Observations & Insight
The Spread – June 18, 2021
Inflation really is a thing; Small traders are still big; John Lothian weighs in on the current trading landscape; and Nasdaq wins the May options market share race. All in this and the debut of the options “Term of the Week” in The Spread.
****JJL: Cboe’s Henry Schwartz noted on LinkedIn that the options industry set another record yesterday for total listings. He wrote: Single stocks with options surpassed 4k for the first time this week, 4971 stocks, etfs and indices have traded options available today- 16% above year-ago levels.” — LinkedIn
****JJL: MIAX is extending its zero exchange fees for SPIKES futures for another three months.
****SC: As more companies return to their workplaces, we checked in with Cboe Global Markets on the long-planned move of Its Chicago office on LaSalle Street to a new space at the Old Post Office building on Van Buren. A spokeswoman said construction is complete and the offices “are move-in ready.” However, the space currently remains closed and most Cboe staffers continue to work remotely. “We will initially open the space to associates who would like to return to the office on a voluntary basis, with health and safety guidelines in place,” the spokeswoman said, adding that Cboe has not yet established a required return-to-office date for its associates.
Influencers Are Luring Investors Flummoxed by Meme Stonks and Options
With the rise of free, fast trading from your phone, demand has surged for information about creating wealth, not just managing it.
Misyrlena Egkolfopoulou and Donald Moore – Bloomberg Wealth
The U.S. was already doing a poor job of teaching people how to manage their money. Then meme stonks came along.
Now with everyone desperate for financial advice, a deluge of new companies and their influencer leaders are all at your service, fighting to be the first place you turn to chat about stocks, budgets or finances — at times, for a fee.
‘Witching’ Sparks Volume Bursts Following Stock-Market Lull
Lu Wang – Bloomberg
In a week when even a hawkish Federal Reserve failed to shake the equity-market lull, Friday brought some fireworks.
Stock transactions spiked amid a quarterly event known as triple witching, when options and futures on indexes and equities expire. As of 11:45 a.m. in New York, volume on S&P 500 Index stocks was almost 50% above the average for that time of day over the past 30 sessions as the benchmark slipped 0.9%.
Friday marks quadruple witching and the U.S. stock market is already looking ugly
Mark DeCambre – MarketWatch
What’s the best way to cap an important week featuring a closely watched update from the Federal Reserve? Quadruple witching.
Quadruple witching, occurs on the third Friday of the month of every quarter, in March, June, September, and December, and refers to the simultaneous expiration of single-stock options, single-stock futures, and stock-index options and stock-futures.
FX algos and auto-pricing on the rise as traders look to minimise market impact, says Bloomberg FXGO head; Bloomberg’s Tod Van Name said algos, automation for NDFs and options pricing and trading grids have risen dramatically in the last year.
Annabel Smith – The Trade
FX algorithmic trading and automated pricing has surged in the last year as traders seek best execution and minimal market impact, according to the head of Bloomberg’s FX electronic trading platform.
China’s Steps Turn Iron Into World’s Most Volatile Commodity
Annie Lee – Bloomberg
Iron ore, one of the hottest commodities in the early days of the raw materials rally, has now become the most volatile as bulls and bears joust over the trajectory of prices.
In a series of wild swings, the ore that fuels China’s vast steel industry surged to a record, collapsed into a bear market and then returned to a bull market in the space of about a month. Its gyrations in the past 30 days mark the mineral as the most volatile of the two dozen most traded commodities around the world.
The Fed Pulls Back on Its Ultra-Easy Stance. Volatility May Follow.
Randall W. Forsyth – Barron’s
It’s summertime, but the living may not be easy, at least for the financial markets.
The summer solstice arrives in the Northern Hemisphere on Sunday at 11:31 p.m. Eastern Time, and the main priority for everybody cooped up by Covid-19 is to get out and go somewhere, anywhere. In ages past, that typically meant that financial markets entered the doldrums, which sailors associate with the season. That’s been less and less the case in recent years, and this summer shapes up to be less than tranquil for the markets.
China’s Dalian palm options make debut as first available to foreign investors
Emily Chow – Reuters
China launched its palm oil options on the Dalian Commodity Exchange on Friday, the country’s first options contract accessible to overseas traders, but traders said they expect foreign participation to be low.
The launch comes amid volatile palm oil prices, which have been declining since the start of the month after hitting milestone highs in May amid rising output and inventories, and declining exports.
The U.S. Stock Market Will Remain Open for First Federal Juneteenth Holiday
Connor Smith – Barron’s
President Joe Biden on Thursday signed a bill making June 19—known as Juneteenth—a federal holiday, but major U.S. exchanges will remain open Friday and Monday.
The New York Stock Exchange and Nasdaq will be open for business as usual Friday, according to people familiar with the matter. That means the market will open at 9:30 a.m. EDT and close at 4 p.m. EDT. The exchanges are closed on most federal holidays, with Columbus Day and Veterans Day being the exceptions.
Regulation & Enforcement
ETFs to turn to as Fed sets stock market up for rising inflation and interest rates; GameStop heads to IWF
Mark DeCambre – MarketWatch
It is time to talk about talking about ETFs. Yes that’s a riff off what Federal Reserve chair, Jerome Powell, said about the central bank slowing bond purchases, as it’s just not possible to ignore the impact of Wednesday’s move by the Fed to start negotiating the fraught process of peeling back its easy-money policies, while dealing with the economic recovery from the global epidemic.
We won’t bore you with the particulars, but the Fed might hike interest rates earlier than expected, penciling in two rate increases in 2023. You can read about what Chairman Jerome Powell said and did here and the market’s reaction here and here and here, and the Fed’s view on interest rates here and on inflation.
Webinar: Q2 2021 trends in futures and options trading
28 July 2021 • 10:00 AM – 11:00 AM ET
This webinar highlights the main trends in trading activity in the second quarter of 2021 in the global exchange-traded derivatives markets, with category and regional breakdowns as well as exchange and contract rankings.
Moderator: Will Acworth, Senior Vice President, FIA
Date/Time: Wednesday, 28 July 2021 | 10:00 a.m. – 11:00 a.m. ET
It Isn’t Just AMC. Retail Traders Increase Pull on the Stock Market.
Caitlin McCabe – WSJ
Call it the year of the individual investor.
Nonprofessional investors are continuing to upend financial markets and build on their forceful entrance into the arena last year. In the first half of 2021, new brokerage accounts opened by individual investors have already roughly matched the total created throughout 2020, hitting more than 10 million, according to estimates from JMP Securities.