Observations & Insight
Nick Solinger Reflects on FIA Tech Role, Its Future and IDX Takeaways
JohnLothianNews.com
In this JLN video interview from this year’s FIA IDX in London, JLN Correspondent Julie Ros talked to Nick Solinger, the president of FIA Technology Services, Inc. He offers a comprehensive overview of FIA Tech’s role within the industry, recent developments at FIA Tech, its future plans, and the impact of its participation in IDX.
Lead Stories
Cboe’s CEO Resigns Over Undisclosed Personal Relationships; Tilly’s departure comes after probe launched last month; Former TD Ameritrade CEO Tomczyk to take over top job
Sally Bakewell – Bloomberg
Cboe Global Markets Inc. said Edward Tilly has resigned following an investigation that determined the chief executive officer didn’t disclose personal relationships with colleagues, ending a decade-long run during which the company’s stock more than tripled. The derivatives and securities exchange said it appointed Fredric Tomczyk, a current member of Cboe’s board of directors, as its new CEO, effective immediately.
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***** Coverage of this story from The Trade, Reuters, The Financial Times, MarketWatch, and The Wall Street Journal.
A Popular Options Trade Gives Investors a $1,000 Stock Bet for Just $1
Lu Wang – Bloomberg
There’s an invisible force driving the most popular options trade of the year — one that gives Wall Street pros and day traders alike the power to turn a $1 investment into a $1,000 stock bet.
Investors are wagering on the daily gyrations of American equity benchmarks by dashing in and out of trading contracts that expire within 24 hours — known by the “0DTE” moniker — with less upfront capital than meets the eye. The hidden fuel for the frenzy: Quirks in the ecosystem of the derivatives marketplace that makes these zero-days-to-expiry options look cheap.
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What the ‘mysterious shrinking’ of Wall Street’s fear gauge means for stocks, according to DataTrek
Christine Idzelis – MarketWatch
Wall Street’s so-called fear gauge has been subdued this year, in a “mysterious shrinking” pattern, that’s a bullish signal for equities, according to DataTrek Research.
Declines for the Cboe Volatility Index VIX fear gauge come despite continued worries over inflation and elevated interest rates.
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The Fed’s Next Challenge: $100 Oil
Joe Wallace and David Uberti – WSJ
An almost uninterrupted rise in oil prices has pushed benchmark Brent crude close to $100 a barrel, posing a new challenge for central banks in their battle against inflation.
The rise is a victory for Saudi Arabia, which sought to bolster prices to fund a planned transformation of its oil-dependent economy. Russia, which depends on energy income to finance its war on Ukraine and joined Riyadh in slashing supplies, is another winner. The two countries sparked the rally early this month when they said they would restrict supplies until the end of the year.
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Exchanges
Cboe Global Markets Announces Leadership Transition
Cboe
Fredric J. Tomczyk, current member of Cboe Global Markets Board of Directors, and former President and Chief Executive Officer of TD Ameritrade Holding Corporation, named CEO; Edward T. Tilly resigns as Chairman and CEO of Cboe Global Markets; William M. Farrow, III, currently Lead Director, named non-executive Chairman of the Board of Directors of Cboe Global Markets. Cboe Global Markets, Inc. (Cboe: CBOE), the world’s leading derivatives and securities exchange network, announced today that it has appointed Fredric J. Tomczyk, a current member of Cboe’s Board of Directors, to the role of CEO, effective immediately. Mr. Tomczyk succeeds Edward T. Tilly, who has resigned from the company following the conclusion of an investigation led by the Board of Directors and outside independent counsel that was launched in late August 2023. The Board of Directors determined that Mr. Tilly did not disclose personal relationships with colleagues, which violated Cboe’s policies and stands in stark contrast to the company’s values. The conduct was not related to and does not impact the company’s strategy, financial performance, technology and market operations, reporting, or internal controls.
/jlne.ws/452887A
Cboe Stock Rises After CEO Resigns
Candice Choi, Alexander Osipovich and Dean Seal – WSJ
Shares of Cboe Global Markets gained, moving toward a record high, after the exchange operator said Chief Executive Officer Edward Tilly was resigning with immediate effect.
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Strategy
Faster Options Are More Fun
Matt Levine – Bloomberg
Let’s say you own a bunch of stocks, say $1 million worth of the stocks in the S&P 500 Index. You think they will go up (that’s why you own them), but you worry that they might go down. You can buy insurance against that risk: You can pay someone a fee now, and she will guarantee you that, in a year, your S&P 500 stocks will be worth at least $1 million. If they’re not, she’ll pay you the difference. (If they’re worth more than $1 million, you keep the gains, but she keeps the fee.) This is a put option.
The fee for that insurance is about $50,000: You pay about 5% of the value of your portfolio to insure it against a drop for one year.1 That’s kind of a lot? If the S&P goes down by 20%, you’ll be happy you bought insurance, but if it goes down by 4% you won’t be: You’d have been better off taking that loss and not paying 5% upfront.2 If the S&P goes up by 20%, you won’t mind your insurance that much — you still made 15%, net of insurance costs — but if it goes up by 5% you’ll be bummed; the cost of insurance wiped out all of your gains.
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Bitcoin Prices Rise as Traders Turn Bullish Ahead of Fed. It May Be Premature.
Jack Denton – Barron’s
Bitcoin and other cryptocurrencies rose Tuesday as digital asset traders continued to pile into overwhelmingly bullish bets on cryptos ahead of the interest rates decision from the Federal Reserve on Wednesday. It might mark a premature wave of wagers in a quiet market.
The price of Bitcoin has advanced 1% over the past 24 hours to near $27,100, paring gains after spiking above $27,400 to hit the highest levels this month. The largest digital asset’s recent rally marks another attempt to push past the $26,000 zone, around which Bitcoin has stagnated for more than a month amid historically low volatility and trading volumes as investor interest has waned.
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Education
Does the VIX Have an Expiration Date?
Jermal Chandler – tastylive
Aside from the mini banking crisis this year, market volatility has been on a downtrend in 2023. We know this because the CBOE volatility index (VIX) tells us so.
The VIX is a measure of the S&P 500 (SPX) option costs and usually moves in the opposite direction of the index benchmark, going up when demand expands for hedges in down markets.
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How ZISHI is preparing students for the derivatives trading world
Kirsten Hyde – FIA
ZISHI, a leading provider of financial services training and qualifications, is working with a growing number of universities in the UK to provide undergraduate and postgraduate courses to prepare students for the financial trading world.
Already supported by market players such as Intercontinental Exchange (ICE) and options market maker Mako Trading, ZISHI is looking for more firms in the derivatives industry to support its efforts as it expands its trading courses to more universities across the country and advances on its mission to provide “financial education for all.”
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Miscellaneous
The Greased-Pig Economy: Higher Inflation, Stock Market Crash Possible
Linette Lopez – Business Insider
Trying to catch a greased pig is an American tradition that has fallen out of fashion — so you’re forgiven if you don’t know the rules.
The game, once a staple of county and state fairs, is simple enough: A small pig is covered in lubricant and thrown into a ring where contestants try to catch the animal. What makes it hard — and fun to watch for spectators — is that pigs are shiftier than lumbering humans. Just when you think you have a grip on them, the slick porker can slip through your fingers. And when it’s all over, both pig and human end up dirty.
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Chicago considers $800 million tax for derivatives industry
Isis Almeida – Fortune
The letters are stamped all over the hallways of Chicago’s giant skyscrapers and grand office buildings. DRW, IMC, CME, Cboe.
These are some of the derivatives firms that collectively handle trillions of dollars a year in trades, greasing the wheels of global markets with everything from stock options to corn futures. Most of them have called Chicago home for decades — providing thousands of jobs within the city’s $75 billion finance industry.
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