Observations & Insight
Options thrive as markets nosedive
By Matt Raebel – John Lothian News
February is known as the month of love – the month in which Valentine’s Day takes place. Options traders certainly got a lot of love last week, when the stock market saw its biggest crash since 2008.
Cboe has been seeing far more interest and volume than average for VIX futures since January of this year, especially for contracts expiring around the Iowa caucus and Super Tuesday (the day when the greatest number of U.S. states hold primary elections and caucuses for the presidential election in November), and of course, around the November election itself. The October and November activity is somewhat typical for an election year, but as Cboe President Ed Tilly said at the exchange’s annual press lunch in January, the demand for hedging and hedging vehicles expiring around the Iowa caucus and Super Tuesday has been “unprecedented.”
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2020 Options Industry Conference Cancellation
It is with deep regret that we are informing you of the cancellation of the 2020 Options Industry Conference on April 22-24 in Puerto Rico. This determination was made due to growing concerns about travel and the spread of the coronavirus or COVID-19. In making this difficult decision, we consulted industry stakeholders and considered the risks presented by this virus.
Down $52,000 in a day: Furious Robinhood customers want payback following the app’s two day outage
Lucinda Shen – Fortune
Talk about stress. Following an outage that spanned two days, Robinhood co-founders wrote in a Tuesday post that they were working as quickly as possible to address the issue. “We now understand the cause of the outage was stress on our infrastructure—which struggled with unprecedented load,” wrote co-founders and co-CEOs Baiju Bhatt and Vlad Tenev of the outage that spanned the majority of Monday’s trading hours, and a shorter, second one on Tuesday.
Wild stock-market swings are ’emotionally and intellectually wearing’ on Wall Street
Mark DeCambre – MarketsWatch
Over the past few sessions, volatility has reigned supreme on Wall Street. Outsize moves in U.S. equity benchmarks have come at a daily clip lately. And you can blame coronavirus or Bernie Sanders or the Federal Reserve, but wild intraday swings and dramatic intersession moves may be here to stay, say strategists and market experts.
Volatility Markets Become The New Battleground For Exchanges As Global Demand Surges: New Burton-Taylor Report
PR Newswire (press release)
The volatility trading landscape is set to see rapid growth in 2020 as rising customer demand is attracting the attention of global banks, market makers and derivatives exchanges according to a Burton-Taylor International Consulting (part of TP ICAP’s Data & Analytics division) report published today. The new report is based on more than 100 interviews with global banks, market makers, exchanges, and institutional investors active in global volatility markets.
Exchanges and Clearing
Cboe Global Markets Reports Several Trading Volume Records for February 2020
Cboe (press release)
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today reported February monthly trading volume. The data sheet “Cboe Global Markets Monthly Volume & RPC/Net Revenue Capture Report” contains an overview of February and year-to-date trading statistics and market share by business segment, volume in select index products, and RPC, which is reported on a one-month lag, across business lines.
Traded derivatives contracts and OTC clearing at Eurex show strong growth
Eurex’s February figures showed strong growth across virtually all product classes, with European equity index derivatives, OTC clearing, and Eurex Repo’s GC Pooling leading the way. The number of traded contracts in European equity index derivatives at Eurex grew by 60 percent in February 2020 compared to the same month last year, while the number of traded European interest rate derivatives also grew by 23 percent over the same period. And despite a small drop in the number of European equity derivatives traded – down 11 percent – overall financial derivatives contracts traded grew by 33 percent between February 2019 and February 2020.
CME Globex Notices: March 2, 2020
HKEX to Introduce New Stock Option Classes
Hong Kong Exchanges and Clearing Limited (HKEX) is pleased to announce today (Wednesday) the launch of five new stock option classes on Monday, 23 March 2020. Stock options trading volumes at HKEX have been very active this year, with average daily turnover of over 520,000 contracts, a 17.6 per cent increase compared with the average daily turnover in 2019. HKEX is inviting applications for market makers for the new options.
Regulation & Enforcement
CFTC Clarifies Cross-Border Regulatory Commitments in Unanimous Vote
The Commodity Futures Trading Commission today announced it unanimously approved amendments to § 30.10 of CFTC regulations to codify the agency’s authority to terminate exemptive relief issued to foreign firms. Part 30 of CFTC regulations governs the offer and sale of foreign futures and options to customers located in the United States. “International comity and deference as well as clarity in our supervisory activities are critical for sound regulation. Because they are essential to our global derivatives markets, my commitment to them is ironclad,” said CFTC Chairman Heath P. Tarbert.
Trade associations publish best practices for derivatives trade reporting under EMIR
FIA joined the International Swaps and Derivatives Association, Inc. (ISDA), the European Fund and Asset Management Association (EFAMA), the European Venues and Intermediaries Association (EVIA), and the Global Foreign Exchange Division (GFXD) of the Global Financial Markets Association (GFMA) to publish jointly a set of best practices for derivatives trade reporting under the European Market Infrastructure Regulation (EMIR).
A proposed rule to amend The Nasdaq Options Market LLC Rules at Options 3, Section 7, Types of Orders and Quote Protocols to permit the Exchange to determine the availability of order types and time-in-force provisions.
Renaissance Technologies: Discovering the Omnitrade
In the early days of Quantlab, we suspected that there were stock trading signals in option data. Our futures program had waaaay too much slippage in it, and we needed to make a shift into a strategy with far less position concentration if we were ever going to survive. It was 1996 – or maybe it was 1997 – and the biggest challenge we faced in making such a shift was finding clean historical option data. That’s when we met Sandor Strauss, Renaissance Technologies’ first data guru…
Be Like Warren Buffett in Times Like These. Here’s How.
Steven M. Sears – Barron’s
When fear defines financial markets, remember Warren Buffett. The great investor once said the secret to beating the market was to be fearful when others are greedy and greedy when others are fearful.
It is a simple idea, but it’s hard to do, especially now, when no one knows what the coronavirus might do. Right now, it exists as a widespread yet not especially lethal outbreak, though some—like Buffett’s friend Bill Gates—fear it is a once-in-a-century pathogen. President Donald Trump insists that political opponents are using the virus to destabilize his administration. And the Federal Reserve lowered interest rates by half a percentage point, driving the 10-year Treasury yield to a historically low level, in order to blunt its impact.
JPMorgan Asked Thousands Of Employees To Work From Home: This May Start A New Trend
Jack Kelly – Forbes
There may be a positive unintended consequence of the COVID-19. Companies may start permitting large numbers of their employees to work from home. Banking behemoth JPMorgan announced a pilot program, code-named “Project Kennedy,” which calls for 10% of the company’s 125,000 plus employees to work from home. In light of the unknown ramifications relative to the COVID-19, JPMorgan, similar to other top companies, is trying to disperse their employees in an effort to alleviate the chance of catching the virus. Project Kennedy will test how efficiently and effectively the work-from-home program will serve as a contingency plan in case the situation worsens.