Observations & Insight
2016 Exchange CEO Series: Jeff Sprecher Talks Data, Clearing and Growth for ICE
For the Intercontinental Exchange (ICE), 2015 was about major investments in data and analytics services. Now in 2016, the exchange is looking to integrate recent data acquisitions into its business and grow well beyond traditional exchange trading and clearing services.
ICE CEO Jeff Sprecher spoke with John Lothian News at the FIA Boca Conference about how its purchases of SuperDerivatives, Interactive Data and S&P Analytics fit into its business model. ICE is also working with Blackrock, on exchange traded funds, to become its benchmark index provider.
“We started to pivot the company to get deeper into the data space,” Sprecher said. “We want to articulate a vision on how exchanges and data can come together into one holistic business that can serve customers.”
OCC 2015 Annual Report: Preparing for Tomorrow
On behalf of the Board of Directors and employees of OCC, I am pleased to share with you our 2015 Annual Report. Strong volume in the U.S. listed equities options industry continued in 2015, with cleared contract volume of more than 4.1 billion; the third-highest year in our 43-year history. OCC also cleared nearly 1.4 million new stock loan transactions, up 16 percent from 2014. These achievements underscore the critical role that OCC plays in serving industry participants and the greater public interest.
Amid calm, U.S. stock investors steel themselves for shocks
Saqib Iqbal Ahmed – Reuters
The last two weeks in the U.S. stock market have been quiet – almost too quiet for some investors, who think there’s something dangerous swimming beneath the surface. After a disastrous start to the year, major U.S. indexes regained most of the losses in a mid-February-to-mid-March rebound. Volatility measures collapsed as the S&P 500 rose to levels not seen since the beginning of 2016 and the market entered a period of calm not seen since early December.
****SD: Home, home on the range(bound S&P). From MarketWatch: The S&P 500 is on pace to log its longest streak of calm since June
Investors bet against US share market rally
Joe Rennison – Financial Times
Investors are questioning the rebound in US share prices and buying exchange traded funds that offer the prospect of high returns from renewed market volatility. US equities have risen more than 12 per cent from their low in February, with the S&P 500 turning positive for the year on Tuesday after Janet Yellen, the Federal Reserve chair, said the central bank would proceed cautiously on raising interest rates.
Europe Traders Aren’t Waiting Around to See If Rebound Holds
Manisha Jha – Bloomberg
European stocks, which plunged 17 percent to start the year then recouped half the losses, are suddenly treading water. The onset of calm is failing to stem a crush of withdrawals among fund investors. After surging 14 percent in a five-week rebound through March 14, the Stoxx Europe 600 Index has hit a wall. It’s traded in a range of about 14 points for most of March and is heading for a 2 percent monthly advance, the smallest move in almost a year.
Wells Fargo plans quiet assault on Wall Street from glass tower
Dan Freed – Reuters
As Wall Street remakes itself on a former rail yard in the far west of Midtown Manhattan, one surprising name is leading the way. Wells Fargo & Co (WFC.N), the San Francisco-based lender known for its retail banking business, has picked out space for a trading operation to use as a base for a stealth attack on the investment banking world. The bid for more capital markets business – from advising on deals and security issues to trading derivatives – is a potentially risky move by the third-largest U.S. bank by assets.
****SD: Glass makes for a poor bulwark if Wells Fargo has to beat a hasty retreat.
Meet the millennials looking to get rich or die tryin’ with one of Wall Street’s riskiest oil plays
“Y-O-F**KING-LO,” the teen wrote, flashing his trading statement. “900 to 55K in 12 days!” On Reddit, he’s known as “World Chaos,” a Florida high schooler who earlier this year multiplied his money by betting against the S&P 500. His real name is Jeffrey Rozanski, and the 18-year-old’s appetite for risk would make many seasoned market players facepalm. In one corner of the Internet, though, praise rained down. “You magnificent bastard,” read one reply. “Sailing away on your yacht while the rest of us f**kers who went long are looking for the nearest window.”
****SD: Hardly conventional portfolio building in this story. Two days with stories about 18-year-olds trading options with success. Now you can say: “What do ‘Desperate Housewives,’ Reddit and UWTI have in common? Millennial options traders.” Also, probably the only time we’ll get an article that kicks off with “Y-O-F**KING-LO.”
ICE Annual Report 2015
I am pleased to report another year of record results at Intercontinental Exchange (NYSE: ICE). As the operator of exchanges around the world, we are deeply engaged in supporting markets and their role in capital raising, price discovery and risk management. This includes global markets that enable companies to manage the risk of their commodities and financial exposures, as well as stewardship of the New York Stock Exchange, where we help more than 2,400 listed companies reach corporate milestones as they grow. I want to take a moment to highlight an important milestone for our own company. November 2015 marked the 10-year anniversary of our IPO on the NYSE. The access to U.S. capital markets provided by the NYSE helped our small start-up company founded in Atlanta, Georgia to rapidly grow and continuously innovate for our customers and generate strong returns for our investors on a global scale
Glencore cans ICE Clear Europe membership
Luke Jeffs – Futures & Options World
Glencore Commodities has cancelled its membership of ICE Clear Europe, the largest energy clearing house in Europe, following a decision by the commodities trading giant to pull back from direct exchange participation. ICE said in a client note: “The purpose of this circular is to advise clearing members that Glencore Commodities Ltd has resigned its futures and options clearing membership of ICE Clear Europe.” The move was linked to a decision by Glencore to pull back from direct membership of exchanges and clearing houses, and to rely instead more heavily on brokers to handle the firm’s listed derivatives trading activities, according to sources.
CME Remains First Place in Terms of Volumes: FIA
According to the trading volumes survey for 2015 published by the Futures Industry Association (FIA), the US Chicago Mercantile Exchange (CME) is still in first place among 78 exchanges of derivatives instruments in the world, reporting trading volume growth to 3.5 billion contracts (+2.6%) year-over-year (YoY).
****SD: Full breakdowns of global volumes from the FIA can be found here
Bats Global Markets to Acquire ETF.com, Broadening Content Offerings for Issuers, Brokers and ETF Investors
Bats Global Markets, the leading exchange operator for the trading of exchange-traded funds (ETFs), and creator of the Bats ETF Marketplace, signed a definitive agreement to acquire ETF.com, a leading provider of ETF Data, news and analysis.
Regulation & Enforcement
Benchmark rate-rigging divides N.Y. trial courts in big-money antitrust cases
Alison Frankel – Reuters
It’s a good thing the 2nd U.S. Circuit Court of Appeals has already heard arguments about whether collusion among banks attempting to manipulate key benchmark rates constitutes an antitrust injury – because the lower courts in Manhattan, where these big rate-rigging cases are being litigated, can’t seem to agree on that issue. On Monday, U.S. District Judge Jesse Furman denied a motion by 14 banks to dismiss a consolidated class action accusing them of colluding to manipulate the ISDAfix, a benchmark rate that affects trades in the multi-trillion dollar market for “swaptions,” or options on interest-rate swaps. (If you need to know more about the derivatives impacted by the alleged ISDAfix manipulation, Judge Furman has a quite lucid explanation.)
Financial Services Quarterly Report – First Quarter 2016: Singapore Continues Global Trend in Derivatives Regulation: Reporting for OTC Derivatives
Dechert LLP – JDSupra
The Monetary Authority of Singapore (MAS) continues to develop and strengthen its regulation of derivatives markets, most recently focusing its attention on the formulation and completion of a comprehensive reporting regime. In January 2016, MAS consulted on proposed amendments to the Securities and Futures Regulation relating to MAS’ derivatives reporting regime (Consultation) that could extend reporting requirements to previously exempt fund managers. The amendments would complete the implementation of Singapore’s OTC derivatives reporting regime that came into force in October 2013.
CFTC calls for global regulation of Blockchain
Julie Aelbrecht – Futures & Options World
The Commodity Futures Trading Commission’s Chris Giancarlo has urged global regulators to come up with a common approach to nascent distributed ledger or “blockchain” technology. In a special address at the DTCC’s Blockchain Symposium on Tuesday, the CFTC commissioner drew a parallel with the early days of the internet and flexible regulation in the Clinton era.
BCSC Warns Investors about Central Option
Rosemary Barnes – Finance Magnates
British Columbia Securities Commission (BCSC), one of the thirteen Canadian provincial financial regulators, has issued a warning to investors about binary options broker Central Option.
American HFTs try to derail rival’s Kent mega-tower
James Rundle – Financial News
In the race to build giant communications masts in coastal Kent, two of America’s high-frequency trading firms are trying to derail a rival.
Montreal-based trading group Vigilant Global, owned by DRW Trading, and New Line Networks, owned by Jump Trading and KCG Holdings, both want to build radio masts in Richborough in Kent. A letter has now been published on Dover Council’s web site in which New Line argues that Vigiliant’s application should not be considered until more evidence is provided on how it would affect nearby power and railway lines, both of which it says are 200 metres away from the 324-metre tower. The letter was submitted on behalf of New Line by its planning agency Nathaniel Lichfield and Partners. It also says that the Vigilant application has technical errors and the accompanying drawings are incomplete.
****SD: Show some goodwill and sponsor local football clubs. Can’t hurt right?
Fully understand the Fintech Ecosystem with this report
We’ve entered the most profound era of change for financial services companies since the 1970s brought us index mutual funds, discount brokers and ATMs. No firm is immune from the coming disruption and every company must have a strategy to harness the powerful advantages of the new financial technology (“fintech”) revolution.
Nasdaq Introduces New Compliance Dashboard
Nasdaq is pleased to announce that it is combining its three compliance tools, Reg Recon, Short Sale Monitor and Limit Locator into a single dashboard with enhanced features. This new dashboard will be available starting Wednesday, March 30, 2016.
2016 Global Market Outlook – Q2 Update
Russell Investments released its 2016 Global Market Outlook – Q2 Update, offering the latest economic insights and market forecasts from its global team of investment strategists, which help guide the firm’s multi-asset portfolios and services. The firm’s strategists expect business cycle support for global equities to weaken and government bond prices to remain rich in 2016, as the difference between hawkish (U.S.) and dovish (Europe, Japan) monetary policies drives market volatility. Regarding China, the team believes the economic downturn still appears to be heading for a “soft landing,” but if there is a time when skeptics will be proven correct, this is the year.
CBOE Hosting New Conference on Derivatives and Volatility
CBOE Options Hub
Over the past ten years or so VIX futures and options have been two of the fastest growing listed derivative markets in the world. This has resulted in traders and investors paying more attention to market volatility than ever before. It has also resulted in the dramatic expansion of academic research focused on volatility. The combination of these two factors has led to a collaboration between the Financial Management Association and CBOE in the form of a new conference. In November we will be hosting the first Conference on Derivatives and Volatility to be held at CBOE.