Hedges Across Assets Are Too Expensive, Morgan Stanley Says

May 26, 2022

Lead Stories

Hedges Across Assets Are Too Expensive, Morgan Stanley Says
Options imply broad range of outcomes, strategists say
Morgan Stanley suggests positioning for a peak in volatility
Joanna Ossinger – Bloomberg
Long volatility is too expensive as hedging strategy and investors should position for a peak in price swings in some assets, according to Morgan Stanley.
Volatility markets tend to top out before spot markets find their bottom, even if only by a few days, and it’s worth allocating for such a peak now with bets on the Canadian dollar and credit markets, strategists led by Phanikiran Naraparaju wrote in a note Wednesday.
/jlne.ws/3PN3Daw

Courts deny Nasdaq’s attempts to halt market data rule changes
US markets watchdog has thrown out claims from the exchange that its proposed new rules around market data put incumbent venues at a disadvantage and harm the markets.
Annabel Smith – The Trade
The US Court of Appeals has denied petitions from Nasdaq to halt the Securities and Exchange Commission’s (SEC) proposed changes to the level of data publicly available.
In an opinion released on 24 May, the Courts denied the exchange’s petitions on the grounds that the SEC has rejected and disproved its claims that the new rules would harm competition, increase information asymmetries, exacerbate market resiliency and encourage order flow off-exchange.
/jlne.ws/3Gm4efc

Bitcoin Options Show Investors Becoming Anxious About Declines
Spike in put-to-call ratio signals cynicism, says Olszewicz
Spike in ratio in April last year preceded plunge in Bitcoin
Vildana Hajric – Bloomberg
Bitcoin might be registering tepid moves as of late but that doesn’t mean investors have become less anxious about the largest cryptocurrency’s prospect for further declines.
The put-to-call ratio on the coin hit a 12-month high at 0.72, meaning that many traders are loading up on hedges in the event it embarks on another leg lower and its losses deepen. The ratio hit a high of 0.96 April last year before prices plunged roughly 50% the following month, according to option Skew data compiled by Babel Finance.
/jlne.ws/3sUlfrp

Cathie Wood’s Ark and 21Shares refile for spot Bitcoin ETF
The U.S. SEC rejected the application for the ARK 21Shares Bitcoin ETF in early April and has not approved a spot Bitcoin ETF so far.
ARK Investment Management, an investment firm founded by veteran investor Cathie Wood, is taking another try to launch a spot Bitcoin (BTC) exchange-traded fund (ETF) in the United States.
ARK Invest submitted on May 13 yet another application for its physical Bitcoin ETF, the ARK 21Shares Bitcoin ETF, according to a filing with the U.S. Securities and Exchange Commission (SEC). The application includes a proposed rule change from the Chicago Board Options Exchange (CBOE) BZX Exchange.
/jlne.ws/3PMctp2

Exchanges

Cboe’s BIDS Trading Fined $200K for Overstating Trade Volume
It overstated the advertised trade volumes due to system errors.
It has already accepted the penalty order.
Finance Magnates
Dark pool equities trading platform, BIDS Trading has been slapped with a censure order and a fine of $200,000 by the Financial Industry Regulatory Authority (FINRA) for overstating its advertised trading volume.
BIDS configured its systems to automatically advertise daily trading volume from July 2018 to August 2019. The company used two third-party service providers, Bloomberg and Thompson Reuters, for publishing the data.
/jlne.ws/3LQd7Pa

Cboe Global Markets to Present at Deutsche Bank’s 12th Annual Global Financial Services Conference on Wednesday, June 1
Cboe Global Markets
Cboe Global Markets, Inc. (Cboe: CBOE), a leading provider of global market infrastructure and tradable products, announced today that Brian Schell, Executive Vice President, Chief Financial Officer and Treasurer, will present at Deutsche Bank’s 12th Annual Global Financial Services Conference on Wednesday, June 1, from 1:00pm to 1:45pm Eastern Time.
The webcast and replay of the virtual presentation will be accessible at www.cboe.com in the Investor Relations section, under Events and Presentations. The archived webcast is expected to be available within an hour of the presentation.
/jlne.ws/3MWD2WP

Regulation & Enforcement

Volatility to Spark Increased Scrutiny of Complex Products Sales, Regulators Warn
Miriam Rozen – AdvisorHub
Market volatility will expose brokerages that fail to supervise and ensure their representatives adequately comply with Regulation Best Interest rules when they pitch complex products, according to enforcement officials from regulatory agencies.
“Make sure that you’re training your reps so that they understand the products and how they work for people because otherwise they can’t make the recommendation that they need to be making,” said Melissa Hodgman, associate director of the Division of Enforcement at the Securities and Exchange Commission, during a session at the Financial Industry Regulatory Authority’s annual conference broadcast earlier this month from Washington, D.C.
/jlne.ws/3sUlsLd

SGX RegCo to further extend suspension of entry into issuers’ watch-list
SGX
Further to our announcement on 21 May 2021, Singapore Exchange Regulation (“SGX RegCo”) in consultation with the Monetary Authority of Singapore (“MAS”) will continue to suspend its half-yearly review to place issuers on the Financial Watch-List until 1 June 2023.
/jlne.ws/38KkOJv

Strategy

Use This Options Strategy to Profit When Everyone Else Is Running Scared
Steven M. Sears – Barron’s
There is something wrong with the psychology of investors when a company that kids use to write and send brief messages has the power to broadly influence the trajectory of the stock, futures, and options markets.
Yet Snap SNAP’s (ticker: SNAP) warning on late Monday that investors should expect lower growth from the social-media company has gutted what many investors hoped was the start of the end of weeks of poor market performance.
/jlne.ws/3m5aTRP

Miscellaneous

ASIC CELEBRATES RETAIL BAN ON BINARY OPTIONS AS 68% OF WHOLESALE CLIENTS LOSE MONEY
Rick Steves – Finance Feeds
In the 13 months before the ban, between 74% and 77% of active retail clients lost money trading binary options. The product intervention order does not apply to wholesale clients.
ASIC is seeking feedback on a proposal to extend its product intervention order banning the issue and distribution of binary options to retail clients, until it is revoked or sunsets on 1 October 2031.
Australia’s financial watchdog banned the sale of binary options to retail clients, with effect from 3 May 2021, after finding that binary options had resulted in and were likely to result in significant detriment to retail clients.
/jlne.ws/3MVJoFW

Crypto Lender BlockFi, in Talks With FTX, Also Gets Ledn Offer

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