Observations & Insight
MarketsWiki Education World of Opportunity 2019 Day One Held Tuesday in Chicago
Sarah Rudolph – John Lothian News
Cryptocurrencies and blockchain were not the only themes at the MarketsWiki Education World of Opportunity event at the headquarters of Trading Technologies on Tuesday, but they kept cropping up.
The first presenter, Colleen Sullivan, is the CEO and cofounder of CMT Digital, a company that is all about crypto and blockchain. Sullivan got started in the trading world when her uncle, who worked for Michael Milken, gave her a t-shirt that said “Junk Bonds Keep America Fit.” She worked as a runner at First Options and then later in the legal department, and went on to law school. Her legal background led her to Sidley Austin, where she first heard about blockchain when she read the bitcoin white paper. In 2013 she told the partners they should start investing in bitcoin. But bitcoin was a big unknown then, and not regulated at all. She ended up co-founding CMT and launching a bitcoin trading desk there in 2016. Her legal expertise tells her that “we need to get the regulatory environment right” for cryptocurrencies – as Switzerland has done – or the U.S. will end up being a follower rather than a leader in the space, she said.
Rumi Morales, a partner in Outlier Ventures, talked about blockchain and how that and other technology is transforming finance, giving a brief history of hundreds of years of trading in about five minutes. The biggest change in trading is of course – as she showed in photographs – that it is now driven by machines, and the crowded, jostling floors have been replaced by rows of computer desks nearly empty of people. Morales said blockchain is revolutionary because there is no central counterparty needed. She is also excited about the “trillions” of communication devices now coming online, as well as things like self-driving cars and intelligent sprinkler systems that “can create and hedge their own water risk.” She said we will be seeing a Convergence Ecosystem driven by the Internet of Things (IOT), blockchain, and Artificial Intelligence (AI).
To read the rest of this report, go here.
Anybody Can Now Bet on Bitcoin $100,000 With New Call Options
Olga Kharif – Bloomberg (SUBSCRIPTION)
The most bullish of Bitcoin backers can now bet on the largest cryptocurrency soaring to $100,000.
U.S.-regulated derivatives exchange LedgerX unveiled a call option that pays off if Bitcoin surpasses that price by December 2020. Such a move implies a 10-fold increase in the digital token from Tuesday’s price and would take Bitcoin’s market cap toward $2 trillion.
Former Chicago Board Options Exchange director pleads guilty to fraud
Lynne Marek – Crain’s Chicago Business
Former Connecticut investment manager Alvin Wilkson is accused of collecting about $13 million from 30 people, including friends, acquaintances and former colleagues, but then using some of the money to pay off new investors in a Ponzi strategy.
Pound hovers around $1.24 on growing concern over chaotic Brexit
Philip Georgiadis and Michael Hunter – Financial Times (SUBSCRIPTION)
Sterling was trading below $1.24 on Wednesday morning amid dollar strength and growing investor concern that a no-deal Brexit is becoming increasingly likely.
The pound was as much as 0.2 per cent lower against the dollar at $1.2385, stuttering around 25-month lows, while it fell by the same amount against the euro. UK inflation data that met expectations helped pull sterling off its lows.
****JB: See also Reuters’ – Sterling dives amid investor rush to hedge rise in Brexit risk
Markets need to wake up to the risk of US dollar intervention
Katie Martin – Financial Times (SUBSCRIPTION)
Investors are, belatedly, catching up with the real risk that US authorities will try to weaken the dollar.
Early in Donald Trump’s presidency, the notion was waved away despite his comments suggesting an aversion to a strong currency. No way, the smart money said. It would be destabilising, probably counterproductive, and a break with long-held norms of the global financial system.
****JB: Also see Financial Times’ – Currency intervention: how would the US do it, and would it work?
Exchanges and Clearing
Index FLEX Contracts Hit New Records as Investors Customize Their Options
Matt Moran – Cboe
FLexible EXchange Options (FLEX Options) offer customers customizable terms for strike prices, exercise styles and expiration dates with the transparency, administrative ease and clearing guarantees of standard listed options. Since Cboe first introduced FLEX Options in 1993, interest has grown tremendously – most notably in the first half of 2019.
Peter Reitz, CEO EEX: “We are a globally operating commodities exchange”
In an interview with Bˆrsen-Zeitung, Peter Reitz, CEO of the energy exchange EEX AG and its clearing house ECC AG, talks about the reasons for their success. He discusses how risk awareness and regulation are driving moves towards more clearing and gives details about EEX Group’s expansion into North America and Asia. He also touches on the emissions market and green energy and much more.
Blue Trading Systems Expands Connectivity to Include the ICE Futures Markets
Blue Trading Systems (BTS) today announced the expansion of their market connectivity coverage to include the futures exchanges operated by Intercontinental Exchange (NYSE: ICE). Futures traders are now able to leverage Blue Trading Systems’ low latency trading platform, BTS Spark, to trade products on ICE Futures U.S. and ICE Futures Europe, which together offer access to a broad range of global energy, financial and agricultural markets.
Regulation & Enforcement
NY Judge dashes attempt by seven US stock exchanges to dismiss HFT case
Maria Nikolova – FinanceFeeds
A market manipulation case targeting some of the biggest US stock exchanges, including BATS Global Markets, Inc., Chicago Stock Exchange, Inc., Direct Edge ECN, LLC, New York Stock Exchange, LLC, NYSE Arca, Inc., Nasdaq OMX BX, Inc., and the Nasdaq Stock Market LLC, continues at the New York Southern District Court.
On Tuesday, July 16, 2019, Judge Jesse M. Furman dashed an attempt by the Exchanges to dismiss the case against them.
Regulators plan to delay IM ‘big bang’ – market sources
Market participants expect regulators to announce a one-year delay to the fifth and final phase of the initial margin rules for non-cleared derivatives, which had been due to take effect in September 2020.
Goldman Sachs reveals the top 25 overlooked opportunities that could make investors a bundle this earnings season
Christopher Competiello – Business Insider Prime (SUBSCRIPTION)
John Marshall, a derivatives strategist at Goldman Sachs, thinks crowded trades and a quiet options market are setting the stage for an extremely volatile second-quarter earnings season. He identifies and details 25 individual trades to profit from out-of-whack investor positioning.
JPMorgan’s Kolanovic Sees Once-in-Decade Trade in Value Stocks
Marko Kolanovic – Bloomberg (SUBSCRIPTION)
Beneath the calm surface of stocks lie two groups that if played right pose an almost unprecedented opportunity for when the market turns.
Not now, says Marko Kolanovic, JPMorgan Chase & Co.’s quant guru, and probably not until the summer’s over. But when the peace lifts, traders with the wherewithal should put down bets in a convergence trade that is tuned to the relative performance of two otherwise sleepy corners of the market.
Why Long-Term Investors Should Ignore the VIX
Katie Stalter – Yahoo Finance
Nobody likes the roller-coaster ride of a volatile market. For many of today’s investors, volatility stirs up anxiety that’s reminiscent of the sharp decline that began in November 2007 and finally reversed higher in March 2009.
Of course, some investors don’t follow every up- and downtick of the equity markets, and that’s a healthy approach for those with a focus on the long term. At any given time, the current politically charged environment also makes investors believe markets are flashing sharp downside action, when in fact, indices may be flat or trading higher.
Wall Street’s Crowded Bond-Bull Trade Has a Problem
Robert Burgess – Bloomberg (SUBSCRIPTION)
Bank of America Merrill Lynch released its widely-followed survey of money managers on Tuesday, and for the second month in a row, being “long” U.S. Treasuries was deemed to be the world’s “most crowded trade.” That worked out just fine in June, but this month it’s looking more like the very definition of a “pain trade.”