Observations & Insight
A World of Opportunity Returns To London!
Doug Ashburn – JLN
MarketsWiki Education is headed back to London next month for another round of our World of Opportunity speaker series geared toward “the next generation of market participants” – college students, interns, young professionals and anyone interested in the financial markets.
We will hold three sessions, one on October 14 and two on October 15, all at Nasdaq, Woolgate Exchange, in the heart of the City’s financial district. The events feature executives from the CME Group, Nasdaq, London Metal Exchange and Euronext as well as fintech entrepreneurs, proprietary traders, bankers, regulators and more.
With generous support from CME Group, the global premier sponsor of MarketsWiki Education, the London event comes at the heels of two wildly successful events in New York and Chicago in the summer of 2015. Our MarketsWiki Education talks feature speakers from around the financial industry who give short, 10- to 12 minute presentations that cover the entire scope of our markets.
Please help us spread the word throughout the U.K. about this FREE event series!
Hedge Fund VIX Positions Double in Bet Stock Turbulence to Last
Inyoung Hwang – Bloomberg
Now that turbulence has resurfaced in the stock market, the biggest traders are piling into bets that it’s going to last.
Hedge funds and other large speculators just doubled wagers that U.S. equity volatility will increase, a week after pushing them to a record, according to data from the U.S. Commodity Futures Trading Commission released Sept. 4. Prices for bearish options on the Standard & Poor’s 500 Index are also near an all-time high as investors give up on two years’ of bets that calm will prevail in American stocks.
Why the Oil Rout Isn’t Over
Helen Thomas – WSJ
What jumps up will slowly come down. Some variant of Newton’s law still applies in the oil market.
The price of crude oil soared last month, rising nearly 30% over three days. It then promptly gave up a third of that gain and the U.S. crude benchmark has since traded around $46 a barrel.
Market Volatility Has Changed Immensely
Tracy Alloway – Bloomberg
On Aug. 24, as global markets fell precipitously, one thing was shooting up.
The Chicago Board Options Exchange’s Volatility Index, the VIX, briefly jumped to a level not seen since the depths of the financial crisis. Behind the scenes, however, its esoteric cousin, the VVIX, did one better.
Although August Was A Roller Coaster Ride For Investors ETFs/ETPs Listed Globally Gathered 20.8 Billion US Dollars In Net New Assets, According To ETFGI
Press Release – Mondovisione
Although August was a roller coaster ride for investors, ETFs/ETPs listed globally gathered US$20.8 billion in net new assets, marking their 19th consecutive month of positive net inflows, according to ETFGI’s preliminary ETF and ETP global insights report for August 2015.
Market volatility means more than just the VIX
Wallace Witkowski – MarketWatch
When trading in stocks is volatile, it can turn away investors who are concerned that wide swings will endanger their returns. That’s been the case over the last month, during which the Dow Jones Industrial Average, the S&P 500 Index and the Nasdaq Composite Index all fell about 8%, sending them into correction territory from their 52-week highs.
Spot FX trading on Thomson Reuters platforms hits 5-month high
Jemima Kelly – Reuters
Daily spot trading volumes on foreign exchange platforms run by Thomson Reuters jumped almost 20 percent to a five-month high in August, the company said on Monday, as traders sought to profit from China-driven market volatility.
Volatility Uncovered: Equity markets take it on the chin
Georgio Stoev – TradingFloor
Volatility continued to roam about the equity markets last week. On Friday, stocks took it on the chin following the US Department of Labor nonfarm payroll report that cited the US economy as having added 173,000 new jobs in August while unemployment fell to 5.1%.
G-20 Countries Vow to Refrain From Currency Depreciation
Ian Talley and Emre Peker – WSJ
The Group of 20 largest economies on Saturday renewed their pledge to avoid depreciating their currencies to gain a competitive trading advantage as the fallout from China’s slowing economy roils international markets and threatens to stall a weakening global economy.
The effort to avert a so-called currency war comes on the heels of China’s yuan devaluation last month and as the International Monetary Fund plans to downgrade global growth prospects, warning that a confluence of downside risks threatens to slam the brakes on output.
China stocks slip in volatile trade despite fresh steps to calm investors
Samuel Shen and Pete Sweeney – Reuters
China major stock indexes fell in volatile in early trading on Tuesday, after Beijing introduced fresh measures – including tax cuts and a proposed “circuit breaker” system – to discourage speculation and stem further slides in share prices.
Bats Chi-X Europe to start continuous auctions for share trading
Philip Stafford – Financial Times
Bats Chi-X Europe is to introduce continuous auctions for share trading, allowing investors to trade large blocks of shares without worrying about being fastest to market.
The London exchange, which typically garners the largest slice of daily share trading in Europe, will begin the process next month via its first new order book in six years.
Bats Chi-X Europe revenues top GBP60 million in 2014
Tim Cave – Financial News
London-based Bats Chi-X Europe recorded pre-tax profits of GBP22.1 million in 2014, marking a 31% surge from GBP16.9 million in 2013, according to accounts filed in late August at the UK’s Companies House.
The group’s revenues increased from GBP55 million to GBP60.2 million over the period.
BATS Global Markets Reports Record U.S. Equity and Options Market Share In August; European Equities Market Share Reaches 25.0%
Press Release – BATS
BATS Global Markets (BATS) today reported August data and highlights including record market share in both its U.S. equities and U.S. options businesses.
New VIX Weeklys – More Responsiveness in Recent Weeks
Matt Moran – VIX Views
VIX Weeklys futures began trading at CBOE Futures Exchange (CFE) on July 23, 2015. VIX Weeklys options are expected to begin trading at CBOE on October 8, 2015. One of the most important features of the new VIX Weeklys is the fact that these products have the potential to provide more trading precision and responsiveness for investors.
SGX Securities, Derivatives and Commodities activities saw continued growth in August
Press Release – SGX
Singapore Exchange (SGX) reported an increase in Securities, Derivatives and Commodities activities in August from a year earlier.
China Stock Rout Delaying Market Links With Hong Kong, HKEx Says
Jasmine Ng Kana Nishizawa – Bloomberg
China’s stock rout is hampering efforts to link mainland markets to the rest of the world via Hong Kong, said Charles Li, who runs the city’s bourse operator.
“Psychologically, this is not the time to talk a lot about mutual market access when you’ve just put out a fire,” Hong Kong Exchanges & Clearing Ltd. Chief Executive Officer Li said at a conference in Singapore on Monday. “You’d want to calm down, figure out how to clean up and then move forward.”
Deutsche Bank merges listed derivatives unit into prime services arm: source
Nishant Kumar – Reuters
Deutsche Bank has merged its listed derivatives and markets clearing unit into its prime services arm following the departure of the unit’s head Michelle Neal last month, a source with direct knowledge of the matter said.
Moscow Exchange Trading Halted for Almost Two Hours
Victor Golovtchenko – Finance Magnates
Trading on the Moscow Exchange was suspended starting from 15:00 local time (13:00 GMT). The company shared in an announcement that the trading session was suspended due to a technical problem related to the network.
The list of affected markets extends to equities and bonds, FX, derivatives and money markets. This is not the first time the Moscow Exchange has experienced technical issues within the past year.
NYSE Arca Widens Amount Prices Can Move During Opening Auction
Bloomberg – Washington Post
NYSE Arca, the New York Stock Exchange’s sister market, widened the amount prices are allowed to move during the opening minutes of trading.
Regulation & Enforcement
How to Catch a Spoofer
Matthew Leising, Mira Rojanasakul and Adam Pearce – Bloomberg
A federal judge in Chicago is expected to rule soon on a high-profile spoofing case. Brought by local firm HTG Capital Partners, the lawsuit seeks to compel the owner of the Chicago Board of Trade to identify those behind thousands of trades that, the company alleges, manipulated the U.S. Treasury Futures market.
Probe Into New York Mellon’s Fund-Pricing Glitch Is Underway
Chris Dieterich – Barron’s
Bank of New York Mellon (BK) last week addressed the most pressing aspect of its fund-pricing problem.
But the shadow of the glitch, which cropped up during routine maintenance of SunGard Systems’ software, isn’t going away soon.
SEC Member Daniel Gallagher to Leave Agency Next Month
Andrew Ackerman – WSJ
Securities and Exchange Commission member Daniel Gallagher said Friday he will leave the agency next month, after nearly four years on the job and four months after he told the White House he planned to step down.
White House Considering Law Professor for SEC Seat
Andrew Ackerman – WSJ
The Obama administration is considering a law professor favored by Sen. Elizabeth Warren (D., Mass.) for an open spot on the Securities and Exchange Commission, according to people familiar with the process.
Lisa Fairfax, a professor at George Washington University Law School, was floated by Ms. Warren earlier this summer as part of a list of potential candidates that she and others who back tighter Wall Street oversight offered to fill the Democratic seat on the U.S.’s top securities regulator, these people said.
China Considers Circuit Breaker Tied to Gauge of Biggest Firms
Bonnie Cao – Bloomberg
China is considering a circuit breaker tied to shares of the nation’s biggest companies, following an equities rout that wiped out about $5 trillion.
Trading of stocks, stock options and index futures would halt for 30 minutes when the CSI 300 Index rises or falls 5 percent, according to a statement Monday from the Shanghai and Shenzhen stock exchanges along with the China Financial Futures Exchange. Feedback on the plan is being accepted until Sept. 21, it said.
Bloomberg And Traiana Develop Solution For FX Options Post-Trade Processing
Press Release – Mondovisione
Bloomberg STP Solutions, a global cross-asset, post-trade processing provider, and Traiana, the leading provider of pre-trade risk and post-trade processing solutions, today announced a joint effort to develop a straight-through processing infrastructure to further streamline the workflow of foreign exchange (FX) options. The solution integrates Traiana’s Harmony messaging network with Bloomberg’s trade processing tools.
“Cash-Secured” Puts Can Help Investors in a Tough Market
Steve Sosnick – Barron’s
When you work in a trading room, you get used to people overhearing your conversations. So I wasn’t surprised that a colleague turned to me with a comment after I finished a phone call.
Are We In the Eye of a ‘Sell the Rumor, Buy the News’ Storm?
Adam Warner – Schaeffer’s Research
Why did the market implode on Friday? Here’s one take:
“Selling on Wall Street accelerated on Friday afternoon sending the Dow industrials down more than 300 points after the monthly jobs report for August was viewed as solid enough for the Federal Reserve to consider an interest-rate hike in September.”
I don’t mean to pick on MarketWatch because this was literally the take everywhere but… NO!
Human decisions blamed for August’s stock market rout
Dan McCrum – Financial Times
Human decisions to sell stocks may have been behind the August rout for equity markets after all, with hedge fund and mutual fund managers selling in response to turbulence and fears for the Chinese economy.
The conclusion, based on work by strategists at JPMorgan, is a riposte to those who have attempted to blame esoteric trading strategies such as “risk parity” for the size and speed of the summer correction.
The Week in VIX – 8/31 – 9/4
Russell Rhoads – CBOE Options Hub
On the traditional VIX curve we saw a pretty dramatic shift of the upside across the board. The exception was spot VIX, but we have to attribute the smaller move to the three day weekend effect that causes VIX to close a little lower than if we were approaching a 2 day weekend. A couple of things catch my eye on the term structure chart below.
The Week in Volatility Indexes and ETPs – 8/31 – 9/4
Russell Rhoads – CBOE Options Hub
The S&P 500 lost 3.4% last week which I guess is becoming commonplace these days. Do note on the curve below that VXST closed a tad lower on a week over week basis. We attribute this to the long weekend we are currently experiencing and I’ll address that a little more in a minute.