Euro Traders Betting on a Break of $1.10 This Month; Traders Line Up Bets Hong Kong’s Dollar Peg Will Snap

Aug 16, 2019

Lead Stories

Euro Traders Are Starting to Bet on a Break of $1.10 This Month
Vassilis Karamanis – Bloomberg (SUBSCRIPTION)
ECB stimulus, auto tariffs threat and charts back up bears; Jackson Hole symposium not seen a game changer amid trade woes
Options traders are starting to bet on the euro dropping below psychological support at $1.10 as the European Central Bank prepares a stimulus package amid a deepening global downturn and trade uncertainty.
/bloom.bg/2Nd5GXT

****SD: There are lots of FX options stories in today’s newsletter – see the below story and the CME disciplinary notices in our “Regulation” section.

Options Traders Line Up Bets That Hong Kong’s Dollar Peg Will Snap
Stephen Spratt and Gregor Stuart Hunter, Bloomberg via Yahoo
Options traders are ramping up bets against the Hong Kong dollar as the city’s political unrest grows more violent and a slide in the Chinese yuan shifts attention to one of the world’s longest-standing dollar pegs.
/yhoo.it/2TDDjD4

LSE market open delayed due to trading services issue; FTSE 100 and FTSE 250 stocks affected by market outage this morning on the London Stock Exchange.
Hayley McDowell – The Trade
The London Stock Exchange (LSE) was forced to delay its market open this morning as it investigates an issue with its trading services.
bit.ly/2YZHgIx

****SD: Bloomberg here.

The $3.4 Trillion Haven Where Investors ‘Hide Out for a While’
Vivien Lou Chen and Alex Harris – Bloomberg (SUBSCRIPTION)
Money-market funds rake in $18 billion in past week, ICI says; Inverted term structure of volatility in swaptions shows panic
As fears of a global economic slowdown deepen and stock prices swing wildly, many U.S. investors are running for cover in money-market funds.
/bloom.bg/33AXM00

****SD: With record breaking amounts of negative yielding debt out there, I find it kind of amazing you can still get 2.2% out of money market funds.

Exchanges and Clearing

MIAX Options Exchange – Activation Of Enhanced MIAX Order Monitor (MOM) – Effective August 19
Mondovisione
The MIAX Options Exchange will activate enhanced MIAX Order Monitor (MOM) effective Monday, August 19, 2019.
bit.ly/2TC4ezn

SIX Swiss Exchange denies report it could buy an EU-based bourse
Reuters
Swiss financial infrastructure group SIX Swiss Exchange is not looking to buy a bourse based in the European Union, it said on Friday, denying a report it could do so amid squabbling between Switzerland and the EU over a stalled treaty.
/reut.rs/2TEwNvX

Now the London Stock Exchange Is Back to Life, It’s Investigation Time
Chris Hughes – Bloomberg (SUBSCRIPTION)
The London Stock Exchange’s trading failure on Friday came at a bad time for the markets but a relatively good time for its newish CEO David Schwimmer. The former Goldman Sachs Group Inc. banker has been enjoying a glorious honeymoon. It had to end at some point.
/bloom.bg/2N6p4FH

Regulation & Enforcement

Ex-KPMG Partner’s Broker Probably Won’t Be Doing Any Insider Trading For a While
Jason Bramwell – Going Concern
The last man standing in the KPMG insider trading case (the one not involving Scott London) has finally fallen.
bit.ly/2TBEOBS

Notice of Disciplinary Action – R.J. O’Brien & Associates
CME Disciplinary Notice
Pursuant to an offer of settlement in which R.J. O’Brien & Associates, LLC (“RJO”) neither admitted nor denied the Rule violations upon which the penalty is based, on August 13, 2019, a Panel of the Chicago Mercantile Exchange Business Conduct Committee (“Panel”) found that on June 16, 2016, June 23, 2016, and June 24, 2016, an employee of RJO pre-hedged block trades in Euro FX options strategies by executing trades on Globex on the opposite side of the market in the same product as the requested block trade prior to consummation of the block trade. As a result of this activity, RJO realized an aggregate profit of $110,050. The Panel also found that the RJO employee failed to report two of the block trades to the Exchange within the required time period following execution. In addition, two RJO employees used each other’s Tag50 User IDs to execute trades. The Panel thereby concluded that RJO violated CME Rules 526, 526.F., and 576.
bit.ly/2TEoCzH

Notice of Disciplinary Action – Hicham Boularbah
CME Disciplinary Notice
Pursuant to an offer of settlement in which Hicham Boularbah (“Boularbah”) neither admitted nor denied the Rule violations upon which the penalty is based, on August 13, 2019, a Panel of the Chicago Mercantile Exchange Business Conduct Committee (“Panel”) found that on several dates in June 2016, Boularbah, a broker, acting on non-public order information from his customer, directed a broker at his clearing firm to execute trades on Globex in August 2016 and September 2016 Euro FX options strategies. Boularbah, without first obtaining the prior consent of the customer, used the average price of the Globex fills to price block trades for his customer, which allowed Boularbah’s firm to secure a portion of riskless profit. After a reach out by the Exchange, Boularbah’s firm returned its portion of the profits. The Panel thereby concluded that Boularbah violated CME Rules 532 and 432.T.
bit.ly/33EOQqo

Notice of Disciplinary Action – Hamza Slaoui
CME Disciplinary Notice
Pursuant to an offer of settlement in which Hamza Slaoui (“Slaoui”) neither admitted nor denied the Rule violations upon which the penalty is based, on August 13, 2019, a Panel of the Chicago Mercantile Exchange Business Conduct Committee (“Panel”) found that on several dates in June 2016, Slaoui, a broker, acting on non-public order information from his customer directed a broker at his clearing firm to execute trades on Globex in August 2016 and September 2016 Euro FX options strategies. Slaoui, without first obtaining the prior consent of the customer, used the average price of the Globex fills to price block trades for his customer, which allowed Slaoui’s firm to secure a portion of riskless profit. After a reach out by the Exchange, Slaoui’s firm returned its portion of the profits. The Panel thereby concluded that Slaoui violated CME Rules 532 and 432.T.
bit.ly/33E2Bpy

Strategy

How to Make the Stock Market’s Wild Swings Work in Your Favor
Steven M. Sears – Barron’s
On Aug. 13, 1979, BusinessWeek’s cover warned the nation of the Death of Equities. The Dow Jones Industrial Average was then at 867, and the magazine asserted that attacking inflation and rewriting the tax code was needed to save the stock market.
The Dow is now over 25,000 – and hardly dead – but the timing of the story’s 40th anniversary couldn’t be better. It’s as if the market gods have sent us a reminder to focus on the two key factors – volatility and time – that can help investors weather rough seas even when circumstances seem overwhelmingly dire.
bit.ly/33yNz4l

Using VIX Futures to Pinpoint Butterfly Option Spread Trade Entry
Mark Fenton – Futures Mag
-ATM long butterfly options spreads are purchased for debit
-Buy long butterfly options spreads in high implied volatility environment
-Using CBOE VIX futures to pinpoint high volatility options trade setup
bit.ly/33GWOiL

Miscellaneous

After A Year, Commodities Remain In The Trade War Crossfire
Gregor Spilker – CME Group OpenMarkets
U.S. soybeans remain one of the most affected U.S. commodities in the trade war, and history suggests there could be lasting effects
No increased tariffs on oil could mean that U.S. crude remains too important to the Chinese economy
bit.ly/2TEtNzH

Take Five: Fed in a hole
Reuters
On Wednesday, the U.S. Federal Reserve releases the minutes of its last meeting, revealing what policymakers said about the flattening Treasury yield curve and the strength of support for July’s quarter-point rate cut.
/reut.rs/33G1HJ6

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