China launches gold options as prices near six-year highs; U.S. Stocks Move Higher on Quadruple-Witching Day

Dec 20, 2019

Lead Stories

China launches gold options as prices near six-year highs
Emily Chow – Reuters
China, the world’s top bullion producer and consumer, launched its first gold options contract on the Shanghai Futures Exchange on Friday, adding to an array of investment options for the metal that saw prices hit six-year highs this year.
Gold prices globally have gained about 15% so far this year and are set for their strongest annual increase since 2010, as global growth concerns and uncertainties over the U.S.-China trade war boosted the metal’s appeal as a safe haven.

U.S. Stocks Move Higher on Quadruple-Witching Day
Todd White and Vildana Hajric – Bloomberg
U.S. equities moved higher on Friday alongside European stocks as investors counted down to the holiday break. The dollar edged up while Treasuries were little changed.
The S&P 500 Index rose from Thursday’s record close, led by technology and health-care shares. The Stoxx Europe 600 also jumped above its previous all-time high. Both markets are expected to be volatile as major indexes rebalance and options and futures on indexes and stocks expire in what’s known as quadruple witching.

JPMorgan Mulls Upping Vol Call as Clients Protest Recommendation
Katherine Greifeld – Bloomberg
JPMorgan Chase & Co. may double down on a call for increased volatility in currency markets, saying that a client backlash over its forecast demonstrates how overly complacent investors have become.
In the bank’s year-ahead currency outlook, analysts noted on Nov. 22 that plunging volatility had made bets on an increase “ultra-cheap.” While not anticipating a “V-shaped” rebound, they wrote that abnormally low levels argued for allocating larger-than-average risk to bullish volatility positions, either through options or outright longs.

U.S. gas volatility diminishes on higher output and exports: Kemp
John Kemp – Reuters
Not even a relatively cold start to the winter heating season and a record volume of gas-fired power generation has been enough to prevent U.S. natural gas prices getting hammered since the start of November.
Traditionally severe seasonal swings in inventories and prices are being softened by surging domestic production and the increasing international integration of the U.S. gas market through LNG exports.

Dow, S&P 500 and Nasdaq surge to record intraday highs with stocks set to notch fourth straight week of gains
Chris Matthews and Mark DeCambre – MarketWatch
U.S. stocks touched new records Friday during a ‘quadruple-witching session,’ which will see the expiration of December stock options along with stock index futures and options, after setting more records in the previous session. Investors were also digesting an update on third-quarter U.S. GDP growth that showed strong consumer spending was offset by weaker business investment in inventories, while in the fourth quarter consumer spending climbed at its fastest pace in four months in November.

Exchanges and Clearing

Intercontinental Exchange Reaches Open Interest Records in Brent Crude Oil Futures and TTF Natural Gas
Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced record open interest of 2.71 million contracts in Brent Crude Oil futures and 2.21 million contracts in TTF futures and options. As of December 17, and on a year-over-year basis, Brent Crude Oil futures open interest is up 22% versus the prior year, while open interest across TTF futures and options is up 73%.

Robinhood just got fined $1.25 million by its regulator for how it executed trades — and it highlights the issues that can arise with payment for order flow
Dan DeFrancesco – Markets Insider
Robinhood, the buzzy startup that made a name for itself by offering commission-free stock trading, was fined on Thursday by its regulator, which said it found violations around how Robinhood executed clients’ trades.
The Financial Industry Regulatory Authority, which regulates US broker-dealers, said it fined Robinhood $1.25 million for “best execution” violations from October 2016 to November 2017. The startup also agreed to bring on an independent consultant to review its “systems and procedures related to best execution,” FINRA said.

Binance Takes Minority Stake in Crypto Derivatives Exchange FTX
Olga Kharif – Bloomberg
Binance Holdings Ltd., one of the world’s largest cryptocurrency-trading platforms, made a minority investment in the derivatives exchange FTX.
The investment was in the “tens of millions,” and values FTX, which debuted in May, in the “hundreds of million of dollars,” said Sam Bankman-Fried, who founded the exchange and also heads the crypto-trading firm Alameda Research.

Checking in on Micro E-Mini Volume Trends
Russell Rhoads – TABB Forum
Despite initial questions, the launch of Micro E-Mini futures could be considered one of the most successful product launches in years, especially for the S&P 500 and Nasdaq-100 contracts. TABB Group head of derivatives Russell Rhoads analyzes Micro contract and related volumes to provide perspective on the market trends.

Regulation & Enforcement

Options Regulatory Alert #2019 – 29
Effective December 23, 2019, the market maker quarterly quote width requirements on Nasdaq PHLX (PHLX), The Nasdaq Options Market (NOM), Nasdaq BX (BX Options), Nasdaq ISE (ISE), Nasdaq GEMX (GEMX) and Nasdaq MRX (MRX) will be effective through March 20, 2020. The exchanges may, in their discretion, amend these requirements by providing notice to members. Please note the added underlying option classes from the previous month bid/ask differentials

Options Regulatory Alert #2019 – 3
Effective December 23, 2019, the below market maker quote width requirements for options overlying MKL, NDX and BKNG on Nasdaq PHLX (PHLX), The Nasdaq Options Market (NOM), Nasdaq BX (BX Options), Nasdaq ISE (ISE), Nasdaq GEMX (GEMX) and Nasdaq MRX (MRX) will be effective through March 20, 2020. The exchanges may, in their discretion, amend the bid/ask differentials by providing notice to members.


Eurex fixed income sales and clearing deputy global head departs after 14 years
Hayley McDowell – The Trade
Eurex Group veteran and deputy global head of fixed income trading and sales, Byron Baldwin, will leave the exchange operator at the end of this month after 14 years. Baldwin confirmed in a post on social media that he will leave after first joining Eurex in 2005. Since then, he has held various business development roles with the derivatives market operator across OTC clearing, listed derivatives and client asset protection for institutional investors.

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