Observations & Insight
EDITOR’S NOTE: We apologize for the delay in getting the newsletter out today. Our email provider was having technical problems.
Fireside Chat Launches FIA Asia with Regulatory Discussion
By Sarah Rudolph – John Lothian News
Regulatory issues were the first order of business at the first panel of FIA Asia Tuesday Morning (Monday night for those of us in Chicago) as Walt Lukken held a virtual fireside chat with Sharon Shi, chair of FIA Asia’s regional advisory board and managing director at G.H. Financials, and Bill Herder, FIA’s head of Asia-Pacific.
Lukken brought up the Draft Futures Law China proposed this year, for which he said the FIA “provided useful industry comments.” The law, intended to provide a comprehensive legal and regulatory framework for the futures markets in China, may become final in 2022, and Lukken asked what this would mean for the derivatives markets globally and in Asia.
“The law will significantly boost the confidence of investors,” Shi said. When some China contracts became accessible in 2018, some of her clients or prospective clients expressed concerns about the lack of a legal framework on the entire China futures market, and “quite a few” international firms were still in wait and see mode, she said.
To read the rest of this story, go here.
Bitcoin’s Selloff Driven by Options, but Also Interest Rates, Fed Policy
Bitcoin’s weekend selloff illustrates the crypto market’s volatility, but also its growing connection to traditional asset classes.
Between late Friday night and early Saturday morning, bitcoin’s price fell more than 20%, trading as low as $42,000 at one point. By Monday afternoon, it had recovered some of those losses, and it was up nearly 7% over the last 24 hours as of Tuesday morning, according to CoinDesk. Bitcoin recently traded around $51,531, about 25% below its high of $68,990 set in November.
Crypto ‘Fear & Greed’ Index Is Latest Talisman for Bitcoin Fans
Alice Kantor – Bloomberg
A group of indefatigable Bitcoin investors aren’t going to let Saturday’s 21% plunge, in the span of a few hours, curb their enthusiasm.
They’re now promoting a “Fear & Greed” index via Twitter and other social media to justify their claim that the recent drop in prices is actually a great opportunity to get on the Bitcoin bandwagon.
Monday Rebound in Stocks Eyed Warily by Traders Seeing Troubling Clues in VIX
Emily Graffeo and Vildana Hajric – Bloomberg
Investors wondering whether another Monday rebound marks the end of the latest bout of stock-market turbulence are seeing troubling signs in the volatility market.
The Cboe Volatility Index edged back below 30 Monday as the S&P 500 jumped 1.2%. But at 27, the VIX still sits seven points above its average for the year and the front-month futures contract is higher than ones in subsequent months, a signal that investors anticipate near-term turbulence to persist.
Investors Are Using Robinhood, Other Platforms to Jump Into Options Trades, Worrying U.S. Regulators; Options contracts are swapping at highest level on record, with retail traders making a quarter of all activity
Paul Kiernan – WSJ
The flood of everyday Americans into options trading has drawn a skeptical eye from U.S. regulators, who are considering possible rule changes for the era of smartphone brokerage apps. Around 39 million options contracts have changed hands on an average day this year, up 35% from last year and the highest level ever, according to Options Clearing Corp. data as of the end of November. Retail traders recently made up around one-quarter of all options activity.
FX options wrap – Reflecting expectations and opportunity
Improved risk appetite is adding some weight to option implied volatility, but most prices remain well above recent lows, reflecting the ongoing uncertainty from the Omicron variant and upcoming central bank meetings.
Traders Take Long-Shot Bets on Chance of U.S. Oil Export Ban
Devika Krishna Kumar and Michael Roschnotti – Bloomberg
Oil traders are scooping up options contracts that would pay out if U.S. crude futures plummet against international benchmark Brent, a signal that some believe the Biden administration could intervene in the market again to bring down oil prices.
Some traders have bet on the small chance that West Texas Intermediate’s discount to Brent surges past $10 a barrel next year. The last time the spread traded near $10 was in 2018 and 2019 when severe pipeline constraints trapped barrels in the Permian Basin – the largest oilfield in the country. The spread was trading around $3.60 a barrel Tuesday.
Cboe Global Markets Announces Date of Fourth-Quarter 2021 Earnings Release and Conference Call
Cboe Global Markets
Cboe Global Markets, Inc. (Cboe: CBOE), a leading provider of global market infrastructure and tradable products, today said it will announce its financial results for the fourth quarter of 2021 before the market opens on Friday, February 4, 2022. A conference call with remarks by the company’s senior management will begin at 7:30 a.m. Central Time (CT), 8:30 a.m. Eastern Time (ET).
NYSE reveals sweeping changes to top leadership
President Stacey Cunningham and chair Jeffrey Sprecher to step aside
Nicholas Megaw and Mamta Badkar in New York – The Financial Times
Intercontinental Exchange has made sweeping changes to its top management, including the two most senior positions at the New York Stock Exchange.
Stacey Cunningham, who became the first woman to lead the NYSE in 2018, will step aside as president. Jeffrey Sprecher, ICE’s co-founder and chief executive, will relinquish his role as chair of the NYSE, which he has held since ICE bought the Big Board in 2013 for $8.2bn.
Nasdaq Is On Track to Beat NYSE in Record Year for IPOs
Alexander Osipovich – WSJ
Nasdaq Inc. is poised to beat the New York Stock Exchange in initial public offerings this year, far outpacing its crosstown rival during a record year for capital raised in U.S. public markets.
IPOs at Nasdaq have raised $191 billion this year through Friday, compared with $109 billion for new listings at the NYSE, according to Dealogic. Nasdaq’s commanding lead with only a few weeks left in 2021 means it is likely to beat the Big Board for the third year in a row.
Regulation & Enforcement
Traders suing CME Group can proceed as a class, judge rules
Grace Barbic – Chicago Daily Law Bulletin
The Circuit Court of Cook County granted class certification to Chicago Mercantile Exchange members with Class B memberships who allege the switch to electronic trading changed their trading rights and privileges and devalued their shares by more than $1 billion.CME Group, Inc. is the world’s largest futures and options exchange company, with annual revenues of more than $3.6 billion.It operates through various futures exchanges and trading platforms, including CBOT, otherwise known as the Board of Trade of the City …
Should You Buy the Dip? Goldman Sachs Has Bad News for Investors Rushing In
Anchalee Worrachate and Denitsa Tsekova – Bloomberg
Goldman Sachs Group Inc. is issuing words of caution for dip buyers plunging back into stocks: The December volatility breakout has room to run — and risk gauges aren’t yet flashing buy signals.
The hawkish tilt from the Federal Reserve just as the omicron variant spreads will continue to create all manner of trading challenges in the near-term, according to Christian Mueller-Glissmann, managing director of portfolio strategy and asset allocation at the firm.
How Options-Based Strategies May Provide Protection
Max Chen – ETF Trends
Investors have enjoyed great runs in the equities and fixed-income markets, but with traditional assets hitting new record highs, investors are more susceptible to greater downside risks. Investors may consider options-based strategies to help mitigate that potential downside and better manage their future risks.
In the upcoming webcast, How Options-Based Strategies May Provide Protection, Ben Jones, Senior Index Strategist, Nasdaq; and Rohan Reddy, Research Analyst, Global X ETFs, will highlight various options-based ETF strategies that may help financial advisors diversify a traditional stock and bond portfolio to meet any challenges ahead.
Mark Phelps to step down as Group CEO of G.H. Financials in early 2022
G.H. Financials, a leading independent clearing firm for exchange-traded derivatives, announces that a leadership transition is underway with the planned departure of its Group CEO, Mark Phelps, early next year. Mark has decided that following 10 successful years with the Company, latterly as Group CEO since March 2018, it is time for him to pursue new challenges and opportunities elsewhere.
R.J. O’Brien Appoints Mark Phelps as New Managing Director, EMEA for RJO Limited UK Affiliate
Chicago-based R.J. O’Brien & Associates (RJO), the oldest and largest independent futures brokerage and clearing firm in the United States, today announced that Mark Phelps, Group Chief Executive Officer of G.H. Financials, will soon assume the role of Managing Director, EMEA for its London-based affiliate, R.J. O’Brien Limited (RJO Limited). Phelps is a nearly 25-year veteran of the futures markets in Europe and globally. Phelps will operate out of London for the Europe, Middle East and Africa (EMEA) region and report to RJO Chairman and CEO Gerald Corcoran.
FIA Exchange Briefing: Euronext
8 December 2021 • 2:00 PM – 3:00 PM GMT
Growth for Impact 2024 Strategic Plan
Overview of key pillars for Secondary Markets, including Derivatives
New Post Trade offering, including new Clearing framework with CC&G
Euronext Data Centre and Borsa Italiana Optiq migrations
Note: This webinar is available to FIA Members only.
Host: Stuart Bailey, Vice President of Clearing Policy & Operations
Speakers: Chris Topple, CEO Euronext London and Head of Global Sales, Euronext
Anthony Attia, Global Head of Primary Markets & Post Trade, Euronext
Georges Lauchard, Chief Operating Officer, Euronext
Date/Time: Wednesday, 8 December 2021 | 10:00 a.m. – 11:00 a.m. ET
This Hedge Fund Manager Thinks Crypto Speculation Is Headed for a ‘Screeching Halt’
Michelle Celarier – Institutional Investor
Cryptocurrencies could be hit hard by the U.S. Federal Reserve’s effort to fight inflation, hedge fund manager Chris Brown wrote in a November letter to investors in his Aristides Capital hedge funds.
“If the Fed really does hike rates enough to make money considerably less loose, or if markets believe they will, you are going to see certain areas of speculation come to a screeching halt,” he predicted. “The prime example of such asset speculation is cryptocurrency; here lies $2.64 trillion of ‘wealth’ that is backed by nothing and generates no cash flows.”