeting on the U.S. Treasury market through interest rate derivatives known as swaptions. JPMorgan’s revised analysis shows that while the sensitivity of the market to the president’s tweets peaked in May, in the midst of the Covid-19 pandemic, the Trump’s Twitter activity still significantly influences expectations of volatility in this key market.
Don’t fear the VIX. Volatility is here to stay for now, and that’s no bad thing.
Amanda Cooper – Markets Insider
Higher volatility looks like it will last well into next year, regardless of the outcome of the November presidential election – or even the arrival of an effective vaccine against COVID-19. That’s according to 30 years of data suggesting that volatility takes months, or even years, to subside after a crisis.
Few bellwethers of investor sentiment capture the headlines quite as often as the Cboe Volatility Index, or VIX, which essentially tracks future expectations of volatility in the benchmark S&P 500.
Bitcoin Options Open Interest Hits Record High in Expiry Week
Omkar Godbole – Coindesk
Open interest in bitcoin options has risen to new record highs this week. But the market will witness $1 billion in notional value expiring Friday, which could trigger heightened volatility. A record $2.14 billion worth of options contracts were open on Tuesday, up nearly 53% from the multi-month low open interest of $1.14 billion back on Aug. 28, according to data source Skew. As of Wednesday, open interest was $2.03 billion. The previous record high of $2.11 billion was reached on July 30.
Exchanges and Clearing
MIAX Exchange Group – Options Markets -Listing of Snowflake Inc. (SNOW)
The option class listed below will begin trading on the MIAX Options Exchange, the MIAX PEARL Options Exchange, and the MIAX Emerald Options Exchange on Friday, September 25, 2020:
Snowflake Inc. (SNOW)
Market Makers can use the Member Firm Portal (MFP) to manage their option class assignments. All LMM and RMM Option Class Assignments must be entered prior to 6:00 PM ET on the business day immediately preceding the effective date. All changes made after 6:00 PM ET on a given day will be effective two trading days later.
MIAX Options and MIAX Emerald Primary Lead Market Maker (PLMM) assignments and un-assignments will not be supported via the MFP.
Withdrawal of admission of Single Stock Futures, options and Total Return Futures due to corporate actions
Due to corporate actions, the Management Board of Eurex Deutschland took the following decisions with effect from 5 October 2020:
MSCI index options: Adjustment of Non-disclosure limits
As of 19 October 2020, Non-disclosure limits for MSCI options will be amended.
Increase in maximum precision of Eurodollar and SOFR strike prices – Effective October 12, 2020
Effective Monday October 12, 2020, listing rules for certain CME options on Three-Month Eurodollar futures and on Three-Month SOFR futures will be modified to allow creation of strikes at intervals of 0.0625 index points. Currently, the interval is 0.125. Thus, the maximum number of decimal places needed to represent a strike price will change from three to four.
REVISED: Product Modification Summary: Amendments to the Exercise Price Rule of the Options on Three-Month Eurodollar and Three-Month SOFR Futures Contracts – Effective October 12, 2020
Amendments to the Exercise Price Rule of the Options on Three-Month Eurodollar and Three-Month SOFR Futures Contracts.
Amendment to the Listing Cycle and Subsequent Delisting of the KC HRW-Chicago SRW Wheat Intercommodity Spread Options Contract
Effective Sunday October 11, 2020, for trade date Monday, October 12, 2020, and pending all relevant CFTC regulatory review periods, The Board of Trade of the City of Chicago, Inc. (“CBOT” or “Exchange”) will amend the listing cycle of the KC HRW – Chicago SRW Wheat Intercommodity Spread Options contract (the “Contract”) to cease listing new expirations. Following the expiry of the last listed contract on June 25, 2021, the Contract will be delisted
UPDATE: Amendments to the Exercise Price Rule of the Options on Three-Month Eurodollar and Three-Month SOFR Futures Contracts – Addition of 6.25 Basis Point Strike Price Intervals
Effective Sunday, October 11, 2020 for trade date Monday, October 12, 2020, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will amend the Exercise Price rules of the Options on Three-Month Eurodollar Futures (Rulebook Chapter 452A) and Options on Three-Month SOFR Futures contract (Rulebook Chapter 460A) (the “Contracts”) for trading on the CME trading floor, the CME Globex trading platform (“CME Globex”) and for submission of clearing via CME ClearPort (collectively, the “Rule Amendments”).
Eurex named ‘European derivatives exchange of the year’ by Global Capital
Being recognized and awarded for one’s performance is always nice, especially when the jury at the Global Derivatives Awards 2020 – hosted by Global Capital – pays tribute to the”excellent understanding of the competitive landscape and intelligent product creation” at Eurex. We are proud of this award and promise to keep on with our way of working, and anticipating our clients’ needs with innovative products and solutions. We also received a special mention for our roll-out of our ESG derivatives. Read more in this article.
SGX named Asia-Pacific Derivatives Exchange of the Year by GlobalCapital for seventh consecutive year
Singapore Exchange (SGX) has been named “Asia-Pacific Derivatives Exchange of the Year” by GlobalCapital for a seventh consecutive year, underscoring its strengths in an especially challenging environment for market infrastructure. SGX demonstrated its role as a flight-to-quality marketplace as uncertainties over COVID-19 roiled global markets. Even during the early days of the pandemic, the exchange kept its platforms open round-the-clock, enabling investors to react to news and risk-manage their portfolios across equities, foreign exchange (FX) and commodities. GlobalCapital, a leading news, opinion and data service, unveiled the winners of its annual Global Derivatives Awards on 23 September in London.
EBS Institutional Connects to IHS Markit’s thinkFolio Investment Management Platform
EBS, a leading provider of electronic trading platforms and technology services in foreign exchange markets, today announced the connectivity between its EBS Institutional (EBSI) execution management system and thinkFolio, a leading multi-asset investment management platform from IHS Markit. As a result of this new service to be in place by Q4 2020, thinkFolio clients will be able to access EBSI’s unique execution functionality to reduce their trading costs. Additionally, mutual clients of IHS Markit and EBSI will benefit from thinkFolio’s extensive cash and currency management capabilities, sophisticated analytics and enhanced liquidity. The integration of workflows across the two systems will enable portfolio managers and traders to aggregate or split FX orders in thinkFolio, before routing the orders to be executed through EBSI.
CME Globex Notices: September 21, 2020
Regulation & Enforcement
JPMorgan Nears Deal to Pay About $1 Billion to Settle Spoofing Probes
Dave Michaels and David Benoit – WSJ
JPMorgan Chase & Co. is nearing an agreement with federal prosecutors and regulators to pay a fine to settle civil and criminal charges that its traders rigged futures and securities markets, people familiar with the matter said.
The bank would pay about $1 billion to wrap up several investigations into whether its trading desks manipulated prices for metals and Treasury securities, one of the people said.
Amendments to the Termination of Trading Rule of the Options on the Russian Ruble/US Dollar (RUB/USD) Futures Contract (Monthly) to Clarify LTD in the Event of a Russian Holiday
To Members, Member Firms and Market Users
From Research and Product Development
Notice Date 24 September 2020
Effective Date 12 October 2020
Stock Market Turbulence Is Here to Stay. How to Protect Your Investments.
Nicholas Jasinski – Barron’s
For reasons well known by investors, 2020 has seen an explosion in realized and expected stock-market volatility. Don’t expect that to change once the election is over.
The Cboe Volatility Index, or VIX—a measure of market volatility calculated from pricing of S&P 500 options for the next month—has remained in the high 20s even as the market has steadily rebounded from its tumultuous selloff in February and March.
Qualified Black candidates are plentiful, just not yet represented
Darryl Blakey – FIA.org
What drew you to the derivatives industry? My career in the industry officially began when I was afforded the opportunity to work in Congress for the House Committee on Agriculture under the leadership of then-chairman Mike Conaway. During my 3-year tenure on the Committee, I had the opportunity to work on the financial services portfolio, which included oversight of the U.S. Commodities Futures Trading Commission (CFTC) and to gain a better understanding of the derivatives industry, its stakeholders, and its impact on both the U.S. and the global economy.