Lead Stories

Interactive Brokers suffers $22m market making loss
Hayley McDowell – The Trade
The market making business at Interactive Brokers made a $22 million loss in the first quarter this year, as the firm moves forward with winding down its options market making services. Interactive Brokers explained the rate of continuing losses within market making had been ‘substantially reduced’ by the decision to shutdown options market making.

****SD: In case anyone thinks this was a sudden phenomenon, and in lieu of a graph of declining profits, I’ll point readers to an AmsterdamTrader post from 2010 titled “Timber Hill is too slow.” Also see FinanceFeeds’ Interactive Brokers expects $25m in one-time restructuring costs due to halt of options market making activities. For the Q1 earnings press release go here.

Former Harvard Money Whiz Jack Meyer Tries to Regain His Edge
Juliet Chung – WSJ
Jack Meyer trounced rivals when he ran Harvard University’s endowment in the 1990s. But as a hedge-fund manager, he is struggling. His Convexity Capital Management LP has lost $1 billion of its clients’ money over the last few years as once reliable options trades backfired. Investors pulled more than $3.5 billion from the bond shop last year, its fifth down year in a row. The firm laid off a tenth of its staff in recent months.

****SD: Money Whiz would be an odd addition to the Cheez Whiz product line…

Dash Financial Technologies Names Ari House Chief Financial Officer
Press Release
Dash Financial Technologies today announced the appointment of Ari House as Chief Financial Officer. His first day was April 1. Mr. House has spent nearly 20 years working in various capital markets roles and has accumulated extensive experience successfully operating private equity-backed software and information services businesses. He joins Dash from The Association of Certified Anti-Money Laundering Specialists (ACAMS), where he served as Chief Financial & Corporate Development Officer.

Volera integrates derivatives analytics suite with options tick database
Hanweck, a leading provider of real-time risk analytics on global derivatives markets, today announced the integration of its Volera platform with its product formerly known as the Premium Hosted Database (PhD).

A new method for predicting volatility ‘tsunamis’
Is volatility about to spike? It’s a question frequently asked by anxious investors in times of relative calm. Now there’s a new answer. In a recent paper entitled “Forecasting a Volatility Tsunami” that was awarded the 2017 Charles H. Dow Award from the Market Technicians Association, Andrew Thrasher argues that it’s not low volatility that presages a volatility spike, but a consistent level of volatility.

Exchanges and Clearing

In 2016, we saw sustained strong volume in the U.S. listed equities options industry. OCC’s total cleared contract volume reached 4.17 billion, the fifth highest annual contract volume in our history. Securities lending reached a new high with more than 1.9 million cleared stock loan transactions, representing growth of 37 percent from the previous year. 2016 cleared futures volume was also OCC’s highest ever at 104 million contracts, up 56 percent from 2015.

****SD: Lot to parse through here.

China launches white sugar options
China’s second commodity options, white sugar options, started trading on Zhengzhou Commodity Exchange Wednesday. “Businesses can now use a combination of investment tools including spot contracts, futures contracts, and options to manage risks more effectively,” said Ma Wensheng, chairman of Xinhu Futures, a Shanghai-based futures brokerage firm.

Report Delivery for Nasdaq ISE
Report HQ is Nasdaq’s new report portal. This new portal will offer a full suite of reports for Nasdaq ISE once the migration to INET technology begins. Members must request access via the Report HQ Request Form.


Maths genius puts down UBS risk book, heads to Citadel
Samuel Agini – Financial News
The global head of trading for UBS’ central risk book – a maths prodigy who achieved the coveted rank of managing director at the unusually young age of 28 – is leaving to join the hedge fund Citadel. Paul Jefferys, a quantitative trader who plays a key role in managing risk for the Swiss bank’s equities business, will join Ken Griffin’s $26 billion investment group in an as yet unknown role, according to people familiar with the matter.

****SD: Ahh, yes, but is he street smart?

Regulation & Enforcement

Spoofing, the Flash Crash and Excessive Canceled Orders: Raising the Red Flag
John Slauson – TABB Forum
Spoofing is perhaps the most targeted form of market manipulation. But the definitions provided by the regulators for violations are quite vague, challenging compliance officers attempting to root out spoofing and other forms of market abuse.

Even supporters of DOL fiduciary rule call for modifications
Mark Schoeff Jr. – InvestmentNews
Even supporters of the Department of Labor’s fiduciary rule are still looking to tweak the measure. For instance, the Investment Adviser Association wants the regulation modified so that advisers who are already fiduciaries can promote their services to prospective clients without fiduciary responsibility being attached to the pitch.

Banks and Clients Tussle Over What It Will Cost to Read Analysts
Stephen Morris and Stefania Spezzati – Bloomberg
Just months before banks stop giving trading clients market research for free, they’re still locked in discussions about how much to charge.

U.S. top court questions SEC’s powers to recover ill-gotten profits
Sarah N. Lynch – Reuters
The U.S. Supreme Court, in a case with wide consequences for the policing of Wall Street, indicated on Tuesday it may diminish the Securities and Exchange Commission’s ability to get back ill-gotten profits reaped through defendants’ misconduct.


Blockchain Grows Up – ?The Days of Experimentation Are Over
Pramod Achanta, IBM – TABB Forum
The days of blockchain experimentation are over. Blockchain now is being implemented to work at scale in our global financial institutions, and no one will be left untouched by its tidal force. But failure to implement blockchain initiatives intelligently, as part of an enterprise-wide strategy, will cost crucial time and resources in the race for financial services success. What will it take for the financial services industry to realize the possibilities of this nascent technology, and make it an integral part of their technology strategy?


EQDerivatives: “Strategists Eye Dispersion As French Election Nears”
Georgia Reynolds, EQDerivatives via Eurex Group
Dispersion trades on the EuroSTOXX 50 Volatility Index and France’s CAC 40 are being touted thanks to the effect the upcoming French Election is having on index volatility. Peng Cheng, strategist at JPMorgan in London, told EQDerivatives the VSTOXX term structure was inverted, with April outperforming May. “There are opportunities that are arise because of that so for example the dispersion on EUROSTOXX 50 and CAC looks attractive because people buy protection and they buy the index single stock so that has pushed up the index volatility vs. single stock volatility, so dispersion looks attractive,” he said.

Since 1990, market gains double when this happens — and it just did
Rebecca Ungarino – CNBC
If investors have been sitting on the sidelines while the market rallies, then it may be high time to jump in, according to one technical analyst. The CBOE Volatility index recently hit its highest level of the year, just above 16, as global geopolitical concerns pressure the markets, sending the S&P 500 sliding modestly toward the end of last week. This may signal a prime buying opportunity, according to Oppenheimer’s head of technical analysis, Ari Wald, who points to an intriguing relationship between the market’s moves and spikes in the VIX. Historically, when the VIX spikes while the market is in an uptrend, above-average returns tend to be seen in stocks over the next three to six months, Wald said.

Profiting From French Election Volatility
Attempting to predict the outcome of an election is a fool’s errand — we don’t bother with it. But that doesn’t mean we can’t make money off the vote…

The Phenomenon That’s Been Plaguing U.S. Investors For Years!
Call it patriotic… Call it lazy… But most people stick close to home when it comes to investing. This is called home-country bias, and it’s a phenomenon that’s too big to ignore. It’s pervasive across time and geography. And even though it makes investors feel all warm and fuzzy inside, it generally tricks us into accepting lower returns and higher volatility from domestically-tilted portfolios. In the U.S., this is particularly prevalent.

Reflation trades of 2016 deflate with remarkable speed
Jamie McGeever – Reuters
Stocks, bond yields and the dollar are all falling, yield curves are flattening and sterling is marching higher. The “reflation” trades of 2016 that were supposed to mark a turning point in global markets are fading. Fast. The question for investors is whether this is the play book for the rest of the year, or whether the trends of 2016 will resume in the second half of the year.


The impact of Brexit-related shocks on global asset prices
Marek Raczko, Mo Wazzi and Wen Yan – Bank Underground
Economists view the United Kingdom as a small-open economy. In economists’ jargon it means that the UK is susceptible to foreign shocks, but that UK shocks do not influence other countries. This definitely was not the case in 2016. The result of the EU referendum, even though it was a UK-specific policy event, had a global impact. Our analysis shows that the Brexit vote not only had a significant impact on UK bond and equity markets, but also spilled over significantly to other advanced economies. Moreover, this approach suggests that the initial Brexit-shock has only partially reversed and still remains a drag on global bond yields and equity prices, though there are wide error bands around that conclusion.


French Election Shocker: Pollsters Baffled by Four-Way Race
Gregory Viscusi and Mark Deen – Bloomberg
The four-candidate battle to reach the runoff in France’s presidential election is putting pollsters to the test as never before.

FlexTRADER Named Best Sell-Side Automated Trading Platform
Press Release
FlexTrade Systems, a global leader in multi-asset execution and order management systems, today announced its FlexTRADER EMS has won the “Best Sell-Side Automated Trading Platform” category during this year’s Sell-Side Technology Awards, which was held by Waters magazine at the New York Marriott Marquis on April 5.

Here’s Where London Bankers Are Moving After Brexit
Brexit is two years away but the exodus of finance jobs is already beginning. Banks are planning to move employees from the U.K. in advance of expected limitations on what goods and services can be sold into the European Union from Britain. The question is how many will leave, and where will they go?

****SD: Some infographic fun.

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