Observations & Insight
Owain Johnson: World-class Listener, Citizen, Author And Researcher, Sees Acceleration Of Economic Change; CME’s Global Head Of Research In London Interviewed By JLN
By John J. Lothian – JLN
Things are happening so fast amidst an acceleration of economic change that the old order of product adoption by various categories of industry players is being upended, Owain Johnson told John Lothian News in a recent interview.
That speed of change is exciting to Johnson, the London-based global head of research for the CME Group. New asset classes are joining the six traditional asset classes of the CME’s traded products, he said. He mentioned digital assets as a new asset class, as well as environmental products. The CME’s new CVOL products are also exciting. The CME’s six traditional asset classes are agriculture, metals, energy, interest rates, equities and foreign exchange.
For the rest of this interview, click HERE.
AMC, Other Meme Stocks Turn Options Market Upside Down; Flurry of activity in meme-stock options underscores investors’ fear of missing out on surges
Gunjan Banerji – WSJ
The meteoric rally in meme stocks such as AMC Entertainment Holdings Inc. AMC 14.80% and GameStop Corp. GME 12.74% has unleashed a burst of options trading, upending traditional dynamics in the market for stock bets. The rush into the stocks coincided with frenzied trading for options—contracts that allow investors to bet on price moves in stocks or protect their portfolios. The once-obscure corner of the market has boomed this year like never before, with many new investors trying their hands during the pandemic shutdowns.
AMC’s Meme-Stock Traders Mess With Corporate Theory; Neither shareholder value nor stakeholder value explains selling shares into a wild froth
James Mackintosh – WSJ
The theory of the firm features a thriving academic debate about whether responsibility to shareholders or responsibility to broader stakeholders should be the founding principle of corporate life. You can’t fit raising billions of dollars from shareholders merely because the stock price is wildly overvalued into either rubric. Maybe the academics should be following Reddit’s AMC AMC 14.80% Entertainment memes, because the movie-theater operator’s maneuver last week to raise $817 million by selling shares into a wild froth—the latest in a series that quintupled its share count since September—adds a third constituency often missing from the theory of the company: the company itself.
Wall Street brokers are reportedly limiting short bets against meme stocks by hedge funds
Carla Mozée – Markets Insider
Some of Wall Street’s largest brokers are quietly tightening rules on who can bet against meme stocks popular among retail traders in an effort to protect themselves against the fallout from sharp price surges and falls, according to a Bloomberg News report.
Firms that have adjusted risk controls at their prime-brokerage operations include Goldman Sachs, Bank of America, Citigroup, and Jefferies Financial Group, the Friday report said, citing people familiar with discussions about internal policy decisions.
Wendy’s surges 19% on day-trader mania as Reddit post highlights its chicken tendies and knack for memes
Matthew Fox – Markets Insider
The Reddit-driven day-trading phenomenon spread to shares of Wendy’s on Tuesday, with shares surging as much as 19% after a post on the WallStreetBets forum explained why the fast-food restaurant is “literally the perfect stock for this sub.”
Reddit’s WallStreetBets forum has had a knack for influencing stock prices, with the most notable examples being the epic rallies they’ve fueled in both GameStop and AMC Entertainment this year.
FX volatility falls to pre-pandemic lows as traders wait it out
Tommy Wilkes – Reuters
Currency market volatility on Tuesday fell to its lowest since before the COVID-19 pandemic roiled markets in March 2020, as investors sat on the sidelines waiting for clearer signals on the inflation trajectory and how central banks will respond.
With an impending European Central Bank meeting on Thursday and U.S. inflation data due the same day, and a U.S. Federal Reserve meeting next week, currencies appear to be treading water.
Oil output restraint draws hedge fund buying: Kemp
John Kemp – Reuters
Portfolio managers increased their positions in petroleum last week, reversing roughly half the sales over the previous three weeks, as benchmark oil prices started to break up through the recent ceiling.
Hedge funds and other money managers purchased the equivalent of 40 million barrels in the six most important futures and options contracts in the week to June 1, after selling a total of 74 million over the previous three weeks.
Clover Health soars as ‘meme stock’ rally gathers steam
Shares of Clover Health Investments Corp (CLOV.O) surged as much as 109% on Tuesday as it became a new focus for small individual traders on social media platforms who have sparked rallies in heavily shorted U.S. stocks this year.
The so-called “meme stock” phenomenon, which began with video game retailer GameStop Corp (GME.N) in January and spread to cinema operator AMC Entertainment Holdings Inc (AMC.N) in May, has prompted the U.S. Securities and Exchange Commission to say it was looking into signs of market manipulation. read more
London’s Ring metals trading floor wins battle to reopen
Philip Stafford and Henry Sanderson – Financial Times
The London Metal Exchange has withdrawn plans to close its distinctive Ring trading floor permanently, bowing to a passionate effort to maintain the pit where brokers and industrial traders have gathered for more than 140 years.
The LME Ring has been closed for more than a year during the pandemic, and the exchange operator had suggested shifting to a fully electronic model.
Euronext announces volumes for May 2021
Euronext, the leading pan-European market infrastructure, today announced trading volumes for May 2021. Monthly and historical volume tables are available at this address:
May a Busy Month for Ag Options Trading
CME Group reports the Grain and Oilseed option complex averaged 3.9 million contracts of open interest, the highest mark ever in the month of May.
The complex also had an average daily volume of 351,000 contracts, the second-highest mark in May. July Corn ended May with a 41 percent implied volatility, the highest level going back to 2007. July added more than 90,000 contacts of open interest reaching 636,000 contracts, with the $7 calls having the most volume and open interest change.
Regulation & Enforcement
As AMC Entertainment stock surges, SEC says it’s watching memes for ‘disruptions of the market, manipulative trading, or other misconduct’
Mark DeCambre – MarketWatch
The U.S. Securities and Exchange Commission warned Monday that it is closely monitoring frenetic moves in the stock market, amid the stratospheric surge in values of meme stocks AMC Entertainment and GameStop Corp.
“SEC staff continues to monitor the market in light of the ongoing volatility in certain stocks to determine if there have been any disruptions of the market, manipulative trading, or other misconduct. In addition, we will act to protect retail investors if violations of federal securities laws are found,” said the SEC in a statement provided by the regulator’s spokesman.
Wall Street body proposes new rules on short positions, stock loans
Katanga Johnson – Reuters
The Financial Industry Regulatory Authority (FINRA), Wall Street’s self-regulatory body, has proposed changes to its short-interest reporting requirements in a bid to make information more useful.
The proposed changes to Rule 4560 would increase the frequency of short-interest reports from twice a month to weekly or even daily. The change would require clearing firms to report synthetic short exposure – bets made against shares via derivatives – in firm and customer accounts.
This ‘Short-Strangle’ Strategy Can Generate Income in a Go-Nowhere Market
Steven M. Sears – Barron’s
In a directionless stock market, use options to embrace stillness.
Investors can generate income by selling put options and call options with strike prices that are, respectively, below or above the price of the underlying asset. Should the asset remain moribund, investors get to keep the options premium, essentially profiting from the stillness in the market.
Women In Listed Derivatives (WILD)
Join your WILD member community for another round of virtual networking in this quarter’s Conjunction Function event.
Regroup with industry peers and friends online for continued dialogue & relationship via small group discussion.
Register now, we look forward to seeing you soon!
11:30 AM – 12:30 PM
Trading meme stocks like GameStop can mean billions in hidden costs for retail investors – reflecting how the equities market is broken in places, a markets chief says
Shalini Nagarajan – Markets Insider
The retail trading frenzy that saw groups of amateur traders encourage one another on Reddit to buy and hold meme stocks is the product of zero-commission trading, according to the co-chief executive of a London-based trading firm.
Apps like Robinhood that offer commission-free trades on stocks have created the impression that retail traders place wagers against the broader stock market and make money in the process. But the boom in meme-stock trading is an example of a battle against Wall Street that small traders cannot win, Alex Gerko of XTX Markets told the Financial Times in an interview.