Chicago Tribune Editorial: Improbably, downtown Chicago gets a new open-outcry trading floor

May 31, 2022

Lead Stories

Chicago Tribune Editorial: Improbably, downtown Chicago gets a new open-outcry trading floor
The Editorial Board – Chicago Tribune
Downtown Chicago needs help recovering from the pandemic, as office closures and a public safety crisis continue to weigh down the city’s business district. So, it’s with a mix of gratitude and mild disbelief that we welcome the launch of something most Chicagoans probably thought they’d never see again: A new open-outcry trading floor. On the morning of June 6, CBOE Global Markets is scheduled to ring the opening bell at its new venue in the same Chicago Board of Trade building at the foot of LaSalle Street where the options market got its start in the 1970s — and where the shouting and arm-waving of open outcry ruled for decades until computers mostly took over.

Share Sales in Europe Haven’t Been This Bad in Nearly 20 Years
Kat Van Hoof and Swetha Gopinath – Bloomberg
The value of stock offerings in Europe is at the lowest level since 2003 as stormy markets, roaring inflation, rising interest rates and a grim economic growth outlook send investors running for the hills.
Initial public offerings and follow-on transactions have raised a measly $30 billion this year, the worst showing in nearly two decades, according to data compiled by Bloomberg. The biggest deals have come from stake sales by the likes of Nordea Bank Abp, Deutsche Bank AG, Barclays Plc and Glencore Plc.

Stock Market Outlook: Selling to Resume As Oil Approaches 2008 Highs
Matthew Fox – Markets Insider
Selling in the stock market is set to resume and overpower buying pressure after last week’s 7% rally in the S&P 500, which was the index’s strongest week since April 2020.
That’s according to Fairlead Strategies’ Katie Stockton, who highlighted in a Tuesday note that upside in the stock market appears limited as the overall trend remains down.

Analysis: CTAs, other ‘uncorrelated’ investments boom in volatility ride
Saqib Iqbal Ahmed and Davide Barbuscia – Reuters
This year’s U.S. stock and bond sell-offs have boosted demand for strategies aimed at generating returns less dependent on upside in those asset classes during an extended period of volatility.
Worries over a hawkish Federal Reserve have depressed both asset classes for most of 2022, bruising investors who had counted on a blend of the two to buffer portfolios from declines.

Deglobalisation is boosting foreign exchange volatility
Adam Iqbal – Financial Times
Foreign exchange markets have this year been jolted by a sudden increase in volatility. There are many reasons for this, but at the heart of the shift is deglobalisation.
To understand why, consider first the opposite. In a hypothetical, perfectly globalised world, there would be no barriers to international trade, meaning goods could be produced in one country and transported to the other without cost or friction.

Stock markets may be plagued with volatility, but history suggests investors must stick with long term bets
Mahavir Kaswa – The Financial Express
Financial markets around the world have had a rough start in 2022. Equity indices are tumbling from all-time highs and bond yields continue to trend upwards. Central Banks have begun raising rates and are tightening the supply of “easy money” to combat the woes of rampant inflation. The Russia-Ukraine conflict and lockdowns across major cities in China continue to cause supply-chain disruptions and have only added fuel to the fire. The stock markets in India have seen heightened volatility as well which has made investors uneasy after a tremendous bull run over the last ~2 years.


Crypto Exchanges Set Their Sights On The Sleepy Futures Industry
Javier Paz – Forbes
The U.S. futures industry is slow to change and has seen its footprint consolidate around fewer firms over the years. The number of futures commodity merchants (FCMs) as of the latest period, March 2022 stood at 61 firms, compared to 64 in 2017, 116 in 2012, and 171 in 2007. FCMs are dedicated firms that can transact at derivatives exchanges. Much of this consolidation was regulatory-driven under the watch of Gary Gensler, the same man now at the helm of the U.S. Securities and Exchange Commission (SEC). Gensler led the Commodity and Futures Trading Commission (CFTC), the derivatives industry’s primary regulator from 2009-2014. Now, with the launch of CME Group CME bitcoin futures in 2017 and other crypto futures and options contracts in subsequent years, crypto derivatives gained a foothold in the U.S. and validated the hypothesis that institutions have a steady appetite for trading crypto futures, driving as much as $6.7 billion daily volume this year. CME crypto futures open interest – capital tied up to support futures trading activity – has ranged between $2 billion and $7 billion so far this year.

APAs and ARMs partner to launch new trade association; New association aims to represent the views of its members in relation to regulations and laws impacting APA and ARM businesses.
Wesley Bray – The Trade
Six Approved Publication Arrangements (APAs) and Approved Reporting Mechanisms (ARMs) have partnered together to launch the APAs and ARMs Association (APARMA). APARMA was founded by affiliates of Bloomberg, Cboe Europe, Euronext, London Stock Exchange, MarketAxess and Tradeweb Markets to represent the interests of companies who operate APAs and ARMs in the EU and the UK. Following the establishment of Mifid II, APAs publish post-trade transparency reports in financial instruments that have been traded off-venue, while ARMs submit transaction details to regulators on behalf of investment firms.

Battle lines are drawn over European consolidated tape plans; Cboe, AFME, EFAMA and BVI have drafted their position on how they think a consolidated tape should be implemented in Europe; the German finance ministry is reportedly leading the opposition.
Annabel Smith
Participants have drawn their battle lines as the ramp up towards the implementation of a consolidated tape in Europe continues. Following a working group meeting of the Council of Ministers on 24 May, Cboe and industry associations AFME, the European Fund and Asset Management Association (EFAMA) and German funds association BVI have published their position on plans for a tape: including their preference for a single pre-trade real-time tape provider and a recommendation for mandatory contributions.

Regulation & Enforcement

Robinhood agrees to settle customer lawsuit over 2020 outages
Jody Godoy – Reuters
Robinhood Markets Inc (HOOD.O) has agreed in principle to settle a proposed class action filed by customers in the United States who claimed the investment app’s outages in March 2020 shut them out of trading on pandemic-related volatility. The company filed notice of the pending deal with a San Francisco federal court on Thursday, saying it was resolving details of the agreement and would seek court approval of a settlement within 60 days. Court papers did not disclose how much Robinhood will pay to settle the action, which sought damages for a class of all U.S. users who held stock or options during a service outage on March 2, 2020.

CFTC roundtable on non-intermediation focuses on FCM benefits and default waterfalls; Wide-ranging discussion touches on customer protection, product suitability, self-certification, margin and liquidation issues
Jeff Reeves – FIA
The US Commodity Futures Trading Commission hosted a wide-ranging and at times contentious discussion on issues related to intermediation in derivatives trading and clearing on 25 May. The roundtable event was more than six hours long, and included representatives from CFTC-registered derivatives clearing organizations (DCOs) and futures commission merchants (FCMs) as well as trading firms, asset managers, agricultural industry representatives, academics, public interest groups, and others. Though the event was ostensibly about non-intermediation broadly, a great deal of discussion centered around the specifics of a recent request by FTX US Derivatives to amend its order of registration as a DCO to expand its existing non-intermediated model to permit the trading and clearing of margined products. That request would open the door for FTX to offer futures on cryptocurrencies, and possibly other asset classes, through a direct clearing model in which customers bypass FCMs and become direct members of the FTX clearinghouse. As a result, FTX founder and CEO Sam Bankman-Fried, who participated in person in the roundtable, spent a significant amount of time responding to both general concerns as well as specific questions about the FTX proposal.

Regulators Have a Shot at Bringing Competition to Derivatives Market
M. Todd Henderson & Geoffrey Manne – Real Clear Policy
While tech giants like Amazon and Google have drawn much of the Biden administration’s antitrust attention, a more significant — but as yet ignored — antitrust problem is flying under the radar in the less obviously sexy area of derivatives trading. While derivatives may seem like the kind of thing that only matters to Wall Street fat cats, futures trading is, in fact, how everyone from farmers to retailers to insurance companies hedge their risks. By spreading risk, derivatives lower the costs of risk taking and thus are the secret ingredient that has driven a great deal of recent American prosperity. Ensuring derivatives markets are competitive, innovative, and secure should be a national priority. Recently, much derivatives trading, especially in new asset classes, has moved overseas.


Brace for another selloff if U.S. stocks reach this technical ‘danger zone’
Joseph Adinolfi – MarketWatch
“Top Gun: Maverick” is taking American cinemas by storm, so it’s only right that Wall Street strategists would work some references to the classic 1980s franchise into their client research which is often shared with the media.
And now that U.S. stocks have broken a historic string of weekly losses, market analysts are looking to technical indicators to determine where the “danger zone” for equities might lie.

Sifting through the stock market wreckage
Maike Currie – Financial Times
After an exceptional 2021, this year was never going to be an easy ride for investors. With the world’s largest economy, the US, moving towards monetary normalisation, choppier market conditions were only to be expected. Add to this a brutal mix of snarled supply chains, rising inflationary pressures, Russia’s war in Ukraine and mounting fears about possible recessionary slowdown, and it’s made for a humbling experience even for seasoned investors.

Hedge funds pile into renminbi FX options
Ben St. Clair –
Hedge funds have cashed in on US dollar/renminbi moves in recent weeks, sending traded options volumes to at least three-year highs amid a surge in volatility in the recently calm pair.


Hot stocks may bring an initial thrill, but they’ll break your heart
Andrew Small – MarketWatch
My father was born ?in 1936 in Brooklyn. He attended Erasmus High School, earned a degree in chemical engineering from Brooklyn Polytechnic High School and then went on to study dentistry at New York University. He was a strong bridge player and loved tennis, golf and—most of all—downhill skiing. Just about everything my father wanted to do, he did well. But he wasn’t without flaws.

Market Slide Forces Rookie Traders to Grow Up Fast
Matt Grossman and Hardika Singh – WSJ
Lucas Daignault likes to glance at his E*Trade account before school or after his shifts at the supermarket. More days than not lately, it shows a sea of red.
Mr. Daignault, who just turned 18 years old, is mostly invested in a fund that tracks the S&P 500. The index is off to its worst start to a year in more than five decades, but he tries not to dwell on it. His strategy is to put about $500 a month into his brokerage account, and he has no plans to stop.

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