Fear fading on Wall Street as investors learn to love the new bull market; Are global macro hedge funds enjoying renaissance – or a final hurrah?

Aug 20, 2020

Observations & Insight

DOJ Settles Criminal Spoofing Charge Against Scotiabank for $60.4 Million;
CFTC Sanctions Bank of Nova Scotia $17 Million for False Statements Re: Spoofing
By Thom Thompson – John Lothian News

The Department of Justice announced on Wednesday that it was settling its criminal spoofing case against the Bank of Nova Scotia for its role in a “. . . massive price manipulation scheme aimed at falsely manufacturing the prices of precious metals futures contracts . . .”

The Commodity Futures Trading Commission ordered the Bank of Nova Scotia to pay $77.4 million for spoofing and making false statements. $60.4 million of the amount announced by the CFTC is to be split with the Department of Justice. $17 million is the penalty for making false statements to investigators.

In a separate action, the commission ordered Scotiabank to pay $50 million for swap dealer compliance and supervision failures and false statements.

The charges against Scotiabank for spoofing and making false statements with regard to the CFTC’s spoofing case come as something of a surprise, since the commission had settled spoofing charges against the bank less than two years ago. In a slap on the wrist on October 1, 2018 the CFTC ordered Scotiabank to pay $800,000 to settle charges of spoofing the gold and silver futures contracts on CME’s Commodity Exchange (COMEX) from June 2013 through June 2016 “by and through traders on its precious metals trading desk.”

To read the rest of this story, go here.

Lead Stories

Fear fading on Wall Street as investors learn to love the new bull market
April Joyner and Tom Westbrook – Reuters
Fear is ebbing on Wall Street, with stocks on a bull run in the midst of the global coronavirus pandemic.
The Cboe Volatility Index , known as Wall Street’s “fear gauge,” is near its lowest level since late February and options markets are showing diminishing concerns of a near-term drop in equities.
/reut.rs/3gk55y9

Are global macro hedge funds enjoying renaissance – or a final hurrah?
Robin Wigglesworth via LinkedIn
Volatility is back with a vengeance as the coronavirus crisis has engulfed the global economy. This has nurtured a renaissance for many macro hedge funds, with some notching up gains not seen since their 1990s heyday.
/bit.ly/3aFcA1w

London to maintain grip on EU financial market plumbing post Brexit
Huw Jones – Reuters
London will remain a big part of Europe’s financial market plumbing well beyond Brexit as the coronavirus pandemic has thwarted Frankfurt’s ambitions to grab billions of euros worth of derivatives clearing business from Britain.
/reut.rs/3l1KgeG

Gen Z and millennial investors are taking more and more risks as trading activity surges, E-Trade says
Ben Winck – Markets Insider
The US’s youngest investors took on more risk and traded with more volatile products as the coronavirus pandemic roiled markets over the summer, according to a new E-Trade survey.
More than half of Gen Z and millennial investors said their risk tolerance has grown since the outbreak began, according to the brokerage. Only 28% of all respondents said the same. More than half of investors below the age of 34 are also trading stocks more frequently throughout the pandemic and resulting economic slump, E-Trade said.
/bit.ly/34lf6ca

Red Flags Point to Faltering Recovery in Oil
Joe Wallace – WSJ
After rebounding from a historic crash this spring, the oil market is back under pressure from the twin forces of rising supply and stalling demand.
Futures for Brent crude, the benchmark in international energy markets, fell 1% to $44.94 a barrel Thursday after a group of major producers said the recovery in demand from the Covid-19 shock had been unexpectedly slow. West Texas Intermediate, the main U.S. oil gauge, also slipped.
/on.wsj.com/2FI5LRz

The Incredible Shrinking Market
Chris Hall – Traders Magazine
Retail-led irrational exuberance may or may not explain this week’s S&P 500 record highs, but 2020’s lockdown-inspired home trading explosion has reignited concerns about the uneasy coexistence of retail and institutional players in US equity markets. The conditions that are so attractive to newly active traders are leaving institutions feeling frustrated and restless.
/bit.ly/3l5VXRm

S&P 500, Nasdaq slide from record highs after Fed minutes
Gertrude Chavez-Dreyfuss – Reuters
The S&P 500 and Nasdaq slipped from all-time intra-day highs on Wednesday in choppy trading after the Federal Reserve ruled out for now more dovish monetary policy measures such as the yield curve control. Under yield-curve control, the Fed would cap yields at a specific point on the curve by buying 2- or 3-year maturities, for example, to reinforce guidance that rates are not going up anytime soon.
/reut.rs/3hkIVxe

Fear fading on Wall Street as investors learn to love the new bull market
April Joyner, Tom Westbrook – Reuters
Fear is ebbing on Wall Street, with stocks on a bull run in the midst of the global coronavirus pandemic. The Cboe Volatility Index , known as Wall Street’s “fear gauge,” is near its lowest level since late February and options markets are showing diminishing concerns of a near-term drop in equities. The S&P 500’s .SPX run to fresh highs has come as some of Wall Street’s biggest banks, including Goldman Sachs, UBS Global Wealth Management and Morgan Stanley, turn more bullish on stocks and are urging clients to remain exposed to equities. The index ended at a record high on Tuesday, confirming a bull market, according to one definition.
/reut.rs/3gk55y9

Exchanges and Clearing

FTSE Russell Forms Strategic Partnership With SGX
MarketsMedia
Partnership between FTSE Russell and Singapore Exchange (SGX) to develop a comprehensive Asian and Emerging Markets focused multi-asset index derivatives offering; Collaboration also extends the focus to ETF market development locally and opportunities across index, data and analytics businesses; Partnership supports growing demand across Asia for index-based listed derivatives, including in sustainable investment
FTSE Russell, a leading global index, data and analytics provider, today announces that it has entered into a long-term strategic partnership with Singapore Exchange (SGX). The partnership will initially focus on developing a broad index derivatives offering on Asian and Emerging Markets single country and regional equity derivatives in addition to Environmental, Social, and Governance (ESG) and Listed Real Estate index derivatives.
/bit.ly/3gf7CK3

*****JJL: A good partnership for ESG.

Goldman Sachs to offer clearing services via LCH’s ForexClear
Olga Cotaga – Reuters
Goldman Sachs (GS.N) will offer clearing facilities for some currency derivative products on the London-based clearing house LCH’s ForexClear service, the bank said on Thursday.
/reut.rs/329aSBL

HKEX Launches New Products and Microstructure Enhancements to its MSCI Index Derivatives Suite
HKEX
HKEX to launch new futures products on broad-based MSCI Taiwan 25/50 Index; Confirms early Opening Hours and 100% trading fee waiver for MSCI Taiwan Index Futures; Programme to support open interest migration and deliver optimized latency to customers
Hong Kong Exchanges and Clearing Limited (HKEX) is pleased to announce today (Thursday) new products and microstructure enhancements to its MSCI index derivatives suite, further supporting global investors in managing risk and optimising their portfolios, as well as facilitating open interest migration to HKEX.
/bit.ly/2QcgMww

CME Globex Notices: August 17, 2020
CME Group
Critical System Updates
iLink 3 MSGW Session Migration
Update on Order Routing and Front-End Audit Trail Requirements for iLink 3
CME Globex Market Segment Gateway Enhancements – August 30
Options on Micro E-mini Equity Index Futures – August 30
Harmonization of Enable/Disable Implied Behavior for ICS – September 20
/bit.ly/32bGmXU

CME Globex Notices: August 17, 2020
CME Group
Critical System Updates
iLink 3 MSGW Session Migration
Update on Order Routing and Front-End Audit Trail Requirements for iLink 3
CME Globex Market Segment Gateway Enhancements – August 30
Options on Micro E-mini Equity Index Futures – August 30
Harmonization of Enable/Disable Implied Behavior for ICS – September 20
/bit.ly/32bGmXU

Update – MIAX Exchange Group – Options Markets – Delisting of Valaris plc (VAL)
MIAX Exchange Group
Valaris plc (VAL) will be de-listed from the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange effective on Thursday, August 20, 2020. All GTC orders resting on the MIAX order books in VAL will be canceled at the close of business on Wednesday, August 19, 2020.
/bit.ly/2Yi0qa7

Regulation & Enforcement

Bank of Nova Scotia to pay $127 million in record spoofing settlement; US derivatives regulator said the settlement with Bank of Nova Scotia for spoofing and making false allegations is a record penalty.
Annabel Smith – The Trade
The Bank of Nova Scotia will pay a record $127.4 million penalty to settle charges issued by the US derivatives watchdog for metals market manipulation and making false statements.
/bit.ly/3j1aHPA

Risks of Commodity ETFs Highlighted in U.S. Oil Fund’s Travails
Amrith Ramkumar – WSJ
Securities regulators have warned the largest U.S. crude-oil exchange-traded fund that it could face enforcement action related to its overhaul after oil crashed earlier this year, the latest development illustrating the dangers of trading complex commodity products.
/on.wsj.com/31edMGf

Technology

It’s Time for a New, Industry-Led SIP
Patrick Flannery – TABB Forum
With the benefits offered by today’s technology, the power of competitive forces and industry-wide participation, we believe significant change that can reduce the cost and improve the quality of market data is well within reach. While SIPs have generally served the industry well these past four-plus decades, everything has a shelf life.
/bit.ly/2Qaey0x

Moves

Robinhood’s former head of crypto joins FTX.US as COO
Yogita Khatri – The Block
Sina Nader, the former head of crypto at brokerage firm Robinhood, has joined FTX.US exchange as COO, The Block has learned.
/bit.ly/3l5lmuv

Strategy

2 Stock-Option Strategies That Split the Difference Between Fear and Greed
Steven M. Sears – Barron’s
Inertia may be the most powerful force in the universe.
If people increased their action levels by just a tenth, their lives, and especially their financial accounts, would almost certainly look a lot better.
But, in a world in which bosses or work processes often make decisions for people, inertia defines most people’s actions. Such is the machinery of life.
/bit.ly/2E1suaR

Education

Options Boot Camp: The 100th Episode Spectacular
Options Insider Network
/bit.ly/2EaJ2x3

Events

Micro E-mini Options: The Next Chapter
CME Group
In preparation for the upcoming launch of Micro E-mini options, join us for a live educational discussion on Tuesday, August 25. David Lerman, Director of Education at CME Group, will provide an overview of our new option contracts launching August 31. This exciting addition builds on the heels of Micro E-mini futures, which have traded more than 330 million contracts* since their May 2019 launch.
/bit.ly/34piRNE

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