Lead Stories
Amped-Up Bet on Volatility ETF (UVXY) Goes Awry With Loss of $400 Million
Denitsa Tsekova and Elena Popina – Bloomberg
It doesn’t pay to hedge this bear market.
Investors piled into an exchange-traded fund designed to protect them from market turbulence after the worst start to a year in history, but that protection is turning out to be costly.
Traders lost $392 million on the largest long-volatility ETF in July that profits when volatility surges, according to data complied by Bloomberg. With 2022’s orderly bear market skirting the wild swings that characterized previous downturns, the CBOE Volatility Index, or VIX, has been surprisingly calm.
/jlne.ws/3zrQoov
Return of volatility revs up FX options market
Joe Parsons – Risk.net (subscription)
The foreign exchange options business thrives on uncertainty. Volatility brings trading opportunities and keeps the tills ringing at banks. Calm and predictable markets, conversely, can cause trade volumes to dry up.
Prior to this year, implied volatility had been steadily grinding down since 2015. A brief flurry of activity in March 2020 when Covid-19 sent markets into a spin was followed by the return of systematic volatility sellers, driving vol levels even lower than pre-pandemic levels.
/jlne.ws/3ztDhmB
FX Hedge-Fund Survivors Are Finally Making Money as Dollar Soars
Amelia Pollard – Bloomberg
After getting thrashed in the era of low interest rates, the last remaining hedge fund managers dedicated to the world of foreign exchange are in fighting spirits this year.
Aggressive Federal Reserve tightening is sending the US dollar to historic highs and spurring big moves across exchange rates from Europe to Asia. That’s proving a godsend for a small band of FX-focused quant traders and discretionary managers as they notch some of their biggest wins since the halcyon days of the pre-2008 era.
/jlne.ws/3SkL7aY
Stock Market Volatility Set to Continue Despite July Rebound: UBS
George Glover – Markets Insider
UBS believes the stock market could remain volatile for the next few months as fresh batches of economic data lead to heightened uncertainty levels.
The $1.1 trillion asset manager’s chief investment officer Mark Haefele said that July’s market rebound was unlikely to prove long-lasting in a recent research note.
/jlne.ws/3d1r6Gg
Exchanges
OCC July 2022 Average Daily Volume Up 3.6% Year-Over-Year
OCC
OCC, the world’s largest equity derivatives clearing organization, announced today that year-to-date average daily volume through July 2022 was 40.6 million contracts, up 3.6 percent compared to year-to-date average daily volume through July 2021. Total volume was 742.0 million contracts, down 6.6 percent compared to July 2021. Highlights: ETF options cleared contract volume up 38.0% year-over-year; Index options cleared contract volume up 29.0% year-over-year; Stock Loan transaction volume up 10.0% year-over-year.
/jlne.ws/3SmKL3J
CME Group Reports 20% ADV Growth in July 2022; 40% growth in Equity Index ADV, driven by micro and E-mini contracts; Record SOFR options and futures OI on July 29
CME Group
CME Group, the world’s leading derivatives marketplace, today reported its July 2022 market statistics, showing average daily volume (ADV) increased 20% to 20.4 million contracts during the month.
/bit.ly/3cWdg80
Policy Regarding Corrections to CME, CBOT, NYMEX, and COMEX Options Exercise Instructions
CME Group
Please be reminded that corrections to CME, CBOT, NYMEX, and COMEX option exercise instructions may be accepted by the Clearing House up to option assignment processing provided that such corrections are a result of: (1) a bona fide clerical error, (2) an un-reconciled Exchange option transaction(s), or (3) an extraordinary circumstance where the Clearing Member is unable to communicate final option exercise instructions prior to the relevant deadline and up to the Exchange’s option processing window. Such permissible corrections shall be determined at the sole discretion of the Exchange.
/bit.ly/3bm8YGw
Miscellaneous
Goldman Lost 2 Traders Then Accused Them of Accessing Secret Code
Sridhar Natarajan and Max Abelson – Bloomberg
Inside a lucrative and envied Goldman Sachs Group Inc. trading squad, a pair of employees racked up praise in their recent reviews. One was dubbed “exceptional” with an “impeccable work ethic,” the other as “outperforming” and a “culture carrier.”
When the duo accepted new jobs at a hedge fund this year, they said, the bank urged them to reconsider. One recalled that after he refused, his manager’s tone shifted to a warning: “I would be concerned about your behavior in the past” at Goldman.
/jlne.ws/3JELU2J
JPMorgan Finally Unseats Rivals to Take Equity Trading Crown
Hannah Levitt and William Shaw – Bloomberg
After years of just missing out on the top spot, JPMorgan Chase & Co.’s equities trading business has finally eked out the No. 1 place on Wall Street.
Between April and June, the bank’s revenue from the business outperformed both Goldman Sachs Group Inc. and Morgan Stanley for the first time in a quarter since at least 2006, reaching nearly $3.1 billion. Further down the ranking, a strong set of results Friday for BNP Paribas SA’s equities unit means it has overtaken Barclays Plc this quarter.
/jlne.ws/3cTPv0d
