Observations & Insight
Rumi Morales – The Marriage of Money and Machines
At MarketsWiki Education’s World of Opportunity event in Chicago, Rumi Morales, entrepreneur and partner in Outlier Ventures, gave a brief history of trading and the technological changes that have swept the industry, ending with blockchain, which she said is “revolutionary” because no central counterparty is necessary. Blockchain, along with the Internet of Things and artificial intelligence, will lead to a “Convergence Ecosystem,” she said.
Watch the video »
Cboe Global Markets to Relocate Headquarters to Chicago’s Landmark Old Post Office Building
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today announced plans to move its global headquarters in Chicago to the Old Post Office building at 433 W. Van Buren Street. The company also plans to build new trading floor and office space at 141 W. Jackson Boulevard.
****JB: I am excited to see the old post office revitalized. It was empty for far too long. Such a great building!
Hedge funds turned bullish on oil before Saudi attacks: Kemp
John Kemp – Reuters
Before the attacks on Saudi Arabia’s oil installations on Sept. 14, hedge fund managers had started to become more bullish, or at least less bearish, about the prospects for oil prices amid hope for a trade truce between the United States and China.
Hedge funds and other money managers purchased the equivalent of 122 million barrels of crude and fuels in the six most important futures and options contracts in the week to Sept. 10, the largest one-week increase for more than a year.
****JB: Also see the Reuters story, Oil jumps nearly 15% in record trading after attack on Saudi facilities.
Global daily FX trading at record $6.6 trln as London extends lead
Tommy Wilkes and Saikat Chatterjee – Reuters
Global daily currency turnover surged to a record $6.6 trillion, with London shrugging off Brexit uncertainty to extend its lead as the world’s dominant trading hub, the Bank for International Settlements (BIS) said on Monday.
Foreign exchange markets had been shrinking when the BIS released its last triennial forex survey – considered the most comprehensive take on what is the world’s largest financial market – in 2016 as banks and hedge funds pulled back from trading.
Stock Pickers Are Just Imagining an Index Bubble
Nir Kaissar – Bloomberg via The Washington Post
Spoiler alert: Index funds are no bubble.
It’s not terribly surprising that active managers loathe index funds. It can’t be pleasant to watch their time-honored craft reduced to a computer program and sold for a pittance. Some managers have fought back by accusing index funds of promoting monopolies and distorting markets, among other horrors, but it hasn’t stemmed the wave of money flowing to index products.
Lookout, there’s a dollar crunch!
Izabella Kaminska – Financial Times
As Zoltan Pozsar of Credit Suisse warned a couple of weeks ago, the combination of a glut of safe assets in the market, plus a Fed still intent on keeping monetary policy tight, has been feeding through to repo markets in the form of volatility.
Saudi Officials Consider Delaying Aramco IPO After Attacks
Summer Said, Rory Jones, and Benoit Faucon – WSJ
Saudi Arabian officials are discussing delaying Aramco’s initial public offering, after attacks on the company’s largest oil facilities sidelined more than half of the kingdom’s output, people familiar with the matter said.
Exchanges and Clearing
Aquis poised for Brexit-led share trading move from London
Huw Jones – Reuters
London-based exchange Aquis said its new share trading platform in Paris will operate from Nov. 1 if Britain leaves the European Union without a deal, to accelerate a shift in markets from London to the bloc.
Britain is due to quit the EU on Oct. 31, but has yet to agree a divorce settlement with Brussels.
Regulation & Enforcement
Justice Department Charges Three Traders Over Alleged Metals Contracts Manipulation
Dave Michaels and Dave Sebastian – WSJ
Two traders and one former executive at JPMorgan Chase & Co. were indicted and charged with manipulating prices for precious-metals futures contracts over an eight-year period.
CFTC seeks default judgment against binary options and crypto scammer Blake Kantor
Maria Nikolova – Finance Feeds
About two months after the United States Commodity Futures Trading Commission (CFTC) obtained clerk’s entry of default against Blake Harrison Kantor aka Bill Gordon, and a number of individuals and entities that are responsible for a binary options and crypto scam targeting US investors, the US regulator is now seeking a default judgment against the defendant in this case.
JP Morgan fined $1.1 million for failing to disclose misconduct allegations to FINRA
Hayley McDowell – The Trade News
Investment bank JP Morgan has been fined $1.1 million by authorities in the US, after it failed to timely disclose almost 100 allegations of misconduct over a six-year period. The Financial Industry Regulatory Authority (FINRA) said in a statement that JP Morgan Securities failed to disclose 89 internal reviews or allegations of misconduct by its registered representatives between January 2012 and April 2018. JP Morgan did not admit or deny the charges, but consented to the entry of FINRA’s findings, the authority added.
Small-Caps Will Lead the Market Higher. How to Play It With Options.
Steven M. Sears – Barron’s
Last week’s unexpected rotation into value stocks, upended the market, especially as growth stocks, which had led the stock market higher for so long, suddenly turned rather unpopular. The violence of the move, which came amid growing concerns around growth and valuations, reportedly surprised some hedge funds, and many lost whatever gains they had this year. The weekend drone attack on Saudi Arabia’s oil fields has exacerbated the worries.
The hedge funds split over following market trends
Laurence Fletcher and Robin Wigglesworth – Financial Times
In 1982, Mike Adam, a scholarship student who had dropped out of Magdalen College, Oxford, took a backroom job in his father’s sugar broking firm in London.
The new job entailed drawing commodity price charts by hand and tracking the brokerage’s trades. To save time, Mr Adam programmed the first computer to arrive in the firm’s offices to do the job for him. Soon, overcome by curiosity, he began to test whether the computer could be coded in such a way that he could make money from trading patterns.
Old Habit Is Hard to Break as Momentum Stocks Surge Back to Top
Lu Wang – Bloomberg
So much for the share rotation from momentum into value that froze equity traders in their tracks last week.
Or so much for it today, anyway. One week after traders soured on the market’s highest flyers, momentum, a strategy of chasing winners and dumping losers, is back in vogue. A Dow Jones measure of market-neutral momentum rallied 3% as of 11 a.m. in New York, while a similar gauge for value, or buying cheap shares against expensive ones, lost 1.5%. It’s the first time since July 2016 that momentum beat value by this much.
The Saudi oil crisis, volatile leaders and the risk of escalation
Gideon Rachman – Financial Times
For decades, any list of global geopolitical risks will have had “attack on Saudi oil facilities” near the top. Now it has happened.
The good news is that the world is less vulnerable to an oil price shock than it was in the 1970s, when the Opec oil embargo created turmoil in the global economy. It is also true that all of the major powers involved — Saudi Arabia, Iran and the US — have strong incentives to avoid an all-out conflict.