Bets Against Treasuries Build in Defiance of Uncooperative Data; Taiwan Stock Index Surges the Most in 14 Months on Tech Rebound

May 18, 2021

$42,076/$300,000 (14.0%)
Trading Technologies, John McPartland

Observations & Insight

Small Exchange CEO Donnie Roberts Excited By First Year Of Trading

The Small Exchange did not get started when CEO Donnie Roberts wanted it to in 2020. Just as it was finally given regulatory approval, the pandemic hit in March of 2020. The exchange didn’t start until June 1st and when it did, the initial focus was on making sure all the systems worked properly. John Lothian News spoke to Roberts last week about the exchange’s first year of trading.

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Lead Stories

Bets Against Treasuries Build in Defiance of Uncooperative Data
Edward Bolingbroke – Bloomberg
A robust short base has formed in the Treasury market, expecting an economic recovery, and it’s willing to overlook data points that contradict its preferred narrative. “Investors seem to take the view that what matters is that the U.S. economy is recovering, rather than worry too much about the precise strength of the recovery at any particular moment in time,” Bank of America strategist Ralf Preusser said in a note. Positioning has become a “sea of uncertainty,” he said.

Taiwan Stock Index Surges the Most in 14 Months on Tech Rebound
Moxy Ying – Bloomberg
Taiwan stocks rebounded, posting their best gains since March last year thanks to a broader rally in chipmakers. The Taiwan Stock Exchange Weighted Index closed 5.2% higher on Tuesday. The rally more than erased the 3% slump on Monday after the government tightened restrictions to control its worst outbreak of the coronavirus. Chipmaker Taiwan Semiconductor Manufacturing Co. jumped 4.2% while chip designer MediaTek Inc. climbed 8.8%. The two contributed the most to the benchmark’s gains. Steel, glass and shipping were among the top-performing sectors.

Fidelity’s Pitch to America’s Teens: No-Fee Brokerage Accounts
Justin Baer – WSJ
Fidelity Investments Inc. plans to open the door to a new generation of investors who will be able to trade stocks even before they learn how to drive or head to college. Fidelity said Tuesday it will issue debit cards and offer investing and savings accounts to 13- to 17-year-olds whose parents or guardians also invest with the firm. The accounts will let teens buy and sell U.S. stocks, Fidelity mutual funds and many exchange-traded funds. Similar to how it works for adults, the service won’t charge account fees or commissions for online trading.

Unhedged: Will value stocks save the day?
Robert Armstrong – FT
What to expect when you are expecting poor long-term returns
Yesterday I wrote that equity investors face a dilemma: very high valuations suggest poor long-term returns, but being out of the market risks missing out on the great short-term returns that often characterise the final leg of a bull market.

Market Wrap: Elon Taketh Away – Bitcoin Continues Fall as Options Traders Pile Into Puts
Daniel Cawrey – Coindesk
Most cryptocurrencies are down Monday, prompting a flurry of activity in the options markets as traders reposition themselves amid increased volatility.

Burry of ‘Big Short’ Fame Places Big Bet Against Musk, Tesla
Jeremy Herron and Elena Popina – Bloomberg
His firm Scion reported put options on 800,100 Tesla shares; Tesla has plunged 35% since closing at a record on Jan. 26
Michael Burry, the investor who rose to fame for making billions off bets against mortgage securities during the financial crisis, has placed a sizable wager against Elon Musk’s Tesla Inc. Burry’s Scion Asset Management owned bearish puts against 800,100 shares of the electric-car maker as of March 31, according to a regulatory filing Monday. The puts give Scion the right to sell Tesla shares on or before an unidentified date in the future.

Meme Stocks Roar Back to Life With GameStop, AMC Catching Fire
Katherine Greifeld – Bloomberg
GameStop surges almost 13% on Monday, AMC gains over 7%; Renewed interest on social media seems to be fueling rallies
Day traders who have been flocking to all things crypto in recent weeks have rediscovered their zest for meme stocks. GameStop Corp. surged 13% Monday, its second double-digit rally in three days. AMC Entertainment Holdings Inc. closed 7.5% higher, building on last week’s 36% jump. A basket of stocks caught up in January’s Reddit-fueled meme-stock frenzy rose 5.6% for its best performance since late March.

Exchanges and Clearing

Eurex to offer next generation of ESG derivatives on MSCI indexes
As demand for sustainable investments has increased, so has the need for more advanced methods to select ESG investments. From 31 May, Eurex will expand its globally leading ESG derivatives suite by including futures on the MSCI ESG Enhanced Focus Indexes. By using these ESG integration indexes, Deutsche Börse’s derivatives arm is supporting investors seeking higher ESG scores while at the same time staying close to the benchmark. The underlyings for the five new futures are the ESG Enhanced Focus versions of the benchmark indexes MSCI World, USA, Emerging Markets, Europe, and Japan.

Aquis Stock Exchange granted equivalence by Frankfurt Stock Exchange open market
Annabel Smith – The Trade
The Aquis Stock Exchange has reached an equivalence agreement with the Frankfurt Stock Exchange’s open market, meaning the pair are able to offer dual quotations despite Brexit. The agreement means that if a company has a quotation on the Aquis Stock Exchange it can also seek a dual quotation on the Frankfurt Stock Exchange effective from 3 May even though the UK and Europe have not been able to reach a decision on equivalence in share trading following the UK’s decision to leave the EU. Frankfurt’s open market trades foreign shares, bonds of German and foreign issuers, certificates and warrants, as well as German shares, with a 44,366-strong securities universe tradeable on it.

Exchange outages spark demands for action
Viren Vaghela – FT
It sometimes takes the scare of a heart attack to make people to sit up and treat the underlying causes. And, on recent evidence, the same is true when the health of vital technology fails. Last year, the financial equivalent of a cardiac arrest caused outages at several exchanges around the world — and jolted traders, resulting in a flurry of criticisms and the departure of one chief executive. Then, in March, the European Securities and Markets Authority, the EU watchdog, weighed in, saying it was concerned by trading venues’ increasing reliance on third-party data and software to carry out critical functions.

Timing of Start of Derivatives Holiday Trading
Osaka Exchange, Inc. (OSE) and Tokyo Commodity Exchange, Inc. (TOCOM) are currently discussing the introduction of derivatives holiday trading from the perspective of further convenience for investors through provision of hedging opportunities during national holidays, thereby strengthening the competitiveness of Japan’s derivatives markets. In January 2020, OSE established a “Working Group on Derivatives Holiday Trading” consisting of market participants, and published a summary of the results of said Working Group’s discussions in the form of a report* in June 2020.

Regulation & Enforcement

Credit Suisse Faces Banker Talent Drain After $5.5 Billion Archegos Hit
Cara Lombardo – WSJ
10 managing directors have said they plan to leave, mostly for rivals Credit Suisse’s headquarters in Zurich. The bank had to sell large stock positions at losses after Archegos’s investments plummeted in March. Credit Suisse Group AG CS -0.43% is facing an exodus of senior investment bankers in the wake of a $5.5 billion loss tied to the meltdown of Archegos Capital Management. At least 10 managing directors in the Swiss firm’s U.S. investment-banking division have internally disclosed plans to leave, most for rival firms, according to people familiar with the matter.


BlackRock Bolsters Aladdin Platform’s Trading Capabilities with FlexTrade Partnership
Traders Magazine (press release)
BlackRock (NYSE: BLK) today announced that it has entered into a strategic partnership with FlexTrade Systems, Inc., a leading provider of high performance, multi-asset execution management systems (EMS). The partnership is a commitment to further integrate FlexTrade’s capabilities with the Aladdin platform and jointly create enriched experiences for their common clients in the Aladdin community. FlexTrade’s deep expertise and sophisticated capabilities in the EMS space complement the Aladdin platform’s existing order execution management system (OEMS) capabilities. FlexTrade and Aladdin will deliver a tightly integrated, multi-asset solution to clients for the entire trading lifecycle.


Inflation Is Growing. This Fund Could Benefit.
Steven M. Sears – Barron’s
If the trend is an investor’s friend, regional banks might be one of their besties. Investor concerns about inflation have made the usually quiet, often overlooked regional banking sector a star of the market. The SPDR S&P Regional Banking exchange-traded fund (ticker: KRE) is up 37% so far this year, compared with an 11% return for the S&P 500 index. Such extraordinary outperformance would normally be a turnoff, but investors are in overdrive to find ways to profit from the economic surge that is expected to follow the end of the Covid-19 pandemic.


Asset Management Derivatives Forum 2021; Co-hosted with SIFMA AMG
8 June 2021 – 9 June 2021 • 10:15 AM – 1:30 PM ET Daily • VIRTUAL
FIA and SIFMA AMG are bringing you a virtual take on the Asset Management Derivatives Forum in 2021. Join us for virtual programming on June 8 and 9, during which market participants from all sides of a trade and leading regulators will examine the latest developments impacting the use of derivatives by asset managers, including business, clearing, regulatory and operations issues.
With keynote speakers and panels, this virtual Forum presents a unique opportunity to gain insights into how investors, sell-side firms and market structure operators view the landscape for derivatives activity by the asset management community, attracting attendees from the joint membership of FIA and SIFMA Asset Management Group.

Clearing 101: Exchanges, Clearinghouses and CCPs
Dates: Sep. 15, 2021 12:00 p.m. – Sep. 16, 2021 1:30 p.m. ET.
Location Virtual Live. Two 90-sessions over 2 days.
Early-bird $199
Fee $225
Instructor: Marti Tirinnanzi
Registration is limited to approximately 20 participants to promote student participation and interaction.
Join us for a short program (90 minutes each day for 2 days) that explains the multilateral systems that provide the infrastructure for transferring, clearing and settling payments, derivatives and other financial transactions among financial institutions and end users. Following Dodd Frank, clearinghouses became designated as Systemically Important Financial Market Utilities, vital to the operations of the financial markets and subject to heightened regulatory scrutiny. Buyers and sellers in exchange transactions rely on clearinghouses to intermediate transactions and to manage credit risks between trading parties. As such, clearinghouses promote transparency, efficiency, and stability by providing market-based pricing, daily settlement, and ensuring adequate capitalization for markets to function.


Solving Economics’ Diversity Problem; More can be done to ensure that the policymakers who influence our lives take decisions informed by broad experience as well as economic nous.
Chris Hughes – Bloomberg
The Bank of England has four big job vacancies this year and there’s hope that several will be filled by women. Even if that happens, central banks still have some way to go to tackle the lack of diversity in policymaking. Without more progress, this risks becoming a crisis of legitimacy.

Billionaire Family Offices Reveal Biggest Equity Picks
Devon Pendleton – Bloomberg
Duquesne boosted stakes in Starbucks, Expedia, exits Disney; Family offices for Soros, Tsai and Bonderman report new stakes
Stanley Druckenmiller said last week that pretty much anyone could make money in the markets right now and that he was up 17% this year. The latest regulatory filing from his Duquesne Family Office shows some of the ways he’s done this and what he’s betting on going forward. The investor, worth $10.4 billion according to the Bloomberg Billionaires Index, took a new $154.6 million position in Citigroup Inc., and a smaller stake in JPMorgan Chase & Co., a bet that could benefit from rising rates.

We’re divorcing — has my husband got hidden bitcoins?
He boasted to friends about the investments, but there is no evidence they exist
Lucy Warwick-Ching – FT
Over the past year or so I have overheard my husband telling his friends about how well his bitcoin investments have done. We are now getting divorced and I realise I have no idea how much his cryptocurrency holdings are worth or even how to find that out.

The UK’s Crisis of Confidence Was Years in the Making

The UK’s Crisis of Confidence Was Years in the Making

First Read Hits & Takes John Lothian & JLN Staff The World Federation of Exchanges 61st Annual General Meeting concluded today in Malta after a session on ESG. The big announcement at the end was that the next annual general meeting would be held in September...

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The Spread

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