2017 Viewpoint: Craig Donohue, Chairman & CEO, Options Clearing Corporation
We hear Craig Donohue’s views on what the coming year may hold for the sector.
Is The Market Starting To Price In Trump Risk?
Bryan Rich – Forbes
The Trump agenda continues to dominate the market focus as we entered the second week of Trumponomics. To this point the market focus has been on the pro-growth agenda. With that, stocks have been higher, yields have been higher, the dollar has been higher, and global commodities have been broadly rising. Meanwhile, gold (the fear trade) has been falling and the VIX has been falling, toward ultra-low levels. The VIX, like gold, is a good market indicator of uncertainty and/or fear. Let’s talk about the VIX…
Wall Street’s ‘fear index’ jumps the most in 3 months as Trump spooks market
Mark DeCambre – MarketWatch
A popular measure of Wall Street fear jumped by the most in about three months on Monday, as the equity market retreated amid concern over President Donald Trump’s controversial executive order aimed at tightening U.S. immigration rules.
‘Mystery’ Buyer Bets Big On Volatility Spike
Markets are sleep-walking into a disaster.
That’s what former FX trader and Bloomberg contributor Mark Cudmore said early Tuesday morning following a Monday evening mini-purge that saw the Trump Administration fire acting Attorney General Sally Yates for defying the new President’s Executive Order on immigration.
Contango Whitepaper: The Changing Face Of Client Derivatives Clearing
Contango has just released a special report looking at the changing face of client derivatives clearing as regulation, higher capital requirements and constraints on revenue models are changing the way banks in particular look at their clients. In line with a trend that started some years ago, the number of derivatives clearing firms is shrinking further. Banks must earn more from their clients or be faced with exiting the listed derivative brokerage business (unwelcome), accept lower returns on capital utilised (unlikely) or be more picky about the types of clients that they serve (likely). As a result a number are ‘reassessing’ their client base and some clients just don’t fit any more.
****SD: Link directly to the PDF here. Here is a piece about the whitepaper if you do not wish to read the whole thing – As banks continue to downsize clearing units, self-clearing gains traction
Trump tweets drive day trading but leave math, computer whizzes sidelined
Gertrude Chavez-Dreyfuss and Anna Irrera – Reuters
Day traders love making bets on tweets from U.S. President Donald Trump, but some of the most prominent quantitative strategists from hedge funds and banks are not quite ready to make big, bold trades on his social media musings.
The president’s active Twitter presence has lifted volatility in financial markets, which is good for day traders who capitalize on price fluctuations in highly liquid markets. Such traders, who have a short-term horizon, have struggled the last few years as market moves have become steadier and more predictable amid a low interest-rate environment.
Are tougher times for Wall Street’s ‘Flash Boys’ here to stay?
Miles Johnson in London – Financial Times
The publication of Michael Lewis’s book Flash Boys in 2014 thrust the arcane world of ultra-high frequency trading firms into the popular consciousness, prompting debate over everything from the industry’s morality to the possible risks it posed to financial stability.
Market volatility not as scary as it seems
Clancy Yeates – The Age
Strap yourself in, 2017 is set to be “volatile” in financial markets. That’s the view of many fund managers and other investment experts, and you can see why it seems a pretty safe prediction.
With Donald Trump in the White House, market-moving comments are just a presidential tweet away. A host of European nations also hold elections this year, which could open the door to more anti-establishment leaders, adding to the many unknowns in the world economy.
Trump beneficiaries? Formerly bored traders
Scared markets are good markets.
That’s true for traders, at least. They profit when volatile markets pick winners and losers more frequently.
Exchanges and Clearing
Nasdaq to close London derivatives exchange NLX
Samuel Agini – Financial News London
Nasdaq has called time on the European interest-rate futures business it launched in 2013 and is now looking to shut the exchange and help customers wind down open positions.
April 28 will be the final day of trading on NLX, according to a January 31 market notice, which said that more information will be provided to participants in the coming days.
Nasdaq Reports Fourth Quarter 2016 With Record Revenues
Nasdaq, Inc. (Nasdaq:NDAQ) today reported financial results for the fourth quarter of 2016. Fourth quarter net revenues were $599 million, up $63 million or 12% from $536 million in the prior year period, driven primarily by a $54 million positive impact from acquisitions. Organic growth in non-trading segments was 5%4 as compared to the fourth quarter of 2015.
PHLX, NOM, and BX Options Updates Technical Specifications
PHLX, NOM and BX Options have updated their technical specifications to support the addition of a new options market, MIAX Pearl, which is scheduled to launch on Monday, February 6, 2017.
MIAX Options Exchange: MIAX Options
Effective February 1, 2017, pending SEC approval, the MIAX Options Fee Schedule will be amended.
PHLX Options Updated Pricing, Effective February 1, 2017
Effective Wednesday, February 1, 2017, pending filing with the SEC, the following changes will apply to Nasdaq PHLX.
BX Options Updates Per Port Pricing and Cap Effective Wednesday, February 1st
Effective Wednesday, February 1, 2017, pending filing with the SEC, the below changes will apply to BX Options:
Regulation & Enforcement
Deutsche Bank fined $630 million for ‘mirror-trading’ scheme
John Bakie & Hayley McDowell – The Trade
The New York State Department of Financial Services (DFS) and the Financial Conduct Authority (FCA) in the UK have fined Deutsche Bank a combined $630 million for violating anti-money laundering (AML) laws through a mirror-trading scheme.
The DFS found Deutsche Bank had engaged in a long-term mirror-trading scheme on the equities desk at its Moscow branch in Russia.
Wenchi Hu, Associate Director In The Division Of Trading And Markets, To Leave SEC
The Securities and Exchange Commission today announced that Wenchi Hu, an Associate Director in the Division of Trading and Markets, will leave the agency in early February.
Conservative leadership candidate Kevin O’Leary’s image being improperly used to promote binary options ‘get rich’ schemes: OSC
Barbara Shecter – Financial Post
Canada’s biggest stock market regulator is warning that Conservative party leadership candidate Kevin O’Leary’s likeness is being improperly used to entice investors into “get rich” schemes involving binary options trading platforms.
Torstone Technology Partners With Unavista To Provide Complete Mifir Reporting Service For Clients
Torstone Technology, a leading provider of securities and derivatives processing software to the global financial markets, today announced that it will connect to London Stock Exchange Group’s UnaVista Approved Reporting Mechanism (ARM). The service will allow users of Torstone’s new InfernoRC (Regulatory Compliance) module to comply with the transaction reporting obligations of the Markets in Financial Instruments Regulation (MiFIR).
Trump Aides’ Confusion Mimicked by Bond, Stock Options Gauges
Tanvir Sandhu – Bloomberg
President Donald Trump’s aides aren’t the only ones offering conflicting interpretations. The markets are as well.
While options investors in the U.S. are expressing risk-on sentiment, traders in Treasuries are beginning to sense a risk-off move may be round the corner.
Trading to Win? Break Those Bad Habits
Bob Lang – CBOE
We are all creatures of habit, and with so much going around us in our lives at the speed of light we tend to fall into some set routines. That is often the case for us as option traders, and while some routines are efficient and allow us to make quick decisions, others can be quite harmful and cause some dangerous missteps. Many of us are unaware of these habits, they become instinctual.
Relax – Market Internals Still Look Good
Michael Kahn – Barron’s
Fearful voices joined together after the weekend news from Washington concerning immigration halts and tax cut-delays. The Dow Jones Industrial Average reacted Monday morning with a 200-point decline – the worst intraday performance since the first trading day after the election. But that’s just the surface noise. The state of the market is sound, and breadth and sector measures still look solid.
The Best Stocks to Own in February
Kirra Fedyszyn – Schaeffer’s Research
Historically speaking, February is one of the worst months for stocks. In fact, Februaries during the first year of a presidential cycle, like this year, tend to be particularly brutal.
Your Options Questions Answered
Join OIC for a discussion on a variety of options topics. We will be reviewing buying vs. selling options, determining “fair value” for an option, evaluating factors that affect an investor’s decision to exercise an option, and much more. You also will have a chance to ask questions throughout the discussion. Don’t miss this chance to talk to our options professionals!
****SD: Webinar taking place today from 3:30 p.m. – 04:30 p.m. Central