Israeli Firm Stole Millions Using Bogus Options – CFTC; Junior RBC analyst charged with insider trading

Aug 13, 2019

Lead Stories

Israeli Firm Stole Millions Using Bogus Options, CFTC Says
Janan Hanna – Bloomberg (SUBSCRIPTION)
Four Israeli citizens and the financial firms they owned or operated were sued by U.S. securities regulators for allegedly using bogus swap and option trades to steal about $80 million from investors, including some Americans.

***SD: The full CFTC complaint – CFTC Charges International Enterprise with Operating a $103 Million Fraudulent Binary Options Trading Scheme.

Junior RBC analyst charged with insider trading
Kadhim Shubber – Financial Times
A junior analyst at RBC Capital Markets in New York has been arrested and charged with insider trading barely a year after joining the bank from college.
The Manhattan US attorney’s office accused Bill Tsai of buying options in Electronics for Imaging ahead of its $1.6bn acquisition by Siris Capital in April. The private equity firm had used financing from the bank to secure the deal.

***SD: Other sources are Reuters, Bloomberg, the WSJ, Business Insider, and the SEC filing pertaining to Tsai’s case.

Regulators and the Fed reportedly looking to roll-back Volcker Rule, giving banks leeway on investments
Maggie Fitzgerald – CNBC
Regulators are trying to make it easier for banks to invest their own money by changing the Volcker Rule, a centerpiece of the legislation in the post-financial crisis bank crack-down, Bloomberg reported Monday.

****SD: Also see Bloomberg.

An Incredible Earnings Season Draws to a Close
With only 12% of firms left to report, we can start making statements about the overall earnings season that started mid-July and continues to the end of this month. It has been an incredible earnings season especially the big moves in stocks after announcing versus the expected moves as implied from the straddle prices. This earnings season has had the highest ratio of the actual earn move to implied earn move, 104% and the only year over 100%. The average of each quarterly earnings season ratio is 85%.

Hedge funds polarised on oil by economy and supply threats
John Kemp – Reuters
Hedge fund managers remain deeply divided about what matters more for the future direction of oil – intensifying fears about a global recession or Saudi Arabia’s production cuts and other supply disruptions.
Hedge funds and other money managers sold futures and options equivalent to 25 million barrels in the six most important contracts linked to petroleum prices in the week to Aug. 6.

A Steady Diet of Nothing Is Making Equity Investors Irritable
Elena Popina – Bloomberg (SUBSCRIPTION)
S&P 500 hasn’t moved since a January 2018 high, 563 days ago; Recent selloff reminds JPMorgan’s Matejka of 2015- 2016 rout
It has certainly seemed like a busy 18 months for stock traders. There was the bull market’s near-death experience in December 2018, the VIX blowing up 10 months before that, a smattering of other memorable tumbles, as well as 18 record highs. On the other hand, nothing whatsoever has happened. Never mind that equities had their best yearly start since 1987, or that the index is up 23% since Christmas: 563 days after surging to a high in January 2018, the S&P 500 hasn’t made a lick of progress from there.

Exchanges and Clearing

Some Stock Prices Delayed as Glitch Hits NYSE-Run Data Feed; Issue marks the latest in a series of tech problems for exchange
Alexander Osipovich – WSJ (SUBSCRIPTION)
A key stock-market data feed run by the New York Stock Exchange suffered a technical glitch on Monday, leading to delays in releasing the end-of-day values of the Dow Jones Industrial Average and the S&P 500.

****SD: CNBC here.

BSE to introduce Liquidity Enhancement Scheme in equity derivatives from August 26
Economic Times
With an objective to boost trade in the derivatives segment, the country’s leading stock exchange BSENSE 0.20 % is going to launch the Liquidity Enhancement scheme (LES) in equity derivative segment from August 26. The LES will be provided on index futures and options and fifty stock futures and options.

****SD: Global Investor Group has the story here.

KRX to launch Kospi 200 weekly options
Jung Min-kyung – Korea Herald
South Korea’s bourse operator Korea Exchange (KRX) said Tuesday it will introduce weekly options contracts based on the Kospi 200 index on Sept. 23, in a bid to boost the local derivatives market.

Regulation & Enforcement

Cboe’s Chief Policy Officer On the Dangers of the Current Exposure Method
Cboe Blog
In a recent article for International Financial Law Review, Cboe’s Chief Policy Officer, Angelo Evangelou, detailed why the Current Exposure Method (CEM) – a methodology created to determine capital requirements for counterparty credit risk to derivatives in the U.S. – is harming liquidity provision in the options market. Angelo explains that because of CEM, banks in the options clearing business are unnecessarily incurring capital charges and makes the case for change.

FIA and ISDA respond to CPMI/IOSCO CCP auction paper
FIA and ISDA welcome the efforts by CPMI and IOSCO on auction design, especially the extensive engagement with the industry including the two workshops held on this topic. The CPMI-IOSCO discussion paper on central counterparty default management auctions (the discussion paper) accurately represents the views presented at these workshops, including some questions where different constituents of the industry do not agree.

Opening Up China’s Futures Market: A Consistent Message
Manesh Samtani – Regulation Asia
Since the start of this year, Chinese regulators have been consistent about a plan to opening up the futures market to foreign investors. The Shanghai International Energy Exchange on Monday (12 August) launched trading of yuan-denominated natural rubber futures – TSR 20 futures – the fourth commodity futures contract in China to allow trading from both domestic and overseas investors, after crude oil, PTA (purified terephthalic acid) and iron ore.


Goldman Says Use S&P 500 Calls to Position for Return to Record
Gregory Calderone – Bloomberg (SUBSCRIPTION)
Goldman Sachs Group Inc. has some advice for investors bruised by this month’s U.S. equity sell-off: use call options to position for a rebound to last month’s record highs.


Recession Fears Spike to 2011 High as Risk of Bubbles Spreads
Ksenia Galouchko – Bloomberg (SUBSCRIPTION)
Third of investors say recession likely within 12 months; Bonds are seen as most at risk of central bank-induced bubbles
Recession fears are spreading among investors at a time when valuations across major assets are looking dangerously stretched following years of monetary stimulus, the latest Bank of America Corp. survey shows.

The Bond Market Is In a Bubble
John Authers – Bloomberg (SUBSCRIPTION)
There has been a tendency since the financial crisis to label any market that is rallying or deemed overvalued to be in a “bubble.” The word has become overused and debased. But if we treat it rigorously, the bubble concept is still vital in navigating financial markets. And the rigorous treatment reveals that bonds really are in a bubble.

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