Bold Option Wagers Call for Half-Point Cut as the Fed’s Next Move; Theresa May Quits

May 24, 2019

Observations & Insight

European Interest, Cross Asset Growth and the Retail Base
In this video from the 2019 Options Exchange Leader Series, Cboe Head of Options and Global Client Services Arianne Criqui talks about the exchange’s select sector index options, the listing of XSP, corporate bond futures, and more.
Watch the video »


Which Stock Markets Are Closed for Memorial Day
Sophia Cai – Barron’s
The New York Stock Exchange, Nasdaq, and bond markets will be closed on Monday, May 27, as the U.S. observes Memorial Day and commemorates the men and women who lost their lives serving in the military.

****SD: There will not be a JLN Options newsletter on Monday.

Lead Stories

Bold Option Wagers Call for Half-Point Cut as the Fed’s Next Move
Edward Bolingbroke – Bloomberg (SUBSCRIPTION)
Dovish structures crop up as China trade tensions simmer; Market pricing in 30 basis points of Fed rate cuts in 2019
Gutsy eurodollar options traders are amassing structures that can make money only if the Federal Reserve’s next move is to cut interest rates by a half-point before the year is out.

Brexit brings down May, Johnson stakes leadership claim
Elizabeth Piper, William James, Kylie MacLellan – Reuters
Fighting back tears, Theresa May said on Friday she would quit after failing to deliver Brexit, setting up a contest that will install a new British prime minister who could pursue a cleaner break with the European Union.

****SD: The Bloomberg Editorial Board has this: May’s compromise is dead, and Parliament has no answer. The country should vote again.

Currency Volatility: Euro Potentially Underpricing the Impact of the EU Election
Justin McQueen – FXWeek
This weekend will see focus on the results of the upcoming EU elections, in which results will be released by Sunday evening.

DLT for derivatives? It’s already happening Blockchain technology shows promise as a tool to help track collateral between institutions
Arjun Jayaram, Baton Systems in MarketVoice
While it’s early in the roll-out of many blockchain use cases, there are immediate opportunities for the use of distributed ledger technology in the derivatives markets. Near the top of this list is the management and settlement of collateral, a multi-billion dollar headache for the world’s largest banks. The root cause: the frequent need to overly pre-fund margin requirements for the positions that banks hold at clearinghouses and at custody banks on behalf of themselves and their clients.

SS&C’s Win of Trade Secrets Suit Highlights Hiring Risks
Chris Kentouris – FinOps
SS&C Technologies’ recent US$44 million jury verdict in a lawsuit against Clearwater Analytics has put Wall Street’s legal and human resource managers on alert to protect their firms from the receipt of trade secrets when hiring key employees from the competition.

****SD: Missed this earlier this week. It’s not an options story, but it’s relevant to anyone in financial services. Read this while considering the litigation between MIAX and Nasdaq based around hiring people formerly employed by a rival. That’s not the only employee overlap involved: at one point MIAX’s legal representation in the case represented Nasdaq for 13 years. The firm, Fish & Richardson, was removed from the case due to potential conflicts.

TradeTalks: “.@Nasdaq #TradeTalks: Buy-Side Engagement in the Volatility Market #GlobalEQD19 @JillMalandrino”
Periscope TV
.@Nasdaq #TradeTalks: Buy-Side Engagement in the Volatility Market #GlobalEQD19 @JillMalandrino

****SD: There’s a bunch of good content out of EQD – see it all on TradeTalks’ Twitter feed.

Exchanges and Clearing

Cboe Analyst Wins Big at J.P. Morgan Corporate Challenge
Cboe Blog
Quantitative analyst by day, Olympic-qualifying runner by night (or non-working hours, that is). Brett recently won the J.P. Morgan Challenge in Chicago, finishing the 5K in 17 minutes and 26 seconds. We chatted with Brett about his running career and the upcoming Olympic trials.

Regulation & Enforcement

Wall Street Broker-Conflict Rules Poised for Overhaul by SEC
Jesse Westbrook – Bloomberg (SUBSCRIPTION)
Agency sets June 5 meeting to vote on its best-interest rule; Regulation is expected to be softer than Obama-era standard
The U.S. Securities and Exchange Commission plans to hold a June 5 meeting to vote on the most sweeping overhaul of broker rules in years, setting new standards for Wall Street on what the regulator considers inappropriate conflicts of interest.

SEC Issues Warning on Cloud-Based Storage Solutions
Melanie Waddell – ThinkAdvisor
The Securities and Exchange Commission is warning of security risks the agency has found in advisor and broker-dealer exams associated with the storage of electronic customer records, including those leveraging cloud-based storage.


Emerging market stock funds suffer $3.8bn withdrawals
Richard Henderson – Financial Times (SUBSCRIPTION)
Investors have pulled money from emerging market stock funds in the past week at the fastest rate since the crises last year involving Turkey and Argentina, as concerns mount over the trade stand-off between the US and China.

Corn sinks as USDA trade aid seen encouraging planting, soy also down
Karl Plume – Reuters
U.S. corn futures dropped for the first time in nine sessions on Thursday after the U.S. Department of Agriculture (USDA) unveiled a farm aid package that could encourage farmers to plant more corn despite adverse weather this spring.

****SD: It’d been a nice run…

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