Observations & Insight
What is going on at LedgerX?
Thom Thompson – JLN
LedgerX may have launched trading on the contract market platform designated by the CFTC in June as reported by the cryptocurrency press on July 31. According to details shared exclusively with CoinDesk, the online news service that broke the story around 9:00 a.m. Chicago time, LedgerX launched deliverable bitcoin futures on Wednesday, making it the first exchange ever to offer deliverable cryptocurrency futures contracts in the United States. CoinTelegraph and Bitcoinist carried similar stories later in the day.
“FOMO” as a Motivator
Whether we like to admit it or not, the fear of missing out, or FOMO, does influence our behavior. FOMO is just as likely to lead to a bad trade as it is to a good career choice (or the other way around). In this video from MarketsWiki Education’s World of Opportunity event in Chicago, RSM Partner Todd Briggs talks about how this fear can both positively and negatively impact our lives.
Watch the video »
Trump says US will impose 10% tariffs on $300 billion of Chinese goods starting September 1
President Donald Trump said Thursday the U.S. is putting an additional 10% tariff on the remaining $300 billion dollars worth of Chinese goods.
****SD: Twitter risk!
Cboe nears deal to move HQ to Old Main Post Office
Danny Ecker – Crain’s Chicago Business
The parent company of the Chicago Board Options Exchange is closing in on a deal to move its Loop headquarters to the redeveloped Old Main Post Office, adding to a leasing hot streak at the historic structure as it transforms into a modern office building.
Cboe Global Markets is negotiating a deal for about 175,000 square feet in the mammoth building at 433 W. Van Buren St., according to sources familiar with the discussions.
OCC July Cleared Volume Up 7.9 Percent; Highest Total Volume Ever for July
OCC, the world’s largest equity derivatives clearing organization, announced today that total cleared contract volume in July reached 403,483,838 contracts, a 7.9 percent increase compared to last July, and the highest total volume for July in OCC’s history. OCC’s year-to-date average daily cleared contract volume is 19,358,621, down 5.8 percent compared to 2018’s record-breaking pace.
Susquehanna International Group Case Study: Overview and Executive Summary Available for Download
Paul Rowady – Alphacution
The modern capital markets era begins in the mid-1970’s with the emergence and then convergence of three critical factors: derivatives, computers and data feeds. Together, these factors symbolize the birth of the quantitative research revolution and beginnings of trade workflow automation, and therefore, propel the conception of some of the most consequential product developments, trading strategies and trading firms that the financial world has ever known. A subset of the most notable players were the pioneers in the emerging listed option market. In some ways, they were also the pioneers in quantitative research – the “first quant shops” – developing advanced capabilities in the modeling of option pricing frameworks by way of computers and mathematics.
The Rationale for Ag Options’ Upward Skew
Erik Norland – CME Group
Across most markets, out-of-the-money (OTM) put options tend to be more expensive than OTM call options. This is most obviously true in the equity market, where investors fear downside risks more than upside risks. It’s also true in the crude oil market, where, despite political risks to the upside, downside risk is usually the main concern. Precious metals, fixed income and currency markets are quirkier and, by-and-large, upside and downside risks are more symmetrical or, at least, more time varying. Options on agricultural goods, however, are unique: call options are usually more expensive than puts – between 74% and 99% of the time since early 2017, depending on the product (Figures 1 -3).
How derivative compression is easing the Libor transition
Thomas Helm – Practice Insight (SUBSCRIPTION)
Market participants have found a new way of managing the colossal amount of administration work associated with the transition from Libor: compressing swaps and options contracts
Hedge funds grasp opportunities from stocks rally
Laurence Fletcher – Financial Times (SUBSCRIPTION)
After a miserable 2018, hedge funds are starting to enjoy trading equities again.
Last year’s global stock market sell-off pushed equity hedge funds to a 7.1 per cent average loss, according to data group HFR, but this year they are bouncing back with a 9.5 per cent gain in the first six months of this year. Helped by widespread rallies in global stock markets, this marks their best first half of a calendar year in a decade.
BNP Paribas says Deutsche Bank prime brokerage transition will be finalised by summer 2020
Hayley McDowell – The Trade
BNP Paribas has said the transition of Deutsche Bank’s prime brokerage and electronic equities units will likely be finalised by summer next year, despite Deutsche Bank’s hopes that the deal will be completed by the end of 2019.
Exchanges and Clearing
LSE Still Needs to Prove Logic of Buying Refinitiv; Buying Refinitiv will increase London Stock Exchange’s earnings per share by more than 30%
Stephen Wilmot – WSJ (SUBSCRIPTION)
Do investors like the London Stock Exchange’s $14.5 billion acquisition of Refinitivóor do they just like leverage? LSE shares jumped another 6% Thursday morning after the company formally announced an all-share deal to buy the financial data provider for $27 billion including debt. They are now up 24% since LSE gave preliminary details over the weekend.
Cboe Global Markets Announces Election of Fredric Tomczyk to Board of Directors
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today announced its Board of Directors elected Fredric J. Tomczyk, former President and Chief Executive Officer of TD Ameritrade Holding Corporation, to its Board of Directors on July 30, 2019.
Cboe Global Markets Declares Increased Third-Quarter 2019 Dividend
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today announced its Board of Directors has declared an increased quarterly cash dividend of $0.36 per share of common stock for the third quarter of 2019, representing a 16 percent increase from the prior quarter’s dividend of $0.31 per share.
Q3-Q4 2019 Market and Exchange Driven Changes
Do you know which exchange-driven changes (EDCs) are coming up over the next few months? And are your systems ready?
TradeZero America Announces Membership on the NYSE American Options Market
Yahoo Finance (Press Release)
TradeZero America, a Brooklyn, New York-based online broker dealer, announced that the firm is now a member of the New York Stock Exchange American Options market. The NYSE American Options exchange provides traders with deep liquidity across listed options contracts with an integrated technology platform offering access to American and Arca options, combined with the benefit of the open outcry trading floor in New York.
MIAX Options: Amendment To Exchange Rule 520, Limitations On Orders, To Remove Certain Order Entry Restrictions On Electronic Exchange Members
MIAX Options has amended Rule 520, Limitations on Orders, to allow Electronic Exchange Members (“EEMs”) to enter buy and sell limit orders in the same options series for the account or accounts of the same beneficial owners, other than for the account or accounts of Priority Customers, and the Exchange will no longer need to designate specific classes for EEMs to engage in this type of activity.
CME Group Inc. Reports Second-Quarter 2019 Financial Results
CME Group Inc. (NASDAQ: CME) today reported financial results for the second quarter of 2019. The company reported revenue of $1.3 billion and operating income of $699 million for the second quarter of 2019. Net income was $514 million and diluted earnings per share were $1.43. On an adjusted basis, net income was $632 million and diluted earnings per share were $1.76. Financial results presented on an adjusted basis for the second quarter of 2019 and 2018 exclude certain items, which are detailed in the reconciliation of non-GAAP results.
CME “not overly concerned” by LSE-Refinitiv talks
Louisa Chender – Global Investor Group (SUBSCRIPTION)
Chicago-based exchange says the deal wouldn’t change the competitive landscape
ICE Reports Second Quarter 2019
Intercontinental Exchange (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listing services, today reported financial results for the second quarter of 2019. For the quarter ended June 30, 2019, consolidated net income attributable to ICE was $472 million on $1.3 billion of consolidated revenues, less transaction-based expenses. Second quarter GAAP diluted earnings per share (EPS) were $0.84. Adjusted net income attributable to ICE was $534 million in the second quarter and adjusted diluted EPS were $0.94. Please refer to the reconciliation of non-GAAP financial measures included in this press release for more information on our adjusted operating expenses, adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted EPS and free cash flow.
SGX reports FY2019 net profit of S$391 million
Singapore Exchange (SGX) today reported FY2019 net profit of S$391.1 million (S$363.2 million), its highest net profit in 11 years. Revenues were also the highest since listing at S$909.8 million (S$844.7 million).
SGX seeks “bolt-on” acquisitions
James Thursfield – Global Investor Group (SUBSCRIPTION)
SGX CEO says the exchange is looking for “bolt-on” acquisitions for its newly formed business units
Euronext publishes Q2 results
Euronext, the leading pan-European exchange in the Eurozone with 1,500 listed issuers, today announces its results for the second quarter of 2019.
Euronext eyes acquisitions in market data or post-trade services
Inti Landauro – Reuters
Euronext (ENX.PA) is looking for opportunities to buy market data or post-trade services providers, CEO Stephane Boujnah said on Wednesday, after larger rival London Stock Exchange (LSE.L) said it was in talks to buy Refinitiv in a $27 billion (GBP22.1 billion) deal.
Profiting From the Fear Premium in Tech Stock Options
Steven M. Sears – Barron’s
Institutional investors pretty much own all of the same stocks, yet another bank recently noted. A realist might conclude that such investors operate expensive index funds that all buy the same things and charge high management fees for doing so.
If you want to give your money to these guys, go ahead. But something tells me that is about as appealing to you as buying stocks that are dancing around highs.
History Points To Rocky Markets Ahead
DataTrek Research Blog
Our historical playbook analysis of what happens after the S&P 500 has outsized gains in January has worked every month this year except May when trade concerns spooked markets. Overall, abnormally strong January returns have been a historically clear signal about market direction in the following months and July 2019 further affirmed that trend.
The best and worst performing hedge funds so far this year
Bradley Saacks – Business Insider (SUBSCRIPTION)
The market-beating human stock-picker is far from dead.
Quant funds now dominate hedge fund flows and assets, but the biggest winners midway through 2019 are funds run by old-school investors who take large, concentrated bets.
Fintech firm Revolut launches a Robinhood-style stock trading service
Ryan Browne – CNBC
Revolut British fintech firm Revolut is jumping into the online brokerage space with its own commission-free stock trading platform. The company launched the service ó which lets users buy or sell popular U.S. stocks from Apple to Beyond Meat at the tap of a button ó on Thursday, looking to lure in millennials who normally shy away from investing.
PanXchange Launches Industry’s First Institutional Grade Industrial Hemp Exchange
John D’Antona Jr. – Traders Magazine
PanXchange, a physical commodities OTC market structure solutions provider, today announced the launch of the industry’s first institutional-grade industrial hemp exchange. The marketplace will allow producers, processors, trade houses and end-users to participate in a transparent and efficient cash market for industrial hemp products and will ultimately pave the way for the creation of hemp derivatives contracts.