Cboe to launch crypto indices following major data deal with CoinRoutes; Open interest in Bitcoin derivatives hit new highs this week

Dec 16, 2020

Observations & Insight

$18,761/$300,000 (6.3%)


What a Year: Pandemic Spurs ‘Beauty Contest In Growth Expectations’ Among Nations
Suzanne Cosgrove – John Lothian News

While the pandemic sent chills around the globe, a close look at equity performance in 2020 shows a striking dispersion of portfolio returns that makes a case for more selective investment in international markets going forward, said analysts in a FTSE Russell webinar held Tuesday.

In addition, the expected arrival of vaccines to fight the virus “changed the market narrative in November,” said Phillip Lawler, managing director of global investment research for FTSE Russell. Most equity markets posted double-digit percentage gains, fueled by a shift into what had been some of the year’s worst-performing cyclical sectors.

A major rotation in investments from leaders to laggards on a country level was also evident in November, Lawler said, with Taiwan a stand-out example of a country that rebounded toward the end of the year. Taiwan is expected to end 2020 with positive GDP growth despite the global pandemic, benefiting from ties to the U.S. and advances in its tech prowess, analysts said.

To read the rest of this report, go here.


Eurex’s Randolf Roth Talks MSCI with JLN

John Lothian News interviewed Randolf Roth, Eurex’s head of equity & index derivatives and head of client services for trading & clearing, over Zoom about Eurex’s MSCI offering. The MSCI has been in the news recently as MSCI awarded HKEX a license for the complex in Asia instead of SGX, where it had been for decades. The move to HKEX opened new doors for Eurex to compete for Asian MSCI business.

Watch the video »

Lead Stories

Cboe to launch crypto indices following major data deal with CoinRoutes; The partnership with CoinRoutes will see Cboe roll out indices for digital assets using the RealPrice market data feed.
Annabel Smith – The Trade
Exchange operator Cboe Global Markets has confirmed plans to create crypto indices early next year after signing a major licensing agreement with trading software provider CoinRoutes. Through the licensing agreement Cboe said it will use the RealPrice data feed from CoinRoutes to establish digital asset indices and offer custom index creation and calculations to clients.

*****JB: See also The Block’s story, Cboe’s latest data deal lays the foundation for a wide range of new crypto market products.

Open interest in Bitcoin derivatives hit new highs this week
MK Manoylov – The Block
This week saw open interest in bitcoin options and futures surge to new highs, according to data collected by The Block Research. On Sunday, open interest for bitcoin options reached $4.81 billion. Open interest refers to the total amount of contracts that have yet to be settled at a given time. Eighty-one percent of bitcoin options open interest was on market leader Deribit, followed by Bit.com (6%) and CME (5.4%).

Bitcoin Whale Emerges With $1 Billion, Alan Howard’s Backing
Erik Schatzker – Bloomberg
A hedge fund specializing in volatility bets has emerged as one of the largest investors in Bitcoin after quietly buying more than $600 million in cryptocurrencies and joining forces with Alan Howard, the co-founder of Brevan Howard Asset Management.
Eric Peters, chief executive officer of One River Asset Management, said in an interview he set up a new company to seize on the growing interest in cryptocurrencies among institutional investors. In addition to its initial purchases, One River Digital Asset Management has commitments that will bring its holdings of Bitcoin and Ether to about $1 billion as of early 2021, he said.

Bitcoin tops $20,000, breakthrough price milestone for the largest digital asset
Daniel Roberts – Yahoo Finance
The price of bitcoin passed the $20,000 mark on Wednesday morning, a new all-time-high and the latest milestone in a huge 2020 surge that accelerated during the COVID-19 pandemic.

Massachusetts Regulators to File Complaint Against Robinhood; The wildly popular trading platform exposed Massachusetts investors to ‘unnecessary trading risks,’ according to the complaint
Caitlin McCabe – WSJ
Massachusetts securities regulators are expected to file a complaint Wednesday against the wildly popular trading platform operated by Robinhood Financial LLC, alleging the company aggressively marketed to inexperienced investors and failed to implement controls to protect them. In a final draft of a more than 20-page administrative complaint reviewed by The Wall Street Journal, the enforcement arm of the Massachusetts Securities Division said Robinhood failed to protect its customers and their assets, violating state laws and regulations. Robinhood exposed Massachusetts investors to “unnecessary trading risks” by “falling far short of the fiduciary standard” adopted this year that requires broker-dealers to act in their clients’ best interest, the state said.

*****JB: Also see the Financial Times’ story, Robinhood faces legal action over ‘gamification’ of investing and Bloomberg’s story, Robinhood Accused of ‘Gamification’ of Trading by Massachusetts Regulator.

Stocks Mixed Before Fed Amid Stimulus Wrangling
Rita Nazareth – Bloomberg
Stocks were mixed as lawmakers attempted to agree on stimulus amid signs the economic recovery is faltering. Traders also awaited the Federal Reserve decision for guidance on its bond-buying program. The S&P 500 fluctuated as gains in technology and retail companies offset losses in utility and industrial shares. Earlier Wednesday, the benchmark gauge fell after disappointing retail-sales data. The Nasdaq 100 outperformed, while the Dow Jones Industrial Average retreated. Treasuries dropped and the dollar was little changed. Bitcoin surpassed $20,000 for the first time.

Exchanges and Clearing

Cboe Global Markets and CoinRoutes Enter Exclusive Licensing Agreement for CoinRoutes RealPrice Cryptocurrency Market Data
Cboe Global Markets, Inc.
Cboe Global Markets, Inc. (Cboe: CBOE), a market operator and global trading solutions provider, today announced it has signed an exclusive licensing agreement with CoinRoutes to disseminate its market data and create potential derived data and analytics products using its RealPrice data.

Futures Now Trading on the SPIKES Volatility Index
Miami International Securities
Exchange, LLC (MIAX) and the Minneapolis Grain Exchange (MGEX) today announce that a successful first day of futures trading on the SPIKES Volatility Index (SPIKES) took place yesterday on December 14. “SPIKES Futures are a significant step forward for the volatility marketplace, adding necessary competition, choice and innovation,” said Thomas P. Gallagher, Chairman and CEO of MIAX. “With SPIKES Futures, investors have access to an advanced, competitively priced volatility trading product that further rounds out the SPIKES Volatility Products portfolio. We are excited that SPIKES Futures liquidity providers successfully began actively quoting yesterday, providing a tight market for SPIKES Futures right out of the gate.”

Cboe Becomes Primary Listing Exchange for ProShares Volatility ETFs
Cboe Global Markets, Inc., a market operator and global trading solutions provider, today announced that the full suite of ProShares Volatility ETFs successfully transferred to Cboe BZX Exchange from NYSE Arca for trading beginning Wednesday, December 16. ProShares Volatility ETFs are designed to offer exposure to the S&P 500 VIX Short-Term Futures Index and the S&P 500 VIX Mid-Term Futures Index, as well as leveraged and inverse exposure to the S&P 500 VIX Short-Term Futures Index. The ETFs include: VIX Short-Term Futures ETF, VIX Mid-Term Futures ETF, Ultra VIX Short-Term Futures ETF and Short VIX Short-Term Futures ETF (Ticker: SVXY). With the addition of these four ETFs, Cboe BZX Exchange now lists a total of 22 ETFs from ProShares. These comprise of 11 ETFs which had launched on Cboe, and 11 ETFs which transferred to Cboe from competing exchanges.

Investment platforms scramble to retain new customers
Madison Darbyshire – Financial Times
Online brokers are scrambling to hold on to new customers acquired during a surge in account openings over the pandemic in anticipation of reduced market volatility in 2021.
This year set records for new customers signing up to investment platforms in the US and Europe, but companies fear clients will have less inclination to trade if they return to office work and markets calm down.

DGCX Wins ‘Exchange Of The Year- Middle East And Africa’ At FOW International Awards For The Third Year
The Dubai Gold & Commodities Exchange (DGCX) – the largest and most diversified derivatives exchange in the Middle East – has been named as ‘Exchange of the Year’ at the prestigious FOW Global Investor MENA 2020 for a third year in a row.

Regulation & Enforcement

U.S. Names Switzerland, Vietnam Manipulators Over Dong (VND), Franc (CHF)
Saleha Mohsin and Liz McCormick – Bloomberg
The U.S. Treasury Department designated Switzerland and Vietnam as currency manipulators for the first time, while keeping China on a watch list, in the Trump administration’s final foreign-exchange policy report.
Having removed the manipulator label from China in January, the Treasury urged the world’s second-largest economy to “improve transparency” in its currency management, especially of its central bank’s relationship with state-owned banks — which market participants say can act in the currency market with official guidance.

A proposal to amend the rules of The Nasdaq Options Market LLC at Options 1, Section 1; Options 2, Section 5; Options 3, Sections 5, 7, 10, 15 and 23


DoorDash Puts Are All the Rage After IPO Mania Stoked 54% Surge
Katherine Greifeld – Bloomberg
DoorDash Inc.’s first day in the options market suggests there may be limits to the IPO euphoria that’s engulfed Wall Street.
Roughly four put contracts were sold for every call after options on the food-delivery company began trading Tuesday. As of 12:45 p.m. in New York, the most popular contracts were out-of-the-money put options with strike prices lower than where the stock is currently trading, according to data compiled by Bloomberg.

Here’s the ideal portfolio based on the Fed wanting investors to borrow, says a Merrill Lynch veteran
Barbara Kollmeyer – MarketWatch
Stocks are looking at another struggle, apart from techs, on Wednesday after some downbeat data. That’s as we wait for the outcome of the Federal Reserve’s last policy meeting of the year and progress on an ever-elusive stimulus deal.
A model portfolio for the next two to five years is what’s on offer from our call of the day from former Merrill Lynch executive Harley Bassman. He created and traded a variety of derivative and structured products during 26 years at Merrill Lynch, and is best known for inventing the MOVE index, which measures treasury volatility. He now writes the Convexity Maven newsletter.

Dogs of the Dow Stock-Picking Strategy Didn’t Work This Year. It Could in 2021.
Al Root – Barron’s
2020 has been a wild year. Look no further than the Dogs of the Dow for evidence.
The Dogs of the Dow have performed, well, like dogs in this year, losing investors about 7% year to date. That lags behind the 8% comparable gain of the Dow Jones Industrial Average and 16% gain of the S&P 500.


Trading Options: Understanding Assignment
The options market can seem to have a language of its own. To the average investor, there are likely a number of unfamiliar terms, but for an individual with a short options position—someone who has sold call or put options—there is perhaps no term more important than ‘assignment’—the fulfilling of the requirements of an options contract.


Roundtable Discussion: Trading Opportunities in European Volatility with VSTOXX Derivatives
Topic – Roundtable discussion: Trading Opportunities in European Volatility with VSTOXX Derivatives
Description – Join Eurex, RCM-X, Shore Capital Research and Equity Armor Investments for a webcast discussion on:
1. Why volatility is so relevant in today’s markets?
2. What factors could influence the spread between VSTOXX & VIX volatility indices? Are these spreads seasonal or event driven? Could traders find a way to incorporate this data into their daily trading? What events in the near to mid-term will affect these spreads?
3. Besides the spread trading opportunity (VSTOXX vs VIX), what other trading opportunities may arise out when considering the VSTOXX?
4. Why is there a negative correlation between VSTOXX, volatility Indices and the equity markets? Does this behavior offer potential opportunities to hedge an equity portfolio?
Dec 16, 2020 11:00 AM in Central Time (US and Canada)

2020 Annual Trends in Futures and Options Trading
27 January 2021 • 10:30 AM – 11:30 AM ET • Webinar
This webinar will highlight the main trends in trading activity in 2020 in the global exchange-traded derivatives markets, with category and regional breakdowns as well as exchange and contract rankings.
Moderator: Will Acworth, Senior Vice President of Publications, Data & Research, FIA


FIA urges market role in addressing climate change
Washington, D.C. — FIA President and CEO Walt Lukken made the following statement following FIA’s participation in a public consultation led by the Taskforce on Scaling Voluntary Carbon Markets (TSVCM). “Markets need to be part of the solution to addressing global climate change, and FIA is committed to working with the public and private sector to help foster a robust and transparent voluntary carbon market,” said FIA President and CEO Walt Lukken. “The private sector-led Taskforce on Scaling Voluntary Carbon Markets should be commended for bringing together stakeholders from across the globe to provide recommendations and solicit feedback about how best to scale an effective and efficient voluntary carbon market — a market that will help lead a global transition to a more sustainable economy.”

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