Fear Gauge Sounding an Alarm; Inherent Costs Of Liquidity

Jun 11, 2019

Observations & Insight

Options Industry Leader Series: Volatility Products, Interacting with Order Flow and Complex Order Books – Nasdaq
In this video from the Options Exchange Leader Series, Nasdaq Vice President and Head of US Options Greg Ferrari discusses the exchange’s plans for its own volatility products, trading technology developments and how market participants interact with options order flow.
Watch the video »

****SD: Have you seen the other videos in the Options Exchange Leader Series? See the following links for updates on MIAX, Cboe, NYSE and BOX.


Cboe to Host 2019 Risk Management Conference Europe in September
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, will host its 8th annual Cboe Risk Management Conference (RMC) Europe from Monday, 9 September through Wednesday, 11 September, 2019, at the Andaz Hotel in Munich, Germany. This will be the first time Cboe’s highly-acclaimed Risk Management Conference will be hosted in Germany.

Lead Stories

The Fear Gauge Is Sounding an Alarm Even as U.S. Stocks Surge
Luke Kawa – Bloomberg (SUBSCRIPTION)
Cboe Volatility Index is up over the past three sessions; It’s unusual for VIX to stay high while stocks rally
Remain vigilant. That’s the apparent message the Cboe Volatility Index is flashing, even as cash equities race toward records.

The Inherent Costs Of Liquidity
Gianluca Mineieri, Amundi Asset Management – GlobalTrading
Large asset managers will increasingly provide liquidity and play a leading role in the future evolution of financial markets.
During the past few years, much has been written about market liquidity and the main factors that have had a significant impact on it.

Hedge Fund Secrets Shared With CFTC May Be Vulnerable to Hacks
Benjamin Bain and Robert Schmidt – Bloomberg (SUBSCRIPTION)
Confidential market information collected from hedge funds and brokers by the main U.S. derivatives regulator is vulnerable to hacking because of the agency’s outdated computer systems, according to an internal watchdog.

Wells Fargo launches outsourced trading with new prime trade services group
Hayley McDowell – The Trade
US investment bank Wells Fargo has confirmed the launch of its new prime trade services group to provide buy-side clients with access to outsourced and agency trading.

****SD: The “just focus on doing what you do best” trend in financial markets definitely includes the push for more outsourced trading.

Exchange leaders see a greening future in derivatives
Helen Bartholomew – Risk.net (SUBSCRIPTION)
The derivatives world is being reshaped by ESG – environmental, social and governance issues – of all things. And the changes will take decades. That was the message at the Futures Industry Association (FIA) IDX event last week in London, where exchange heads said they were responding to a clamour for investments with environmental and ethical bona fides, priorities that will alter the business over the next 10 years.

****SD: ESG was indeed a big topic – we’ll have more on ESG in the coming weeks.

Wall Street Outguns Europe’s Banks, Again
Elisa Martinuzzi, Bloomberg – via The Washington Post
Pity Europe’s banks. For years, they have been in retreat, losing business in their own back yards to Wall Street rivals. Now the battlefront is shifting – but what looks like an opportunity to gain ground may be just the opposite.

Mood Swings Divulge Stress in a Stoic Stock Market
Nir Kaissar – Bloomberg (SUBSCRIPTION)
The U.S. stock market has been surprisingly resilient in recent months despite signs that the U.S. economy is slowing. Behind the lofty broad market averages, however, disagreements are intensifying about the value of individual stocks, an indication that the overall outlook is increasingly uncertain.

Exchanges and Clearing

SGX plans push into foreign exchange markets
Philip Stafford – Financial Times (SUBSCRIPTION)
SGX, the Singapore exchange, is planning an aggressive expansion in foreign exchange markets over the next five years, aiming to capitalise on efforts from local regulators to strengthen the country’s grip as Asia’s largest currency trading hub.

Speed Bumps Are the New Black
Larry Tabb – TABB Forum
While the IEX speed bump has been in production for more than six years, lately, speed bumps are all the rage, notes Larry Tabb. Cboe is the latest exchange to join the party.

****SD: I believe the correct phrasing now is that speed bumps are the new orange.

Regulation & Enforcement

SEC Broker-Conflict Rules Face Wary Dems, States, and AARP
Andrew Ramonas – Bloomberg (SUBSCRIPTION)
Wall Street’s victory securing new broker conflict-of-interest rules at the SEC is by no means final. The regulatory overhaul directing brokers to act in their customers’ “best interest” faces potential challenges in the courts, Congress, and inside the Securities and Exchange Commission itself, if a Democrat takes control after the 2020 elections.

Opening Remarks of FIA President and CEO Walt Lukken at the FIA Commodities Symposium
FIA President and CEO Walt Lukken today made the following opening remarks at the FIA Commodities Symposium in Houston, Texas. The following remarks are prepared for delivery:
Good afternoon everyone and welcome to FIA’s Commodities Symposium.
Commodity markets underpin and drive our entire global economy—whether it’s the food that feeds our families, the energy that fuels our cars or the steel that frames our cities. Commodities are literally the building blocks for society.


Cleaning noisy data ‘almost 70%’ of machine learning labour
Faye Kilburn – Risk.net (SUBSCRIPTION)
Noisy data is one of the biggest risks when applying machine learning to stock selection, according to two quants trying to tackle the problem.

Sparrow’s options trading platform takes flight
FinTech Futures
Singapore-based Sparrow has launched its platform to make options trading simple, secure and accessible for institutions and individuals, reports Jane Connolly.

****SD: This is bitcoin and ethereum options.

JPMorgan spends $11 billion on technology. But a top exec at the giant bank says some clients don’t want it to be a tech company.
Bradley Saacks – Business Insider Prime (SUBSCRIPTION)
The feel of a tech company, the trust of a bank. That’s the tricky intersection Wall Street firms are trying to land in as they remake their businesses.
But despite spending billion on technology upgrades ranging from fintech partners to blockchain initiatives, JPMorgan’s investment banking clients don’t necessarily want the firm to be a tech company, Huw Richards, the bank’s head of digital investment banking, said on Monday.
Instead, clients are looking for “a technology-enabled partner,” said Richards.


`Buy the Dip’ Is Looking Risky But Wall Street’s Doing It Anyway
Cecile Gutscher – Bloomberg (SUBSCRIPTION)
From near-certainty on interest-rate cuts to signs of a detente in the trade war, investors see the makings of a spirited upswing. And the recipe for its potential downfall.
It’s the latest chapter in 2019’s unloved rally.


BOE Warns of Downside Risks From No-Deal Brexit and Global Trade
Bank of England policy makers reiterated the downside risks to the U.K. economy from Brexit and global trade tensions, even as they emphasized that interest rates could still rise.

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