Observations & Insight

MarketsWiki Education Chicago 2015
MarketsWiki Education Summer Intern Series – Day One
By Sarah Rudolph, Managing Editor, JLN

Our Chicago Summer Intern Series kicked off with a packed auditorium at IIT and five lively speakers, who all spoke about their passion for the trading industry. Scott Gordon, the CEO of Rosenthal Collins Group, was up first with some tips for interns on success and balance in work and life. These included checking out the view from 30,000 feet – looking beyond your particular job to know the major players, products, drivers and interactions in your industry; asking questions rather than knowing all the answers; pretending you are a taxi, which zigzags around and doesn’t know where it’s going next, rather than a train which has a set route and schedule; and not making assumptions.

“I was a floor clerk at the CME 44 years ago this summer,” Gordon said. “I worked on all the Chicago exchanges, and all were like a taxi ride. There was no way I could have told you what I would do next.”

His top recommended reading was Improvise: Unconventional Career Advice from an Unlikely CEO, by Fred Cook, and The Checklist Manifesto by Atul Gawande.

Read the rest of the Day 1 wrap-up at JohnLothianNews.com

Lead Stories

Wild A-share swings boost demand for volatility HFs
Oliver Jones – Asian Investor
Demand for volatility-focused hedge funds has increased in tandem with rising worries about A-share price swings, despite global equities being largely unaffected.
Chinese volatility has, however, led to dampening demand for structured products, although Japanese demand for structured products is seeing a resurgence because of the Abenomics-inspired equities rally.
Low levels of volatility in recent years have made investors more comfortable about investing in structured products – which are typically short volatility.

Gold Is Your Trade if You Believe in Buying Fear
Steven M Sears – Barron’s
Investors are in a deep panic about gold.
A key measure in the options market shows that bearish puts are trading at a sharp premium to bullish calls. In other words, options traders are betting heavily that the price of gold will continue to fall.

Commodities Are Crashing Like It’s 2008 All Over Again
Debarati Roy – Bloomberg
Dear commodities investors: Welcome back to 2008!
The meltdown has pushed as many commodities into bear markets as there were in the month after the collapse of Lehman Brothers Holdings Inc., which spurred the worst financial crisis seven years ago since the Great Depression.

Investment Banks Are Rewarded by Volume Surge in European Stocks
Blaise Robinson and Inyoung Hwang – Bloomberg
European stocks have swung this year from a central-bank-fueled rally to a Greece-induced slump and back up. The upshot for investors? A resurgence in volume.

Market volatility is good for CBOE
Portia Crowe – Business Insider
Market volatility due to uncertainty in Greece has been great for one US company: the Chicago Board Options Exchange.
That is according to a note from UBS’ Alex Kramm, which said that surging volatility spurred increased activity on America’s largest options exchange last month.

Birinyi Says You Can Toss Out the Old Tools for Calling S&P 500
Joseph Ciolli – Bloomberg
Anchoring stock market predictions on valuation data that go back a century or more is a prescription for failure, according to Laszlo Birinyi.
Things have changed in a world dominated by institutional investors, hedge funds and service industries, and sentiment is as likely to drive prices as anything else, the 72-year-old former Salomon Brothers Inc. analyst wrote in a note to clients. Birinyi’s star has risen since 2009 as his bullish forecasts for the Standard & Poor’s 500 Index came true again and again.

Investors Show a Bearish Trend
Press Release – Business Wire
E*TRADE Financial Corporation (NASDAQ:ETFC) today announced results from the most recent wave of StreetWise, E*TRADE’s quarterly tracking study of experienced investors. Results show investors have grown increasingly more negative toward the market, with bearish sentiment the highest it has been all year.

The Oil Crash Has Caused a $1.3 Trillion Wipeout
Asjylyn Loder – Bloomberg
It’s the oil crash few saw coming, and few have been spared as it erased $1.3 trillion, the equivalent of Mexico’s annual GDP, in little more than a year.
Take billionaire Carl Icahn. When crude was at its peak in June 2014, the activist investor’s stake in Chesapeake Energy Corp. was worth almost $2 billion. Today, oil has lost more than half its value, Chesapeake is the worst performer in the Standard & Poor’s 500 Index and Icahn has a paper loss of $1.3 billion. The S&P 500, by contrast, is up 6.9 percent in that time.


Intercontinental Exchange Reports ICE and NYSE Monthly Statistics for July 2015; Energy Daily Volume up 3%, Ags up 8%, Cash Equities up 23% over Prior July
Press Release – ICE
Intercontinental Exchange, the leading global network of exchanges and clearing houses, today reported July exchange traded volume.

ICE Earnings Rise, Despite Lackluster Trading Volume
Lisa Beilfuss and Bradley Hope – WSJ
Intercontinental Exchange Inc.’s profit rose in its second quarter, as lower expenses helped offset lackluster trading volume.
The exchange operator reported a profit of $283 million, up from $226 million a year earlier. Per-share earnings rose to $2.54 from $1.95. Revenue grew 6.3% to $797 million.

CME Group and CFETS Sign Memorandum of Understanding
PR Newswire
CME Group, the world’s leading and most diverse derivatives marketplace, and China Foreign Exchange Trade System (CFETS), announced they have signed a Memorandum of Understanding (MOU) in Shanghai today.

Euronext Announces Monthly Trading Volumes For July 2015
Press Release – Mondovisione
Euronext, the leading exchange in the Eurozone, today announced trading volumes for July 2015.

CME reports mixed trading fortunes for July
Alice Attwood – Futures & Options World
Derivatives giant CME Group said Tuesday that it saw a solid month of trading in July with volume up 5% on the comparable month, driven by strong growth in agricultural commodities and treasury options, while interest rates and its flagship futures contracts reported declines.

Moscow Exchange posts Q2 2015 metrics, results lag behind stellar Q1
Maria Nikolova – LeapRate
Moscow Exchange, or Moskovskaya Birzha OAO (MCX:MOEX), the biggest platform for trading shares, derivatives and Forex in Russia, has just reported its financial and operating metrics for the second quarter of 2015.

Multi-legged facility in equity derivatives from Monday: BSE
Press Release – Business Standard News
Leading stock exchange BSE today said that it will launch multi-legged order entry facility in equity derivatives segment from August 10.

Regulation & Enforcement

Extra powers to curb abuse need work
Alice Attwood – Futures & Options World
Accusations of market manipulation can spark years of legal investigations, court proceedings and media speculation of wider manipulative practices, so a recent proposal to increase an exchange group’s internal powers to suspend those they suspect to be undertaking manipulative behaviour, could lead to a market-wide increase in powers.


Nasdaq’s Second Error of Day Hobbled Service Dark Pools Use
Sam Mamudi – Bloomberg
A Nasdaq OMX Group Inc. service that some dark pools need in order to function broke down twice Tuesday, hobbling part of the U.S. stock market.

Wall Street embraces blockchain as the future
Matthew Leising – Financial Review
When Justin Brownhill wants to check up on one of his latest investments through SenaHill Partners, he only needs to check the ledger unpinning bitcoin. The address: block 368396.
That’s the new digital home for the equity stake his firm made in Symbiont, a startup using bitcoin’s underlying blockchain software to make it quicker and easier to prove ownership of assets or transfer them between buyers and sellers.


Oil Looks Ready to Bounce But E&P Stocks May Not Follow – Focus on Funds
Chris Dieterich – Barron’s
Barclays is recommending that traders position for a rebound in oil at the same time they brace for additional declines in oil exploration and production company stocks.

4 Risk Aware ETFs For Nervous Investors
David Fabian – Nasdaq
The risk of a pullback in stocks that morphs into a full blown correction or even bear market is one that lurks out on the horizon. While no one knows when it will materialize or how long it will last, there are steps that nervous investors can take to help cushion their portfolios from a pernicious decline.
Some may turn to low volatility strategies such as the PowerShares S&P 500 Low Volatility Portfolio (SPLV) that include a mix of quality stocks with defensive characteristics. Nevertheless, even “safe stocks” can experience significant declines during periods of extreme duress.

The Fed and the Mindset for a Downturn
Bob Lang – CBOE Options Hub
I can hear it now from someone reading the title: ‘A HA! this guy is finally bearish after all this time — I knew he would come around’. That couldn’t be further from the truth, in fact the bearish label is completely inaccurate. I don’t like labels, as when we describe ourselves bullish or bearish that puts us in a specific mindset unable to be flexible. Hence, when we change our minds and decisions with changing markets our tactics are questioned. In other words, don’t put me in a box.
Markets move in cycles and if we’re not able to identify shifts in these cycles, money flows and pricing structures then we will just be making the same mistakes in prior periods. There are many valid arguments for bull market runs but also many good arguments for bear raids. Liquidity and Fed accommodation are at the top of the list, and as long as those are strong you can bet that any pullback/correction will be short-lived.

Indicator of the Week: Are Selling Climaxes Bullish Indicators?
Chris Prybal – Schaeffer’s Research
When looking back at the last week of July 2015, one indicator caught my eye as having contrarian implications: selling climaxes. A selling climax is a weekly signal, and occurs when a 52-week low is reached during the week, but the equity reverses direction and actually closes higher than the previous weeks’ closing level.


Day Two – Chicago Summer Intern Education Series
John Lothian
Yesterday we also had a surprise musical guest play before the event. Andrew Lothian, my nephew and aspiring singer/songwriter, played for 25 minutes prior to the presentations.
Today is Day Two of the Chicago Summer Intern Education series. We are again at IIT Stuart School of Business starting at 3:30 p.m. today. We also have a musical guest today, Matthew Scharpf of Eurex. Matt spoke, played and riffed at last year’s Chicago series. See one of the most popular MarketsWiki Education talks, Trading with a Creative Mind

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