Observations & Insight
Go Fund Me Campaign for MarketsWiki Education Video Series and John Lothian News
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STA 2020: Post-COVID Options Volume Recovers, Volatility Lingers
Suzanne Cosgrove – John Lothian News
When Cboe Global Markets flipped the switch on its trading floor in mid-March and temporarily moved to all-electronic trading in response to the COVID-19 crisis, it also heralded a period of change for the options industry.
“It was a big, big move to take robust open outcry trading to all-electronic over a weekend,” said Ed Tilly, Cboe Global Markets’s CEO, chairman and president, in an interview at the STA’s 2020 Market Structure Virtual Conference on Wednesday.
One change that appeared to be well-received by customers during Cboe’s temporary closure of the trading floor was the implementation of a modified version of AIM (automated improvement mechanism) for Cboe S&P 500 options (SPX). AIM offers potential price improvement through an auction process — something that became more important when Cboe went to an all-electronic format.
To read the rest of this story, go here.
Bitcoin Options Volume on CME Jumps 300% as Traders Take Bullish Bets
Omkar Godbole – Coindesk
Activity in bitcoin options listed on the Chicago Mercantile Exchange (CME) surged Wednesday, as investors traded call options, or bullish bets. According to data source Skew, the CME traded $48 million-worth of options during the day – the highest daily volume figure since July 28. The number marks a 300% rise from Tuesday’s figure of $12 million. “The CME options had a strong session, and the spike in the volume was mainly due to increased activity in call options,” Skew’s Goh told CoinDesk over Telegram.
There Is Such a Thing as Too Much Volatility, Online Broker Says
Joe Easton – Bloomberg
British online broker CMC Markets Plc’s revenue surged as coronavirus-driven volatility spurred a jump in trading volumes, but the firm’s boss says he’s hoping for a return to more normal times.
“We do not like extreme volatility,” founder and CEO Peter Cruddas said in an interview. “You might think that it’s good for our business, and it is, we do make good money during these extremely volatile periods, but overall we prefer normal volatility.” More stable markets allow the company to better manage its risk and predict future earnings, he explained.
Mexico’s peso faces volatility spikes ahead of U.S. election
Abraham Gonzalez – Reuters
Mexico’s peso is facing the highest volatility in five months, experts say, as markets grow nervous about the upcoming U.S. presidential elections and possible economic policy outcomes.
So far this year, the currency of Latin America’s second-largest economy has fallen more than 13%, trading at about 21.5 pesos per U.S. dollar.
Exchanges and Clearing
Crypto exchange BitMEX overhauls management after U.S. criminal charges
Top executives at BitMEX, one of the world’s largest cryptocurrency derivatives exchanges, will step back from their roles, the company said on Thursday, a week after U.S. prosecutors filed criminal charges against them.
The company said last week it would “vigorously” fight the allegations after the U.S Department of Justice charged the exchange’s three founders, Arthur Hayes, Samuel Reed and Benjamin Delo with violating the federal Bank Secrecy Act. Gregory Dwyer, its first employee, was also charged.
Amendments to the Exercise Price Rule of the Options on Three-Month Eurodollar and Three-Month SOFR Futures Contracts – Addition of 6.25 Basis Point Strike Price Intervals
Effective Sunday, November 22, 2020 for trade date Monday, November 23, 2020, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will amend the Exercise Price rules of the Options on Three-Month Eurodollar Futures (Rulebook Chapter 452A) and Options on Three-Month SOFR Futures contracts (Rulebook Chapter 460A) (the “Contracts”) for trading on the CME trading floor, the CME Globex trading platform (“CME Globex”) and for submission of clearing via CME ClearPort (collectively, the “Rule Amendments”).
Product Modification Summary: Amendments to the Termination of Trading Rule of Eight (8) Coal Futures and Options Contracts – Effective November 09, 2020
Effective Sunday, November 8, 2020, for trade date Monday, November 9, 2020, and pending all relevant CFTC regulatory review periods, New York Mercantile Exchange, Inc. (“NYMEX” or “Exchange”) will amend the Termination of Trading rules of eight (8) coal futures and option contracts (the “Contracts”) in the table below to align the Contracts’ last trade date (“LTD”) for December contract months with Argus’ current practice
New Product Summary: Initial Listing of the Pork Cutout Futures and Options on Pork Cutout Futures Contracts – Effective November 09, 2020
Initial Listing of the Pork Cutout Futures and Options on Pork Cutout Futures Contracts.
In London, a Europe-heavy stock exchange is facing down Brexit
Silla Brush, Viren Vaghela, and Bloomberg – Fortune
The approach of Brexit has London confronting the loss of its role as Europe’s undisputed stock-trading hub and, with it, billions of euros in daily trading.
More than half the volume in London is in shares of European Union companies, and that’s at risk of migrating to the EU without a breakthrough in negotiations, according to data kept by Cboe Global Markets Inc. The City’s loss of face notwithstanding, the biggest losers would be investors because the more splintered trading will result in worse prices.
Eurex to launch next generation of ESG derivatives
The international derivatives exchange Eurex is supporting the strong global trend towards responsible investing by expanding its ESG segment. With futures and options on the EURO STOXX 50 ESG Index, Eurex will add another European benchmark to its offering. In addition, derivatives on the DAX 50 ESG Index will cover the German market for the first time. The new contracts will be launched on 9 November. ESG derivatives are playing an important role in the transition towards a more sustainable economy as they help to more effectively align investment exposures to environmental, governance and social risk factors.
SGX Orb Awards winners unveiled, with focus on economic resilience
Singapore Exchange (SGX) has unveiled the winners of the third edition of its SGX Orb Awards, with a focus on the resilience of the economy and businesses in the past year.
As the COVID-19 pandemic brought uncertainties to global markets, international financial centres such as Singapore have gained prominence in facilitating the seamless exchange of capital across markets. Sustaining the growth of financial markets is part of securing the recovery of the broader economy.
MIAX Exchange Group – Options Markets – Delisting of Vivint Solar, Inc. (VSLR)
Vivint Solar, Inc. (VSLR) will be de-listed from the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange effective on Friday, October 9, 2020. All GTC orders resting on the MIAX order books in VSLR will be canceled at the close of business on Thursday, October 8, 2020. Additional details about the Vivint Solar, Inc. (VSLR) merger are provided in the attached OCC Memo.
Regulation & Enforcement
MIAX Exchange Group – Options Markets – Corporate Action Alert: Fortive Corporation (FTV)
Fortive Corporation (FTV) has announced a distribution effective for Friday, October 9, 2020. On that date, the current FTV option class will change to FTV1. The MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange will not list FTV1 options. Therefore, no options on FTV will be available for trading on Friday, October 9, 2020. Fortive Corporation (FTV) will resume trading on the the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange on Monday, October 12, 2020.
Worried About a U.S. Stock Market Drop? Buy Alibaba Options.
Steven M. Sears – Barron’s
China might be the best hedge for U.S. stocks.
Key Chinese indexes and stocks are outperforming their U.S. counterparts, and investor sentiment suggests that Asia might even emerge as an economic haven, as America and Europe are still struggling with the Covid-19 pandemic.
The Xtrackers Harvest CSI 300 China A-Shares exchange-traded fund (ticker: ASHR), a proxy for mainland China’s stocks, is up 18% this year, compared with 6% for the S&P 500 index.
A $2 Billion Solar ETF Joins Options Mania on ‘Blue Wave’ Bets
Lu Wang – Bloomberg
As U.S. stocks rallied Wednesday, one area of the market deemed sensitive to Joe Biden’s election chances absolutely took off.
Shares of renewable-energy companies expected to benefit from Biden’s energy policy plans surged, continuing a trend of outperforming the broader market as the Democrat’s chances to win steadily improve. The $2 billion Invesco Solar ETF climbed 5.4%, extending a six-day rally to 20%. The S&P 500 is up just 2.5% in that span. Options traders have piled into the exchange-traded fund, with a record 17,000 calls changing hands Tuesday. NextEra Energy Inc., the largest renewable supplier, closed with a higher market valuation than Exxon Mobil Corp.
Save the Date for the Annual Chicago Conference on Futures and Derivatives
Thompson Coburn LLP
Between the pandemic and the resulting financial devastation, the futures and derivatives markets have displayed unprecedented volatility. Add working from home to the mix and compliance has never been more challenging.
In response, we are offering a two-hour webinar on the current state of regulation and enforcement in our industry. At no cost, you can hear from regulators and enforcement attorneys about the latest developments and earn two hours of CLE.
Tuesday, October 20, 2020
1:00 PM – 3:00 PM CST
Law & Compliance Division Conference
7 October 2020 – 9 October 2020 • 9:00 AM – 6:00 PM ET
Our virtual Law & Compliance Division conference (L&C-V) will provide a forum to learn and discuss the legal and regulatory issues impacting the derivatives industry. L&C-V meets the needs of multiple levels of practitioners in the industry, from the new law firm associate to the chief compliance officer. Register today & join us, virtually, 7-9 October to explore recent legal and regulatory precedents affecting the futures, options and centrally cleared derivatives markets.
FIA Legal Opinions Primer
13 October 2020 • 2:00 PM – 3:00 PM BST • Webinar
If you are an experienced user of FIA legal opinions, new to the world of FIA netting and other legal opinions for regulatory capital purposes or just curious as to why FIA maintains a library of legal opinions, please tune in to this FIA webinar where experts from Clifford Chance LLP and FIA will explain the types of legal opinions that FIA maintains, their structure and purpose in the context of regulatory capital requirements. Speakers will also discuss practical aspects of how firms can go about accessing FIA legal opinions, how the legal opinions are reviewed and made available to member and non-member firms. This webinar will focus on the FIA legal opinions procured out of Europe and will not cover the US FCM netting opinions.
Vatican used charity funds to bet on Hertz credit derivatives
Miles Johnson and Robert Smith – Financial Times
The Vatican invested some donations for the poor and needy in derivatives that bet on the creditworthiness of Hertz, the US car rental company that defaulted on its debts earlier this year, according to documents seen by the Financial Times.
In 2018, Pope Francis said credit default swaps “encouraged the growth of a finance of chance and of gambling on the failure of others, which is unacceptable from the ethical point of view”. The instruments, he said, were “a ticking time bomb”.
OPR 334: Playing an Airline Bailout With a JETS Straddle
Options Boot Camp – Options Insider Network
On this episode, Brian first looks at last week’s trade, which was a calendar spread in LUV. Then he discusses this week’s trade which is a long short term straddle in the airlines (JETS – JETS Airline ETF).