Observations & Insight
In observance of the 4th of July holiday, there will not be a JLN Options newsletter tomorrow or Friday. (Sadly, that also means there will not be an episode of “The Spread” this week either.) Enjoy the BBQ and fireworks, loyal readers – we’ll be back in action on Monday, July 8.
Ice, CME set to launch new VAR models in early 2020
Costas Mourselas – Risk.net (SUBSCRIPTION)
Ice Clear Europe is set to roll out its new value-at-risk (VAR)-based margin methodology for listed derivatives clearing in early 2020 – a move that puts it on a potential collision course with CME Group, which is plotting the launch of its own revised VAR-based method during the first half of next year. Both timelines are provisional, and subject to regulatory approval.
A quant superstar seems to have left Citadel
Sarah Butcher – efinancialcareers
Where is Jeffrey Ryan? The answer, seemingly, is that he is no longer at Citadel. As of sometime last month, Ryan’s LinkedIn profile says he’s on one of the hedge fund’s notoriously interminable non-competes. For quant watchers, this is a big deal. Because Ryan isn’t any normal quant. He’s special, particularly if you’re an enthusiastic programmer in R. He organizes the popular R/Finance conference (now in its 11th year). He wrote the popular xtx tools used for handling R’s different time-based data classes. He wrote quantmod (Quantitative Financial Modelling Framework), which has been downloaded millions of times and allows users to build, trade, and analyse quantitative financial trading strategies. He teaches. He writes. He’s a big deal.
Horizon Software Offers Dispersion Trading Bringing Algorithmic Volatility Strategies To The Next Level
Horizon Software (Horizon), the world’s leading provider of electronic trading solutions and algorithmic technology, has announced the release of a new volatility algorithm to automate volatility spreading strategies, and more generally dispersion trading strategies. This algorithm will be known as Hedged Vol Spreader (HVS). Dispersion refers to the practice of selling index volatility while buying volatility on its constituents at the same time in a delta neutral fashion. The key benefit of this volatility strategy, if well implemented and automated, is to offer a volatility neutral exposure to the difference between implied and realized correlation on the index constituents.
****SD: Horizon’s clients include HSBC, Nomura, Natixis and Credit Suisse.
SociÈtÈ GÈnÈrale chairman admits it was too slow to fire traders
David Crow – Financial Times (SUBSCRIPTION)
The chairman of SociÈtÈ GÈnÈrale has conceded the French bank was too slow to cut jobs at its struggling securities trading unit, as it tries to regain investor confidence following a collapse in its share price. The Paris-based lender announced 1,600 job cuts in April following several quarters of poor performance at its investment bank as part of a push to reduce its annual costs by EUR500m.
Bitcoin Rally Fuels Market in Crypto Derivatives
New structured products draw concern as digital currency climbs back above $10,000
Alexander Osipovich – WSJ (SUBSCRIPTION)
Wall Street has dreamed up an array of derivatives tied to stocks, commodities and mortgages. Now such contracts are being developed for bitcoin.
In recent months, some cryptocurrency firms have begun touting structured products linked to the price of bitcoin, with complex formulas determining how much they pay out.
Deutsche Bank Looks to Shed Big Chunk of Wall Street Presence
Deutsche Bank AG is taking steps to dismantle a pillar of its Wall Street investment bank.
The troubled German lender has had discussions with Citigroup Inc., BNP Paribas SA and others that could involve selling or transferring parts of its once-prized equities business, including operations that serve hedge funds and other big trading customers, according to people familiar with the matter.
Derivatives Market Punishes Countries for Poor Governance
Mark Gilbert – Bloomberg (SUBSCRIPTION)
Asset managers are increasingly using their financial clout to persuade companies to be friendlier to the planet, wielding a combination of the stick of disinvestment and the carrot of engagement. But can the financial world do more to ensure countries and their central banks are also meeting their environmental, social and governance responsibilities?
The inside story of how Robinhood, a $6 billion investing app for millennials, blew a huge launch so badly that Congress got involved
Nick Bastone and Dan DeFrancesco – Business Insider Prime (SUBSCRIPTION)
In late 2017 the crypto craze was on. Bitcoin was reaching record highs by the day, turning speculators into overnight millionaires. Robinhood, a four-year-old startup with grand ambitions to upend the financial world by letting investors make trades on their smartphones, wanted in on the action. Vlad Tenev and Baiju Bhatt, Robinhood’s founders and co-CEOs, called an emergency town-hall-style meeting at the company’s Menlo Park headquarters that December to lay out the game plan: Robinhood was going to update its app to let users buy and sell cryptocurrencies from their phones. To cash in on the fervor, the team would need to move fast. They had six weeks to meet the end-of-January deadline.
****SD: Robinhood is not the only disruptive, fast-growing company to play fast and loose with the rules to keep things moving.
Exchanges and Clearing
Cboe Global Markets Reports June 2019 Trading Volume
Cboe Mini-SPX (XSP) options set new monthly total volume, ADV and open interest records in June
Cboe Press Release
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today reported June monthly trading volume and provided selected revenue per contract (RPC) guidance for the second quarter of 2019.
HKEX completes acquisition of exchange technology firm
Hayley McDowell – The Trade
Hong Kong Exchanges & Clearing (HKEX) has confirmed the completion of its acquisition of exchange and regulation technology provider, Shenzhen-based Ronghui Tongjin.
Intercontinental Exchange Reports June Statistics
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today reported June trading volume and related revenue statistics, which can be viewed on the company’s investor relations website at http://ir.theice.com/ir-resources/supplemental-information in the Monthly Statistics Tracking spreadsheet.
Eurex June figures: Eurex Exchange falls slightly, EEX and Eurex Repo on an upward trend
Eurex, Europe’s largest derivatives exchange and part of Deutsche Bˆrse Group, saw an increase of 12 percent in the number of traded contracts in European equity derivatives (41m compared to 36.5m in June 2018). Across all Eurex markets there was a slight reduction of 7 percent in the number of traded contracts (185.4m compared to 199.8m in June 2018).
June saw monthly records in the number of traded contracts for numerous products including 3.62 million traded contracts for MSCI indexes, 2.78 million traded contracts in STOXX broadbased/size indexes and 1.65 million traded contracts for STOXX Europe 600 sector indexes.
Regulation & Enforcement
From buy buy to bye-bye for crypto derivatives in the UK
Izabella Kaminska – Financial Times
Fresh from the Financial Conduct Authority on Wednesday: a proposal to ban the sale, marketing and distribution of derivatives and exchange traded notes linked to “cryptoassets” for retail consumers.
****Finance Magnates here and Reuters here. Thinking of crypto, check out this Bloomberg story – Bitcoin Criminals Set to Spend $1 Billion on Dark Web This Year.
Market Observers Give Cautious Thumbs Up to Lagarde: Street Wrap
Charlotte Ryan and Anooja Debnath – Bloomberg (SUBSCRIPTION)
Market players have given an early — if cautious — thumbs up to the prospect of International Monetary Fund Managing Director Christine Lagarde taking over as head of the European Central Bank.
****SD: From the WSJ – Lagarde Has Investors Betting on Easy Money for Europe.
Ray Dalio shares top lessons from career at Bridgewater
Richard Feloni – Business Insider
For the past couple years, Ray Dalio’s life has been in transition.
He still spends most of his time as the co-CIO of Bridgewater Associates, the hedge fund he founded and built into the largest in the world, but he’s also focused on passing on what he’s learned.