Observations & Insight
Lisa Dunsky, OCC – Hit By A Brick: How Setbacks Shape Your Career
“Sometimes life is going to hit you in the head with a brick. Don’t lose faith.” – Steve Jobs, at the commencement speech at Stanford in 2005.
It’s sometimes hard to see what challenges and setbacks will do for your career, but in this very personal and articulate presentation, Lisa Dunsky, senior compliance officer at OCC, describes how tragic events can transform your skill set and your career.
Speaking at the MarketsWiki Education World Of Opportunity event in Chicago in 2016, Dunsky tells the story of the October 2005 Refco meltdown, the publicly traded brokerage firm that went bankrupt after its CEO, Phil Bennett, covered up $430 million in customer losses and debt. Bennett and other executives were convicted and sentenced to prison for securities fraud, including her boss and mentor at the outside law firm she worked for that represented Refco. Devastated, Dunsky learned from the experience in the most unexpected places and built a career path that led her to her current role today at OCC.
“This brick that just hit me in the head, of losing my mentor, was going to teach me something I don’t think I could have learned any other way.”
She learned how to pick herself up, build on the skills needed to succeed in the derivatives industry and deal with other bombshell events such as the MF Global bankruptcy and Lehman Brothers’ collapse.
Brexit-linked derivatives trade boosts Deutsche Boerse revenue
Jonathan Gould – Reuters
Deutsche Boerse (DB1Gn.DE) said it was on course to reach its 2016 earnings target after net revenue rose 10 percent in the second quarter, helped by higher derivatives trading linked to Britain’s vote to leave the European Union. The German exchange operator, which is planning a $27 billion merger with the London Stock Exchange Group (LSE.L), said quarterly net revenue rose to 601 million euros ($660.38 million) from 547 million a year earlier, driven by stronger trade in index derivatives and commodities business at its Eurex derivatives unit, as well as consolidation effects.
Volatility Update: Looking Ahead With the VIX Curve
Frederic Ruffy – The Ticker Tape
The CBOE Volatility Index (VIX) notched 2016 lows last week after falling below 12 for the first time since August 2015. The market’s so-called “fear gauge” is now a far cry, or roughly half the levels, from late June when it was trading in the mid-20s. The sharp decline in the index seems to reflect a notable change in sentiment and comes as investor focus appears to have shifted to second-quarter earnings and away from the macro concerns that roiled financial markets a month ago. The change in sentiment has been reflected with notable shifts along the VIX “curve” as well.
This is the ‘dullest market in decades,’ but get ready for some turbulence ahead; S&P 500 trading in a range
Jonathan Garber – Business Insider
The dog days of summer have brought on the “dullest market in decades,” according to note from Tom Leveroni, CFA & Shourui Tian, Ph.D of Nautilus Investment Research. The duo says the the S&P 500 has spent the last 10 trading sessions in a 92 basis point range, the tightest in 22 years. The lackluster action has come in the wake of the UK voting to leave the European Union, the Fed gearing up for its next rate hike, and uncertainty surrounding the upcoming US election.
Hong Kong and Singapore’s exchange battle pivots on China
Jennifer Hughes – Financial Times
On the anniversary of Loh Boon Chye’s appointment as head of the Singapore Exchange this month, he might have chosen to highlight SGX’s shares outperforming the city’s benchmark and the potential in its merger talks with the Baltic Exchange. But on the day a technical malfunction halted trading and produced the worst outage in the exchange’s history. The glitch was more embarrassing than commercially damaging. The SGX does not even derive the largest part of its revenues from cash equity trading any longer but, like its rival, the Hong Kong Exchange, its primary function is still what it is best known for.
The VIX is low, but it’s too low to signal a major market top
Last Wednesday, the VIX closed at 11.77, the lowest level since Aug. 26, 2014. According to contrarian investing 101, low volatility means high complacency, and high complacency is usually seen near major market tops.
Posen Says BOE Should Cut Rates to Zero to Counter Brexit Impact
Jill Ward – Bloomberg
Says negative rates may be considered if prolonged recession; Bank of England officials announce next decision on Aug. 4
Former Bank of England official Adam Posen said policy makers should slash the U.K. benchmark to zero to mitigate any Brexit turmoil and consider negative rates if the outlook worsens.
The Matrix: A quick take on the FOMC and what’s next
Kay Van-Petersen – TradingFloor
There was a divergence between immediate market price action and the Fed statement. As could be seen by spikes in EuroDollar, Aussie, Kiwi, gold and contraction in US yields the market seemed to have been positioned for a more hawkish statement.
****SD: Had I know this story was coming out, I wouldn’t have used a Matrix reference yesterday…
CME Group Inc. Reports Strong Second-Quarter 2016 Financial Results
CME Group Inc. (NASDAQ: CME) today reported revenue of $906 million and operating income of $563 million for the second quarter of 2016. Net income was $320 million and diluted earnings per share were $0.95. On an adjusted basis, net income would have been $387 million and diluted earnings per share would have been $1.14. Financial results presented on an adjusted basis for the second quarter of 2016 and 2015 exclude certain items, which are detailed in the reconciliation of non-GAAP results.
****SD: WSJ take here
Exchange Medallions Keep Nasdaq Busy
Rob Daly – MarketsMedia
Interest in its recently completed International Securities Exchange acquisition and the future role of blockchain within the company dominated questions during Nasdaq’s second-quarter earnings call. Nasdaq CEO Bob Greifeld started the call noting that Nasdaq has managed to maintain the pre-acquisition markets share across its six options exchanges as well as reaching 20% of the announced $40 million in run-rate synergies since the deal closed in late June. He attributes the approximate 40% market share to recent pricing changes Nasdaq instituted recently.
****SD: Also see Demand for Nasdaq tech prompts record earnings
Nasdaq explores moves to compete with speed bumps
Nicole Bullock – Financial Times
Nasdaq is weighing different options after the approval of IEX as formal stock exchange, including a potential speed bump style venue of its own, its chief executive said on Wednesday. IEX, the startup trading venue, employs a trading delay meant to combat what it believes are abusive high frequency trading styles. It won a bitter battle this year to become an exchange on equal footing with Nasdaq, the New York Stock Exchange and Bats Global Markets, which all opposed its application, reports Nicole Bullock in New York.
****SD: Bloomberg’s take here
Euronext Publishes Second Quarter 2016 Results
Euronext has delivered its most profitable quarter since the IPO despite market uncertainty causing lighter volumes until the outcome of the UK referendum on 23 June 2016. Revenue generated by non-volumes operations (listing, market data, market solutions) have more than offset the decrease in transaction-based businesses. It reinforces our confidence in our capability to deliver the company’s Agility for Growth plan, which is built on the resilience of our core business with ongoing cost discipline and growth in selected initiatives. In spite of the uncertainties for the second half of 2016, we are well positioned to capture opportunities arising from changes in the industry landscape.” said Stéphane Boujnah, Chairman and CEO of the Managing Board of Euronext NV
****SD: Total options volume on Euronext in Q2 2016 was 17,386,201 contracts compared to 18,555,839 contracts in Q2 2015 (note that there were three more trading days in Q2 2016 than Q2 2015).
Exchanges report strong second quarter trading
Julie Aelbrecht – Futures & Options World
Nasdaq, Deutsche Boerse were up 8% and 10% as Euronext revenue rose 1.7%
Exchange giants Nasdaq and Deutsche Boerse have reported strong growth in revenue for the second quarter of the year while Euronext reported a marginal increase in earnings. New York-based exchange group Nasdaq reported record net revenue of $559m in the second quarter, up 8% compared to last year. Market services, which accounts for 35% of the firm’s revenue, was up 2.6% year-on-year, to $46m, while information services, a quarter of the group’s net revenue, was up 4.6%. Revenue from the exchange’s technology arm were up a fifth on last year.
NFX eyes hedges to rival incumbents
Alice Attwood – Futures & Options World
The chief of Nasdaq Futures plans to offer hedging capabilities and expand the energy market’s product range to challenge CME Group and the Intercontinental Exchange for their flagship energy contracts The Nasdaq exchange launched one year ago 25 energy futures and options contracts and has added to this list over the past 12 months but the Merc and ICE still dominate the US and European oil markets with their brent, gas oil and WTI contracts.
MIAX Options Exchange
Effective August 1, 2016, pending SEC approval, the MIAX Options Fee Schedule will be amended.
Regulation & Enforcement
Backed Up Budgets Hurt SEC’s Talent Pool, Say Ex-Chairs
John D’Antona Jr. – Traders News
Former chairs of the Securities and Exchange Commission say that Congress’s delays in approving full-year spending year after year have hurt the agency’s ability to hire top talent. At no time in this decade has the SEC known at the October 1 start of its fiscal year how much money it can spend for the next 12 months.
IEX Builds Regulatory Framework
John D’Antona Jr. – Traders News
IEX, the newest U.S. equity exchange, has set up its own regulatory framework and hired staff to oversee surveillance efforts. This initiative, as told to Markets Media in an interview by company co-founder and COO John Schwall, is meant to bolster trader confidence in its business model and help the bourse fulfill its new mandate as a Self-Regulatory Organization.
Bytes and barrels: the origins of oil traders’ love of Yahoo
Catherine Ngai – Reuters
For the oil industry, Yahoo Inc’s (YHOO.O) decision this week to sell its core business to Verizon Communications Inc (VZ.N) for $4.8 billion does not matter all that much. Their world already changed a few months ago, when the company said it would jettison its messaging system that has been the norm for oil traders since the late 1990s.
****SD: The origins = a trader watching his adolescent kids use tech he didn’t know existed. See? Millennials aren’t all bad.
Options Traders Are Feeling Good About Alphabet Shares
Akane Otani – WSJ
Another earnings report, another big move for Alphabet Inc. shares. The Google parent is expected to report second-quarter earnings after the market closes on Thursday. So far, analysts’ consensus has been pretty rosy: They see Alphabet reporting revenue of $20.76 billion, up from $17.73 billion a year ago, and earnings per share of $8.04, compared to $6.99 a year ago, according to a poll conducted by Thomson Reuters.
Options Market Sees Huge Moves Ahead for Amazon Shares
Akane Otani – WSJ
Amazon.com shares are primed for a giant swing after the company releases earnings on Thursday, options data show. The e-commerce giant is poised to report earnings after the bell. Options traders are betting on Amazon shares moving 7.2% in either direction after the company releases earnings on Thursday, according to data provider Trade Alert’s price for an options strategy called a straddle.
Pioneer Jumps Most in Three Months After Lifting Output Goal
Joe Carroll – Bloomberg
Pioneer Natural Resources Co., which has been ramping up drilling while rivals pull back, climbed the most in three months after increasing its full-year output target and exceeding earnings expectations.
****SD: From the article: “Pioneer booked $229 million in losses on the value of hedging instruments such as swaps and options for the quarter, 16 percent wider than the $197 million loss booked a year earlier, according to the statement.”