Observations & Insight
FIA Europe Head Bruce Savage’s One-Question IDX Interview
Bruce Savage helped Walt Lukken host his first June IDX and was pleased to see so many people show up and participate. The head of FIA Europe, Savage was interviewed by John Lothian News outside The Brewery, where FIA’s IDX conference was being held.
FIA Tech’s Andrew Castello Talks Reference Data, Symbology at IDX
John Lothian News interviewed FIA Tech’s Head of Reference Data Andrew Castello at IDX in London about his role at the firm he joined in 2019.
Goldman Sachs and Charles Schwab Executives Join OCC Board of Directors
OCC, the world’s largest equity derivatives clearing organization, today announced two new members of its Board of Directors: Alicia Crighton, Managing Director at Goldman Sachs and Faris Matalka, Managing Director at Charles Schwab.
“We are pleased to welcome Alicia and Faris as they are both widely respected leaders across the global derivatives market,” said Craig Donohue, OCC Executive Chairman. “Their extensive leadership experience and diverse skillsets make them highly qualified to join our board, and we feel confident that they will support our continued innovation and transformation. We look forward to benefiting from their counsel as we work to ensure confidence in the financial markets and the broader economy.”
Is the US the ultimate winner in derivatives trading post-Brexit? Lack of equivalence between the UK and Europe post-Brexit saw a huge chunk of derivatives trading move to the US, however, proposed upcoming regulatory changes have the potential to push some of that liquidity back across the pond.
Annabel Smith – The Trade
A huge portion of derivatives trading migrated to the US post-Brexit following the UK and Europe’s inability to reach a decision on equivalence in the derivatives trading obligation (DTO). Around 80% of volumes in ITRAXX and credit default swaps (CDS) moved over to the US post-Brexit, confirmed Deutsche Bank’s head of electronic fixed income, platform, and listed derivatives sales, Mario Muth.
A Crypto Winter Is Setting In. Why the Outlook Is Different This Time.
Jack Denton – Barron’s
Between a collapse in prices, layoffs, and high-profile defaults, the winds of the next so-called cryptocurrency winter are blowing for Bitcoin and other digital assets.
Bitcoin was trading near $20,200 late on Wednesday afternoon, down by more than two-thirds from an all-time high near $69,000 hit in November 2021. It is off 56% since the beginning of the year as June nears its end, while the S&P 500 has lost a bit less than 20%. Other tokens like Ether, Solana, and Dogecoin have fared even worse, and the market capitalization of the entire crypto economy has been reduced to $945 billion from nearly $3 trillion in less than eight months, according to CoinMarketCap.
US stocks struggle for direction as traders weigh signs of slowdown
Naomi Rovnick and Nicholas Megaw – Financial Times
Wall Street stocks traded choppily on Wednesday after heavy falls in the previous session as traders weighed up fresh signs of a looming economic slowdown.
The blue-chip S&P 500 share index bounced between small gains and losses before eventually closing 0.1 per cent lower for the day. The technology-focused Nasdaq Composite was flat.
ETFs inflows take steep drop in first half of 2022, high-yield bonds see ‘massive’ outflows amid recession fears
Christine Idzelis – MarketWatch
Investors aren’t piling into exchange-traded funds like they were in the first half of last year, with inflows falling off steeply amid fears a recession may be looming amid persistently high inflation.
“The first half of 2022 is largely a tale of two quarters,” said Matthew Bartolini, head of SPDR Americas research at State Street Global Advisors, by phone. “In the first quarter, we were still chugging along at a really record pace and then all of a sudden market sentiment shifted.”
Fed’s inflation target ambiguity risks market misstep
Jamie McGeever – Reuters
It may just boil down to semantics, and in good times when inflation is low it’s not an issue at all. But the Fed has a communication problem.
Inflation’s surge to the highest level in 40 years has shone a light on what exactly the Federal Reserve’s inflation goal is, how policymakers go about achieving it, and how they get their message across to the public and financial markets.
Crypto Derivatives Exchange Bybit to Settle Options Contracts in USDC
Jimmy He – CoinDesk
Crypto derivatives exchange Bybit said it is offering options contract settlement using USD coin (USDC). The exchange said in a press release that USDC, a stablecoin pegged 1:1 to the United States dollar and the second largest by market capitalization, will enable stable prices for the duration of each contract. Most crypto options are margined and settled using the same currency. For example, if bitcoin (BTC) is used as collateral in a contract, it will also be used as the settlement currency. Bybit says its move to settle using USDC is a first for crypto options trading. The settlement date is the date when a trade is final, and the buyer must make payment to the seller while the seller delivers the assets to the buyer. Options contracts and other derivatives have settlement dates for trades in addition to a contract’s expiration dates. Bybit’s choice to use USDC for contracts because of its stability unfolds against a bear-market backdrop of stablecoin doubts. In May, Terra’s UST, then the third-largest stablecoin by market cap, crashed to near zero from its dollar peg. Tether (USDT), the largest stablecoin, lost $10 billion in market capitalization the same month when investors started to redeem the tokens.
Derivatives Holiday Trading Days (Finalized) for the First Half of 2023
Osaka Exchange, Inc. (OSE) and Tokyo Commodity Exchange, Inc. (TOCOM) are currently preparing to introduce derivatives holiday trading starting from September 2022 in perspective of further convenience for investors through provision of hedging opportunities during national holidays, thereby strengthening the competitiveness of Japan’s derivatives markets.
We today announce the finalized derivatives holiday trading days for the first half of 2023 as follows. (The finalized dates for the second half of the next year shall be announced in December.)
Regulation & Enforcement
UBS to Pay $25 Million to Settle SEC Fraud Charges Over Complex Options Products; Swiss bank sold the Yield Enhancement Strategy to around 600 investors as relatively low risk
Margot Patrick – WSJ
UBS Group AG agreed to pay $25 million to settle fraud charges from the Securities and Exchange Commission over a complex options-trading strategy that lost customers tens of millions of dollars.
SEC Rejects Grayscale ETF in New Blow to Crypto. Let the Legal Battle Begin.
Jack Denton – Barron’s
Grayscale Investments’ application to convert its flagship Bitcoin Trust to an exchange-traded fund has been rejected by the Securities and Exchange Commission. It’s a blow to crypto that will be battled in court.
Citing outstanding concerns including market manipulation and fraud in crypto, the SEC denied Grayscale’s application to convert its $12.9 billion trust, which has traded on over-the-counter markets since 2015, to an ETF. A lawsuit against the SEC has been launched by Grayscale.
ICE promotes Chris Rhodes to run ICE Futures Europe
Luke Jeffs – FOW
Intercontinental Exchange has appointed Chris Rhodes as the new head of its European exchange, replacing former president of ICE Futures Europe Stuart Williams who has been promoted to group chief operating officer.
Rhodes, who was latterly the chief operating officer of ICE’s European clearing house, will become on July 1 president of ICE Futures Europe, the London-based futures and options exchange.
Raging U.S. inflation is starting to cool, key price gauge signals
Jeffry Bartash – MarketWatch
The numbers: A key gauge of U.S. inflation rose 0.6% in May largely due to the higher cost of gas and food, but there were renewed signs that price pressures were starting to ease.
The increase in the so-called personal-consumption price index was triple the 0.2% gain in April.
But a narrower measure of inflation that omits volatile food and energy costs, known as the core PCE, rose by relatively modest 0.3% for the fourth month in a row. That was below Wall Street’s 0.4% forecast.