Observations & Insight
JJ Kinahan, TD Ameritrade – Seeing Opportunity Everywhere in the Market
“I don’t care what job you have, I don’t care where you are at, you basically hate 25 percent of what you do. Twenty-five percent of your job you’d probably do for free. It’s fun, it’s great, it’s why you get up in the morning. So, now you have a challenge — the 50 percent in the middle. The 50 percent in the middle, your opportunity is to say, ‘You know what? I’m going to make this fun somehow.'”
Nasdaq Preps ISE Migration
Rob Daly – MarketsMedia
During a record low in options trading volume and volatility, Nasdaq plans to kickstart opening liquidity on the ISE by adopting a tweaked version of the process used by Nasdaq PHLX exchange. “But that is not carved in stone,” said Kevin Kennedy, vice president and head of US options at Nasdaq. The global exchange operator still needs approval from the U.S. Securities and Exchange Commission to introduce the necessary rule changes.
****SD: Timeline as laid out by the article: “Kennedy’s team looks to complete ISE Gemini’s migrations sometime within the first or second quarter of 2017. The ISE and ISE Mercury should finish their migration by July 2017 and August 2017 respectively.”
China’s Stock Options Traders Haven’t Been This Bullish All Year
Kyoungwha Kim – Bloomberg
China’s options traders are betting that one of the world’s worst-performing stock markets is due for a rebound. The cost of bullish contracts on the China 50 exchange-traded fund is near the highest level this year relative to bets that profit from a decline, data compiled by Bloomberg show. While the mainland ETF is up 17 percent from its 2016 low, that rebound has been dwarfed by a surge for Chinese stocks traded in Hong Kong. With a 15 percent drop this year, the Shanghai Composite Index is the fifth-worst performer among 94 global measures tracked by Bloomberg.
Taiwan says tightens forex derivative options business for seven banks
Taiwan’s financial regulator said on Tuesday it has punished seven domestic banks and tightened their foreign currency derivatives options business amid malpractices related to opening client accounts in their offshore banking units. The Financial Supervisory Commission (FSC) will tighten business of such products on put options by Taipei Fubon Commercial Bank, CTBC Bank, Cathay United Bank, Yuanta Commercial Bank, Jih Sun Bank, Ta Chong Bank and Bank Sinopac, it said in a statement.
****SD: I suppose that makes this the FSC’s version of a put-down.
High Frequency Traders Elbow Their Way Into the Currency Markets
Lananh Nguyen – Bloomberg
High-speed electronic market making, already widespread in stocks, is getting a grudging welcome from currency markets. They don’t have much choice.
IEA Changes View on Oil Glut, Sees Surplus Enduring in 2017
Grant Smith – Bloomberg
The surplus in global oil markets will last for longer than previously thought, persisting into late 2017 as demand growth slumps and supply proves resilient, the International Energy Agency said.
****SD: Bloomberg also has The Crazy, Mixed-Up Global Oil Market
US bumper crop keeps growing, soybeans sell off: WASDE
Ole Hansen – TradingFloor.com
Following the very upbeat August estimates for the upcoming US harvest in the US, which helped send the price of corn and wheat down to a multi-year low, traders were looking for the September report to provide an update and to see if these expectations could be maintained.
In the end, the market once again came under renewed selling pressure after US officials in their World Agriculture Supply and Demand report raised expectations of the domestic harvest of soybeans and subsequent ending stocks by more than was expected.
****SD: Just covers action from the report.
New Ingredient for U.S. Stocks Obsessed With Fed Is Tepid Data
Oliver Renick – Bloomberg
One day U.S. stock investors seem at ease with an interest rate increase. The next, the S&P 500 Index has its biggest loss in more than two months amid hawkish commentary. What gives? Judging by the the trajectory of the equity market this summer, the U.S. economy may be the deciding factor. While the S&P 500 Index is down 2.4 percent since Friday, after Boston Federal Reserve President Eric Rosengren said it was dangerous to wait too long to raise rates, it was just last month that stocks were rallying even as odds of a rate hike rose.
****SD: More on the data obsession in our tech section.
KCG Plans to Fund Buybacks With Bats Stake Worth $321 Million
Annie Massa – Bloomberg
KCG Holdings Inc. plans to start cashing in its Bats Global Markets Inc. shares, liquidating an investment worth about a quarter of the trading firm’s market capitalization.
Nasdaq plan for key stock exchange data draws rebuke from Bats
John McCrank – Reuters
Bats Global Markets (BATS.Z) on Monday accused rival exchange operator Nasdaq Inc (NDAQ.O) of attempting to boost revenues by proposing a new feed for industry data essential to U.S. stock market operations. The data is related to systems called securities information processors, or SIPs, which consolidate all the stock quotes and last sales prices from the 13 U.S. stock exchanges. Regulators use the information to determine the best market prices, which brokers must give their clients when executing trades.
Bats Reports Strong Market Share Across All Markets in August
Bats Global Markets, Inc. (Bats: BATS), a leading global exchange operator and provider of market data and other financial markets services, today reported August data and highlights, including strong market share across all of its markets for the month.
Nasdaq Announces End-Of-Month Open Short Interest Positions In Nasdaq Stocks As Of Settlement Date August 31, 2016
At the end of the settlement date of August 31, 2016, short interest in 2,329 Nasdaq Global MarketSM securities totaled 7,371,196,258 shares compared with 7,501,329,605 shares in 2,334 Global Market issues reported for the prior settlement date of August 15, 2016. The end-of-July short interest represents 5.23 days average daily Nasdaq Global Market share volume for the reporting period, compared with 4.37 days for the prior reporting period.
CME’s new EU wheat futures trade in debut session
CME Group’s long-planned European Union wheat futures generated trade on their debut session on Monday, a first step towards building liquidity in a market dominated by Euronext.
CME aims to expand in the EU, which is collectively the world’s biggest wheat production zone, by offering similar delivery and trading features to its Chicago Board of Trade (CBOT) futures, the global benchmark for grain markets.
SGX must do better at reducing frequency of trading outage: Ong Ye Kung
While other stock exchanges around the world have had their own fair share of trading disruptions, the Singapore Exchange (SGX) needs to do better in reducing the frequency of such outages and manage them well, said Mr Ong Ye Kung in Parliament on Tuesday (Sep 13).
****SD: Who in their right mind would disagree with that statement?
Are LME copper stocks set to surge past 400,000 tonnes?
LME copper stocks are on a seemingly unstoppable rising trend, with 400,000 tonnes on the horizon depending on a tug-of-war apparently being fought by two trading houses.
****SD: This on the heels of the story last week about the Chinese tycoon with 6 percent of the world’s aluminum stockpiled in the Mexican desert. If you missed that, check out the WSJ’s story on it here
Regulation & Enforcement
New action on CFTC automated trading rules
At a CFTC meeting last week, Chairman Tim Massad outlined the Commission’s fall priorities. Among them is a supplement to the proposed rule on automated trading, or Reg AT. Although the Chairman didn’t go into specifics about what might be included in this supplement, he did thank the industry for providing detailed feedback on the proposed rule.
Momentum Ignition: Arson for Financial Markets
Tayloe Draughon – Neurensic
ESMA has defined momentum ignition as a case of prohibited market manipulation. ICE Canada considers this to be disruptive, and so does the CME Group. One UK government report stated that momentum ignition will “induce algorithms to compete with other algorithms, can push prices away from fundamental values.”
****SD: Tayloe spoke at our MarketsWiki Education event in Chicago. We’ll be releasing the video of his talk tomorrow. Stay tuned. Some of Bloomberg’s thoughts on recent algo activity — Dear Algos: Thanks for the Tantrum. Love, Mom and Pop
Regulation and Market Evolution – Surviving in the Jungle
George Bollenbacher, Capital Markets Advisors – Tabb Forum
With falling revenues, higher compliance costs, layoffs, and disappearing bonuses all around, the financial markets worldwide have arrived at the lion’s den. Deep in the darkest part of the jungle, it would be easy to conclude that there is no way out because of two forces acting at once: increased regulation and reduced volatility. Either by itself would cause some worry, but together they appear dangerous.
Commodity market to get options only in two products initially
Commodity market participants expecting big bang reforms from market regulator Sebi might be in for some disappointment. The commodity derivatives advisory committee (CDAC), at its July 22 meeting with Sebi officials, has proposed introduction of just two options in commodities — — one agri and one non-farm — — two persons aware of the development told ET.
TRADING UP: EBS BrokerTec Names Seth Johnson CEO; O’Kane Joins Two Sigma
Wall Street personnel moves pick up following a summer slowdown.
Wall Street’s Insatiable Lust: Data, Data, Data
Bradley Hope – WSJ
A new species is prowling America’s most obscure industry conferences: the data hunter.
Erik Haines, head of data and analytics at New York-based Guidepoint Global LLC, trawls the globe for meaningful data to sell to hedge-fund clients. One of his best strategies is to attend the most seemingly mundane gatherings, such as the Association for Healthcare Resource & Materials Management conference in San Diego last year, and the National Industrial Transportation League event in New Orleans.
****SD: Looking for edge in all the strange places.
Transatlantic Latency Slashed For Quincy Extreme Data Service – Lowest Latency For Transatlantic Market Data Service
McKay Brothers International (MBI) has reduced transatlantic latency on its Quincy Extreme Data (QED) service to the lowest available for financial market data services. QED’s new transatlantic fiber capability combined with McKay’s extremely low latency microwave on land in the US and across Europe sets a new speed benchmark for market data services. The improvement in transatlantic latency extends a long history of upgrades. The QED service is operating between Aurora, IL and Europe at unprecedented one-way speeds
****SD: One way speed to Marseilles = 41.444 ms. Speaking of a French connection, did you know that the movie with that name was the first R-rated film to win the Academy Award for Best Picture?
How investors can hedge against a Trump victory
David Stevenson – Financial Times
It’s been a funny old few months. The US equity market reached a new all-time high over the past few weeks and the bulls seemed in fairly fine fettle. The US central bank, the Federal Reserve, still looks as if it’s not quite ready to commit to substantially higher interest rates. This should help underpin asset prices and especially corporate bonds. There’s also probably more fiscal easing on its way and higher oil prices seem to be having a positive effect. One other key factor is that mergers and acquisitions activity in the US seems to be accelerating.
A Bold Strategy For Bearish Options Traders
Most traders are familiar with basic bearish strategies, such as short selling and put buying. However, one slightly more complex way to bet against a stock or exchange-traded fund (ETF) — especially for the trader who’s confident in the underlying’s trajectory – is with a put ratio spread.
Hedge Funds Find a New Short-Selling Guru
Tom Redmond and Anna Kitanaka – Bloomberg
As activist short sellers descend on Japan’s stock market for the first time, one local analyst is emerging from obscurity to contend for the title of Tokyo’s most influential bear.
Using Covered Calls to Play Volatility
Jim Collins – TheStreet
How do you fortify your portfolio in times of increased volatility? That’s a great question — and one I’ve been asked quite a bit over the past few days. It almost seems as if people are asking the question sheepishly, as in, “I should know this, but …” However, there’s nothing to embarrassed about.
Trying to Get Rich Can Be Highly Volatile
Nir Kaissar – Bloomberg Gadfly
For 43 consecutive trading days this summer — nearly two months — U.S. stocks barely budged. The S&P 500’s one-day move never crept above 1 percent during that time, and the S&P 500’s average one-day move was just six basis points over that period. That streak stopped when the S&P 500 tumbled 2.5 percent on Friday and then bounced back 1.5 percent on Monday.
****SD: The point is that low volatility funds are not necessarily low vol.
Talking Your Book Vs. Skin in the Game
Timothy Collins – TheStreet
It’s intriguing to talk about emotions and dilemmas for traders. They make for great buzzwords, but calling them buzzwords doesn’t make them any less real. The same can be said for traders in the media business. There is a dilemma that presents itself every time we discuss a trade or a strategy or a market view. Let’s set the scene, shall we?
2016 CBOE Risk Management Conference Asia
Chicago Board Options Exchange (CBOE) will be hosting the second annual CBOE Risk Management Conference (RMC) Asia, from November 30 through December 1, 2016, at the Conrad Hong Kong.
Hanjin’s fall will not fix the global shipping industry’s ills
Nick Carey – Reuters
Following the collapse of Hanjin Shipping Co Ltd (117930.KS), container shipping rates from Asia to the United States spiked 50 percent as the carrier’s customers scrambled for ships. Few shipping industry experts expect those price increases to fix what is wrong with the industry. Hanjin’s collapse and the resulting chaos in the global shipping sector are symptoms of deeper ills caused by a capacity glut that will remain even after the resolution of Hanjin’s crisis, industry officials and experts told Reuters.
****SD: Some far ranging implications. Bloomberg’s take on Hanjin here.
The Endless, and Expensive, Quest for Rare Objects
Adam Alter – The New Yorker
A few months ago, I was invited to speak at a small marketing conference in Chicago. To attract attendees, its organizer promised everyone a one-ounce pour—a sip, more or less—of a cult bourbon called Pappy Van Winkle. Pappy, as it is known to its fans, is so sought after that it’s nearly impossible to find, and, a few days before the conference, word came that the Pappy supplier had fallen through. Luckily, I happened to walk into a Greenwich Village liquor store where two bottles had just arrived. “They’ll be gone by tomorrow,” the clerk said, before naming his price: thirty-five hundred dollars for the pair. I left with both bottles in a brown paper bag (after, of course, determining that the conference organizers would reimburse me).
****SD: Some psychology behind humanity’s obsession with rarity.
EZTrader Signs New Sponsorship Deal With Italian Football Club Roma
Binary options brokerage EZTrader.com has announced a new partnership deal with a football club. This time the company has picked Italy to expand its branding presence by signing a deal with Roma AS from the capital of Italy, Rome.
****SD: Golly, binary options firms love signing deals with football clubs.