Observations & Insight
*****Thom Thompson: Some 400 days into the global pandemic, the session at this week’s Eurex Derivatives Forum titled “The Changing Shape of Markets” dealt briefly with the havoc wreaked on European equity options and dividend futures markets when corporate payouts were thrown into doubt last year. John Keogh, chairman of the Susquehanna International Group‘s Executive Committee, said now that dividend policies are returning to normal, dividend contracts might again be used for hedging dividend risk or, as he has heard, even as an inflation hedge by those who see inflation picking up this year. Speaking with Annette Weisbach, CNBC correspondent for Germany, Keogh also said that European options markets might need to learn a lesson from the recent experience in the interest rate markets where ESMA, the EU regulator, says 60% of over-the-counter interest rate transactions are cleared. He said that a similar move for equity options, also forcing them onto exchanges, might be a welcome development. Keogh also expressed concern that retail order flow for options tends to go into structured products like warrants rather than onto exchanges.
*****SC: Will Acworth, senior VP, publications, data and research at FIA, just published his take on last week’s FIA-Boca-V conference. Reviewing the highlights, he says Boca offered six lessons for the derivatives industry. The list is not surprising: 1) Brexit is poised to disrupt the clearing landscape in Europe; 2) exchange leaders are worried about political risk in relations with China; 3) the rise of retail is spilling over into derivatives; 4) ESG is the next “mega trend” for the institutional side of the business; 5) the tide is turning on digital assets; and 6) fintech is entering a golden age. More details on his observations are here.
Bitcoin Gains Ahead of $6B Options Expiry After Market Finds $50K Floor
Damanick Dantes – Coindesk
Bitcoin rose for the first time in three days as traders looked past Friday’s record $6 billion expiration of option contracts to a stronger market next week as April begins. “Returns after prior bitcoin options expiration dates have tended to be positive,” David Grider, strategist at Fundstrat, told clients in an email. “The market is calm based on bitcoin VIX falling, with room to fall further.” BTC was changing hands at roughly $52,700 as of 12:03 coordinated universal time (8:04 a.m. ET), up 2.9% on the day.
BOE Says Artificial Sterling Libor Could Continue for a Decade
William Shaw and Silla Brush – Bloomberg
‘Synthetic’ Libor powers would be assessed for up to 10 years; Options for dollar tenors ending in 2023 to stay under review
U.K. regulators have raised the prospect that an artificial sterling Libor number could be published for up to a decade after the controversial benchmark is retired at the end of this year.
GameStop rebounds 53% as it finds technical support at its 50-day moving average
Matthew Fox – Markets Insider
GameStop surged as much as 53% on Thursday as the stock found technical support from traders at its 50-day moving average.
The video game retailer’s first earnings release since the epic January short-squeeze failed to impress investors, leading to a 34% decline in Wednesday’s trading session.
Dow stages 600-point turnaround as stock market snaps 2-session slump
Mark DeCambre – MarketWatch
U.S. stocks ended higher on Thursday, after a frenetic session of trading that saw the benchmark indexes dig out of a deep hole earlier in the day as investors weighed improving economic data with the country emerging from the COVID pandemic.
Evidence of a recovering economy of late has prompted a sharp rise in U.S. Treasury yields in the past couple of months and has led to end-of-quarter fund rebalancing out of stocks and into bonds and yields have drifted lower this week.
Japan debuts swaptions linked to risk-free rate
Chris Davis – Risk.net
Yen interest rate swaptions linked to the Tokyo overnight average rate, Tonar, have begun to trade in recent weeks, in a move dealers say is an important milestone in the adoption of the alternative risk-free reference rate in Japan’s swaps market. But experts are sounding caution over thin trading in Tonar swaps, which could result in a liquidity premium for swaption pricing.
Fundamentals of Futures & Options (also applicable to Series 3 Exam)
For more than 30 years, IFM has consistently provided learners with a solid foundation and understanding of futures and options markets and trading including terminology, risk management, pricing, and basic trade strategies. This instructor-led virtual course includes lectures from an engaging instructor with real-world expertise and supported by class discussion, practice exercises and educational materials. The course fee includes two must-read industry books – Futures and Options and the Guide to U.S. Futures Regulation.
Date May 10, 2021 12:00 p.m. – May 14, 2021 2:00 p.m.
Location Virtual Live. 2-hour sessions over 5 days.
Class size registration is limited to approximately 20 participants to promote student participation and interaction.
A New Virtual Experience
The Options Industry Conference is Going Virtual in 2021. Join OCC and the options exchanges for the 39th annual Options Industry Conference, April 28-29, 2021. While the conference will be held virtually for the first time in history, the focus will continue to be the key topics facing the options industry today, from the regulatory shifts in the U.S. and Europe to the technological developments that are driving monumental change in markets around the globe.
DOJ enforcement priorities in commodities & derivatives markets: A discussion with DOJ leadership
April 13, 2021 • 1:00 p.m. – 2:00 p.m. ET
During this discussion, James McDonald, Sullivan & Cromwell Partner, will interview Robert Zink, U.S. Department of Justice, Acting Assistant Attorney General (and Chief of the DOJ Fraud Section from January 2019 to August 2020), regarding DOJ’s enforcement priorities in the commodities and derivatives markets and white collar area more generally.
Wall Street Bonuses Rose 10% Last Year, N.Y. Comptroller Says
Jennifer Surane – Bloomberg
The average Wall Street bonus climbed 10% last year as the coronavirus pandemic fueled market volatility and a surge in underwriting.
The typical bonus paid to employees in New York’s securities industry climbed to $184,000, according to calculations by New York State Comptroller Thomas DiNapoli. That was in line with the state’s projections, meaning the city will likely meet or exceed its income-tax revenue projections in its fiscal 2021 year.
Ships Divert From Canal; More Tugs Coming: Suez Update
Salma El Wardany and Mirette Magdy – Bloomberg
The blockage of the Suez Canal is wreaking havoc on global seaborne trade, raising the prospects of higher inflation with more ships ferrying cargoes and commodities forced to divert. A special dredger has been deployed to free the vessel that has been stuck in the key waterway for days. Natural gas prices have increased and food supply chains may be affected if the blockage persists. Mark Ma, owner of China-based Seabay International Freight Forwarding Ltd., which has 20 to 30 containers waiting to cross the blocked canal, said that if traffic doesn’t resume in a week, “it will be horrible.”
(Podcast) TWIFO 242: Nothing Behind It But Good Intentions
This Week In Futures Options – Options Insider Radio Network
Host: Mark Longo, The Options Insider Media Group
Co-host: Sean Smith, FTSE Russell
CME Hot Seat: Dan Gramza, Gramza Capital Management
On this episode, Mark, Sean and Dan discuss:
The movers and shakers this week in futures options, top volatility movers, equities/Russell 2000, crypto/bitcoin, energy/crude oil/nat gas, and much more.