Delta One to Launch Equity Finance Marketplace; IMF Warns of Continued Vol Spikes

Apr 11, 2019

Observations & Insight

US v Jitesh Thakkar: Waiting for the Denouement
Thom Thompson – John Lothian News

According to Merriam Webster, the (second) definition of “denouement” is “the outcome of a complex sequence of events.”

On Monday, April 8, the twelve members of the jury in the trial (surely “a complex sequence of events”) of Jitesh Thakkar for allegedly aiding and abetting Navinder Sarao’s 2013 spoofing of the CME’s E-mini S&P 500 futures heard final arguments and retired to deliberate. Which they did over a more than 24 hour period.

But, as we reported, the jurors found no unanimity and were sent home late Tuesday afternoon. There was no final outcome, no denouement.

To read the rest of this commentary, go here.


Six-month Brexit delay sends sterling into the doldrums
Tommy Wilkes – Reuters
The pound stumbled below $1.31 on Thursday after a delay of up to six months to Brexit left traders scratching their heads about the direction for the British currency, with few expecting wild price swings in the months ahead.

****SD: How perfect is the Halloween deadline shift? Social commentary from Time – The Neverending Nightmare of Life in Brexit Britain; EU politics angle from Bloomberg – Macron Gets on Everyone’s Nerves With Brexit Tough Guy Act; and CNN with the UK political angle – Halloween Brexit delay could mean a summer nightmare for Theresa May.


Building a Crypto Market in Traditional Futures Exchange Form – Thomas Chippas, ErisX

Early crypto exchanges weren’t bred from any tradition – they were born on the far fringes of capital markets know-how. To change that, ErisX brought together a staff with decades of experience in fields like prime broking, matching engine functionality, and central clearing, to build its exchange that will feature spot and futures contracts side-by-side. The result? A 24/7 real-time clearing platform for fiat and physical delivery of crypto. In this video from JLN’s Industry Leader Series, ErisX CEO Thomas Chippas talks about how innovating in crypto sometimes just means applying technologies and methodologies that are already established in other markets, the exchange’s expansive investor base, and what it is going to take for crypto trading to take off on regulated U.S. exchanges.

Watch the video »


March Volumes via FIA
FIA reports in its March 2019 volume stats that worldwide volume of exchange traded derivatives was 2.86 billion contracts for the month, up 18.7% from the previous month and up 11.7% from March 2018. On a year-to-date basis, volume in the first three months of the year was 7.97 billion contracts, up 8.1% from the first three months of 2018. Total open interest at the end of March was 876.1 million contracts, up 2.6% from a year ago.~SR

Lead Stories

IMF warns recent volatility spikes could be ‘tip of the iceberg’
Robin Wigglesworth – Financial Times (SUBSCRIPTION)
Recent abrupt gyrations in financial markets could be the “tip of the iceberg”, according to a top International Monetary Fund official.
Since the financial crisis, stricter regulations and commercial pressures have forced many banks to pare back or close their once-vast proprietary and market-making desks.

Delta One Brings Transparency, Liquidity and Actionability to the Equity Finance Marketplace
Delta One, LLC and Dynamex Trading, LLC are pleased to announce the upcoming launch of Delta One, a fully transparent, liquid, and actionable equity finance marketplace. The platform enables market participants to quickly and efficiently compare rates, identify trading opportunities, and match against the options market to optimize finance rates and balance sheet usage in a way that’s never been possible before. The platform will be available exclusively for Dynamex customers on July 1st, 2019 with detailed information about Delta One currently available at

****SD: Henry Schwartz with some context via LinkedIn – “Rev/Con trading set a quarterly record in Q1 2019 with 10M contracts executed vs half a billion shares! $LLY, $ELAN, $COTY tenders dominated. Fortunately [TradeAlert] rolled out real-time Rev/Con alerts and recaps just in time!”

Cboe Global Markets, Inc. Annual Report 2018
I am pleased to report another year of record financial results at Cboe Global Markets, fueled by
increased trading across our five business segments and record volume in our proprietary products. Record 2018 revenue combined with solid expense discipline and synergy execution resulted in strong cash flows from operations, allowing Cboe to invest in future growth while returning over $270 million to shareholders through share repurchases and dividends. We have raised our quarterly dividend per-share each year since our IPO in 2010, bringing the annualized dividend growth rate to 15 percent. As of December 31, 2018, we achieved a total shareholder return of approximately 101 percent over the past five years, significantly outperforming the S&P 500.

5 Questions with Options Trader Adam Webb
Brian Mehta – Trading Technologies
Adam Webb began his trading career in the mid-’90s, working on the London FX spot desk at Goldman Sachs. By 2002, he was running one of the world’s top global exotic options books. Adam left Goldman in 2004 to set up a small boutique market making business focused entirely on exchange-listed options products, and he has been running that business ever since. Adam recently moved to the TT platform and is using the Advanced Options Package. You can contact Adam though his Macrohedged website and follow him on Twitter at @macrohedged.

Jeremy Isaacs: Lehman was the wrong option
Peter Lee – Euromoney
Jeremy Isaacs started as a blue-button at Smith New Court (later acquired by Merrill Lynch in 1995), working on the London Stock Exchange as a trainee trader at one of the biggest stock jobbers. He was in at the start of equity options in the early 1980s.

****SD: Euromoney is celebrating its 50th anniversary.

Bull Run Doubts Outweigh FOMO as Apathy Reigns in U.S. Stocks
Luke Kawa – Bloomberg (SUBSCRIPTION)
Light volumes, low volatility, little conviction. In U.S. stocks, fear of future falls outweighs any fear of missing out.
Trading activity across NYSE and Nasdaq exchanges is running at its slowest two-week pace since the S&P 500 Index hit its all-time high in September. It’s a similar story for the world’s largest exchange-traded fund, the SPDR S&P 500 ETF (SPY). Six of the 10 least-traded days this year have come in the past 10 sessions; volumes are running about half what they were during the same two-week stretch in 2018.

Fed weighs ‘significant uncertainties’ over global economy
Sam Fleming – Financial Times (SUBSCRIPTION)
Federal Reserve officials kept their options open for the next move in interest rates in their latest meeting as they weighed “significant uncertainties” over the US and global economic outlook.
Minutes to the latest Fed meeting in March indicated a high degree of uncertainty over the policy prospects, with some officials stressing their outlook could “shift in either direction” as they seek to determine whether a weak bout of growth will persist.

Derivatives: From innovation to exploitation… and back again?
Jon Macaskill – Euromoney
The use of a derivative agreement to mitigate risk can be traced back to around 1754 BC, when the Code of Hammurabi was set in stone in Babylon.

Exchanges and Clearing

OCC Re-elects Donohue as Executive Chairman, Elects Member and Public Directors at 2019 Stockholder Meeting
OCC, the world’s largest equity derivatives clearing organization, today announced the re-election of Craig S. Donohue as Executive Chairman of the Board, along with the election of three Class III Member Directors and two Class I Public Directors to its Board of Directors. The vote took place during OCC’s annual stockholder meeting on April 10.
The following Directors were unanimously elected as Class III Member Directors:

Eurex Exchange – Equity Index Highlights – April 2019 edition

Eurex Exchange – Fixed Income Highlights – April 2019 edition

Erik Müller joins ISDA Board of Directors
Eurex Exchange
Three new directors join the board of the International Swaps and Derivatives Association (ISDA), among them Erik Tim Müller, CEO of Eurex Clearing. “ISDA works hard on making the global derivatives markets safer and more efficient. I am looking forward to contributing to this important work”, says Müller.

SGX reports market statistics for March 2019
Singapore Exchange (SGX) today released its market statistics for March 2019. Risk management was a major theme during the month, with commodity supply disruptions in Brazil and Australia spurring hedging demand for iron ore. Positive investor sentiment also drove market activity, with SGX’s equity-index futures volume achieving a record high of 18.6 million contracts in March, as portfolio investors managed their exposure to the Chinese and Japanese stock benchmarks. SGX’s derivatives volume marked a record first quarter, with a daily average of more than 1 million contracts changing hands per quarter for the first time.

Dalian Commodity Exchange To Accelerate Listing Of Iron Ore Options
At the 2019 FOW Derivatives World Asia (FOW DW Asia) held in Hong Kong on April 3, an official of Dalian Commodity Exchange (DCE) says that smooth operation has been seen in iron ore futures since it ushered in overseas traders, presenting a good start. DCE will continue to optimize relevant systems, accelerate the listing of iron ore options, and gradually roll out more products for the internationalization business upon research.

Regulation & Enforcement

Fed urges U.S. financial industry to accelerate Libor transition
Michelle Price and David Milliken – Reuters
The U.S. financial industry must accelerate efforts to move away from the scandal-plagued Libor reference interest rate, Federal Reserve Governor Randal Quarles said on Wednesday, adding that the regulator was scrutinizing banks’ transition plans.

Exotic Finance Products Are Back Under Korean Watchdog Spotlight
Heejin Kim – Bloomberg (SUBSCRIPTION)
South Korean moms and pops are piling into exotic finance products with catchy names like “super lizard” and “double-chance.” Some even come with complementary beauty products and department store vouchers. For an industry with a checkered past, regulators see changes afoot.

****SD: If the product sounds like it could be the name of a scratch-off lotto game, maybe it should get looked at.


Gamification and the Future of (Alternative) Data
Paul Rowady – Alphacution Research Conservatory
Whether you are a consumer or purveyor of data for the application of financial markets risk transfer, there’s something in here for you. Let’s start with a quick trip in the Wayback Machine: In a report that I authored for TABB Group that was published in June 2011, “Quantitative Research: The World After High-Speed Saturation,” one critical concept presented there that has proven itself to stand the test of time, and I expect to continue to do so for the foreseeable future, is this:
“As strategies and quant directives change, the need for effective communication with stakeholders will march in parallel. Though quants are not usually known for their silver tongues, we strongly encourage them to meditate on one word: pictures.
Rather than turning your backs on spreadsheets, embrace them as the best solutions for reporting, visualization, collaboration and concept development. At the higher end, enhanced information design techniques are the best panacea for navigating the scale and complexity of oncoming data challenges.”


FX Options Skews: Economics and Implications
CME via
Nearly all options markets exhibit some kind of natural skewness. For example, out-of-the-money (OTM) put options on equity index futures are typically more expensive than OTM call options: investors typically fear a sudden fall in stock prices more than a sudden rise and, hence, are willing to pay more for downside than upside protection. In agricultural markets, skew tends to work the opposite way. On corn, soy and wheat options, for example, OTM call options are usually more expensive than OTM puts. Food buyers fear a sudden spike in the price of these crops in the event of a bad harvest more than farmers fear a sudden price decline in the event of an exceptionally good harvest.

How to Play Apple Stock’s Surge
Steven M. Sears – Barron’s
Fear. It’s percolating in the stock market, and it’s something that long-term investors should embrace. Fear should be viewed as a tool that can be used to buy quality stocks at potentially favorable prices. We say that despite recently focusing on ways to hedge stock portfolios against a broad market decline. After all, this bull market is some 10 years old, and many smart investors, as first-quarter earnings season is set to begin, are increasingly wondering if this is as good as it gets.

VIX: Is a Pattern Emerging?
Sage Anderson – tastytrade blog
Since exploding higher at the end of 2018, the VIX has steadily declined in the last several months.
Although it may seem hard to believe, the world’s best-known thermometer for market volatility hasn’t been above 19 (its historical average) since the end of January – over 60 days of relative “complacency.”

‘Brace yourself for a choppy ride’: A Wall Street investment chief overseeing $237 billion warns of a ‘panicky’ market — and lays out 4 ways traders can stay safe
Marley Jay – Business Insider Prime (SUBSCRIPTION)
The market’s future is getting cloudier, according to one of Deutsche Bank’s investment leaders, who says investors need to protect themselves against an increasingly unsteady market.


Conference Recap: Asset Management Derivatives Forum 2019
From February 13-15, 2019, FIA and the SIFMA Asset Management Group hosted their annual forum, which brings together market participants from all sides of a trade to examine the latest developments in global derivatives trading and clearing, operations and regulation. More than 400 attendees examined important trends related to regulatory recalibration and industry collaboration.

Short Sellers Wait and Wait and Wait for Canadian Banks to Sink
Doug Alexander and Natalie Wong – Bloomberg (SUBSCRIPTION)
Falling home prices, rising debt are arguments against lenders; Latest ‘Great White Short’ has yet to pay off as shares rise
Canadian households are wallowing in debt. Home prices are falling. Credit growth, the key driver for bank earnings, is hovering close to its slowest pace since 1983. All of which should be bad news for the country’s lenders — and good news for investors betting against them. “Should” being the operative word.

There Are Huge Objects That Swallow Energy, Galaxies and Money
Mark Gongloff – Bloomberg (SUBSCRIPTION)
Today humanity got its first real look at a black hole, a super-massive object that sucks all light and matter into its maw, never to be seen again. Also known as the derivatives market! I’ll be here all week, folks.

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