Observations & Insight

Bits & Pieces
They call them the dog days of summer. We used to think that means sleepy and laid back. This month, it seems, it means we are working like dogs.

Well, unless you are Jim Kharouf. Jim has been on holiday for the past two weeks, which added to the rest of our workloads. To be fair, though, Jim did put in a month of hard work before he left, finishing up three projects for John Lothian Productions, as well as a couple of editorial interviews. We will see him in the office for a few days, and then he and Patrick Lothian head to New York for a project with the International Securities Exchange (more on that in the coming days), and they will also be stopping by the DTCC/Euroclear Collateral Conference for the Americas

During that time Doug Ashburn will be speaking at CTA Expo Chicago, where he will join Sol Waksman, head of BarclayHedge, in a panel on modern investment fund databases and the tools that separate them.

John Lothian and JLN Managing Editor Sarah Rudolph will be headed to the Burgenstock conference in Geneva on September 20. They will be finishing their trip in Paris, meeting up with JLN Environmental/Energy editor Lysiane Baudu

We do not exactly put on the brakes in October, either. We are headed to London for another round of MarketsWiki Education sessions. We will hold three sessions, one on the afternoon of October 14, followed by a reception, and then two sessions on the 15th. Each session will be held at Nasdaq, Woolgate Exchange, in the heart of the City. Registration is officially open. Please click HERE for all the information on dates, speakers, directions and more. Please pass along the info to all your London friends who may have interns, college students, young professionals and anyone else who would benefit from these increasingly popular talks.

As always, many thanks to CME Group, Global Premier sponsor of MarketsWiki Education

We keep having to remind ourselves – we are not an events company. But we play one on TV.

Lead Stories

Oil options calm shows 10 percent price surge may be fleeting
Catherine Ngai – Reuters
As oil prices skyrocketed on Thursday to their biggest daily gain since the aftermath of the financial crisis, the corresponding crude options market remained muted, suggesting most big traders were shrugging off the move as merely a correction in the year-long bear market.

Predicted correction lacks full fear factor
John Authers – Financial Times
August’s stock market turmoil may be the most widely anticipated and predicted correction in history. While the selling of stocks has been dramatic, several other usual signs of panic have been absent.

Can S&P 500 shrug off ‘deathcross’ in coming weeks?
Investment Week
A ‘deathcross’ occurs when an index’s 50-day moving average falls below its 200-day trend line.
Traders fear this kind of formation could signal a short-term drop is about to become a wider slump.

Bears Circle Swiss Stocks Already Slammed by Franc, China Slump
Roxana Zega – Bloomberg Business
First it was the strengthening of its currency in January that sent Switzerland’s stocks down, only to recover two months later. Now it’s China’s economy, and this time options traders don’t see a speedy recovery.

Oil Set for Biggest Weekly Gain Since 2011 as Volatility Climbs
Grant Smith Mark Shenk – Bloomberg Business
Oil approached its biggest weekly advance in more than four years, sustaining a rebound above $40 a barrel amid signs of a strengthening economy in the U.S., the world’s biggest crude-consuming country.

Gold’s Chance of Acting as a Haven Is No Better Than a Coin Flip
Luzi-Ann Javier – Bloomberg Business
When markets melted down this week and volatility in equities surged, gold did exactly what it’s not supposed to do: it moved along with everything else, betraying its role as a haven.
To see how the metal failed to live up to its reputation as a safety asset, take a look at this chart. This shows an increasing correlation between the measure of U.S. equity market turbulence, the Chicago Board Options Exchange Volatility Index, or VIX, and the Gold VIX, which measures swings for bullion.


NYSE Draws Users’ Ire With Fee Increases, Patent Charge Proposal
Sam Mamudi and Matthew Leising – Bloomberg Business
Intercontinental Exchange Inc., owner of the New York Stock Exchange and some of the world’s biggest derivatives markets, is setting up a clash with customers with its plan to generate income by licensing patents and boosting market-data fees.

Surveillance unit created for Japan exchanges
Alice Attwood – Futures & Options World
An independent Japanese exchange regulator has confirmed plans to create an International Surveillance Office to oversee cross-border transactions, hot on the heels of debate over increased market surveillance techniques and provisions.
Set to be established on September 1, Japan Exchange Regulation (JPX-R) will examine regulations and trends outside Japan regarding unfair trading and seek cooperation with foreign self-regulatory organisations (SRO).

Euronext Introduces Weekly Options Classes On French And Belgian Single Stocks
Press Release – Mondovisione
Euronext today announced the launch of new weekly options on single stocks on the Euronext Paris and Brussels derivatives markets. These short term option classes on three Belgian shares (AB InBev, KBC Groep and UCB) and seven French shares (AXA, BNP Paribas, ENGIE, Orange, Peugeot, Societe Generale and Total) are available for trading as from today.

Chicago Mercantile Exchange opening Ulster University ‘trading floor’ to help train students
Belfast Telegraph
Chicago Mercantile Exchange (CME) is opening a financial innovation laboratory at Ulster University in Jordanstown to educate students about its work.

Regulation & Enforcement

Do we need a cross-asset universal product identifier?
FTSE Global Markets
Covering the entire spectrum of asset classes and financial services, from loans and credit cards to derivatives and bond positions, a Universal Product Identifier (UPI) will enable a holistic approach to identifying all trades and positions, including capital calculations, reporting, clearing mandates and booking rules. While such an idea sounds great in theory, historical attempts at achieving global agreement have fallen short, even within a sub sector of the industry. Peter Meechan, Jim Bennett and Pauline Tykochinsky of Sapient Global Markets examine the feasibility of universal product codes; ponder whether the industry is ready to come together to create them; and discuss what a potential solution might look like.

Haywire ETFs Draw Regulator and Investor Scrutiny After Crash
David Michaels and Margaret Collins – Bloomberg Business
Investment managers facing tough questions from regulators over what caused trading disruptions for hundreds of exchange-traded funds this week said they got hit by a double whammy.

Fidessa Regulation Matters – ‘All together now…’
Anne Plested – Automated Trader
I’m hopeful that the ‘final’ Technical Standards due next month will have at least dropped requirements to include static data. Do we really need multiple systems storing and passing around redundant static instrument, client and trader data?


OptionsCity adds tech for commodity platform
Alice Attwood – Futures & Options World
Chicago-based OptionsCity Software has inked a deal with independent inter-dealer broker OTC Global Holdings to supply a new trading widget to its platform, EOXLive, which will allow the tech firms’ clients to have trading access to the broker.

Fintech Spotlight: An Unsecured Debt Bubble? Or Is This Time Different?
Ron Finberg – Finance Magnates
For those following the marketplace lending sector, also called P2P lending or alternative finance, one question being asked is whether a bubble in unsecured debt is emerging?
At the heart of this new lending trend are technology efficiency advancements that connect borrowers and lenders. The technology is similar to other electronic marketplace such as eBay or over the counter (OTC) exchanges that are replacing previous formats of connecting participants.

Technical Issues Hit ITG’s Dark Pool
Bradley Hope and Sarah Krouse – WSJ
Investment Technology Group Inc. ‘s brokerage operations and private trading venue were taken off line around 1 p.m. because of a technical problem at the data center where it is located, an executive said.

ITG says open for business following issues at data center
John McCrank – Reuters
Investment Technology Group said on Friday that it was open for business after an operations issue at a data center it uses forced the brokerage to close its U.S. private trading venue, or “dark pool,” on Thursday afternoon.


While Many Panicked, Japanese Day Trader Made $34 Million
Jason Clenfield and Yuji Nakamura – Bloomberg Business
While a lot of investors were hitting the panic button Monday, a Japanese day trader who’d made a big bet against the market timed the bottom almost perfectly and narrated a play-by-play of the trade to his 40,000 Twitter followers. He claims to have walked away with $34 million.

Interested in Managing Global Portfolio Exposure? Explore Options on MSCI Indexes
Matt Moran – CBOE Options Hub
Interest in managing global portfolio exposure has grown in recent weeks.

How Do You Short China?
Christopher Whittall, Carolyn Cui and Anjani Trivedi – WSJ
Suddenly everyone wants to bet against China. But with limited access to the country’s hard-hit stock markets and thin trading in overseas markets for its currency, it can take a little creativity.
As such, traders are scouring stock, bond and currency markets around the globe for ways to make money on the malaise afflicting the world’s second-largest economy.


In charts: Sharp falls and fast recovery
Robin Wigglesworth – Financial Times
After a staggering run, the US equity bull market was finally tamed this month. But stocks have already bounced back strongly out of correction territory, and the S&P 500 is now higher in the week.

Three tests face a market shaken by volatility storm
Michael Santoli – Yahoo Finance
Doing what it could to humble the greatest number of people, the stock market followed its ominous downside dump Tuesday with the best two-day surge since the dawn of this bull market.

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