Fed Outlines Rationale for T-Bill Buying, But Keeps Options Open; Wall Street gauges notch first triple record high since July

Nov 5, 2019

Lead Stories

Fed Outlines Rationale for T-Bill Buying, But Keeps Options Open
Benjamin Purvis and Alex Harris – Bloomberg
A key Federal Reserve official on Monday made the case for the central bank’s program of buying only the shortest-dated Treasuries to ensure the banking system has enough reserves. But she signaled an openness to make changes if they’re needed to keep markets calm. By confining itself to bills, the central bank can help maintain the supply of reserves while limiting the impact on financial conditions, said Lorie Logan, who oversees market operations at the Federal Reserve Bank of New York. She also noted that the market for bills is particularly deep and liquid, and that the Fed at present doesn’t own much in that part of the curve.
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Wall Street gauges notch first triple record high since July
Peter Wells – Financial Times
Wall Street’s three main equities gauges simultaneously closed at record highs for the first time in almost four months, buoyed by optimism towards US-China trade and relief with earnings season.
The Dow Jones Industrial Average was the last of the trio to join the party, after the S&P 500 reclaimed a record high on October 28 and the Nasdaq Composite followed suit on November 1.
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Farmer sentiment on trade and the overall ag economy improves as fall harvest gets underway
CME Group
The Purdue University/CME Group Ag Economy Barometer improved 15 points to a reading of 136 in October. The upswing is attributable to 15-point increases in both of the barometer’s sub-indices. The Index of Current Conditions rose to a reading of 155 and the Index of Future Expectations rose to a reading of 146. The barometer is based on a mid-month survey of 400 U.S. crop and livestock producers. “Almost across the board, farmers were more optimistic about the agricultural economy in October,” said James Mintert, the barometer’s principal investigator and director of Purdue University’s Center for Commercial Agriculture.
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Exchanges and Clearing

Intercontinental Exchange Reports October Statistics: Futures and Options Open Interest Up 8% Y/Y and Up 17% From Year-End 2018
Intercontinental Exchange (press release)
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today reported October trading volume and related revenue statistics, which can be viewed on the company’s investor relations website at http://ir.theice.com/ir-resources/supplemental-information in the Monthly Statistics Tracking spreadsheet.
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Miami International Holdings Reports October 2019 Trading Results and New Daily Market Share Record for MIAX Exchange Group
Miami International Holdings, Inc. (press release)
Miami International Holdings, Inc. (MIH) today reported the October 2019 trading activity for its three fully electronic options exchanges – MIAX, MIAX PEARL and MIAX Emerald (together, the MIAX Exchange Group). The MIAX Exchange Group collectively executed over 41.7 million equity option contracts in October for a combined average daily volume (ADV) of 1,816,090 contracts, representing a total U.S. equity options market share of 10.37%.
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Cboe Global Markets Reports October 2019 Trading Volume
Cboe (PR Newswire)
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today reported October monthly trading volume. The data sheet “Cboe Global Markets Monthly Volume & RPC/Net Revenue Capture Report” contains an overview of October and year-to-date trading statistics and market share by business segment, volume in select index products, and RPC, which is reported on a one-month lag, across business lines.
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Regulation & Enforcement

CFTC Charges Alabama Resident and His Company with Binary Options Fraud
CFTC (press release)
The U.S. Commodity Futures Trading Commission today filed a civil enforcement action in the U.S. District Court for the Northern District of Alabama charging Aaron B. Butler and his company, Negus Capital Incorporated (NCI), both of Alabama, with fraudulent solicitation, misappropriation, and registration violations in connection with binary options trading. The CFTC’s complaint alleges that from March 16, 2017, through February 21, 2018, Butler and NCI unlawfully solicited and accepted at least $300,000 from more than 65 members of the public to trade binary options contracts on the North American Derivatives Exchange (Nadex), defrauded those customers, and operated as an unregistered commodity pool operator (CPO) and an unregistered commodity trading advisor (CTA).
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Technology

Hedge funds preparing for the machines to take over
Joe Parsons – The Trade
Adoption of artificial intelligence (AI) and machine learning will soon become embedded into the day-to-day trading and operations for hedge funds, according to senior institutional investor experts.
Speaking at the ‘Gaining the Edge Hedge Fund Leadership’ conference in New York, representatives from the hedge fund and allocator industry discussed the significant importance the technology will have on investment strategies and processes.
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Moves

ON THE MOVE: BoA Grabs Monnery for Prime Brokerage
John D’Antona Jr. – Trader’s Magazine
Bank of America has hired Chris Monnery as a director in their Prime Brokerage division focused on their Risk platform. He joined from Fidessa where he was the global head of low-touch order management business development. Prior to that he spent over 15 years with Morgan Stanley and Citi across various roles in prime, futures and electronic trading.
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Strategy

How To Profit From The “Fear Premium” While Others Lose Money
Nasdaq
As a general rule, stocks tend to climb in a steady, predictable pattern, while declines have a greater tendency to sell off in dramatic fashion.
Of course, there are exceptions to this rule. When a pharmaceutical company announces an FDA approval, or a junior mining company releases strong data on its underlying reserves, stock prices can spike higher. And there are certainly stocks that drift lower over time.
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Go Long Equities Today And Hedge With TAIL
Harrison Schwartz – Seeking Alpha
There are many alternative ETFs available today that can help investors add serious alpha to their portfolio. Of course, many of these ETFs come at the cost of generally lowering net returns, so investors avoid buying. However, in times like this, with volatility rising and a “blow-off top” in the equity market looking increasingly likely, using alternative funds to hedge your exposure could potentially save you from ruin whilst allowing you to stay long.
/jlne.ws/2pxUdIZ

Money Stuff: Playing the Game of Infinite Leverage
Matt Levine – Bloomberg
Robinhood Markets Inc. is a discount brokerage that allows customers to trade stocks and options, with zero commissions, on their phones. We have talked about Robinhood in the past when we discussed brokerage-y topics like zero commissions and payment for order flow. But you can also analyze Robinhood as a mobile gaming company. It makes an app that you can download to your phone, and then you can play a game on the app.
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Past Newsletters

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