Observations & Insight
STA 2020: New Exchanges Taking Seats at the SIPs Table
By Suzanne Cosgrove – JLN
Given that there are currently more than a dozen U.S. equity exchanges, why launch new ones?
One reason is to lower costs, but another is to have a voice in governance and market structure, according to Jonathan Kellner, CEO of MEMX and Tom Gallagher, chairman and CEO of the MIAX Exchange Group, both of whom launched new equity exchanges in September.
MEMX was built as a start-up with the help of member investors with more than $135 million from firms including Charles Schwab Corp., Citadel Securities, Goldman Sachs Group Inc. and Virtu Financial Inc. MIAX added an equity exchange to its three options exchanges.
Kellner noted MEMX is focused on the trading side of the business and not on listings. MEMX will initially give away data and connectivity. “But the plan is not to lose money,” Kellner said. When we reach a higher volume of trading, we will begin to charge, he said. The questions will be what are the right margins and costs.
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Mini VIX Futures – Trading Views with Cboe’s Arianne Criqui
Arianne Criqui, head of options and global client services at Cboe, talks shop about the 47-year-old exchange’s popular new mini VIX futures and how its customers can benefit from their use.
Father of VIX Warns Options Glitch Is Costing Investors Millions
Alex Longley and Katherine Greifeld – Bloomberg
Options on tech stocks may have dominated the headlines, but one of the leading minds in finance reckons this year’s crazy markets have been stirring up trouble elsewhere in the system.
Robert Whaley, the man who created the VIX Index, is investigating a major problem in the market for derivatives of exchange-traded products.
Biden Poll Lead Dents Case for Costly Election Volatility Trades
Joanna Ossinger – Bloomberg
The possibility of a decisive election victory by Joe Biden and the Democratic Party is chipping away at the cost of hedges against market turbulence surrounding the vote.
The spread between December futures linked to the Cboe Volatility Index and their November counterparts — a proxy for fears about a contested or delayed result — has fallen from its early September high. Biden leads by almost 10 percentage points in the latest RealClearPolitics average of polls amid speculation about a Democratic sweep of Congress, a contrast to previous concerns about a tight contest.
Investors’ bets on a Democratic sweep grow after Biden debate performance
April Joyner and David Randall – Reuters
The debate between Democratic presidential candidate Joe Biden and President Donald Trump, marred by frequent interruptions and name-calling, did little to enlighten the electorate. But it was enough to turn the consensus on Wall Street toward Biden.
The fractious Sept. 29 faceoff led to a jump in Biden’s lead over President Donald Trump in several national polls, fueling moves in a broad range of assets sensitive to a decisive Democratic victory, from clean energy companies and U.S. government bonds to foreign exchange derivatives that hedge against market volatility.
Goldman Sachs senior strategist warns stocks could see ‘considerable’ pre-election downside that isn’t being factored into models
Emily Graffeo – Markets Insider
Goldman Sachs’ Abby Joseph Cohen told Bloomberg on Thursday that markets could soon see “considerable downside” based on factors that financial models cannot predict.
What Congress will do next, what the president will say, and how the election will end cannot be forecasted by modeling, the senior investment strategist said.
U.K. Urges Finance Execs to Prep For Market Volatility on Brexit
Silla Brush – Bloomberg
The U.K.’s two financial regulators urged the industry to finish final preparations for a potentially messy no-deal Brexit.
CME Sounding Out Crypto Traders to Gauge Market Demand for Ether Futures, Options
Muyao Shen, Zack Voell – Coindesk
The Chicago Mercantile Exchange (CME), the largest U.S. regulated market for bitcoin futures, has been sounding out cryptocurrency traders to gauge their interest in a listing of futures and options for the Ethereum blockchain’s native tokens. Darius Sit, founder and chief information officer at Singapore-based QCP Capital, told CoinDesk in an interview that CME had asked his firm whether it might be interested in trading ether (ETH) derivatives on the exchange. Ether is the second-largest cryptocurrency by market capitalization, at $41 billion.
Exchanges and Clearing
MGEX Enters the Top-20 Record Book
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), reports that yesterday, October 7th was the 17th best day in the history of the exchange with a total volume of 24,994 contracts. This record ties the current record holder, June 27th 2017.
CryptoCompare: Binance Takes The Top Spot For Derivatives Trading Volume In September
CryptoCompare has just released its September Exchange Review which covers monthly trends in exchange volumes and this month also features survey data from 26 exchanges. September has been an eventful month despite Bitcoin’s lower volatility: Binance took the top spot for derivatives trading volume, CME options volumes rose 79%, Kraken won Bank Charter approval and Uniswap saw more trading volume than Coinbase last month. Below are the key highlights from our September Exchange Review.
LSE Will Sell Borsa Italiana To Euronext. Why It’s Good News All Around
Jack Denton – Barron’s
The London Stock Exchange has confirmed that it will sell Borsa Italiana to its rival Euronext for EUR4.3 billion ($5.1 billion), paving the way for regulators to approve its $27 billion acquisition of data provider Refinitiv.
Shares in FTSE 100-constituent LSE rose slightly while Euronext stock dropped more than 5%.
FLASH FRIDAY: Too Many is Never Enough
Traders Magazine Editorial Staff
Are there too many equity exchanges in the U.S.? Most market participants would say yes, 16 is a fairly ridiculous number of exchanges; market structure would be better and simpler, and choice and price competition would be sufficient, with half that number. But there are always venue operators and entrepreneurs who see room to squeeze in one more exchange business model.
People News – September/October 2020
FIA Marketvoice Staff
FIA regrets to report that Kevin Baldwin, who served as education director for the Institute for Financial Markets from 2006 to 2014, has passed away. Baldwin’s passion was teaching the uses and benefits of derivatives, and he educated thousands of market participants and regulatory staff internationally, including in the US, UK, India, Turkey and Singapore. He also taught as adjunct professor of finance at the University of Illinois at Chicago’s Liautaud Graduate School of Management on behalf of the IFM, an independent affiliate of FIA. Prior to joining the IFM, Baldwin spent two decades as a futures and options strategist, senior trader, instructor and introducing broker. He began his futures career in 1989 with Refco.