Observations & Insight
The Aggregated Wisdom of Henry Schwartz
In December, JLN was lucky to have Henry Schwartz of Trade Alert as a guest editor for the JLN Options newsletter. Some of you might have missed his contributions from that week – below is a post comprised of all of his observations with some slight edits. His columns are listed in chronological order from when they were published (12-12-16 through 12-16-16).
Bears Vanish From S&P 500 Options as Put-Call Ratio Baffles Pros
Oliver Renick – Bloomberg
The post-election enthusiasm in the U.S. equity market is showing up in a curious way through options trading. As volatility measured by the VIX index dives to levels unseen in more than two years and the S&P 500 Index climbs to fresh records, the number of bearish bets changing hands relative to bullish ones has fallen to the lowest since 2009, according to data compiled by Bloomberg.
****SD: At least Betsy DeVos will be happy to hear the grizzly threat to our schools has lessened.
Chicago traders welcome Trump volatility
Lynne Marek – Crain’s Chicago Business
Chicago traders who survived doldrums in recent years (not to mention boredom) are pumped about more volatility and volume in the age of President Donald Trump. Uncertainty in the financial markets may make investors nervous, but it’s good for traders. People can bet lots of ways on whether Trump will, or won’t, overhaul the tax code, dismantle landmark health care and finance laws and replace Federal Reserve Board Chair Janet Yellen in January 2018. That whipsaws prices and gives traders chances to buy and sell everything from bonds to futures to stock options. The bottom line: volatility begets volume.
****SD: Can’t welcome what hasn’t manifested yet.
EU Robin Hood financial transactions tax is “within reach” if politicians can agree says diplomat
Jasper Jolly – City A.M.
A financial transactions tax – also known as a Robin Hood tax – on trades is “within reach” according to the EU’s commissioner on tax, which could represent a barrier to the UK’s post-Brexit trade deal with the bloc.
****SD: Wat? I hear “if politicians can agree” and interpret that as “it won’t happen.”
Buyside Reshapes Trading
Shanny Basar – MarketsMedia
The buyside is transforming the way it trades foreign exchange due to changes in liquidity provision in a forerunner for other asset classes, especially rates, according to consultancy Celent.
Speed Traders’ ‘Stupid’ Plan for Fast Network Halted in U.K.
Will Hadfield and Brian Louis – Bloomberg
Local officials in rural England rejected as “incredibly stupid” a proposal by a group of high-speed traders to build radio masts as tall as the Eiffel Tower, dashing plans to open the fastest possible trading route between financial markets in London and Frankfurt.
****SD: “There have to be other locations where it will not cause so much havoc and unsightliness.” I can imagine exactly how Bernard Butcher, the vice chairman of the Dover planning committee, said that.
Emerging-Market Fear Gauge Fails to Signal Equity Outlook: Chart
Srinivasan Sivabalan – Bloomberg
What works in developed economies may not always work in emerging markets.
What You Don’t Know About The VIX
Garth Friesen – Forbes
The standard gauge of fear in the market – short-term implied equity volatility (the VIX) – recently touched an 18 month low. Some people think this is a sign of stability: the equity market has rocketed higher post-election, corporate earnings have rebounded and global growth is expected to increase. Others see the new low as a sign of complacency: the worst equity draw-downs often come when nobody expects them, and the low level of the VIX indicates limited demand for downside protection. The idea the VIX could be so low after witnessing such volatility over the last few months understandably seems unsettling to many investors. Is there something else going on? The answer in “yes.”
Exchanges and Clearing
Exchange Speed Bumps: Needle Movers?
Rob Daly – MarketsMedia
As NYSE plans to incorporate a 350-microsecond delay into its rebranded NYSE American exchange, industry observers question what impact speed bumps actually will have on the broader marketplace.
Nasdaq Withdraws Controversial Retail Post-Only Order Proposal
Nasdaq has decided to withdraw their controversial proposal for a Retail Post-only order type.
Regulation & Enforcement
AMF Urging Client Reconciliation with Banc de Binary Following Closure
Jeff Patterson – Finance Magnates
France’s Autorité des marchés financiers (AMF) has issued an advisory note to clients utilizing the European division of Banc de Binary Ltd. the French financial regulator is urging customers to contact Banc de Binary Ltd following the renunciation of the group’s authorization by the Cyprus Securities and Exchange Commission (CySEC) as per the request of the brokerage.
U.S. Regulators Hang Tough at Basel as Trump Rollback Looms
Patrick Henry – Bloomberg
U.S. bank regulators are taking a hard line in a showdown with the European Union over global capital rules, even as President Donald Trump begins to pull the country out of international agreements and prepares to roll back financial regulations.
Nadex adds new Market Filter to mobile app
Maria Nikolova – FinanceFeeds
North American Derivatives Exchange, Inc. (Nadex), a subsidiary of IG Group Holdings plc (LON:IGG), keeps enhancing the capabilities of its mobile application. The latest version of Nadex Binary Options for both iOS and Android gadgets adds a new Market Filter, a tool that will be helpful to traders who’d like to customize their trading experience.
February Worst Month of Post-Election Years
Usually the weak link in the Best Six months, February tends to follow the current trend, though big January gains often correct or consolidate during the month of Valentines and Presidents as Wall Street evaluates and adjusts market outlooks based on January’s performance. Since 1950, January S&P 500 gains of 2% or more corrected or consolidated in February 62.1% of the time. In the 20 years that the S&P 500 gained 4% or more in January, 65.0% of the time the S&P declined or finished flat (less than 1% gain) in February.
Go Long America With the Dow Trading Above 20,000
Steven M. Sears – Barron’s
Go long America. With the Dow Jones Industrial Average at a record high, bullish investors can get paid by the options market to buy stocks on a modest pullback.
The Only Thing Investors Have To Fear Is No Fear Itself
Ed Carson – Investor’s Business Daily
Donald Trump is a different kind of president, touting an “America First” vision and conducting trade negotiations and tax policy debates seemingly on the fly via Twitter and TV. Yet investors have taken the hyperactive populist in stride, with the Dow Jones Industrial Average soaring above 20,000 for the first time this week.
OptionsCity to Sponsor NIBA New York Conference
OptionsCity has signed on to sponsor the NIBA New York Conference on April 26, 2017. The National Introducing Broker Association (NIBA) now includes not only Introducing Brokers but also Commodity Trading Advisors, Associated Persons, and Futures Commission Merchants (FCMs), as well as other participants in the futures, options, and swaps markets.
WTO says $1 trillion global trade treaty about to come into force
Tom Miles – Reuters
A trade accord that will boost global exports by $1 trillion should come into force within two weeks, the head of the World Trade Organization said on Thursday, just as the rhetoric of U.S. President Donald Trump clouds the outlook for global trade.
Why Chinese Investors Have More Opportunities Than Ever
As world attention shifts to China’s new economy, one shaped by more normal rates of growth, and reliant on domestic consumption as an engine, understanding the Chinese consumer has taken on a new relevance.