China Plans Biggest Futures Market Overhaul Since 2015 Clampdown

Aug 8, 2019

Lead Stories

China Plans Biggest Futures Market Overhaul Since 2015 Clampdown
China is mulling the biggest changes to its futures market since 2015, an overhaul that would give global investors unprecedented access, make it easier to execute bearish trades, and lay the groundwork for wagers on stock-market volatility.

Bond Yields Fall, Sparking Volatility in Stocks
Gunjan Banerji – WSJ (SUBSCRIPTION)
A flight to safety that drove down bond yields globally sparked renewed volatility in the stock market Wednesday, highlighting continued uncertainty about how the trade and currency battle between the U.S. and China will play out.

This Might Be the Bond Market’s Dot-Com Moment
John Authers – Bloomberg (SUBSCRIPTION)
Stock markets are known for often going too far. So can bond markets, although they tend to go mad a little less often, and to do so in a way that’s far less visible to the general public.
And as bond markets are generally thought to be more sober, the extraordinary rally in recent weeks has generally been taken as a sign that a recession is at hand. That, after all, is what $15 trillion in negative-yielding bonds around the world, and a virtual all-time low in the 30-year U.S. Treasury bond, would imply. But it is at least possible that this is the moment when the three-decade-long bull market in bonds has at last reached an untenable extreme, ready to snap back. This might, in other words, be the bond market equivalent of early 2000 and the dot-com bubble in the stock market.

Volatility rules in an uncertain world
Robert Guy – Financial Review (SUBSCRIPTION)
The spike in volatility has exposed the sum of all fears for traders of stocks, bonds, currencies and commodities.
Gone is the low volatility grind higher in stock and bond prices. Instead a new phase of ulcer-inducing whip-sawing price action has emerged amid the cross currents of an increasingly hostile trade war, Beijing’s weak yuan manoeuvring, central banks racing to lower interest rates on growth fears, and a US president-cum-monetary policy puppet master unnerving markets with every tweet.

Sterling stuck near two-year lows, markets see more selling
Olga Cotaga – Reuters
Sterling was stuck on Wednesday around its weakest levels since 2017, having matched a two-year low against the euro, as investors further priced in the probability of Britain leaving the European Union without a deal in place.
Boris Johnson, who took over as prime minister two weeks ago, has said he would take Britain out of the EU on Oct. 31, with or without a divorce agreement to smooth ties with the bloc.

****JB: Is there anyone left who thinks a No-Deal Brexit will be avoided? Really asking…I cannot think of anyone.

The direction of the US stock market is being determined by China’s currency right now
Yun Li – CNBC
all Street is obsessed with the yuan right now.
At 9:44 a.m. ET, the Chinese offshore currency hit an intraday low against the dollar. Merely two minutes later, the S&P 500 slumped to the low of the day of 2,824.45. Stocks quickly rebounded in the afternoon with the S&P 500 erasing a 2% loss just when the yuan started to stabilize.

Automated selling has exacerbated US market swings, say analysts
Richard Henderson – Financial Times (SUBSCRIPTION)
Computer-driven investment strategies that automatically sell when market turbulence erupts have exacerbated this week’s swings, offloading up to tens of billions of dollars’ worth of US shares, according to analysts.
So-called “volatility-targeting” funds that manage about $400bn in assets have bought up stocks this year as markets have calmed since markets’ dramatic end to 2018. But the renewed turmoil means they were pegged to sell $50bn by the end of Wednesday, according to Wells Fargo estimates.

Trump Keeps Accidentally Igniting Dollar With His Trade War
Anchalee Worrachate – Bloomberg (SUBSCRIPTION)
No wonder he’s frustrated: Donald Trump’s intensifying battle with China and other major trading partners is morphing into a global currency war, and it will be hard for him to win both.
The president once again bemoaned dollar strength on Thursday, saying in a tweet he wasn’t thrilled with it and calling on policy makers to slash interest rates. Yet the trade tensions he has stoked have supported the currency this year.

Stocks to Trade Sideways for Next Few Weeks, Prosper Trading Academy CEO Says
Bloomberg (VIDEO)
On this edition of “Options Insight,” Prosper Trading Academy Chief Executive Officer Scott Bauer examines the recent stock market volatility and what it means for the future of equities with Bloomberg’s Abigail Doolittle on “Bloomberg Markets: The Close.”

Exchanges and Clearing

CME Group Declares Quarterly Dividend
CME Group
CME Group Inc., the world’s leading and most diverse derivatives marketplace, today declared a third-quarter dividend of $0.75 per share, payable September 25, 2019, to shareholders of record as of September 10, 2019.

Euronext announces volumes for July 2019
Euronext, the leading pan-European exchange in the Eurozone, today announced trading volumes for July 2019.
Following the completion of the acquisition of Oslo Børs VPS, July figures incorporate, for the first time, all Oslo Børs exchange activity (including Fishpool in future commodity and OTC derivatives designated as Taylor Made), comparable figures are provided for information.
Derivatives trading:
In July 2019, the overall average daily volume on derivatives reached 502,577 contracts, down -11.7% compared to July 2018 and down -13.4% compared to the previous month. In detail:
? the average daily volume on equity index derivatives reached 212,720 contracts, up +2.3% compared to July 2018 and down -11.3% from the previous month,
? the average daily volume on individual equity derivatives reached 228,018 contracts, down -15.2% compared to July 2018 and down -17.3% from the previous month,
? the average daily volume on commodity derivatives reached 58,814 contracts, down -30.1% compared to July 2018 and up +13.8% from the previous month.
? the average daily volume on Taylor-Made derivatives reached 3,024 contracts, down -61.6% compared to July 2018 and down -76.9% from the previous month.
Year-to-date, the overall average daily volume on Euronext derivatives stood at 593,414 contracts (-5.3% compared to 2018 YTD) and the open interest was at 17,829,862 contracts (-12.3% compared to the end of July 2018).


What a Rapid-Fire VIX Double Means for Stocks
Andrea Kramer – Schaeffer’s Investment Research
After falling every single day last week, stocks on Monday suffered their worst one-day sell-off of 2019, as the U.S.-China trade war came to a boil. As a result, the Cboe Volatility Index (VIX) — also known as Wall Street’s “fear gauge” — skyrocketed into territory not charted since early January. In fact, the VIX’s surge was so dramatic it set off a signal seen only four other times in the index’s history. Below, we take a look at what that could mean for stocks over the next year.

****JB: This article is a day old now but still an interesting analysis.


Dow erases 589-point skid to end nearly flat in sharpest turnaround in 7 months
Mark DeCambre – MarketWatch
U.S. stocks on Wednesday mustered modest gains following a dramatic turnabout, with all three key equity benchmarks recovering from losses of at least 1% which were partly driven by signs that global economic growth was slowing as the U.S. – China trade war intensifies.

****JB: Whiplash is what comes to mind.

Assured Guaranty Buys Hedge Fund BlueMountain for $160 Million
Mary Childs – Barron’s
Assured Guaranty (ticker: AGO) is buying hedge fund BlueMountain Capital for about $160 million as the insurer builds a money-management business.
That includes buying a stake from Affiliated Managers Group (AMG) for $91 million in cash.

Hedge fund Hoplite Capital plans to shut down – letter
Svea Herbst-Bayliss – Reuters
Hedge fund Hoplite Capital is returning money to outside clients after a period of sluggish returns, the firm’s founder, John Lykouretzos, told investors in a letter on Wednesday.

The Buy Side Ranks its Brokers
Larry Tabb – TABB Forum (SUBSCRIPTION)
TABB Group’s 15th annual Institutional Equity Trading (IET) report included interviews with heads of trading at 92 buy-side firms. Here, TABB Group founder and research chairman Larry Tabb reveals the buy side’s top brokers based on commissions, algo provision, and non-electronic block trading.

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