ANALYSIS: ICE surges in German power options after expiry tweaks

Jul 10, 2024

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Lead Stories

ANALYSIS: ICE surges in German power options after expiry tweaks
Radi Khasawneh – FOW
Coordinating options expiries in its energy markets have provided impetus for Intercontinental Exchange’s ambition to grow market share in European power, according to a senior executive. Speaking to FOW after the firm set in May an open interest record of nearly 80,000 lots in German power options, ICE’s senior director for utility markets said ICE has also seen German power futures total volumes also ticking up to over 105,300 lots in the second quarter. That translates to a record average daily volume of 2,100 lots.

China Watchdog Tightens Short Selling Rules to Bolster Market; Regulator approves CSFC to halt stock lending operations; It also raises margin deposit ratio for investors, funds
Bloomberg News
The China Securities Regulatory Commission is tightening rules on short selling and high-frequency trades in a bid to crack down on improper arbitrage and maintain market stability. The market watchdog approved the mainland stock exchanges to boost margin requirements in short selling, starting July 22. Meanwhile, China Securities Finance Corp., the country’s biggest stocks lending provider, will suspend its business of lending securities to brokerages starting July 11, with outstanding contracts to be settled by the end of September, the CSRC added.

Short Sellers Gained $10 Billion in Second Quarter Despite S&P 500 Rally
Carmen Reinicke and Magdalena Del Valle – Bloomberg
Short sellers had a lucrative second quarter this year, managing to successfully bet against stocks even as the overall market continued to grind higher. Short sellers, who borrow and then sell stocks in a bid to make money from price declines, amassed $10 billion in second-quarter paper profits, according to data from S3 Partners LLC. Paper earnings from sectors such as industrials, health care and financials offset a $15.7 billion mark-to-market loss in technology, said Ihor Dusaniwsky, managing director of predictive analytics at S3.

ETF investors shrug off election jitters and pump cash into Europe; Earnings appear to indicate end to 10 years of stagnation on continent
Steve Johnson – Financial Times
Investors continued to pump money into European equity exchange traded funds in June despite volatility induced by elections in the UK and France.
US-based investors were so relaxed about the political backdrop that the net $1.3bn they sank into European equity ETFs was the highest since February 2023, according to BlackRock data.

Collapse of correlation fails to stem zeal for dispersion; New analysis suggests immensely popular relative value strategy may have more upside
Helen Bartholomew and Faye Kilburn –
Toppish entry levels have done little to temper investors’ enthusiasm for equity dispersion strategies, which bet on swings in single stocks outpacing index volatility.
“We quoted more dispersion in the last week than the month before,” says Steve Nawrocki, head of equities trading for the Americas at BNP Paribas.


Cboe Global Markets Announces Winners of the 2024 Options Institute Research Grant Program, Sponsored by S&P Dow Jones Indices and SpiderRock Advisors
Cboe Global Markets, Inc.
Cboe Global Markets, Inc. (Cboe: CBOE), the world’s leading derivatives and securities exchange network, today announced the recipients of The Options Institute Research Grant Program for 2024, sponsored by S&P Dow Jones Indices (S&P DJI) and SpiderRock Advisors. The recipients for the grant programs are as follows: The Options Institute S&P Dow Jones Indices Fixed Income Index Ecosystem Research Grant: Siamak Javadi, Dr. Ali Nejadmalayeri, William Campbell; The Options Institute SpiderRock Advisors Derivatives Solutions for Private Wealth and Institutional Investors Research Grant: Anup Basu, Adam Clements

Eurex launches trade offset workflow with E-Trading Connectivity to Bloomberg
Eurex has launched the Trade Offset workflow, which helps users of cleared Interest Rate Swaps to optimize their portfolio by automating the close out process. The solution seamlessly connects Bloomberg’s electronic trading tools to the original Eurex trade record. Clients who need to close out a swap position at the Central Counterparty Clearing House (CCP) can retrieve their trade details by inputting the Eurex CCP ID into Bloomberg’s trade register, TREG . The original swap details are then pulled directly from Eurex into this register. The exact offset of the original swap can then be sent to Bloomberg’s List trading tool, BOLT IRS , for execution.

Trading Arrangements of Global X US Treasury 3-5 Year ETF
Exchange Participants are requested to note that Global X US Treasury 3-5 Year ETF (Stock Code: 3450) has been authorized under collective investment scheme by the Securities and Futures Commission and is expected to commence trading on the Exchange and admitted to the list of Designated Securities eligible for short selling on 11 July 2024 (Thursday). Investors should always refer to the details about the Fund provided by the Fund Manager, e.g. Net Asset Value per Unit, before trading the abovementioned ETF(s). Detail of its trading arrangements (Attachment 1)
is attached for reference.

Regulation & Enforcement

CCPs, Clearing Members Must Boost Margin Transparency
Standards bodies, industry associations and regulators are calling for greater transparency around margin models to boost the resiliency of the global derivatives markets during periods of market volatility. In a recent DerivSource ‘Living the Trade Lifecycle’ podcast, Cumulus9 managing director Rafik Mrabet discusses what this means for market participants and the tools that will help them reach this goal. Q: In response to recent market stress events, BCBS-CPMI-IOSCO published three consultative reports: Review of Margining Practices (September 2022), Margin Dynamics in Centrally Cleared Commodities Markets in 2022 (May 2023) and Transparency and Responsiveness of Initial Margin in Centrally Cleared Markets – Review and Policy Proposals (January 2024). What are the key takeaways from these reports?


C8 Technologies enhances FX hedging platform with carry strategies; Users of the platform will benefit from improved returns and strategy diversification when using its active hedging solution.
Wesley Bray – The Trade
London-based fintech C8 Technologies is adding FX carry strategies to its FX hedging platform, C8 Hedge, in response to rate divergence re-emerging as a significant driver in currency markets. Users of the platform will benefit from improved returns and strategy diversification when using its active hedging solution, according to the firm.


How Options Can Supercharge Your Retirement Income
Steven M. Sears – Barron’s
If you are lucky, and make more good decisions than bad ones, you will one day find yourself gray-haired, in good health, and with plenty of money.
You will likely have most everything you could want or need, but you will still be interested in generating income. A reader asked for direction on this phase in life when there are no more big paydays, you have run your race, and time is measured in years, not decades.

5 ways investors can hedge against under-the-radar threats to this ‘Goldilocks’ market, according to a leading UBS strategist who saw this rally coming
James Faris – Business Insider
Investors who’ve ridden this market rally to all-time highs should be cautious, though it’s not yet time to abandon ship, according to a top strategist at UBS Global Wealth Management (GWM).
David Lefkowitz, who’s the head of UBS GWM’s Americas-focused equities team, was optimistic about US stocks in early May following the only shaky stretch in markets this year.

Fear of missing out could spark a parabolic melt-up. This manager likes Nvidia and some non-tech plays.
Barbara Kollmeyer – MarketWatch
Fear of missing out, driving some of the momentum for tech stocks, could spark a precarious melt-up for equities.
That’s the view of Jim Worden, chief investment officer of the Wealth Consulting Group, where he manages $5 billion for individuals with at least with $100,000 and up in their retirement and other plans.

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