Fragmentation in derivatives market top concern post-Brexit for fifth of firms; Options Solutions Offers Options Strategies that Seek to Boost Income and Lower Risk

Mar 17, 2021

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Rory O’Kane

Observations & Insight

FIA Boca-V: Global Exchange Leaders on Markets: Access and Regulatory Issues
John Lothian – John Lothian News

The global leaders panel of FIA Boca-V has been broken into three parts this week: trends, access and regulatory issues and geopolitics. The access and regulatory issues discussed on Tuesday focused on growth opportunities and questions about retail traders using social media sites like Reddit to compete against institutions.

Loh Boon Chye, chief executive officer of Singapore Exchange, focused his comments on opportunities in sustainability and digital assets, stating that SGX is the most international multi-asset exchange in Asia.

He noted that ESG is not just about trading opportunities, but also about creating a framework for meeting sustainability goals.

Adena Friedman, president and CEO of Nasdaq, talked about cloud technology and it’s moving closer to mainstream matching technology. She said Nasdaq has moved services in trading, clearing and surveillance into more cloud-native environments. Friedman noted that some markets are launching in the cloud with trading, clearing and settlement.

To read the rest of this story, go here.

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FIA Boca-V: Exchange Leaders Share Views On Crucial Trends Facing the Markets in 2021
Matt Raebel – John Lothian News

“Global Exchange Leaders on Markets: Trends” was a session during FIA Boca-V that was stacked with top-level executives from some of the biggest exchanges in the industry. Appropriately, it was one of the first sessions that took place on Day One of the virtual conference — it’s always good to start these things off with a bang.

The leaders gave their respective takes on some of the biggest issues facing the financial markets in 2021: the ongoing COVID-19 pandemic, political upheaval in the U.S. and beyond, the growing influence that retail traders have on the markets — especially the stock market and derivatives markets — and the looming threat of climate change. As Michael Peters, chief executive officer of Eurex Frankfurt AG said, “We live in a time of great change. Politically, technologically, socially, and not to mention even the [sic] climate change.”

Loh Boon Chye, Singapore Exchange CEO, said that the risks associated with climate change were a primary concern of his company in 2021. “Global markets have spent a big part of 2020 battling the impact of COVID-19,” he said. “In 2021 we believe the climate challenge will be the next reckoning.” He called for exchange operators and their clients to work together to help standardize and build out the infrastructure for creating climate-sensitive investment products.

To read the rest of this story, go here.

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FIA Boca-V: EU Commissioner McGuinness Takes Stern View Post-Brexit
Suzanne Cosgrove – John Lothian News

If there still are any doubters as to the extent of Brexit’s impact on London’s financial markets, Mairead McGuinness, European commissioner for financial services, set them straight on Tuesday. In a keynote address to the FIA’s Boca conference, she called the U.K.’s then-popular 2016 decision to leave the E.U. “a major fragmenting event” with consequences.

U.K.-authorized firms now cannot provide services across the E.U. based solely on their U.K. authorizations, McGuinness noted, adding “the good news is that our [E.U.] companies were prepared and markets have adjusted well to this new situation.”

McGuinness said she hopes the U.K. and E.U. eventually will have a flexible non-binding framework similar to that between the U.S. and the E.U.: “a voluntary structure for regulatory cooperation…to discuss how to move forward with equivalence determinations, with full respect for the autonomy of both sides.”

To read the rest of this story, go here.

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FIA Boca-V: Does Surviving Brexit and a Pandemic Just Mean You Get to Trade 24/7?
Thom Thompson – John Lothian News

After the now-inevitable discussions of the financial industry’s successful taming of the threats presented by first the pandemic and then Brexit, the hour-long session “The Future of Markets” provided a solid 25 minutes of discussion about a couple of topics likely to affect markets as time goes on: ESG and 24/7 trading.

The Europeans among the panelists highlighted their continent’s dedication to and involvement with ESG as U.K. and E.U. governments push forward with requirements for large public companies to disclose their climate risks. Edwin Schooling Latter from the U.K. Financial Conduct Authority said that the U.K. government already last year had announced a timetable for the mandatory disclosures, while Eurex Clearing’s Erik Tim Mueller repeated Eurex’s thoroughgoing commitment to ESG initiatives and hinted at upcoming developments at the exchange.

To read the rest of this story, go here.

Lead Stories

Fragmentation in derivatives market top concern post-Brexit for fifth of firms; A survey by FIA has found that 23% of firms see fragmentation of markets as the most concerning impact of Brexit on the derivatives market.
Annabel Smith – The Trade
More than 20% of market participants view fragmentation in the derivatives market as the biggest concern post-Brexit, a survey from the Futures Industry Association (FIA) has revealed. FIA polled 274 respondents across exchanges, clearinghouses, banks, brokers, technology vendors, asset managers, and proprietary trading firms in the US, Europe, the Middle East, and Asia Pacific.
/bit.ly/3cFHWqr

*****MR: See also: FIA survey shows strong outlook for cleared derivatives markets by Will Acworth, FIA.org.

Options Solutions Offers Options Strategies that Seek to Boost Income and Lower Risk; Founder William J. Brodsky helped modernize the options market and now wants to help investors realize the benefits of conservative investment strategies using options
Options Solutions LLC
Options Solutions LLC, a specialized asset-management firm that was created to help high-net-worth investors add conservative options trading strategies to their portfolios, has formally commenced operations. Options Solutions’ investment strategies have long been used by institutional investors, including hedge funds, major asset management firms, and other sophisticated investors to often enhance returns and temper investment risks. Yet, these same strategies are less used by many others, including high-net-worth investors, for reasons ranging from a lack of awareness or investor education. Options Solutions has launched to fill this void.
/bit.ly/3vvTJjr

Crypto market maker B2C2 launches options and lending products
Ryan Weeks – The Block
London-based crypto market maker B2C2 is making a push into options trading and lending following its acquisition by SBI Financial Services, the Japanese finance group. The options desk is not expected to begin trading until mid-2021. B2C2 currently offers cash trading against a range of cryptocurrencies, as well as contracts for difference, but said in a press release that heightened client demand for “more sophisticated hedging instruments” drove its decision to branch out. The company has hired Brad Nagela to lead the new business. Nagela has spent time in senior FX roles at Citi, Bank of America and Societe Generale — as well as at BlueCrest Capital Management, the hedge fund. He is based in Chicago.
bit.ly/38Sl8me

The stock market’s fear index just dropped below a key level that suggests further upside ahead
Matthew Fox – Markets Insider
The stock market’s fear gauge fell below a key level on Tuesday that suggested further upside was ahead for stocks.
The CBOE Volatility Index, also known as the VIX, fell below the 20 level and hit its lowest point since the start of the COVID-19 pandemic. A VIX below 20 is seen as a signal that the stock market is transitioning from a high-volatility regime to a low-volatility regime, according to Fairlead Strategies’ Katie Stockton.
/bit.ly/3f2erSz

This is how the first virgin olive oil derivatives market has been created
Hector Chamizo – Business Insider
The olive oil derivatives market is here. It is now possible to trade through the platform, despite the difficulty of its launch.
Business Insider Spain has had an exclusive conversation with Ismael Santiago, one of the promoters of this ambitious project, to detail how the process has been, as well as the obstacles that he has had along the way, which, according to his point of view, have been many during these last months.
/bit.ly/3tugMt9

Derivatives market leaders say infrastructure, cross-border access are top issues
Jeff Reeves – FIA.org
FIA’s International Futures Industry Conference kicked off on 16 March with in-depth discussions about market access and market structure issues. These included the rise of retail investor participation, the impact of Brexit on cross-border trading and clearing, international access to financial markets in China, and market infrastructure issues.
Here are some of the highlights from the first day of Boca-V:
bit.ly/3eOOaGV

Exchanges and Clearing

Cboe Global Markets Announces Date of First-Quarter 2021 Earnings Release and Conference Call
Cboe
Cboe Global Markets, Inc. (Cboe: CBOE), a market operator and global trading solutions provider, today said it will announce its financial results for the first quarter of 2021 before the market opens on Friday, April 30, 2021. A conference call with remarks by the company’s senior management will begin at 7:30 a.m. Central Time (CT), 8:30 a.m. Eastern Time (ET).
/bit.ly/3s2kuu0

Initial Listing of European Style Wednesday Weekly and Monday Weekly Options Contracts on E-mini Nasdaq-100 Index Futures
CME Group
Effective Sunday, April 11, 2021 for trade date Monday, April 12, 2021, and pending all relevant CFTC regulatory review periods, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will list Monday and Wednesday Weekly Options on the E-mini Nasdaq-100 Index Futures (the “Contracts”) for trading on the CME Globex electronic trading platform (“CME Globex”) and for submission for clearing via CME ClearPort as more specifically described below.
/bit.ly/30SVN7e

Strategy

A options trade may indicate investors are bracing for violent bond-market moves before Fed
Sunny Oh – MarketWatch
Derivatives traders could be positioning for volatility in the bond market before the Federal Reserve’s policy update on Wednesday.
An analyst at Susquehanna International Group noted one options trader had placed a large amount of “straddle” derivatives trade in a semiconductor exchange-traded fund at the start of Tuesday.
In a Wednesday note, Christopher Jacobson said the market participant may be bracing for a bout of bond-market volatility as tech shares show vulnerability to the movements of long-term Treasury yields.
/on.mktw.net/3vAvX6c

Figuring Your ETF Option’s Risk/Reward? Remember to Include These 3 Risks
Cboe
Exchange-traded funds (ETFs) have opened up a world of opportunity for investors and traders. With one transaction, you can gain exposure to an index, sector, commodity, or asset class. And options on ETFs open up even more ways to hedge, speculate, and/or generate income. And as all options traders know, at the heart of each options trading decision lies the risk/reward assessment—the trade premium, breakeven price, max profit, max risk, as well as the option delta, theta, and the rest of those risk metrics (collectively known as “greeks”). You can (with the help of options software) do the math and quantify the risks and potential payoff.
bit.ly/3eO1efI

Education

Fundamentals of Futures & Options Course (applicable to Series 3 Exam)
IFM
For more than 30 years, IFM has consistently provided learners with a solid foundation and understanding of futures and options markets and trading including terminology, risk management, pricing, and basic trade strategies. This instructor-led virtual course includes lectures from an engaging instructor with real-world expertise and supported by class discussion, practice exercises and educational materials. The course fee includes two must-read industry books – Futures and Options and the Guide to U.S. Futures Regulation.
bit.ly/3lpLxwA

Events

A New Virtual Experience
OIC
The Options Industry Conference is Going Virtual in 2021. Join OCC and the options exchanges for the 39th annual Options Industry Conference, April 28-29, 2021. While the conference will be held virtually for the first time in history, the focus will continue to be the key topics facing the options industry today, from the regulatory shifts in the U.S. and Europe to the technological developments that are driving monumental change in markets around the globe.
jlne.ws/2PPGgQh

Miscellaneous

Bond king Bill Gross says he made $10 million shorting GameStop
Barbara Kollmeyer – MarketWatch
The phrase “don’t try this at home” was possibly made for moments like this.
Bond king and Pacific Investment Management Co-founder Bill Gross said he made $10 million shorting GameStop stock during the retail frenzy for the shares earlier this year but not before the retired billionaire lost several million dollars.
/on.mktw.net/3tzw7Jd

Bill Gross Surprises With Short Bets on Treasuries, GameStop
Erik Schatzker and Daniela Sirtori-Cortina – Bloomberg
Onetime bond king Bill Gross has been busy in retirement, shorting Treasury bonds, playing chicken with day traders on Reddit and even making a bundle on energy prices.
The Pacific Investment Management Co. co-founder, who runs money for his charitable foundation, shared some of his trades in an interview Tuesday on Bloomberg Television. Gross said he bet against the 10-year Treasury through the futures market and remains short, anticipating a combination of rising commodity prices, a weaker dollar and stimulus-driven demand will spark inflation.
/bloom.bg/2OJ3WbJ

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