This week on The Spread – Bakkt’s CEO heads to Washington, the VIX perks up for the first time since October, and regulators debate over who has jurisdiction over SPIKES futures trading on MGEX.
Bakkt Goes Live With Options, Cash-Settled Futures Products
Nikhilesh De – Coindesk
Barely three months after launching its long-anticipated physically settled bitcoin futures product, the Intercontinental Exchange’s Bakkt has gone live with its bitcoin options and cash-settled futures contracts. The New York Stock Exchange’s sister firm announced in a blog post Monday that it’s using its physically settled bitcoin contracts as a benchmark to support the new products, which were both announced in recent weeks.
It’s Cheaper to Bet on a Pound Rally and Investors Are Noticing
Vassilis Karamanis – Bloomberg
Bets on a pound rally after this week’s U.K. election are starting to look like a good deal to some investors. While the pound has climbed this month since polls point to a win for the ruling Conservatives, many investors in the options market have been covering themselves against the risk of a plunge in sterling. This has made such hedges increasingly expensive, opening up the potential to bet instead on gains at a lower cost.
Just as Hot as ETFs: Options on ETFs
Nick Ravo – WSJ
Though not as large or as publicized as the wave of exchange-traded funds launched over the past decade or two, trading in ETFs options has been quietly swelling in volume. For each of the past three years, ETFs were the underlying instrument for about 40% of total options trading volume in the U.S., according to Options Clearing Corp., the clearinghouse for options trades.
Shenzhen Bourse Introduces Pilot for Trading Stock Options
China’s Shenzhen Stock Exchange released rules for a pilot program to trade stock options, following similar moves by the Shanghai Stock Exchange four years ago. Effective from the date of issue, the rules stipulate trading times, the types of stocks that qualify as well as requirements for investors, according to notices from the Shenzhen bourse published Saturday. The exchange also called on qualified market makers to apply for the program.
OKEx launching bitcoin options trading this month, ahead of CME Group
Yogita Khatri – The Block
Cryptocurrency exchange OKEx is launching bitcoin options trading later this month, according to an announcement shared with The Block on Monday. The Malta-headquartered exchange currently offers spot and futures trading in cryptocurrencies, and starting cash-settled options trading in BTC/USD pair on Dec. 27 due to institutional demand. “We have been seeing the increasing demand of crypto derivative products across all our client segments, especially from our institutional clients, which have shown the fastest growing demand in derivative trading, especially on futures or perpetual swap,” said Jay Hao, CEO of OKEx.
America-Style ETF Weapons Come to Europe’s Biggest Credit Trade
Tasos Vossos – Bloomberg
A key piece in the European ETF jigsaw is falling into place with the listing of derivatives for some of the region’s biggest credit products. Germany’s Eurex introduced options contracts on Monday that give investors the opportunity to buy and sell BlackRock Inc.’s euro investment-grade and high yield exchange-traded funds. The instruments should also help spur short-selling of the multibillion dollar ETFs.
Oil markets hit by profit-taking ahead of China tariff deadline
John Kemp – Reuters
Hedge funds scaled back their bets on higher oil prices last week, with futures and options markets hit by a wave of selling after a jump in positions the week before.
While much of that can be put down to profit taking, the shaky economic outlook and rapidly approaching deadline for more U.S. tariffs on Chinese goods means fund managers are likely to moderate their bullishness for the time being.
Yuan keeps to cautious ranges as trade risks loom large
Winni Zhou and John Ruwitch – Reuters via Nasdaq
China’s yuan held familiar ranges on Monday morning, as investor caution about developments in the Sino-U.S. trade dispute and other global risks kept market volumes thin. A slew of events this week, including the Dec. 15 deadline for U.S. tariffs on Chinese goods, the UK election and major central bank decisions, could shape the investor outlook for 2020 and have the potential to jolt market confidence.
Exchanges and Clearing
Eurex enhances European ETF ecosystem with new product
Eurex – part of Deutsche Börse Group – will extend its pioneering role in ETF derivatives. To further support the financial industry in hedging their portfolios, Europe’s leading derivatives exchange will be the first to launch EUR-denominated fixed income ETF options on 9 December.
Regulation & Enforcement
Keep Your Eye On Record Large Global Derivatives Markets
Mayra Rodriguez Valladares – Forbes
If I had a dollar for every time my clients and students told me in 2008 – 2012, that derivatives markets would collapse from the weight of new financial regulation, I would be a billionaire now. Despite regulations and new standards enacted in the Group of 20 countries beginning in 2009, global derivatives markets are larger than ever.
Bulls flood into oil producers, but their big bets may not pay off
Tyler Bailey – CNBC
Oil producers might be about to get a big-time energy boost, if traders in the options market have it right. The energy sector is in desperate need of some good news. It’s about to lock in its status as the worst-performing sector of the decade, and the XLE ETF that tracks the space has risen only 3% since Jan. 1, 2010, while the S&P 500 has surged nearly 200% during that same period of time. But while this decade can be chalked up as a loss for energy stocks, options traders are betting big on a rebound in 2020.
Successful roll-out of Euronext Derivatives markets to Optiq trading platform
Amsterdam, Brussels, Dublin, Lisbon, London, Oslo and Paris – 9 December 2019 – Euronext, the leading pan-European exchange, today announces the successful completion of the roll-out of its Derivatives market to its proprietary multi-market trading technology, Optiq already powering its Cash Markets. This step was the last one of the full migration of Euronext’s trading systems to Optiq.
Paul Volcker Dead at 92, Fed Chairman Who Set Bank Risk Rule
Vivien Lou Chen and Laurence Arnold – Bloomberg
Paul Volcker, the former Federal Reserve chairman who broke the back of U.S. inflation in the 1980s and three decades later led President Barack Obama’s bid to rein in the investment risk-taking of commercial banks, has died. He was 92.
He died Sunday at his home in New York, according to his daughter, Janice Zima.
FIA forum focuses on transition to sustainable finance
On 27 November, FIA held a Compliance and Regulation forum for members in London where regulatory and industry experts offered perspectives on sustainable finance and discussed the importance of a carefully managed transition to a low-carbon economy. Mindy Hauman, professional support counsel at law firm White & Case, made the introduction to sustainable finance, discussing the range of initiatives that are underway in the EU and the UK. A cornerstone of the EU action plan on sustainable finance is a classification system or “taxonomy” defining environmentally sustainable investments. Hauman described this concept of shared terminology as the “Rosetta Stone” of sustainability.