Eurex plans options speed bump; “Volatility and the Fragility of the Medium”

Sep 27, 2018

Lead Stories

Eurex plans speed bumps to favour traditional investors – CEO
Futures exchange Eurex will impose a speed limit on trading from December that seeks to restore the balance between high-frequency traders and traditional investors, its CEO told Germany’s Boersen-Zeitung.

****SD: Wow. Here we go folks – a speed bump for an options market. This will be interesting to watch develop. “Latency protection would be offered on fixed-income options from December, Eurex said, and then be widened out to other products in 2019.”

What is Water in Markets? Volatility and the Fragility of the Medium
Artemis Capital Management
“This is Water” is the title of a commencement speech delivered by David Foster Wallace that has become a masterpiece of meta-thinking. If you haven’t listened to it, put down this paper and do so now. It is worth 20 minutes of your life. The Foster Wallace parable of two young fish ignorant of the medium that defines their reality is so important on many levels. Foster Wallace contends that we swim in a world defined by self-centered thoughts, that serve to make reality visible, but should never be mistaken as fundamental truth.

****SD: Artemis’ stuff is always a good read. (I check Artemis’ website from time to time so I don’t know how I missed this recent market note from July…)

China plans to launch iron ore options in 2019 – source
Muyu Xu, Manolo Serapio – Reuters
China aims to launch iron ore options next year, a source with direct knowledge of the matter said, as the world’s top buyer of the steelmaking raw material looks to offer more hedging tools to iron ore producers and steelmakers.

****SD: In direct competition with SGX.

More Chinese Stocks Are Coming to Global Indexes; FTSE Russell and MSCI actions show how much easier it has become to buy and sell mainland stocks through a link with Hong Kong
Shen Hong and Saumya Vaishampayan – WSJ (SUBSCRIPTION)
Two major index providers took steps to increase the influence of mainland Chinese stocks in their widely tracked global benchmarks beginning next yearóa vote of confidence in a market that has been battered by trade and economic concerns.

****SD: For more, see Reuters’ FTSE Russell includes China stocks in boon to battered market and MSCI considers boosting China’s index weighting, could add $66 billion of inflows

And now for the giant pay at Citadel in London
Sarah Butcher – efinancialcareers
It’s the equivalent of earnings season for London’s unlisted hedge funds and boutique M&A firms. Yesterday we had news of Balyasny Asset Management’s generosity in London. Today we have similar tidings from Citadel, the hedge fund and trading group run by U.S. investor Ken Griffin.

Exchanges and Clearing

Brokers Notch Wins in Fight Over NYSE, Nasdaq Data Practices; Regulators step up scrutiny of stock-price feeds sold by exchanges
Dave Michaels and Alexander Osipovich – WSJ (SUBSCRIPTION)
Banks and brokerages are starting to win more battles with big stock-market operators over the cost of data, threatening a lucrative revenue stream for the New York Stock Exchange and Nasdaq Inc.

Curiosity is the mother of innovation.
Thomas Book – Eurex
The financial landscape is constantly changing: changing investment behavior, regulatory requirements, new technologies, the challenges of upcoming Brexit as well as the changing business models of our clients – the list goes on and on. This is great as it requires constant innovation. And since Eurex has been an innovation leader since 1998 these items were just an initial impulse. Back then, we were a strong team of curious people – and we are still today. We take an interest in seeing how the world evolves and how we can bring markets forward. We are convinced that there is a necessity to think about innovative ways to reshape and reorganize our business model. This requires fundamental change in thinking it requires looking at our work from a client’s perspective.

****SD: I thought Frank Zappa was the mother of innovation or something?

John Lothian: “The breadth and complexity is the strength of Eurex” (part I)
We spoke with John Lothian, founder and owner of MarketsWiki, publisher of John Lothian News and long-time chronologist of the financial markets about his 20 years of Eurex.

****SD: Part II can be found here.

Popular WTI Crude Options Gaining Global Appeal
Matthew V. Veazey – Rigzone
Akin to insurance, oil options enable traders to pay a premium for the right – but not obligation – to buy or sell crude oil at a predetermined price at some point in the future.* According to a recent report by CME Group, options for NYMEX WTI Light Sweet Crude Oil futures have been very popular this year among traders from outside the U.S. during non-U.S. trading hours. In fact, CME observed last month that such trading is up by more than 20 percent so far this year.

Regulation & Enforcement

TFS-ICAP brokerage pleads guilty in U.S. to fraud in ‘spoofing’ probe
Jonathan Stempel – Reuters
The British brokerage TFS-ICAP Ltd and a U.S. affiliate on Wednesday pleaded guilty to securities fraud and agreed to pay a $1.15 million fine related to the reporting of fake trades in foreign exchange currency options, New York Attorney General Barbara Underwood said.

****SD: It’s been a big time for spoofing news of late.

SEC turns to Court as binary options firm EZTD fails to fully pay penalty and disgorgement
Maria Nikolova – FinanceFeeds
SEC seeks a Court order instructing EZTD to disgorge the balance of the $1,515,858 plus prejudgment interest of $57,691, and civil penalty of $200,000 it was required to pay.


Rates Traders Pare Back Bets on U.S. Recession, End to Fed Hikes
Cormac Mullen – BloombergQuint
Eurodollar markets shows reduction in 2020 rate-cut wagers; Positive sentiment on U.S. growth accelerating, Nomura says
Investors are rethinking the timing of the next U.S. recession, according to the Eurodollar market. The spread between December 2019 and December 2020 Eurodollar contracts has risen back above zero, suggesting short-end traders have pulled back from expecting a possible interest-rate cut after next year. The move suggests traders now see a hike as more likely than a cut in 2020.


OptionMetrics Announces Keynote for 7th Annual Research Conference; Jared Woodard, Ph.D., global investment strategist, Bank of America Merrill Lynch, to open ORC2018 in NYC on October 15
OptionMetrics, an options database and analytics provider for institutional and retail investors and academic researchers, is announcing Jared Woodard, Ph.D., global investment strategist, Bank of America Merrill Lynch, will keynote its 7th Annual Research Conference (ORC2018), Monday, October 15, Fordham University, New York City.


Crypto and Cannabis Are the Perfect Post-Crisis Bubbles
Joe Weisenthal – Bloomberg (SUBSCRIPTION)
Robo-traders and index funds may have taken over most of the stock market, but the psychology of bubbles is still strong.

Exclusive: Danske Commodities cuts position on Nasdaq’s Nordic power exchange after trader’s default
Lefteris Karagiannopoulos – Reuters
Danske Commodities, one of Denmark’s largest commodity traders, has reduced its trading position on Nasdaq’s Nordic power exchange after one trader’s default left a 114 million euro ($134 million) hole in Nasdaq’s clearing house buffers.

PutWrite ETF Family Planned Staff
A recent flurry of filings from WisdomTree outline the issuer’s plans for a full family of ETFs that offer exposure to put-write options strategies. The firm already offers the $239 million WisdomTree CBOE S&P 500 PutWrite Strategy Fund (PUTW) and the $5 million WisdomTree CBOE Russell 2000 PutWrite Strategy Fund (RPUT).

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