Observations & Insight

MarketsWiki Education, Chicago 2015, Day Three
Today is the day of our third and final session of this year’s intern education series in Chicago. Headlining today’s sold-out event, held at the recently-renovated event space at Trading Technologies, will be Chicago Mayor Rahm Emanuel. He will be followed by Phupinder Gill, CEO of our Global Premier Sponsor CME Group. Next comes veteran industry compliance executive Mary McDonnell, Chicago Stock Exchange CEO John Kerin, and the event concludes with CBOE business development head Andrew Lowenthal.

Not coincidentally, today is also the day we release the first of the videos from the New York intern series July 15. We will be releasing these over the next few weeks, beginning with NYSE COO Stacey Cunningham. This and all videos from past events, along with a new and improved job board, can be found on the newly-redesigned education web site.

Thanks again to all of our sponsors, including CME Group, BATS, Barchart.com, The IFM, Trading Technologies, CBOE, Nadex, ICE, SunGard and IIT Stuart School of Business.


Stacey Cunningham, NYSE – The Intersection of People and Technology

“It’s not about you. You don’t take it personally. You’re working for a goal.”

Stacey Cunningham, COO of NYSE, says the driving factor in her career has been “choosing what was right for the business and choosing what was right for the organization.” Some of those decisions were a good fit for her as well, but not always. She also talks about how technology has created speed and access to the financial markets in ways no one could have predicted. Here’s her story on the intersection of people and technology, and how that can work best on a single technology platform at NYSE.
Watch the video »

Lead Stories

Behind enemy lines – foreign hedge funds thrive in China
Michelle Price and Pete Sweeney – Reuters
Hundreds of foreign hedge funds and traders are working in a regulatory grey area in China, using speculative trading strategies that are complicating regulators’ efforts to calm the country’s turbulent stock markets.
Interviews with more than a dozen foreign hedge funds, proprietary traders and consultants reveal foreigners are active on a large scale in Chinese stocks, despite tight investment rules designed to limit their activities.

Oil Prices – Shale Producers Face Reality
Matthew Philips, Asjylyn Loder and Bradley Olson – Bloomberg
Not long ago the oil industry looked like it had dodged a bullet. After the worst bust in a generation cut crude prices from $100 a barrel last summer to $43 in March, the oil market rallied. By June, prices were up 40 percent, passing $60 for the first time since December. Oil companies that had cut costs began planning to deploy more rigs and drill more wells. “We didn’t think we’d be quite this good,” Stephen Chazen, chief executive officer of Occidental Petroleum, told analysts in May.

In Big Switch, Market Supports the ‘Troops’
Helene Meisler – TheStreet
At least we saw a little more fear creep into the market on Thursday. I suppose that’s what happens when the “Haves” take it on the chin. And many of the “Have Nots” have finally come down, some in spectacular fashion.

Low Volatility in Natural Gas May Hide Good Opportunities
Carley Garner – TheStreet
According to a recent Bloomberg news report, trading volume in natural gas futures has risen to almost a three-year high. We see this as a sign of a market that has grown too comfortable — or perhaps complacent is a better adjective.
If so, the natural gas market could be due for a shakeup. Others seem to agree. The news sources also cite expectations of higher natural gas volatility as U.S. shale producers will begin exporting natural gas to Asia and Europe.

Junk Bond ETFs: Wall Street Preparing For The Worst
Tim Maverick – Wall Street Daily
The Wall Street Journal put it succinctly: “Wall Street is preparing for panic on Main Street.”
Or, more accurately, panic among retail investors.
You may recall how money managers like John Paulson made a reputation betting against sub-prime mortgages. This time around, some hedge funds think they’ve found a weakness in high-yield bond mutual funds and exchange-traded funds (ETFs).
Apollo Global Management (APO) and Oaktree Capital Group (OAK), for instance, are buying credit default swaps and put options on junk bond ETFs. Those instruments will rise in price if junk bonds fall.

Traders Have Disappeared From the Gold Market
Joe Deaux and Tatiana Darie – Bloomberg
As gold continues to languish near its lowest price in five years, one element seems to be missing: traders.


BATS Reports Record U.S. Options Market Share in July; Equities Market Share Remains Strong in U.S. and Europe
Press Release – BATS
BATS Global Markets (BATS) today reported July data and highlights including record market share of 10.8% for its U.S. options business, surpassing the previous record of 9.9% set in April 2015.

SGX says securities, derivatives, commodities trading increased in July
Straits Times
Singapore Exchange (SGX) said securities, derivatives and commodities activities in July increased from a year ago.

Vietnam set to open derivatives market next year
Thanh Nien Daily
A market for index futures and government bond futures will be opened in Vietnam next year, sometime between the third and the fourth quarter, the government website reported this week.
The country’s first derivatives market will be established at the Hanoi Stock Exchange, it quoted the Ministry of Finance’s latest order for the State Securities Commission of Vietnam as saying.

Regulation & Enforcement

Europe adopts rules to force OTC swaps clearing
Philip Stafford – Financial Times
Europe is set to enforce mandatory clearing of interest rates swaps from late April next year after Brussels yesterday adopted new rules to bolster over-the-counter derivatives trading.
The move means Europe will finally fall into line with counterparts in the US and Japan — the other main markets for over-the-counter derivatives clearing — in requiring big market participants such as banks to clear some of the swaps.


When Only the Biggest Stocks Will Do – Mega-cap stocks may be slow-growing, but their low volatility has appeal
Michael Rawson – Morningstar
Guggenheim Russell Top 50 Mega Cap ETF (XLG) invests in the biggest of the big. In fact, its $209 billion average market cap is higher than any other mutual fund or exchange-traded fund and nearly 3 times that of the S&P 500. Mega-cap stocks have different risk and return characteristics than mid- and small-cap stocks, and those looking to target these stocks might consider XLG. The fund provides low-cost, market-cap-weighted exposure to 50 of the largest U.S. companies.

Volatility and growth: Two critical questions for international markets
Matthew Dennis – ETF Trends
International markets experienced increased volatility in the second quarter: Equity volatility rose by 19% in the US and by 50% in Europe.1 Notwithstanding a fade in equity volatility in July on the back of a perceived solution to the Greek crisis, bond market volatility has remained elevated. As we look ahead to the remainder of 2015, reading the tea leaves of the market remains challenging.


DIARY of a FIRST TIME TRADER – Oops I did it again!
CBOE Options Hub
So I just started trading…about 2 weeks ago. I’d been thinking about it for years, I’ve watched thousands of options videos. Literally thousands! I’m the producer of CBOETV so, yeah, I’ve created…edited…filmed…reviewed ohhhhhhhh about 10K options related videos. BUT I’d never placed a single options trade. I decided it was time to stop buying shoes, and start trading options!

Settlement: Oh, So That’s How They Do It!
Darrell Martin – Benzinga
Have you ever thought about how you would structure a fair settlement if you owned your own exchange?
It is a thought provoking question with a multitude of possible answers. If you have searched the internet comparing what different brokers and exchanges offer, you may have come across some of the interesting ways that settlement is reached.

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