JLN Options: Volcker Rule Rewrite; Thomson Reuters moving FX derivs to Ireland

May 15, 2018

JLN Options: Volcker Rule Rewrite; Thomson Reuters moving FX derivs to Ireland

May 15, 2018

Spencer Doar

Spencer Doar

Associate Editor

Lead Stories

Volcker Rule Rewrite to Drop Trading Burden on Banks, Sources Say
Jesse Hamilton and Benjamin Bain – Bloomberg
Wall Street is poised to get a big reprieve from the Volcker Rule, as U.S. agencies prepare to scrap a restrictive presumption that most short-term trades violate the post-crisis regulation, three people with knowledge of the matter said.
In a much-anticipated overhaul, the Federal Reserve and other regulators are planning to drop an assumption written into the original rule that positions held by banks for less than 60 days are speculative — and therefore banned, the people said. Instead, banks would have leeway to conclude that their trades comply with the rule, putting the onus on regulators to challenge such judgments, the people said.

Thomson Reuters to move forex derivatives to Dublin due to Brexit
Tommy Wilkes, Guy Faulconbridge – Reuters
Thomson Reuters Corp said on Tuesday it would transfer its $300 billion-a-day foreign exchange derivatives trading business to Dublin from London ahead of Britain’s departure from the European Union next year.

****SD: Client relations will transition to Thomson Reuters’ new Irish legal entity – no plans (yet) to move staff from London to Ireland.

Cboe Announces Successful Migration Of Cboe C2 Options Exchange To Proprietary Technology Platform
Three of Cboe’s four options exchanges now run on the Bats technology that powers Cboe’s equities and futures exchanges
36 participants accessed the new platform with 312,127 contracts traded on launch day
Cboe’s flagship options exchange, Cboe Options, is scheduled to migrate on October 7, 2019

Strategist Who Named ’50 Cent’ Has Left Macro Risk
Lu Wang and Luke Kawa
Pravit Chintawongvanich, whose opining on options and other derivatives made him one of the best-known voices in volatility markets, has left Macro Risk Advisors, his employer of the last five years. Chintawongvanich, who chronicled the exploits of traders who became known as the “VIX Elephant” and “50 cent,” left the New York-based research firm to pursue other opportunities, Macro Risk Advisors said in a statement. He had been head of derivatives strategy.

****SD: I really hope he ends up in a position that lets him opine as much as MRA did. If he doesn’t, who will step up to the plate with a steady stream of options nicknames?

Wall Street’s ‘fear index’ is giving stock-market investors a wrong reading, says Goldman
Mark DeCambre – MarketWatch
Wall Street’s ‘fear index’ is giving stock-market investors a wrong reading, says Goldman
Something is off with one measure of volatility on Wall Street.
According to Goldman Sachs strategists, the Cboe Volatility Index often referred to as Wall Street’s “fear index,” is too low given the recent gyrations of the S&P 500 index

Mexico Traders See Time Running Out for Nafta Deal to Save Peso
Justin Villamil and George Lei – Bloomberg
Mexico peso bulls counting on a Nafta agreement to bolster the currency may be running out of time.
While negotiators are working to reach at least a preliminary trade deal by the end of this month, prospects for an accord are far from certain. At the same time, investors are growing increasingly concerned about a peso rout if the left-wing firebrand leading polls goes on to win July’s presidential election.

Exchanges and Clearing

Exchanges face share price test from lower volatility
Philip Stafford – Financial Times
With a few exceptions, it has been a good year to be an investor in the shares of companies at the heart of global markets trading.
Daily activity in buying and selling equities, futures, fixed income and foreign exchange on global markets passes through a series of intermediaries, including exchanges and computer-driven market makers.

LME reports highest profits since 2015
Neil Hume – Financial Times (SUBSCRIPTION)
The London Metal Exchange has reported its highest profits since 2015, buoyed by a recovery in metals markets and lower costs, according to recently filed accounts.

MCX commences options trading in crude oil contracts
Economic Times
Kolkata: Multi Commodity Exchange of India Ltd. (MCX) on Tuesday commenced options trading in crude oil contract. The contract has witnessed traded volume of 2058 lots with value of Rs 101.67 crore, as of 05:30 pm today.

LedgerX Announces Bitcoin Options Trading Upgrade
Nikhilesh De – CoinDesk
Bitcoin derivatives platform LedgerX is launching a new, simplified interface that lets bitcoin investors earn interest on their holdings.
The new service, announced Tuesday, operates similarly to its existing bitcoin call options with a streamlined user face for investors, according to LedgerX president and chief risk officer Juthica Chou.

****SD: Forbes – LedgerX Launches First CFTC Regulated Bitcoin Savings Account

Euronext Publishes Q1 2018 Results
Today Euronext, the leading pan-European exchange in the Eurozone with 1,300 listed issuers, announces its results for the first quarter of 2018.

Hermes EOS calls for clarity on new Deutsche Boerse chairman by next year
Shareholder adviser Hermes EOS has called for the re-election of Deutsche Boerse’s (DB1Gn.DE) Chairman Joachim Faber for a limited period to allow an orderly succession at the top of the German exchange operator.

Regulation & Enforcement

EU Sees $23.5 Billion in Revenue From Financial-Transaction Tax
Nikos Chrysoloras – Bloomberg
Derivatives account for more than half of the projected total; Hard Brexit could create a ‘more tricky enforcement issue’

****SD: Focusing solely on the revues from such a tax is misguided – one needs to factor in adverse business reactions to the tax.

CFTC Official Urges SEC to Clarify Ether’s Status
Gabriel T. Rubin – WSJ
A top U.S. derivatives regulator urged his counterparts at the Securities and Exchange Commission to quickly reach a decision about the status of ether, the world’s second-most-valuable cryptocurrency after bitcoin.

****SD: Bloomberg here.

Is there a need for a US fintech charter?
Michael McCaw – bobsguide
Following years of new regulations, nobody in the financial sector is particularly keen on new rules. Since Dodd Frank and its related slew of regulatory and reporting requirements, the very thought that regulations could become more demanding should send shivers down the spine of anyone working in the market. Not least regulators – who have found themselves overladen not only with the task of creating market frameworks to satisfy a number of politically satisfactory rules but also enforcing them.


Vola Dynamics releases Vol Derivatives Module
Misha Fomytskyi – LinkedIn
Vola Dynamics is known, amongst others, for its robust volatility fitter capable of calculating arbitrage-free parametric volatility surfaces for any name in real time, for trading (and any other) purposes. Good vol surfaces make a big difference in many areas of options trading from improving the stability of valuations for high-frequency OMM to the ability to easily analyze a variety of longer-horizon vol arb strategies. They also form the basis for more advanced analytics like vol derivatives.


Can Bill Gates Short Bitcoin?
Peter Tchir – Forbes
It all started last Monday when Bill Gates was quoted as saying he would short bitcoin if he could on CNBC.
The reaction on social media, particularly twitter was fast and furious.
Tyler Winklevoss responded with this tweet that pointed out that @BillGates could short bitcoin using the CBOE futures contract.

****Related story from the Irish Times – Short-sellers may have burst bitcoin bubble

The VIX Is Too Low And TVIX Is Ready To Climb
Seeking Alpha
A couple of weeks ago, I made the case for volatility being near a turning point over the short term. I believe this is still the case, and will revisit some of the near term catalysts below. But first, it seems important to look at the current situation in the volatility complex.


CME to Gauge User Interest for Ether Futures After Index Launch
Camila Russo – Bloomberg
CME Group Inc. will review client demand for Ether futures after launching an index tracking prices of the second-largest cryptocurrency.
“We’ll continue to gauge with them to ascertain the demand for futures,” Tim McCourt, CME’s head of equity products, said at an interview Monday at in industry conference in New York. “There are no plans at the exchange to launch one currently.”

****SD: Which of the exchanges will be the first to launch options on their bitcoin futures contracts? Cboe is still giving the “need more settlements of the futures, but soon” answer.

Client’s view: Sylvain Broyer, Head of Economics at Natixis, on Brexit, monetary policy and market trends
The current economic and political situation in Europe raises a number of questions. We talked to Sylvain Broyer, Head of Economics at French investment bank Natixis, about the likelihood of another financial crisis and some key issues investors should keep an eye on.

Wall Street Is Moving, and It’s Reshaping New York
Rob Urban, David M. Levitt and Christopher Cannon – Bloomberg
From the 86th floor of the Empire State Building, historian Ingo Walter can point to Wall Street’s past, present and future—first facing south, then north, now west.

Where will you be able to bet on sports first? These five states are the most likely options.
Matt Bonesteel – Washington Post
The Supreme Court on Monday cleared the path for U.S. states to start offering sports gambling, ruling that a federal law that limited the practice in the United States was unconstitutional. Some states outside of Nevada — which already has a well-established sports-gambling industry — have been preparing for this day for years, and they likely will be the first to start taking bets. Here’s a look at the pacesetters.

****SD: Bonesteel – the name of a comic book hero similar to Wolverine?

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