Fears of a disputed US election fuel market volatility bets; Dollar slides in flows-driven market; investors await U.S. debate

Sep 29, 2020

Lead Stories

Fears of a disputed US election fuel market volatility bets
Robin Wigglesworth and Eric Platt – Financial Times
Investors are growing more jumpy about the risk of a disputed US presidential election, stepping up preparations for a potential period of market volatility as the costs of insuring against turbulence rise.
Futures tied to the Vix volatility index, a measure of the expected choppiness of the US stock market based on derivatives prices, have long reflected investor concerns that the result could become contentious. This has led to what some traders term a “volatility kink” around the November vote.

Dollar slides in flows-driven market; investors await U.S. debate
Gertrude Chavez-Dreyfuss – Reuters
The dollar on Tuesday fell from last week’s two-month highs, weighed down by currency flows in the options market as well as for month end, with investors also capitalizing on recent gains in the greenback ahead of the first debate between two U.S. presidential candidates.
“Today the market is mostly flows-driven, options-related and month-end flows that have pulled the dollar lower,” said Erik Bregar, head of FX strategy at Exchange Bank of Canada in Toronto.
There were FX options-related flows that bet on the downside in the dollar versus the yen as well as the upside on the euro against the Japanese currency, Bregar said. The euro/yen options have pulled euro/dollar higher.

Exchanges and Clearing

CME Notifies Traders of Virus Case in Eurodollar Options Pit
Elizabeth Stanton and Alyce Andres – Bloomberg
CME Group Inc. has informed its members of a positive Covid-19 case in someone who’d recently spent time at its eurodollar options pit in Chicago.
CME Group made the announcement in a memorandum on Monday, stating that the individual had reported symptoms that morning and was last in the pit on Friday. The trading floor has been disinfected twice since then and will remain open, the memorandum said. The eurodollar options pit reopened on Aug. 10 after a nearly five-month closure.

Managing Global Risk Exposure with MSCI EAFE and EM Index Options
Matt Moran – Cboe
In August, the total market capitalizations for the MSCI EAFE Index and the MSCI Emerging Markets Index hit $14 trillion and $6.4 trillion, respectively. Additionally, the country weighting of China’s stocks in the MSCI Emerging Markets Index grew to 42.5% last month. Interest in managing global risk exposure has grown in recent years, and investors may be interested in learning more about recent trends and strategies based on global indices.

CME Group to Launch Pork Cutout Futures and Options on November 9
PR Newswire (press release)
CME Group, the world’s leading and most diverse derivatives marketplace, today announced it will launch Pork Cutout futures and options on November 9, 2020, pending all relevant regulatory review periods. “As the market has evolved, our customers continue to look for new tools to manage the price risk associated with hog and pork production,” said Tim Andriesen, CME Group Managing Director of Agricultural Products. “The Pork Cutout futures and options are complementary to our Lean Hog contracts and will provide clients with the ability to manage risk and discover price from the hog all the way to the meat case.”

Opening and Intra-day Quote Width Requirements and MIAX Order Monitor Settings for Certain Symbols Trading on MIAX Options and MIAX Emerald Extended Through Thursday, December 31, 2020
MIAX Options
Please refer to the following circulars for further details on extended maximum valid bid/ask differentials and MIAX Order Monitor Settings for certain symbols trading on MIAX Options and MIAX Emerald.

MIAX Exchange Group – Options Markets – Delisting of Just Energy Group Inc. (JE)
MIAX Options
Just Energy Group Inc. (JE) will be de-listed from the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange effective on Tuesday, September 29, 2020. All GTC orders resting on the MIAX order books in JE will be canceled at the close of business on Monday, September 28, 2020.

New OTC FX PAA Report Available
CME Group
Please be advised that a new OTC FX price alignment report is live in New Release. The report will be published in Production on October 5th, 2020. The OTC FX PAA Rate will continue referencing Fed Funds Effective rate for USD-settled forwards (CSFs and NDFs) and options. Similarly, the OTC FX PAA Rate will continue referencing EONIA for EUR-settled CSFs. The new standalone OTC FX report will contain the PAA Rate information for the 6 FX settlement currencies.

Temporary Change To Opening Times For Sugar No. 11, Coffee “C” And Cocoa Contracts, And To The Daily Settlement Windows For Coffee “C” And Cocoa Contracts
ICE Futures U.S.
Temporary Trading Hour Changes
Effective with the start of trading for trade date Monday, October 26 and through and including trade date
Friday, October 301, 2020, the Exchange is implementing a temporary change to the open times for Sugar No. 11, Coffee “C” and Cocoa futures and option contracts. On each day in this period the opening times for
these contracts will be:
Sugar No. 11: 4:30 am NY time
Coffee “C”: 5:15 am NY time
Cocoa: 5:45 am NY time

Regulation & Enforcement

EU proposal for second layer of CCP skin-in-the-game a win for clearing firms
Jeff Reeves – FIA.org
Recent regulatory actions show an increased focus on issues surrounding CCP recovery and resolution. And based on the EU’s CCP Recovery and Resolution Regime, it seems that policymakers have provided national authorities and CCPs with adequate tools to manage a crisis while also balancing incentives for all participants to appropriately manage risk. That was the key takeaway from a 24 September FIA webinar on the topic. Access a recording of the hour-long discussion here.


OptionsLive Launches
Traders Magazine (press release)
A team of former options traders has launched OptionsLive, a sophisticated platform allowing institutions to trade US listed options with unsurpassed levels of transparency, insight and execution quality. OptionsLive is built on OpenFin, the financial markets’ operating system (OS), allowing traders to utilize highly customized workflows through a unified trading, data and analytics desktop. For years, options traders have relied on legacy solutions that have lacked interoperability and hindered execution quality, requiring traders to aggregate spreadsheets, market data providers and legacy execution platforms.

The Democratization Of Direct Market Access
Ahmed Heikal – Vela blog
Direct Market Access (DMA) has become increasingly pervasive across the industry in recent years, particularly amongst principal trading groups (PTGs). In fact, research from Acuiti shows that around 89% of PTGs now access markets directly, either through their own DMA platforms or those provided by a third party.* For low touch electronic trading across a range of asset classes – Equities, Exchange-Traded Derivatives, and increasingly FX and Fixed Income – DMA offers benefits such as convenience, greater control over execution, minimal information leakage, consistent speed at ever-lower latencies, and the ability to interact directly with a trading venue’s order book. So it’s clear why it has become so popular, not only amongst PTGs but also with an increasing number of hedge funds and other buy-side firms engaged in algo trading.

New Live Data API For Options Prices, Greeks, Theos, and IVs
ORATS blog
ORATS has launched a new live data feed through a partnership with Tradier Brokerage. The new live data API includes options bid-ask prices, greeks, theoretical values, smoothed values and implied volatilities for all stocks, ETFs and indexes. Also included are summary calculations. Here’s a picture of the Chain in Wheel.orats.com hitting the live data API.


Betting on BlackRock’s Continued Dominance With Options
Steven M. Sears – Barron’s
Few financial giants have weathered the Covid-19 pandemic as well as BlackRock.
Just how much it has thrived in this difficult year will soon become apparent when the world’s largest asset-management company reports third-quarter earnings. A date hasn’t yet been announced, but will likely occur around Oct. 15, or soon thereafter, if the past is predictive. Goldman Sachs is advising clients to expect continued strong growth.

A bull market will boom no matter the president — but skew your portfolio based on who wins, Morgan Stanley’s investment chief says
Emily Graffeo – Markets Insider
Morgan Stanley’s Mike Wilson told CNBC on Tuesday that while there will be a bull market after the election regardless of who wins the presidency or control of Congress, investors will want to skew their portfolios depending on the outcome.
The chief investment strategist said that “ultimately the politicians will have to cave” and release another stimulus plan before or shortly after the election. Markets know this, he said, and that’s why he doesn’t think the outcome of the election will matter in the short term.


FIA Legal Opinions Primer
13 October 2020 • 2:00 PM – 3:00 PM BST • Webinar
If you are an experienced user of FIA legal opinions, new to the world of FIA netting and other legal opinions for regulatory capital purposes or just curious as to why FIA maintains a library of legal opinions, please tune in to this FIA webinar where experts from Clifford Chance LLP and FIA will explain the types of legal opinions that FIA maintains, their structure and purpose in the context of regulatory capital requirements. Speakers will also discuss practical aspects of how firms can go about accessing FIA legal opinions, how the legal opinions are reviewed and made available to member and non-member firms. This webinar will focus on the FIA legal opinions procured out of Europe and will not cover the US FCM netting opinions.


Law & Compliance Division Conference
7 October 2020 – 9 October 2020 • 9:00 AM – 6:00 PM ET
Our virtual Law & Compliance Division conference (L&C-V) will provide a forum to learn and discuss the legal and regulatory issues impacting the derivatives industry. L&C-V meets the needs of multiple levels of practitioners in the industry, from the new law firm associate to the chief compliance officer. Register today & join us, virtually, 7-9 October to explore recent legal and regulatory precedents affecting the futures, options and centrally cleared derivatives markets.


Here’s how the stock market tends to perform after the first presidential debates
Mark DeCambre – MarketWatch
A political face-off for the ages?
Debates ordinarily don’t alter the course of history. They haven’t been a major market mover either. But could this hotly anticipated tête-à-tête between President Donald Trump and Democratic challenger Joe Biden prove different?
That’s the question some investors may be pondering as they brace for Tuesday’s first scheduled presidential debate between the two political opponents. Certainly, the U.S. equity market has moved in sometimes violent fits and starts—mostly lower in September—as the race for the White House has heated up, amid a global viral outbreak that has rocked economies world-wide.

2020’s Rising Stars of Wall Street in investing, trading, and dealmaking
Business Insider
As Wall Street navigates a health pandemic that’s changed the way we work and dramatically changed the economic landscape, we take a look at the players rising up despite the challenges and grasping opportunities as they see them.
From launching game-changing groups within global financial institutions, to having a hand in restructuring entertainment giants like AMC, these 25 stood out as the leaders for tomorrow.

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