Bullish US options trading suggests caution ‘thrown aside’; Wall St traders warn of slowdown after best quarter in a decade

Jul 17, 2020

Observations & Insight


Lead Stories

Bullish US options trading suggests caution ‘thrown aside’; Data show rising volumes of rights to buy stocks, rather than sell
Eric Platt in New York – FT
Traders are betting that US stocks will continue to climb, in a sign that the euphoria that has lifted the benchmark S&P 500 more than 40 per cent from its March low has not fully abated.
Trading of US equity call options, which offer investors the chance to benefit from a rally in stocks, has in recent weeks far exceeded the volume of put options, which protect investors from a slide in the market, according to exchange group Cboe Global Markets.

Wall St traders warn of slowdown after best quarter in a decade
Laura Noonan and Joe Rennison – Financial Times
Wall Street’s top five banks have posted their best quarter for trading in a decade after the coronavirus pandemic led to frenzied market conditions and radical interventions from central banks.
JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup posted combined trading revenues of $33.4bn in the second quarter, their highest tally since the $33.7bn they made in the first quarter of 2010. The gains cushioned the blow of more than $20bn of provisions for loan losses on the banks’ income statements.

Stocks waver on fears European recovery fund will be watered down
Colby Smith, Harry Dempsey and Hudson Lockett – Financial Times
US stocks reversed earlier losses on Friday despite the release of new data that showed consumer sentiment soured in July in the face of surging coronavirus cases across the country.
The S&P 500 was a fraction higher headed into lunchtime in New York and the Nasdaq, too, clawed back previous losses even though one of its biggest constituents, Netflix, fell hard. The streaming giant said overnight that subscriber growth would slow in the second half of the year and its shares dropped by as much as 7.3 per cent.

Lighting up the Dark: Hidden Trends In Off-Exchange Trading
Asad Bhatti – Cboe
The fragmentation of equity markets has caused market centers to evolve in recent years, each with their own distinct characteristics. With 13 live public exchanges (soon to be 16), over 30 Alternative Trading Systems (ATS) — electronic trading venues that match buyers and sellers without displaying a public quote — and multiple other ‘off-exchange’ market centers, equity market participants have a slew of options for optimal execution. The variety of choice makes the decision even more complex, and as a result competition continues to grow between exchanges and off-exchange market centers.

Exchanges and Clearing

Eurex Exchange’s Quarterly Equity Derivatives Highlights – Q2/2020
After the extreme Q1 market volatility, equity derivatives market slowly calmed down following several monetary and fiscal measures by national banks and governments. Whereas the overall market saw a tremendous recovery rally in the second quarter, the situation on a single stock level is still driven by uncertainty on earnings, dividends and local shutdowns. Whereas volumes in single stock options have seen a slight decrease quarter on quarter, the overall trend in 2020 is still up with a plus of more than 6% for the first half-year vs. last year.

5 Questions with Mexican Derivatives Exchange General Directorate/CEO José Miguel “Mak” De Dios
Brian Mehta, CMO – Trading Technologies Blog
When we announced last October our plans to offer connectivity to the Mexican Derivatives Exchange (MexDer) through the TT platform, our customers responded enthusiastically. MexDer is a subsidiary of the Mexican Stock Exchange (Bolsa Mexicana de Valores), one of the largest stock exchanges in Latin America, with widely followed futures and options contracts on the S&P/BMV IPC Mexican Equity Index, MXN/USD FX and Mexican Government Bond. MexDer is now available through TT, so we sat down with the exchange’s General Directorate/CEO José Miguel “Mak” De Dios to learn more about MexDer and the Latin American market. To learn more about MexDer, visit the exchange’s website here.

*****If you ask Gary Flagler about MexDer, make sure you have a cup of coffee to enjoy while he raves about the opportunities there.~JJL

Expansion of the Strike Price Listing Schedule of the Options on Bitcoin Futures Contract
CME Group
Effective Sunday, August 2, 2020 for trade date Monday, August 3, 2020, and pending all relevant CFTC regulatory review periods, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will amend Rule 350A.1. (“Options Characteristics”) of the Options on Bitcoin Futures Contract (the “Contract”) (Rulebook Chapter 350A; CME Globex and CME ClearPort Code: BTC) to expand the strike price listing schedule for trading on the CME Globex electronic trading platform (“CME Globex”) and for submission for clearing via CME ClearPort as more specifically described in the table below.

Regulation & Enforcement

UK probes lawyer linked to binary options scandal; Israeli lawyer under investigation for possible money laundering
Kadhim Shubber and Jane Croft – FT
An Israeli lawyer linked to a high-profile binary options fraud scheme is under investigation in the UK for possible money laundering and conspiracy to defraud, the Financial Times can reveal. Moshe Strugano, 50, had provided a legal opinion used by the operators of the websites BinaryBook and BigOption to underpin the sale to US investors of risky financial products called binary options, which have been the target of a global crackdown by regulators.


(Webinar) CFTC enforcement and the push to data-driven cases
(Part of the L&C Division webinar series)
23 July 2020 • 10:00 AM – 11:00 AM ET
Join us for a discussion of and observations on the trend towards data-driven enforcement investigations by the CFTC. In addition to discussing the data tools that CFTC enforcement is using to enhance their own enforcement program, we will look at the implications for trading firms as they continue to develop and refine recordkeeping, trade surveillance and compliance monitoring capabilities. We will also discuss how the growth of data-driven enforcement means can impact a trading firm that is involved in a trading conduct investigation.


(Podcast) Option Block 918: A Godfather 3 Market
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