General Motors Strike Unleashes Frenzy of Options Trading; Quadruple Witching Brings Heightened Volumes and, Potentially, Volatility

Sep 20, 2019

Observations & Insight

Mary Savoie: The Importance of Investor Education
JohnLothianNews.com

In this video from MarketsWiki Education’s World of Opportunity event in Chicago, Mary Savoie, executive director of the Options Industry Council and first vice president, investor education, for OCC, talks about the importance of investor education and how to become an informed investor. She discusses the role of the OIC in unbiased education for the complicated options industry. Education can lower barriers to options investing and boost people’s confidence, she said, and it is good for the health of the financial markets as a whole.

Watch the video »

Lead Stories

General Motors Strike Unleashes Frenzy of Options Trading
Gunjan Banerji – WSJ
The strike at General Motors GM Co. this week unleashed a flurry of trading in the company’s options, with some investors bracing for extreme moves in the stock. Volumes on GM options hit the highest level since July on Thursday, according to data provider Trade Alert. The United Auto Workers called its first strike in more than a decade earlier this week.
/on.wsj.com/2kUdNwz

Quadruple Witching Brings Heightened Volumes and, Potentially, Volatility
Gunjan Banerji – WSJ
Stock volatility has fallen in recent days. But turbulence could pick up Friday as a flurry of derivatives are set to expire.
The Cboe Volatility Index, or VIX, edged down in early trading Friday, falling about 3.5% as the S&P 500 edged up 0.3% shortly after the opening bell. The options-based gauge traded at Cboe Global Markets Inc. tends to fall when the S&P 500 is rising, and vice versa.
/on.wsj.com/2Nqi5sa

****MR: Also see: Dow and S&P 500 near record highs with U.S. – China trade talks underway against backdrop of Fed rate cut by Chris Matthews and Mark DeCambre, MarketWatch.

CME Group to Launch Bitcoin Options in Q1 2020
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced it will launch options on its Bitcoin futures contracts in Q1 2020, pending regulatory review.
“Based on increasing client demand and robust growth in our Bitcoin futures markets, we believe the launch of options will provide our clients with additional flexibility to trade and hedge their bitcoin price risk,” said Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products. “These new products are designed to help institutions and professional traders to manage spot market bitcoin exposure, as well as hedge Bitcoin futures positions in a regulated exchange environment.”
bit.ly/30gRG6a

Great Time to Be Long Volatility
Bloomberg (VIDEO)
In this edition of “Options Insight,” Headwaters Volatility’s Matt Rowe examines the recent volatility in stocks and his investment strategy with Bloomberg’s Luke Kawa on “Bloomberg Markets: The Close.”
/bloom.bg/2NoLmU7

Oil traders reassess interruption of Saudi output
John Kemp – Reuters
Brent oil futures prices have gyrated wildly as traders have tried to assess the impact of last week’s attacks on Saudi Arabia’s oil infrastructure on the actual availability of crude.
Brent’s six-month calendar spread surged to a backwardation of more than $5.50 per barrel on the first trading day after the attacks, the highest for six years, showing oil traders were anticipating severe shortages in the very short term.
/reut.rs/2NqgvH0

Mitsubishi says Singapore-based oil trader lost $320 million in unauthorized trades
Aaron Sheldrick and Shu Zhang – Reuters
Mitsubishi Corp (8058.T), Japan’s biggest trading house by revenue, said on Friday a trader at its Singapore-based unit has lost $320 million through unauthorized transactions in crude oil derivatives, and the matter has been reported to the police.
/reut.rs/2NsVBqn

Exchanges and Clearing

INTL FCStone joins SGX as derivatives trading and clearing member
Hayley McDowell – The Trade
Securities and commodities broker INTL FCStone has joined the Singapore Exchange (SGX) as a trading and clearing member.
The addition of INTL FCStone Pte, a subsidiary of New York-based INTL FCStone Inc, to the SGX derivatives market expands its footprint in North America, and takes its total trading members to 62, and clearing members to 25, the exchange operator said in a statement.
bit.ly/31yUmJP

CME Group Inc. Announces Third-Quarter 2019 Earnings Release, Conference Call
CME Group
CME Group Inc. will announce earnings for the third quarter of 2019 before the markets open on Wednesday, October 30, 2019. Written highlights for the quarter will be posted on its website at 6:00 a.m. Central Time, the same time it provides its earnings press release. The company will hold an investor conference call that day at 7:30 a.m. Central Time, at which time company executives will take analysts’ questions.
bit.ly/30dMJuO

Regulation & Enforcement

Row Over Brexit Harms Derivative Trading, French Watchdog Argues
Silla Brush – Bloomberg
France’s top markets regulator said Brexit threatens to push derivatives away from Europe toward London and the U.S., calling for major changes to European rules to prevent an exodus.
With just six weeks until Britain leaves the European Union with or without a deal, Robert Ophele, chairman of France’s Autorite des Marches Financiers, used a speech in London to argue that the EU risks self-harm unless it gives firms more leeway to trade derivatives in the U.K. He joins British regulators in calling for a solution that keeps markets moving.
/bloom.bg/30dmS69

Notice of Disciplinary Action: CME 17-0803-BC-2
CME Group
Pursuant to an offer of settlement in which Christian Reynoso (“Reynoso”) neither admitted nor denied the rule violations upon which the penalty is based, on September 18, 2019, a Panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee (“Panel”) found that on four occasions between May 2017 and October 2017, Reynoso, a broker in the Eurodollar options on futures pit, non-competitively traded contracts opposite other brokers within the same brokerage group without bidding of offering his orders in a manner consistent with open and competitive trades.
bit.ly/2kUb32f

Notice of Disciplinary Action: CME 17-0803-BC
CME Group
Pursuant to an offer of settlement in which Scott Moore (“Moore”) neither admitted nor denied the rule violations upon which the penalty is based, on September 18, 2019, a Panel of the Chicago Mercantile Exchange (“CME”) Business Conduct Committee (“Panel”) found that on four occasions between May 2017 and October 2017, Moore, a broker in the Eurodollar options on futures pit, non-competitively traded opposite other brokers within the same brokerage group without bidding or offering his orders in a manner consistent with open and competitive trades.
bit.ly/2kWY7bN

Notice of Disciplinary Action: CBOT 18-0997-BC
CBOT
Pursuant to an offer of settlement in which Leonid Uvarov (“Uvarov”) neither admitted nor denied the rule violation upon which the penalty is based, on September 18, 2019, a Panel of the Chicago Board of Trade Business Conduct Committee (“Panel”) found that on three dates in April and June 2018, Uvarov entered matching buy and sell orders on the CBOT Globex trading platform in May and July 2018 Wheat TAS futures contracts, as well as July 2018 Soybean futures contracts, for accounts with common beneficial ownership.
bit.ly/2m58jz8

Strategy

Volatility Expectations Rise in August (Options LiquidityMatrix)
TABB Forum
As part of our expanding coverage of the options and options on futures markets, TABB Group has added a feature to the monthly Options LiquidityMatrix that explores volatility trends in the most actively traded markets. August was a volatile month for most markets, and options on futures volumes confirmed this. Exhibit 1, below, shows that most macro markets experienced a significant increase in volatility expectations in August compared to July.
bit.ly/2Fn6C7t

Citigroup Advises Bearish Bet on Stocks, Funded by Oil Options
Cormac Mullen – Bloomberg
Investors should take advantage of the surge in oil prices to finance bearish bets on the U.S. equity market, according to Citigroup Inc.
The recent attack on Saudi Arabian crude production sent oil volatility soaring to above-average levels, making it more attractive to sell put options on the commodity — if you believe prices will continue to rise, said strategists including Jeremy Hale in a note Thursday. The proceeds could then be used to buy protection against a sell-off in stocks, where volatility is below average and downside risks remain, they said.
/bloom.bg/2Nqf23s

ETJ: Hedge Yourself Against Economic Volatility With This CEF
Seeking Alpha
Over much of the course of this year, we have seen a growing amount of uncertainty about the future of the economy. This uncertainty has been reflected in the markets, which have been very volatile. Indeed, anyone that has watched the performance of the S&P 500 since early May would attest to this. If we include the performance that we saw in the fourth quarter of 2018, then this uncertainty becomes even more apparent. As such, it may be a good idea to begin hedging your portfolio and accumulating assets that should perform well regardless of what happens in the broader economy. One of the easiest ways to do this is by purchasing shares of the Eaton Vance Risk-Managed Diversified Equity Income Fund (ETJ), which is a closed-end fund that is specifically designed to deliver a reasonable amount of income to its investors no matter what the broader market does.
bit.ly/2NoMw1V

Miscellaneous

Almost 39 per cent of hedge fund managers willing to negotiate management fees, says report
Hedgeweek
Many hedge fund managers are willing to negotiate lower management fees with investors, but far fewer are willing to budge on performance fees, according to a new report from eVestment.
bit.ly/2NqQhDW

Do Traders Need to Code? Goldman Sachs CIO Marty Chavez Says Yes
Sonali Basak – Bloomberg
Just how important will the ability to write computer code be to a successful career on Wall Street?
According to R. Martin Chavez, an architect of Goldman Sachs Group Inc.’s effort to transform itself with technology, “It’s like writing an English sentence.”
/bloom.bg/30wIerh

John Lothian Newsletter

So you want to know what’s happening in the financial markets?

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past Newsletters

General Motors Strike Unleashes Frenzy of Options Trading; Quadruple Witching Brings Heightened Volumes and, Potentially, Volatility

Sep 20, 2019

Observations & Insight

What is going on at LedgerX?
Thom Thompson – JLN
LedgerX may have launched trading on the contract market platform designated by the CFTC in June as reported by the cryptocurrency press on July 31. According to details shared exclusively with CoinDesk, the online news service that broke the story around 9:00 a.m. Chicago time, LedgerX launched deliverable bitcoin futures on Wednesday, making it the first exchange ever to offer deliverable cryptocurrency futures contracts in the United States. CoinTelegraph and Bitcoinist carried similar stories later in the day.
/jlne.ws/2YGhvYI

++++

“FOMO” as a Motivator
MarketsWiki Education
Whether we like to admit it or not, the fear of missing out, or FOMO, does influence our behavior. FOMO is just as likely to lead to a bad trade as it is to a good career choice (or the other way around). In this video from MarketsWiki Education’s World of Opportunity event in Chicago, RSM Partner Todd Briggs talks about how this fear can both positively and negatively impact our lives.
Watch the video »

++++

Trump says US will impose 10% tariffs on $300 billion of Chinese goods starting September 1
CNBC
President Donald Trump said Thursday the U.S. is putting an additional 10% tariff on the remaining $300 billion dollars worth of Chinese goods.
/jlne.ws/2YyELYw

****SD: Twitter risk!

Lead Stories

Cboe nears deal to move HQ to Old Main Post Office
Danny Ecker – Crain’s Chicago Business
The parent company of the Chicago Board Options Exchange is closing in on a deal to move its Loop headquarters to the redeveloped Old Main Post Office, adding to a leasing hot streak at the historic structure as it transforms into a modern office building.
Cboe Global Markets is negotiating a deal for about 175,000 square feet in the mammoth building at 433 W. Van Buren St., according to sources familiar with the discussions.
bit.ly/2YxId5u

OCC July Cleared Volume Up 7.9 Percent; Highest Total Volume Ever for July
BusinessWire
OCC, the world’s largest equity derivatives clearing organization, announced today that total cleared contract volume in July reached 403,483,838 contracts, a 7.9 percent increase compared to last July, and the highest total volume for July in OCC’s history. OCC’s year-to-date average daily cleared contract volume is 19,358,621, down 5.8 percent compared to 2018’s record-breaking pace.
/jlne.ws/2YzWjn3

Susquehanna International Group Case Study: Overview and Executive Summary Available for Download
Paul Rowady – Alphacution
The modern capital markets era begins in the mid-1970’s with the emergence and then convergence of three critical factors: derivatives, computers and data feeds. Together, these factors symbolize the birth of the quantitative research revolution and beginnings of trade workflow automation, and therefore, propel the conception of some of the most consequential product developments, trading strategies and trading firms that the financial world has ever known. A subset of the most notable players were the pioneers in the emerging listed option market. In some ways, they were also the pioneers in quantitative research – the “first quant shops” – developing advanced capabilities in the modeling of option pricing frameworks by way of computers and mathematics.
/jlne.ws/2Yygx0l

The Rationale for Ag Options’ Upward Skew
Erik Norland – CME Group
Across most markets, out-of-the-money (OTM) put options tend to be more expensive than OTM call options. This is most obviously true in the equity market, where investors fear downside risks more than upside risks. It’s also true in the crude oil market, where, despite political risks to the upside, downside risk is usually the main concern. Precious metals, fixed income and currency markets are quirkier and, by-and-large, upside and downside risks are more symmetrical or, at least, more time varying. Options on agricultural goods, however, are unique: call options are usually more expensive than puts – between 74% and 99% of the time since early 2017, depending on the product (Figures 1 -3).
/jlne.ws/2YBWNc4

How derivative compression is easing the Libor transition
Thomas Helm – Practice Insight (SUBSCRIPTION)
Market participants have found a new way of managing the colossal amount of administration work associated with the transition from Libor: compressing swaps and options contracts
/jlne.ws/2K8VDRu

Hedge funds grasp opportunities from stocks rally
Laurence Fletcher – Financial Times (SUBSCRIPTION)
After a miserable 2018, hedge funds are starting to enjoy trading equities again.
Last year’s global stock market sell-off pushed equity hedge funds to a 7.1 per cent average loss, according to data group HFR, but this year they are bouncing back with a 9.5 per cent gain in the first six months of this year. Helped by widespread rallies in global stock markets, this marks their best first half of a calendar year in a decade.
/jlne.ws/2MyxrJS

BNP Paribas says Deutsche Bank prime brokerage transition will be finalised by summer 2020
Hayley McDowell – The Trade
BNP Paribas has said the transition of Deutsche Bank’s prime brokerage and electronic equities units will likely be finalised by summer next year, despite Deutsche Bank’s hopes that the deal will be completed by the end of 2019.
/jlne.ws/2K9rDVw

Exchanges and Clearing

LSE Still Needs to Prove Logic of Buying Refinitiv; Buying Refinitiv will increase London Stock Exchange’s earnings per share by more than 30%
Stephen Wilmot – WSJ (SUBSCRIPTION)
Do investors like the London Stock Exchange’s $14.5 billion acquisition of Refinitivóor do they just like leverage? LSE shares jumped another 6% Thursday morning after the company formally announced an all-share deal to buy the financial data provider for $27 billion including debt. They are now up 24% since LSE gave preliminary details over the weekend.
/jlne.ws/2ZomTRh

Cboe Global Markets Announces Election of Fredric Tomczyk to Board of Directors
Cboe
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today announced its Board of Directors elected Fredric J. Tomczyk, former President and Chief Executive Officer of TD Ameritrade Holding Corporation, to its Board of Directors on July 30, 2019.
/jlne.ws/2Yyd1TH

Cboe Global Markets Declares Increased Third-Quarter 2019 Dividend
Cboe
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today announced its Board of Directors has declared an increased quarterly cash dividend of $0.36 per share of common stock for the third quarter of 2019, representing a 16 percent increase from the prior quarter’s dividend of $0.31 per share.
/jlne.ws/2Yyd9CF

Q3-Q4 2019 Market and Exchange Driven Changes
Vela
Do you know which exchange-driven changes (EDCs) are coming up over the next few months? And are your systems ready?
https://jlne.ws/2KduEEF

TradeZero America Announces Membership on the NYSE American Options Market
Yahoo Finance (Press Release)
TradeZero America, a Brooklyn, New York-based online broker dealer, announced that the firm is now a member of the New York Stock Exchange American Options market. The NYSE American Options exchange provides traders with deep liquidity across listed options contracts with an integrated technology platform offering access to American and Arca options, combined with the benefit of the open outcry trading floor in New York.
/jlne.ws/2MywC3Y

MIAX Options: Amendment To Exchange Rule 520, Limitations On Orders, To Remove Certain Order Entry Restrictions On Electronic Exchange Members
Mondovisione
MIAX Options has amended Rule 520, Limitations on Orders, to allow Electronic Exchange Members (“EEMs”) to enter buy and sell limit orders in the same options series for the account or accounts of the same beneficial owners, other than for the account or accounts of Priority Customers, and the Exchange will no longer need to designate specific classes for EEMs to engage in this type of activity.
/jlne.ws/2KatlpJ

CME Group Inc. Reports Second-Quarter 2019 Financial Results
PRNewswire
CME Group Inc. (NASDAQ: CME) today reported financial results for the second quarter of 2019. The company reported revenue of $1.3 billion and operating income of $699 million for the second quarter of 2019. Net income was $514 million and diluted earnings per share were $1.43. On an adjusted basis, net income was $632 million and diluted earnings per share were $1.76. Financial results presented on an adjusted basis for the second quarter of 2019 and 2018 exclude certain items, which are detailed in the reconciliation of non-GAAP results.
/jlne.ws/2YFfMTv

CME “not overly concerned” by LSE-Refinitiv talks
Louisa Chender – Global Investor Group (SUBSCRIPTION)
Chicago-based exchange says the deal wouldn’t change the competitive landscape
/jlne.ws/2yt8es9

ICE Reports Second Quarter 2019
ICE
Intercontinental Exchange (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listing services, today reported financial results for the second quarter of 2019. For the quarter ended June 30, 2019, consolidated net income attributable to ICE was $472 million on $1.3 billion of consolidated revenues, less transaction-based expenses. Second quarter GAAP diluted earnings per share (EPS) were $0.84. Adjusted net income attributable to ICE was $534 million in the second quarter and adjusted diluted EPS were $0.94. Please refer to the reconciliation of non-GAAP financial measures included in this press release for more information on our adjusted operating expenses, adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted EPS and free cash flow.
/jlne.ws/2ZlQbQA

SGX reports FY2019 net profit of S$391 million
SGX
Singapore Exchange (SGX) today reported FY2019 net profit of S$391.1 million (S$363.2 million), its highest net profit in 11 years. Revenues were also the highest since listing at S$909.8 million (S$844.7 million).
/jlne.ws/2YDnzRF

SGX seeks “bolt-on” acquisitions
James Thursfield – Global Investor Group (SUBSCRIPTION)
SGX CEO says the exchange is looking for “bolt-on” acquisitions for its newly formed business units
/jlne.ws/2Kb8oez

Euronext publishes Q2 results
Euronext
Euronext, the leading pan-European exchange in the Eurozone with 1,500 listed issuers, today announces its results for the second quarter of 2019.
/jlne.ws/2GGmjqR

Euronext eyes acquisitions in market data or post-trade services
Inti Landauro – Reuters
Euronext (ENX.PA) is looking for opportunities to buy market data or post-trade services providers, CEO Stephane Boujnah said on Wednesday, after larger rival London Stock Exchange (LSE.L) said it was in talks to buy Refinitiv in a $27 billion (GBP22.1 billion) deal.
/jlne.ws/2K8H3to

Strategy

Profiting From the Fear Premium in Tech Stock Options
Steven M. Sears – Barron’s
Institutional investors pretty much own all of the same stocks, yet another bank recently noted. A realist might conclude that such investors operate expensive index funds that all buy the same things and charge high management fees for doing so.
If you want to give your money to these guys, go ahead. But something tells me that is about as appealing to you as buying stocks that are dancing around highs.
/jlne.ws/2MtQ4yJ

History Points To Rocky Markets Ahead
DataTrek Research Blog
Our historical playbook analysis of what happens after the S&P 500 has outsized gains in January has worked every month this year except May when trade concerns spooked markets. Overall, abnormally strong January returns have been a historically clear signal about market direction in the following months and July 2019 further affirmed that trend.
/jlne.ws/2YDouS7

Miscellaneous

The best and worst performing hedge funds so far this year
Bradley Saacks – Business Insider (SUBSCRIPTION)
The market-beating human stock-picker is far from dead.
Quant funds now dominate hedge fund flows and assets, but the biggest winners midway through 2019 are funds run by old-school investors who take large, concentrated bets.
/jlne.ws/2MBzmO5

Fintech firm Revolut launches a Robinhood-style stock trading service
Ryan Browne – CNBC
Revolut British fintech firm Revolut is jumping into the online brokerage space with its own commission-free stock trading platform. The company launched the service ó which lets users buy or sell popular U.S. stocks from Apple to Beyond Meat at the tap of a button ó on Thursday, looking to lure in millennials who normally shy away from investing.
/jlne.ws/2MAqo3p

PanXchange Launches Industry’s First Institutional Grade Industrial Hemp Exchange
John D’Antona Jr. – Traders Magazine
PanXchange, a physical commodities OTC market structure solutions provider, today announced the launch of the industry’s first institutional-grade industrial hemp exchange. The marketplace will allow producers, processors, trade houses and end-users to participate in a transparent and efficient cash market for industrial hemp products and will ultimately pave the way for the creation of hemp derivatives contracts.
/jlne.ws/2KcFtqt

John Lothian Newsletter

So you want to know what’s happening in the financial markets?

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past Newsletters

General Motors Strike Unleashes Frenzy of Options Trading; Quadruple Witching Brings Heightened Volumes and, Potentially, Volatility

Sep 20, 2019

Observations & Insight

What is going on at LedgerX?
Thom Thompson – JLN
LedgerX may have launched trading on the contract market platform designated by the CFTC in June as reported by the cryptocurrency press on July 31. According to details shared exclusively with CoinDesk, the online news service that broke the story around 9:00 a.m. Chicago time, LedgerX launched deliverable bitcoin futures on Wednesday, making it the first exchange ever to offer deliverable cryptocurrency futures contracts in the United States. CoinTelegraph and Bitcoinist carried similar stories later in the day.
/jlne.ws/2YGhvYI

++++

“FOMO” as a Motivator
MarketsWiki Education
Whether we like to admit it or not, the fear of missing out, or FOMO, does influence our behavior. FOMO is just as likely to lead to a bad trade as it is to a good career choice (or the other way around). In this video from MarketsWiki Education’s World of Opportunity event in Chicago, RSM Partner Todd Briggs talks about how this fear can both positively and negatively impact our lives.
Watch the video »

++++

Trump says US will impose 10% tariffs on $300 billion of Chinese goods starting September 1
CNBC
President Donald Trump said Thursday the U.S. is putting an additional 10% tariff on the remaining $300 billion dollars worth of Chinese goods.
/jlne.ws/2YyELYw

****SD: Twitter risk!

Lead Stories

Cboe nears deal to move HQ to Old Main Post Office
Danny Ecker – Crain’s Chicago Business
The parent company of the Chicago Board Options Exchange is closing in on a deal to move its Loop headquarters to the redeveloped Old Main Post Office, adding to a leasing hot streak at the historic structure as it transforms into a modern office building.
Cboe Global Markets is negotiating a deal for about 175,000 square feet in the mammoth building at 433 W. Van Buren St., according to sources familiar with the discussions.
bit.ly/2YxId5u

OCC July Cleared Volume Up 7.9 Percent; Highest Total Volume Ever for July
BusinessWire
OCC, the world’s largest equity derivatives clearing organization, announced today that total cleared contract volume in July reached 403,483,838 contracts, a 7.9 percent increase compared to last July, and the highest total volume for July in OCC’s history. OCC’s year-to-date average daily cleared contract volume is 19,358,621, down 5.8 percent compared to 2018’s record-breaking pace.
/jlne.ws/2YzWjn3

Susquehanna International Group Case Study: Overview and Executive Summary Available for Download
Paul Rowady – Alphacution
The modern capital markets era begins in the mid-1970’s with the emergence and then convergence of three critical factors: derivatives, computers and data feeds. Together, these factors symbolize the birth of the quantitative research revolution and beginnings of trade workflow automation, and therefore, propel the conception of some of the most consequential product developments, trading strategies and trading firms that the financial world has ever known. A subset of the most notable players were the pioneers in the emerging listed option market. In some ways, they were also the pioneers in quantitative research – the “first quant shops” – developing advanced capabilities in the modeling of option pricing frameworks by way of computers and mathematics.
/jlne.ws/2Yygx0l

The Rationale for Ag Options’ Upward Skew
Erik Norland – CME Group
Across most markets, out-of-the-money (OTM) put options tend to be more expensive than OTM call options. This is most obviously true in the equity market, where investors fear downside risks more than upside risks. It’s also true in the crude oil market, where, despite political risks to the upside, downside risk is usually the main concern. Precious metals, fixed income and currency markets are quirkier and, by-and-large, upside and downside risks are more symmetrical or, at least, more time varying. Options on agricultural goods, however, are unique: call options are usually more expensive than puts – between 74% and 99% of the time since early 2017, depending on the product (Figures 1 -3).
/jlne.ws/2YBWNc4

How derivative compression is easing the Libor transition
Thomas Helm – Practice Insight (SUBSCRIPTION)
Market participants have found a new way of managing the colossal amount of administration work associated with the transition from Libor: compressing swaps and options contracts
/jlne.ws/2K8VDRu

Hedge funds grasp opportunities from stocks rally
Laurence Fletcher – Financial Times (SUBSCRIPTION)
After a miserable 2018, hedge funds are starting to enjoy trading equities again.
Last year’s global stock market sell-off pushed equity hedge funds to a 7.1 per cent average loss, according to data group HFR, but this year they are bouncing back with a 9.5 per cent gain in the first six months of this year. Helped by widespread rallies in global stock markets, this marks their best first half of a calendar year in a decade.
/jlne.ws/2MyxrJS

BNP Paribas says Deutsche Bank prime brokerage transition will be finalised by summer 2020
Hayley McDowell – The Trade
BNP Paribas has said the transition of Deutsche Bank’s prime brokerage and electronic equities units will likely be finalised by summer next year, despite Deutsche Bank’s hopes that the deal will be completed by the end of 2019.
/jlne.ws/2K9rDVw

Exchanges and Clearing

LSE Still Needs to Prove Logic of Buying Refinitiv; Buying Refinitiv will increase London Stock Exchange’s earnings per share by more than 30%
Stephen Wilmot – WSJ (SUBSCRIPTION)
Do investors like the London Stock Exchange’s $14.5 billion acquisition of Refinitivóor do they just like leverage? LSE shares jumped another 6% Thursday morning after the company formally announced an all-share deal to buy the financial data provider for $27 billion including debt. They are now up 24% since LSE gave preliminary details over the weekend.
/jlne.ws/2ZomTRh

Cboe Global Markets Announces Election of Fredric Tomczyk to Board of Directors
Cboe
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today announced its Board of Directors elected Fredric J. Tomczyk, former President and Chief Executive Officer of TD Ameritrade Holding Corporation, to its Board of Directors on July 30, 2019.
/jlne.ws/2Yyd1TH

Cboe Global Markets Declares Increased Third-Quarter 2019 Dividend
Cboe
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today announced its Board of Directors has declared an increased quarterly cash dividend of $0.36 per share of common stock for the third quarter of 2019, representing a 16 percent increase from the prior quarter’s dividend of $0.31 per share.
/jlne.ws/2Yyd9CF

Q3-Q4 2019 Market and Exchange Driven Changes
Vela
Do you know which exchange-driven changes (EDCs) are coming up over the next few months? And are your systems ready?
https://jlne.ws/2KduEEF

TradeZero America Announces Membership on the NYSE American Options Market
Yahoo Finance (Press Release)
TradeZero America, a Brooklyn, New York-based online broker dealer, announced that the firm is now a member of the New York Stock Exchange American Options market. The NYSE American Options exchange provides traders with deep liquidity across listed options contracts with an integrated technology platform offering access to American and Arca options, combined with the benefit of the open outcry trading floor in New York.
/jlne.ws/2MywC3Y

MIAX Options: Amendment To Exchange Rule 520, Limitations On Orders, To Remove Certain Order Entry Restrictions On Electronic Exchange Members
Mondovisione
MIAX Options has amended Rule 520, Limitations on Orders, to allow Electronic Exchange Members (“EEMs”) to enter buy and sell limit orders in the same options series for the account or accounts of the same beneficial owners, other than for the account or accounts of Priority Customers, and the Exchange will no longer need to designate specific classes for EEMs to engage in this type of activity.
/jlne.ws/2KatlpJ

CME Group Inc. Reports Second-Quarter 2019 Financial Results
PRNewswire
CME Group Inc. (NASDAQ: CME) today reported financial results for the second quarter of 2019. The company reported revenue of $1.3 billion and operating income of $699 million for the second quarter of 2019. Net income was $514 million and diluted earnings per share were $1.43. On an adjusted basis, net income was $632 million and diluted earnings per share were $1.76. Financial results presented on an adjusted basis for the second quarter of 2019 and 2018 exclude certain items, which are detailed in the reconciliation of non-GAAP results.
/jlne.ws/2YFfMTv

CME “not overly concerned” by LSE-Refinitiv talks
Louisa Chender – Global Investor Group (SUBSCRIPTION)
Chicago-based exchange says the deal wouldn’t change the competitive landscape
/jlne.ws/2yt8es9

ICE Reports Second Quarter 2019
ICE
Intercontinental Exchange (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listing services, today reported financial results for the second quarter of 2019. For the quarter ended June 30, 2019, consolidated net income attributable to ICE was $472 million on $1.3 billion of consolidated revenues, less transaction-based expenses. Second quarter GAAP diluted earnings per share (EPS) were $0.84. Adjusted net income attributable to ICE was $534 million in the second quarter and adjusted diluted EPS were $0.94. Please refer to the reconciliation of non-GAAP financial measures included in this press release for more information on our adjusted operating expenses, adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted EPS and free cash flow.
/jlne.ws/2ZlQbQA

SGX reports FY2019 net profit of S$391 million
SGX
Singapore Exchange (SGX) today reported FY2019 net profit of S$391.1 million (S$363.2 million), its highest net profit in 11 years. Revenues were also the highest since listing at S$909.8 million (S$844.7 million).
/jlne.ws/2YDnzRF

SGX seeks “bolt-on” acquisitions
James Thursfield – Global Investor Group (SUBSCRIPTION)
SGX CEO says the exchange is looking for “bolt-on” acquisitions for its newly formed business units
/jlne.ws/2Kb8oez

Euronext publishes Q2 results
Euronext
Euronext, the leading pan-European exchange in the Eurozone with 1,500 listed issuers, today announces its results for the second quarter of 2019.
/jlne.ws/2GGmjqR

Euronext eyes acquisitions in market data or post-trade services
Inti Landauro – Reuters
Euronext (ENX.PA) is looking for opportunities to buy market data or post-trade services providers, CEO Stephane Boujnah said on Wednesday, after larger rival London Stock Exchange (LSE.L) said it was in talks to buy Refinitiv in a $27 billion (GBP22.1 billion) deal.
/jlne.ws/2K8H3to

Strategy

Profiting From the Fear Premium in Tech Stock Options
Steven M. Sears – Barron’s
Institutional investors pretty much own all of the same stocks, yet another bank recently noted. A realist might conclude that such investors operate expensive index funds that all buy the same things and charge high management fees for doing so.
If you want to give your money to these guys, go ahead. But something tells me that is about as appealing to you as buying stocks that are dancing around highs.
/jlne.ws/2MtQ4yJ

History Points To Rocky Markets Ahead
DataTrek Research Blog
Our historical playbook analysis of what happens after the S&P 500 has outsized gains in January has worked every month this year except May when trade concerns spooked markets. Overall, abnormally strong January returns have been a historically clear signal about market direction in the following months and July 2019 further affirmed that trend.
/jlne.ws/2YDouS7

Miscellaneous

The best and worst performing hedge funds so far this year
Bradley Saacks – Business Insider (SUBSCRIPTION)
The market-beating human stock-picker is far from dead.
Quant funds now dominate hedge fund flows and assets, but the biggest winners midway through 2019 are funds run by old-school investors who take large, concentrated bets.
/jlne.ws/2MBzmO5

Fintech firm Revolut launches a Robinhood-style stock trading service
Ryan Browne – CNBC
Revolut British fintech firm Revolut is jumping into the online brokerage space with its own commission-free stock trading platform. The company launched the service ó which lets users buy or sell popular U.S. stocks from Apple to Beyond Meat at the tap of a button ó on Thursday, looking to lure in millennials who normally shy away from investing.
/jlne.ws/2MAqo3p

PanXchange Launches Industry’s First Institutional Grade Industrial Hemp Exchange
John D’Antona Jr. – Traders Magazine
PanXchange, a physical commodities OTC market structure solutions provider, today announced the launch of the industry’s first institutional-grade industrial hemp exchange. The marketplace will allow producers, processors, trade houses and end-users to participate in a transparent and efficient cash market for industrial hemp products and will ultimately pave the way for the creation of hemp derivatives contracts.
/jlne.ws/2KcFtqt

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