Bond Traders Cling to Negative-Rate Bets Despite Fed Pushback; CFTC warns on return to negative oil prices

May 13, 2020

Lead Stories

Bond Traders Cling to Negative-Rate Bets Despite Fed Pushback
Emily Barrett – Bloomberg
Futures hedges against negative fed funds rate in 2021 persist; Eurodollar options show bets on Fed rate of -0.5% by mid-2021
Rates traders are stubbornly holding onto hedges against the risk that the Federal Reserve will drop borrowing costs below zero next year, even as officials signal they’re not headed down that path.

*****SR: From the story: “The market’s behavior isn’t necessarily a bold macro call, as strategists at UBS and Citigroup are among those highlighting how recent flows in options may have distorted wagers in fed funds.”

CFTC warns on return to negative oil prices
Gregory Meyer – Financial Times
The US commodities regulator has issued a rare warning to brokers, exchanges and clearing houses, urging them to be ready for the risk that oil prices could again drop below zero.
The Commodity Futures Trading Commission advised exchanges to monitor their markets and remind them to “maintain rules to provide for the exercise of emergency authority”, including the power to “suspend or curtail trading in any contract” if markets become disorderly, according to an advisory notice released on Wednesday.

Oil traders shun WTI amid continuing concerns about delivery
John Kemp – Reuters
Futures traders are avoiding the June and even July light sweet crude (WTI) futures contracts to avoid the extreme volatility that marked the run up to expiry of the May contract last month.
At the close of business on Tuesday, with five more trading sessions before the June contract is due to expire, traders held contracts equivalent to just 155 million barrels for delivery.

Swaps data: record trading volumes in March
Amir Khwaja –
The Covid-19 pandemic has forced the majority of traders to work from home or back-up sites, but it hasn’t stopped them trading in record volumes. Extreme volatility though March was matched by a surge of activity as traders repositioned portfolios for dramatic rate cuts and a deteriorating economic backdrop. Credit derivatives stand out. March volumes were almost twice the month average, with indexes dominating as traders rushed to protect against a wave of defaults and downgrades since lockdowns brought much corporate activity to a halt.

Exchanges and Clearing

Passive Liquidity Protection: Further rollout to remaining equity options and DAX index option
With this circular, we would like to inform you about the further rollout of the Passive Liquidity Protection (PLP) which will start on 24 August 2020.

MIAX PEARL Equities Announces Upcoming Testing Dates
Exchange Reaffirms September 2020 Launch Date
Miami International Holdings, Inc. (MIH), the parent holding company of the MIAX, MIAX PEARL and MIAX Emerald options exchanges, today announced that the launch of MIAX PEARL Equities, MIH’s first equities exchange, is scheduled to occur on September 25, 2020, pending approval by the U.S. Securities and Exchange Commission (SEC). To meet this launch date, MIAX PEARL recently announced its connectivity and testing schedule (MIAX PEARL Connectivity and Testing Schedule).

Strengthening liquidity: successful pilot phase for Eurex’s Passive Liquidity Protection
As investment behavior and regulation evolve, we at Eurex constantly review our market models and adapt and enhance them when needed. Next to our RfQ platform Eurex EnLight and the new tool Eurex Improve, we launched the Passive Liquidity Protection (PLP) in June 2019 to strengthen order book liquidity.

Cboe Global Markets Announces 2020 Annual Meeting Results
Cboe (press release)
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today announced the preliminary shareholder voting results from its 2020 Annual Meeting held today. All 12 board of director nominees received a majority of votes cast.

Cboe Global Markets Declares Second-Quarter 2020 Dividend
Cboe (press release)
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today announced its Board of Directors has declared a quarterly cash dividend of $0.36 per share of common stock for the second quarter of 2020. The second-quarter 2020 dividend is payable on June 15, 2020, to stockholders of record as of May 29, 2020.


New Book Shares More Details on Trader Blamed for Flash Crash
Liam Vaughan – Bloomberg
On March 9, U.S. stocks had their biggest one-day point drop ever as the economic fallout from the novel coronavirus sank in. Within a week that record had been broken twice, only for the S&P 500 to register its greatest weekly gain in decades in April, after the Federal Reserve intervened by slashing interest rates and buying bonds.

*****JJL: More hype and more baloney.

Trump Still Agitates for Negative Rates. Why That Probably Won’t Happen.
Alexandra Scaggs – Barron’s
President Donald Trump still wants negative interest rates. At first glance, the market would appear to back him up.
Trump tweeted on Tuesday that “as long as other countries are receiving the benefit of negative rates,” the U.S. “should also accept the ‘GIFT.’ ” The European Central Bank’s policy rate is minus 0.5%, and the Bank of Japan’s policy rate is negative 0.1%.

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