Observations & Insight
Bradley Rotter – Open Outcry Traders History Project, Part One
Bradley Rotter has been a pioneer in financial futures, hedge fund investing and cryptocurrencies. He was on the trading floor of the Chicago Board of Trade when financial futures were just getting started. He convinced Merrill Lynch they needed a financial futures expert and was hired, then later moved to New York to work for EF Hutton before returning to Chicago to become the floor manager for AG Becker & Co. when bonds were first traded in the old South Room of the CBOT.
Goldman Sachs Analysts’ Theory About the VIX; Regulators Eye Index Providers – The Spread
This week on The Spread, a Virginia resident is ordered to pay $5 million for defrauding investors, the SEC considers index regulation, bitcoin options drive bitcoin’s price down, and more.
For Startup Leaders, SPACs Have Lost Their Allure
Heather Somerville – WSJ
Startup chief executives are turning a cold shoulder to SPACs. Skeptical CEOs say they are turning down offers from special-purpose acquisition companies, deleting their solicitous emails and tapping the brakes on merger deals amid nosediving shares and disappointed investors. So-called blank-check companies, which go public with no assets and then merge with private companies, exploded in popularity last year as a mechanism for startups to raise a lot of money with more speed and fewer regulatory hurdles than a traditional initial public offering.
Oil prices lose momentum as funds cut positions: Kemp
John Kemp – Reuters
Portfolio managers trimmed their bullish positions in petroleum last week for the second week running, after prices again failed to break through the recent ceiling around $70 per barrel. Hedge funds and other money managers sold the equivalent of 35 million barrels in the six most important petroleum futures and options contracts in the week to May 18, according to exchange and regulatory data. Sales were concentrated in Brent (-25 million barrels) and NYMEX and ICE WTI (-16 million), with small-scale buying in U.S. diesel (+2 million) and European gas oil (+4 million), and no change in U.S. gasoline.
Gold Holds Near Four-Month High as Fund Buying, ETFs Buoy Demand
Ranjeetha Pakiam – Bloomberg
Gold steadied near the highest in more than four months amid signs that investors are turning more bullish on the precious metal. Hedge funds and other large speculators raised their net-long position in U.S. gold futures and options to the highest since January, government data showed Friday. Holdings in exchange-traded funds backed by bullion have climbed in May, following three months of outflows. Declines in the dollar and bond yields on Monday also helped gold.
Inflation Forces Investors to Scramble for Solutions
Sam Goldfarb – Bloomberg
Signs that inflation is picking up momentum are adding a new dimension to the post-lockdown market rally, forcing investors to make difficult decisions about how to protect their portfolios from the emerging threat. Investors have a variety of options at their disposal but face near-record prices for old standbys like gold, sending some searching for alternatives that may be even more imperfect. Inflation fears have buffeted stocks, pulling major indexes back from records. Some have even talked up bitcoin as an inflation bet, but it fell as much as 30% during a trading session last week.
Exchanges and Clearing
CME Group to launch Bloomberg interest rate futures to support Libor transition; The interest rate futures by CME Group will be based on the Bloomberg short-term bank yield index.
Annabel Smith – The Trade
US derivatives exchange CME Group has set out plans to launch a new set of interest rate futures based on Bloomberg’s short-term bank yield index (BSBY) in the third quarter. The launch comes as the market continues to transition away from the Libor benchmark to other alternative reference rates including SONIA and SOFR.
Product Modification Summary: Various Amendments to the S&P 500 Stock Price Index Futures, E-mini S&P 500 Stock Price Index Futures and Related Options Contracts – Effective June 07, 2021
Various Amendments to the S&P 500 Stock Price Index Futures, E-mini S&P 500 Stock Price Index Futures and Related Options Contracts and Addition of Block Trade Eligibility to Options on E-mini S&P 500 Stock Price Index Futures.
Product Modification Summary: Amendments to the Strike Price Increments for Five (5) WTI Crude Oil Weekly Options and Five (5) Brent Last Day Financial Weekly Options
Amendments to the Strike Price Increments for Five (5) WTI Crude Oil Weekly Options and Five (5) Brent Last Day Financial Weekly Options
Exchange for Related Positions
Effective on trade date Monday, June 7, 2021, and pending all relevant CFTC regulatory review periods, this Market Regulation Advisory Notice will supersede CME Group Market Regulation Advisory Notice RA2016-5 from October 26, 2020. It is being issued to advise the marketplace that effective on June 7, 2021, CME full-sized Standard & Poor’s 500 Stock Price Index Options will no longer be eligible as part of an Exchange of Option for Option (“EOO”) transaction. CME E-mini Standard & Poor’s 500 Stock Price Index Options will remain eligible as the Exchange options component of an EOO.
Morgan Stanley joins ICE Futures Abu Dhabi as clearing member
Annabel Smith – The Trade
US investment bank Morgan Stanley has become the latest institution to join the ICE Futures Abu Dhabi (IFAD) exchange as both an exchange and clearing member. With the addition of the investment bank, IFAD now has 29 exchange members and 22 clearing members including Citigroup Global Markets, Banco Santander, BNP Paribas, Goldman Sachs, HSBC, JP Morgan Securities, Societe Generale, RJ O’Brien, ABN Amaro, and Mizuho Securities. Contracts traded on the IFAD exchange are cleared through ICE Clear Europe alongside ICE’s global energy futures platform. Since its launch in March 2021, ICE confirmed that IFAD had traded a total of 282,692 contracts involving 55 participants.
Regulation & Enforcement
Libor Replacements Multiply in Shift That Could Fracture Markets
Alex Harris – Bloomberg
A slew of newer and lesser known reference rates are staking their claim to a share of the post-Libor landscape as the outlook for the space grows increasingly fractured. Once largely considered afterthoughts in the race to replace the London interbank offered rate, a clutch of upstart challengers, from Ameribor and BSBY to ICE’s Bank Yield Index, have been gaining traction, or at least garnering more attention, in recent weeks. Their ascent comes as borrowers and bankers increasingly question whether the Federal Reserve’s long-preferred replacement, the Secured Overnight Financing Rate, is the best option for the multitude of markets that must ditch scandal-tainted Libor by year-end.
Let 1,000 Libor Replacements Bloom
Tracy Alloway – Bloomberg (subscription required)
It’s Bring Your Own Benchmark time for financial markets. Efforts to replace Libor — the interbank lending rate off which trillions of dollars worth of financial assets are famously priced — are still ongoing more than a decade after the financial crisis. And while SOFR (the Secured Overnight Funding Rate) has emerged as a frontrunner and the preferred option of the Alternative Reference Rates Committee — the battle for benchmark supremacy is far from over. In fact, the number of alternative rates continues to multiply, with available options now including the Bloomberg Short Term Bank Yield Index (BSBY), the ICE Bank Yield Index (IBYI), the Across-the-Curve Funding Index (AXI), as well as Ameribor. There’s a huge irony in the race to create alternative rates. While regulators want to move on to something that avoids the weaknesses of the original rate, market participants have been doing their best to recreate Libor as closely as possible, with credit-sensitive rates like BSBY, BYI and Ameribor tracking bank funding costs.
Hong Kong Exchange’s New CEO Is Put on Cleanup Duty
Kiuyan Wong – Bloomberg
The veteran JPMorgan Chase & Co. banker who’s taking the helm at Hong Kong’s exchange has been put on cleanup duty. Chairman Laura Cha has handed Nicolas Aguzin, who takes charge Monday, the task of reviewing the exchange’s practices after a bribery scandal and censure from the regulator, according to people familiar with the matter. The 52-year-old former head of JPMorgan’s international private bank is seen by Cha as having the experience to force a cultural shake-up given his background at a heavily regulated bank, said the people, asking to remain anonymous discussing sensitive issues.
Rising Star Teaches Me About Options Greeks and Free Butterflies | Rolling Trades Series
Vonetta Logan – tastytrade
OK so this is definitely the most posh episode of Rolling Trades. I felt like Oprah interviewing the exiled members of the Royal Family. I picture me and Harvinder sitting on a luxurious patio in Malibu, me, removing my glasses, leaning forward and saying, “who is having THAT conversation…about delta to theta ratio.” Then Harvinder mentions that he sometimes trades with the Queen. Then a pack of corgis runs by. It would be gonzo ratings!
The Exchange Analytics Cybersecurity course is a perfect training solution for NFA-member firms (FCMs, IBs, CTAs, CPOs, RFEDs, SDs, MSPs), RMLOs, FINRA-registered BDs and SEC-registered IAs.
Webinar: Understanding the Protective Put
Wednesday, June 09, 2021
3:30 p.m. – 4:30 p.m. CST
In the equity market, downside risk is always a consideration for investors. However, for some portfolios, certain options may help mitigate the potential for a loss of capital. One such strategy is the protective put. If you want to learn more about protective puts, and if they may be right for you, join The Options Industry Council on June 9th for a free webinar led by former professional options trader Ken Keating.
Webinar: Understanding Option Collars
Wednesday, July 14, 2021
3:30 p.m. – 4:30 p.m. CST
For many option investors, collars can be a core strategy. Generally, collars are created by combining an income opportunity with a protective aspect around a long stock position – but knowing the details is critical. On July 14, join OIC’s Ed Modla, a former market maker, to learn about traditional collars as well as variants.
International Derivatives Expo
September 27, 2021 – September 28, 2021 • 12:00 p.m. – 4:00 p.m. BST
Standing still is not an option in today’s evolving cleared derivatives environment. Without adapting to new products, processes, technologies and regulations, your business won’t meet the needs of tomorrow’s industry. That’s why IDX — the International Derivatives Expo — is the ideal place to be: an event that brings together industry leaders, vendors and policymakers to discuss what’s “now” in derivatives, and what lies ahead. We’re changing dates and changing venues to bring you IDX this fall in the City of London. Our conference team is creating a unique IDX experience that keeps you safe while allowing you to connect with clients, colleagues and friends from the local cleared derivatives community. Registration will launch after 21 June when the final step in the roadmap out of lockdown has been reached. Mark your calendar for 27-28 September and check back soon for additional details.
Enhancing the clearing ecosystem: post trade processing and clearing
June 22, 2021 • 12:00 PM – 1:00 PM ET
Emily Castello, Vice President, ABN AMRO Clearing
Patricia Hergenrother, Vice President Operations, Deutsche Bank Securities
Phousa Khounpachamsy, Listed Derivatives Clearing, Credit Suisse Securities
Steve Rand, Director, Societe Generale
Jason McDonnell, Head of ETD and OTC Clearing – North America
FIA Operations presents a panel on Post Trade Processing and Clearing. Join our panelists through a guided discussion exploring the lifecycle of a trade, including the operational nuances of Give-up, Average Pricing, and Allocation processes, as we look to enhance our clearing ecosystem for 2021 and beyond.
Asset Management Derivatives Forum 2021; Co-hosted with SIFMA AMG
June 8, 2021 – June 9, 2021 • 10:15 a.m. – 1:30 p.m. ET • VIRTUAL
FIA and SIFMA AMG are bringing you a virtual take on the Asset Management Derivatives Forum in 2021. Join us for virtual programming on June 8 and 9, during which market participants from all sides of a trade and leading regulators will examine the latest developments impacting the use of derivatives by asset managers, including business, clearing, regulatory and operations issues.
With keynote speakers and panels, this virtual Forum presents a unique opportunity to gain insights into how investors, sell-side firms and market structure operators view the landscape for derivatives activity by the asset management community, attracting attendees from the joint membership of FIA and SIFMA Asset Management Group.
Clearing 101: Exchanges, Clearinghouses and CCPs
Dates: Sep. 15, 2021 – Sep. 16, 2021, 12:00 p.m. – 1:30 p.m. ET.
Location Virtual Live. Two 90-sessions over 2 days.
Instructor: Marti Tirinnanzi
Registration is limited to approximately 20 participants to promote student participation and interaction.
Join us for a short program (90 minutes each day for 2 days) that explains the multilateral systems that provide the infrastructure for transferring, clearing and settling payments, derivatives and other financial transactions among financial institutions and end users. Following Dodd Frank, clearinghouses became designated as Systemically Important Financial Market Utilities, vital to the operations of the financial markets and subject to heightened regulatory scrutiny. Buyers and sellers in exchange transactions rely on clearinghouses to intermediate transactions and to manage credit risks between trading parties. As such, clearinghouses promote transparency, efficiency, and stability by providing market-based pricing, daily settlement, and ensuring adequate capitalization for markets to function.
Q2 2021 trends in futures and options trading
July 28, 2021 • 10:00 a.m. – 11:00 a.m. ET
Moderator: Will Acworth, Senior Vice President, FIA
This webinar highlights the main trends in trading activity in the second quarter of 2021 in the global exchange-traded derivatives markets, with category and regional breakdowns as well as exchange and contract rankings.
(Podcast) OB 999: Slingin Them Bitcoin Straddles!
Option Block – Options Insider
Host: Mark Longo, The Options Insider Media Group
Co-host: Andrew Giovinazzi, The Option Pit
Co-host: Mike Tosaw, St. Charles Wealth Management
On this episode Mark, Uncle Mike and the Rock Lobster break down: the tanking of crypto, most active equity options today including CSCO, SPCE, T; earnings season volatility; unusual options activity AES, BILL, COUP; what we think is the best 1st options trade for people getting into the markets now; and much more…