Big Tech Bulls Are Vindicated Even After Fed Pulls the Trigger
Thyagaraju Adinarayan and Jeran Wittenstein – Bloomberg
Investors gobbled up megacap technology stocks Wednesday even as the Federal Reserve took a more hawkish stance than expected, doubling the pace of stimulus rollbacks and projecting three rate hikes next year.
Apple Inc. was the hot pick, rising as much as 2.9%. The world’s largest company by market value is roughly 2% short of hitting a $3 trillion valuation. Megacap peers Microsoft Corp. and Google-owner Alphabet Inc. also rallied off day’s lows and were about 5% away from their all-time highs. The tech-heavy Nasdaq 100 was the best performing major average, rising 2.4%.
‘Sell Your Hedge and Move On’: Anxious Stocks Surge After Powell
Lu Wang – Bloomberg
Stock traders prepared for the worst — and didn’t get it.
That may be the best explanation for how a seemingly hawkish turn by Jerome Powell translated into the biggest rally since 2020 on the day of a Federal Reserve decision. Traders laid in hedges, braced for Armageddon, and then turned tail when Powell balanced his rates outlook with a strong dose of economic optimism.
Powell’s Hawkish Tune Rouses Equities as Bonds Wait It Out
Garfield Clinton Reynolds and Ishika Mookerjee – Bloomberg
Investors responded to the Federal Reserve’s intent to tackle inflation with a clear risk-on pivot, as stocks climbed and Treasuries steadied.
Equity strategists highlighted the usually positive outlook for stocks in the early stages of a tightening cycle, even as bond and currency analysts suggested more volatility was likely in their markets into 2022. Though the dollar fell Wednesday, market watchers expect that weakness to be short-lived and see its rally resuming.
The Fed May Have Kickstarted the Santa Claus Rally
The Federal Reserve’s final meeting of the year was perhaps the last thing standing in the way of a year-end Santa Claus rally.
The Fed confirmed it would double the pace of its tapering, as expected, and signaled three potential rate increases in 2022 as it looks to take the fight to inflation.
S&P 500 trades in record territory and Dow, Nasdaq extend post-Fed climb
Steve Goldstein and Mark DeCambre – MarketWatch
U.S. stocks headed modestly higher on Thursday, extending the rally that was seen after a Federal Reserve policy decision on Wednesday and putting the S&P 500 index within range of a record high close.
Investors, meanwhile, were digesting a raft of U.S. economic data against the backdrop of monetary-policy moves by the Federal Reserve on Wednesday and the Bank of England and European Central Bank on Thursday.
How Meme Stocks Impact Options Trading
Equities trading activity among retail investors has increased significantly in the past two years, primarily due to the introduction of zero commission trading and the debut of innovative new retail trading platforms. Cboe’s Equities Execution Consulting team examined this trend, along with the retail meme stock trading phenomenon, with a series of analyses including, A Deep Dive into US Equities Trading Venues, The Lasting Results of an Unprecedented Market Environment and Interlisted Trading Trends and Opportunities. These analyses showed how the influx of retail participant order flow and meme stock trading impacted the U.S. and Canadian equities markets but left us wondering about the impact on options markets. To find out, we examined meme stock retail trading activity on the U.S. equities and options markets in our latest analysis.
Regulator’s Column: What SGX RegCo expects on the conduct of general meetings amid the ongoing COVID-19 situation
This Regulator’s Column seeks to provide the expectations of the Singapore Exchange Regulation (“SGX RegCo”) on the conduct of issuers’ general meetings amid the extension of the temporary legislative relief . Such legislation allows entities to hold general meetings via electronic means amid the COVID-19 situation, and will continue to be in force until revoked or amended by the Ministry of Law .
Regulation & Enforcement
Derivatives Trade Association ISDA to Develop Common Standards for Crypto Assets
Jamie Crawley – Coindesk
ISDA published a white paper Tuesday aiming to characterize the different features of crypto assets and their relevance to existing contractual standards, and identify events that might cause problems with derivatives pegged to crypto assets. The events highlighted by ISDA include forks, airdrops, cyberattacks and changes in law or regulation. The paper also seeks to explore how digital assets can be valued and what happens when that valuation cannot be obtained.
CFTC’s Interest Rate Benchmark Reform Subcommittee Issues User Guide for the Transition of Exchange-Traded Derivatives Activity to SOFR
The Interest Rate Benchmark Reform Subcommittee, a subcommittee of the Commodity Futures Trading Commission’s Market Risk Advisory Committee (MRAC), today issued a user guide for the transition of newly-executed exchange-traded derivatives from LIBOR to the Secured Overnight Financing Rate (SOFR) pursuant to the MRAC’s approval of the SOFR First Initiative at its July 13, 2021 meeting. Acting Chairman Rostin Behnam is the sponsor of MRAC.
SEC proposes greater transparency for swaps at centre of Archegos collapse; US regulator weighs additional disclosures for security-based swaps as well as new rules for money market funds
Stefania Palma and Eric Platt – FT
US markets regulators have proposed rules to inject more transparency into the derivatives that blew up hedge fund Archegos Capital, which would compel investors to disclose swaps positions that have allowed them to build up unseen holdings in public companies.
SEC Floats Rules to Shore Up Money Markets, Curb Insider Trading
Paul Kiernan – WSJ
The Securities and Exchange Commission issued a raft of proposals Wednesday including measures aimed at shoring up money-market funds and curbing executives’ ability to trade their own companies’ stock.
The proposals, some of which surprised Wall Street executives with their scope, indicate that Chairman Gary Gensler is moving quickly to enact a policy agenda that observers have called the SEC’s most ambitious in decades. That stands in contrast to other financial regulators, for which President Biden has yet to fill key positions, and saw a nominee withdraw amid Senate skepticism during confirmation.
CryptoDad’s New Title Implies He Works in Government. He Doesn’t
Robert Schmidt – Bloomberg
J. Christopher Giancarlo no longer runs a high-profile Wall Street regulator, but he found a way to keep some of the prestige of his old job: adopting the made-up title, “chairman emeritus.” The moniker has surprised former political appointees at the U.S. Commodity Futures Trading Commission, where Giancarlo was President Donald Trump’s first chairman. While some ex-officials see the move as a questionable Trumpian attempt at self promotion, others say it crosses ethical lines by suggesting he maintains ties to a powerful watchdog for digital coins and the $610 trillion derivatives market.
****** Chris works for a secret part of the government that gives out special titles. I want “Cranky Crypto Uncle.”~JJL
The S&P 500 in a world of its own — one more bullish than the average stock
Lawrence G. McMillan – MarketWatch
The S&P 500 index has been struggling to break out to new highs. The internals of the market have been downright terrible, but the S&P—pretty much alone—has been pressing to new all-time highs.
This week saw the index under pressure until the Federal Reserve meeting concluded and the Fed indicated that it was likely to be raising rates over the next two years.
The market liked that (ostensibly because the Fed is “ahead of the game” instead of behind it), but that seems like a curious reason to rally.
OptionMetrics launches IvyDB Global Indices 3.1 with expanded volatility surface
OptionMetrics, an options database and analytics provider for institutional investors and academic researchers worldwide, has launched IvyDB Global Indices 3.1.
This database offers even more options data across major indices in North America, including the United States and Canada; Europe, and Asia-Pacific, and an expanded volatility surface, enabling better assessments of shorter- and longer-term investing and hedging strategies.
Boca is back in 2022!
Join us 15-17 March 2022 for Boca – The International Futures Industry Conference, FIA’s powerful and prestigious event. Boca will see the in-person reunion of the cleared derivatives industry, gathering high-level executives from leading banks and brokers, exchanges, service providers and global regulators after a two-year hiatus. Register by 7 January for the best rates.
Cryptocurrency wealth is creating a new generation of luxury consumers in the US, Jefferies says
Carla Mozée – Markets Insider
The jump in cryptocurrency prices is helping to cultivate a new crop of young, American buyers of luxury goods, with their spending on NFT artwork and high-priced apparel set to further propel sales in the luxury market beyond pre-pandemic levels, according to a report from Jefferies.
Chinese consumers remain the dominant force in global luxury spending. But a “surprise package” since the first quarter has been strong growth in the US year-over-year, the investment bank said in a research note Wednesday. The note outlined findings from visits to 48 stores in New York and Florida where shoppers can find high-end brands including Louis Vuitton and Gucci, whose parent company is Kering.
No NFT, no comment — how digital art dominated 2021
Melanie Gerlis – Financial Times
Surplus wealth, in-person activity and the three letters N, F and T have motored the lively art market through the challenges of 2021.
That the rich have got richer through the Covid-19 pandemic and accompanying stock market gains has been well documented. Now, added to the existing billionaires and millionaires, are newcomers from booming economies in Asia, millennial entrepreneurs and a dominant breed of fintech-savvy crypto investors, happy to ride the highs and lows of this volatile arena.
The Newest Commodity Asset Class is Water
Posted by Guest Contributor Willem H. Buiter, visiting professor of international and public affairs at Columbia University.
New York – Just over a decade ago, I predicted the arrival of water as an asset class. I foresaw “a massive expansion of investment in the water sector, including the production of fresh, clean water from other sources (desalination, purification), storage, shipping, and transportation of water.” This would result in “a globally integrated market for fresh water within 25 to 30 years.
Once the spot markets for water are integrated, futures markets and other derivative water-based financial instruments – puts, calls, swaps – both exchange-traded and OTC [over-the-counter] will follow. There will be different grades and types of fresh water, just the way we have light sweet and heavy sour crude oil today.”