Observations & Insight
Looking Back on 2020 with Phil Mackintosh, Chief Economist at Nasdaq
Phil Mackintosh, chief economist at Nasdaq, discusses some of the biggest takeaways learned from 2020, as well as what to expect from 2021.
Bond selloff eases but risk gauges flash orange
Saikat Chatterjee and Thyagaraju Adinarayan – Reuters
The recent violent selloff in the $20 trillion U.S. government bond market has eased, but it isn’t over.
Signs of stress are in fact everywhere; they imply that more such episodes of turmoil — or “tantrums” as they have become known — lie in wait over coming months.
Cboe Seeks Approval to List Trailblazer Bitcoin ETF in U.S.
Joanna Ossinger – Bloomberg
Cboe Global Markets Inc. is seeking approval to list and trade shares of what could be the first Bitcoin exchange-traded fund in the U.S.
Cboe in a Monday filing with the U.S. Securities and Exchange Commission sought the green light for the VanEck Bitcoin Trust. VanEck Associates Corp. in December applied to start an ETF tracking the largest cryptocurrency. It is at least the third time since 2018 that Cboe has teamed with VanEck to seek a fund approval.
US and European markets could be in dangerous bubbles, China’s banking regulator warns
Harry Robertson – Markets Insider
US and European markets are racing ahead of their real economies, potentially creating bubbles that could pop, China’s banking regulator has warned.
The comments weighed on Asian stocks after the US’s S&P 500 had its best day since June, with China’s CSI 300 falling 1.28% and Hong Kong’s Hang Seng dropping 1.21%.
Bitcoin Options Traders Are Taking Bullish Bets on $75K and Higher By Summer
Omkar Godbole – Coindesk
Institutional traders look to be positioning for a bitcoin price rally to $75,000 and beyond in coming months, according to options market data. “On Monday, some block traders took bull call spreads at $75,000 and $100,000 strike call options expiring on May 28 via over-the-counter (OTC) trading and settlement desk Paradigm,” Swiss-based options analytics platform Laevitas told CoinDesk. “These could be institutions betting that bitcoin will hit at least $75,000 by summer.” A call option gives the holder the right but not the obligation to buy the underlying asset at a predetermined price on or before a specific date. A bull call spread involves buying call options at/below or above the spot market price and selling an equal number of calls with the same expiry at a higher strike price.
U.S. bond derivatives signal calm, but economic fundamentals could spur more sell-offs
Kate Duguid, Gertrude Chavez-Dreyfuss – Reuters
After a sharp sell-off last week U.S. Treasury debt has stabilized, with bond market indicators and derivatives positioning pointing to near-term calm, but an improving economy could trigger another sell-off in Treasuries prices. The benchmark U.S. Treasury yield hit a one-year high of 1.614% on Thursday in what investors called a “tantrum without the taper,” as the market sold off on expectations that an economic rebound would force the Federal Reserve to tighten monetary conditions sooner than anticipated. Yields have since retreated. While yields could spike again, analysts and investors pointed to moves in inflation breakevens, swap spreads and put options on Treasury debt exchange-traded funds as evidence of temporary calm.
Exchanges and Clearing
New Product Summary: Initial Listing of the Options on Standard and Poor’s 500 Stock Price Index Futures – Quarterly PM (European-Style) Contract – Effective March 7, 2021
Initial Listing of the Options on Standard and Poor’s 500 Stock Price Index Futures – Quarterly PM (European-Style) Contract.
CME Group Announces Multiple Micro E-mini Equity Index Futures Trading Volume Records
PR Newswire (press release)
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that Micro E-mini Equity Index futures reached back-to-back trading volume records last week of 4.4 million contracts on February 26 and 4.2 million contracts on February 25, across all four indexes – the S&P 500, Nasdaq-100, Russell 2000 and Down Jones Industrial Average Indexes. These new highs surpassed the prior record of 4.1 million contracts set on September 8, 2020. Additionally, a record 1.9 million Micro E-mini Nasdaq-100 futures contracts traded on February 25, exceeding the prior record of 1.8 million contracts on September 3, 2020. Micro E-mini Russell 2000 reached a record 362,663 contracts traded on February 26, exceeding the prior record of 327,842 contracts set on January 29, 2021.
CME Group Reports February 2021 Monthly Market Statistics
PR Newswire (press release)
CME Group, the world’s leading and most diverse derivatives marketplace, today reported February 2021 market statistics, including average daily volume (ADV) of 24.6 million contracts during the month. Market statistics are available in greater detail at https://cmegroupinc.gcs-web.com/monthly-volume.
OCC February 2021 Total Volume Up 45.6 Percent from a Year Ago
OCC, the world’s largest equity derivatives clearing organization, announced today that February 2021 total cleared contract volume was 828,558,430 contracts, the second highest month on record after January 2021 and up 45.6 percent compared to February 2020. Year-to-date average daily cleared contract volume through February was 44,002,651 contracts, up 61.4 percent compared to February 2020.
Regulation & Enforcement
Robinhood in Talks to Settle Finra Probes Into Options-Trading Practices, Outages; Stock-trading app says in filing it is also being examined by SEC and states
Peter Rudegeair – WSJ
Robinhood Markets Inc. is in talks to pay a fine to settle investigations into its options-trading practices and outages the stock-trading app suffered in March 2020, according to a securities filing.
Gary Gensler Says Scrutinizing Trading Apps Would Be Focus at SEC
Benjamin Bain and Robert Schmidt – Bloomberg
Gary Gensler, President Joe Biden’s pick for the U.S. Securities and Exchange Commission, said ensuring retail investors are protected when using trading apps that have exploded in popularity would be a focus if the Senate confirms him to lead Wall Street’s top regulator.
Gensler, speaking at a Tuesday hearing on his nomination, ticked off a few items that would be priorities, including so-called “gamification” and arrangements in which trading firms pay brokers for the right to execute customers’ orders.
Virtu RFQ platform sees record ESG options trades; The ESG options were traded on 9 and 11 February via the Virtu RFQ-hub and were valued at $332 million and $1.67 billion respectively.
Annabel Smith – The Trade
Virtu Financial has confirmed its request for quote (RFQ) platform recently facilitated two record environmental social and governance (ESG) options trades as the market continues to adopt sustainable financial instruments.
DASH Regulatory Technologies’ 360R Broker-Dealer Regulatory Capital Compliance Suite Receives SOC 1 Type II Attestation
DASH Regulatory Technologies
DASH Regulatory Technologies – the regtech-focused affiliate of U.S. options technology and execution services provider DASH Financial Technologies – today announced that its SaaS-based DASH 360R platform has received its SOC 1 Type II attestation.
Derivatives Are Replacing Bonds as Some Fund Managers’ New Hedge
Vivien Lou Chen, Anchalee Worrachate, Jack Pitcher – Bloomberg Law
Derivatives helped trigger some of the most disastrous episodes in the history of finance. Now risk-averse institutional investors are increasingly turning to them for protection amid a perilous time for global debt markets.
All manner of complex solutions, from put options to receiver swaptions, are gaining traction as a way to overcome the drawbacks of bonds as a hedge after debt failed to insulate portfolios at key moments last year.
Registration is open! – FIA Boca 2021
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.