Observations & Insight

New Captain: SGX’s Boon Chye Navigates Tough Asian Markets
Jim Kharouf – JLN

Loh Boon Chye took the reins as CEO of Singapore Exchange (SGX) in July. A former SGX board member and Bank of America Merrill Lynch‘s deputy president and head of global markets in Asia Pacific, he said there is much opportunity for the exchange to grow, and perhaps even benefit from the competition that has moved in around him from ICE and others. Boon Chye spoke at SGX’s headquarters with JLN Editor-in-Chief Jim Kharouf about his management style, the game plan for the exchange going forward and just where SGX fits in the global market landscape.

Q: You took the CEO position in July at SGX. How did you go about setting your priorities as a CEO and for SGX?

A: My philosophy is, you have to listen first, then you have to engage, observe, take feedback. I know some CEOs like to come out with a grand plan after 90 days, but frankly with any new CEO in any organization, how much can you know in 90 days? No doubt I had the benefit of being on the board, but that is different than being in management. So I took the time to listen, engage and interact, not just internally but externally with stakeholders.

Read the rest of Kharouf’s interview with Loh Boon Chye at JohnLothianNews.com

Lead Stories

Will Fed + Put Options = Big Sell-Off?
Adam Warner – Schaeffer’s Research
As if we didn’t have enough to worry about thanks to the imminent, most publicized Fed rate hike ever. Will Fed + put options = big sell-off? J.P. Morgan seems to think it could.

Fed rate hike odds
FX News Call
US Federal Reserve will be meeting on December 15th-16th, to decide on whether to hike rates or not. Market pricing of the rate hike has somewhat softened after reaching as high as 84%. However, hike expectations over next year for subsequent have firmed somewhat.

Oil Burns Dow Jones Industrial Average; VIX Hits 2-Month High
Josh Selway – Schaeffer’s Research
The Dow Jones Industrial Average (DJIA) is getting pounded at midday. The blue-chip index has dropped over 200 points, as oil futures test new multi-year lows after this morning’s warning from the International Energy Agency (IEA). Also weighing on the index is the $130 billion deal between DuPont (NYSE:DD) and Dow Chemical Co (NYSE:DOW), with the former down more than 5%. Against this backdrop, the CBOE Volatility Index (VIX) — or the market’s “fear gauge” — is flirting with two-month highs, and the major market indexes are facing steep weekly losses heading into next week’s highly anticipated Fed meeting.

Building a Better Credit Hedge Is Proving Much Harder Than Expected
Tracy Alloway – Bloomberg
Credit investors hoping that the revamp of a popular derivatives index would make it a better hedge for their portfolios of corporate bonds say they’ve been left disappointed.
Markit, the owner of the CDX High-Yield, unveiled an overhaul of the derivatives index in September aimed at better aligning it with the cash bonds sold by junk-rated companies with more fragile balance sheets. The CDX HY, as the index is known, is comprised of credit default swaps (CDS) written on a basket of 100 junk-rated companies which act similarly to insurance contracts to protect investors from losses in high-yield corporate debt.

****SD: Instead, trade the VIX.

Futures and options turnover takes a dip as investors wait and watch (India)
Biswajit Baruah – Economic Times
Derivatives market turnover has taken a hit in December, as many market participants including foreigners and high net worth individuals, have chosen to stay away from the futures and options (F&O) segment ahead of the crucial US Federal Reserve meeting which might trigger considerable uncertainty.

Junk Bond ETF Selloff Accelerates
Chris Dieterich – Barron’s
Junk bonds are on the front burner Friday, as fresh concerns about liquidity added to long-running worries about potential oil-patch defaults and rising rates.

****SD: In the story: “Traders on Friday were still talking about a big, protective options position put up on Thursday that profits should the [iShares iBoxx USD High Yield Corporate Bond ETF] recently at $79.87, continue its slide.”

Hedge Fund Copycats Draw Record Money as Clients Seek Safety
Nishant Kumar – Bloomberg
Funds copying hedge-fund strategies to make money are on track to record their best ever net inflows this year as investors look for ways to escape volatile markets.

Credit Suisse: Oil Is Not Far Away From A “True Bottom”
Shuli Ren – Barron’s
Oil fell through $40 per barrel this week after the OPEC decided not to set a production ceiling at its meeting last Friday.


Borsa Istanbul Goes Live On Nasdaq Technology Suite -BISTECH Transformation Will Give Turkey One Of The World’s Most Advanced Exchange Technologies
Press Release
Borsa Istanbul and Nasdaq (Nasdaq:NDAQ) have announced that Borsa Istanbul has officially gone live on nine of Nasdaq’s market-leading technologies including trading and clearing, settlement, market data management, index calculation, market surveillance, business intelligence, and pre- and post-trade risk management. The initial implementation is for Borsa Istanbul’s equity market. The Turkish exchange will also go live on Nasdaq technology for all other markets, including derivatives, debt securities, and precious metals markets.

****SD: They’re doing it live!

Intercontinental Exchange Completes Acquisition of Trayport
Intercontinental Exchange
Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses, today announced it has completed its acquisition of Trayport from BGC Partners and GFI for approximately $650 million, comprising approximately 2.5 million ICE common shares. The transaction was announced on November 16, 2015, and will help ICE provide new services to the European over-the-counter (OTC) energy markets.

CME Europe Trading Exceeds 1,000,000 Lots Since Launch
Press Release
CME Group, the world’s leading and most diverse derivatives marketplace, announced today that one million contracts have now been traded on its London-based derivatives exchange, CME Europe. CME Europe launched in April 2014, and the total volume of contracts traded since launch stood at 1,002,497 as of 10 December 2015.

Singapore Exchange to cut freight clearing fee in 2016
Luke Jeffs – Futures & Options World
Singapore Exchange increased its default contribution by S$50m in October
The Singapore Exchange has taken the unusual step of slashing the clearing fees on its freight contracts at a time that some rivals are increasing fees in other areas.
The Asian exchange giant said on Friday it is cutting and standardising its freight swap, futures and options clearing fee at $4.50 from the start of next year while its Full Day Handysize Time Charter clearing fee will be cut to $3.
The exchange said in a statement: “In light of an extended period of low freight rates in the market, SGX has reviewed the fee structure on its freight products and are making a number of changes to continue supporting market participants in this challenging environment.”

QSE launches margin trade to enhance liquidity
Gulf Times
The Qatar Stock Exchange (QSE) has introduced margin trading, a move that is seen not only to enhance liquidity but also the advent of derivatives in the market.
The bourse also announced the commencement of application process to allow the QSE members get licensed as margin lenders.
The introduction of margin trading comes almost a year after the Qatar Financial Market Authority (QFMA) put in place new rules regarding it.

LME details plans for imminent office move
Luke Jeffs – Futures & Options World
Historic British exchange said in January it will move “within the next 12 months”
The London Metal Exchange, home to the last open outcry trading floor in the City, has detailed plans for its move to a new office, including a brief stopover in Essex.
The LME said in a statement on Thursday it will move its headquarters from its current home of 22 years on Leadenhall Street to a new purpose-built office on Finsbury Square in three tranches starting this weekend and completing at the end of January.

NYSE Governance Services launches innovative service for corporate boards
Intercontinental Exchange
The New York Stock Exchange, a subsidiary of Intercontinental Exchange’s (NYSE:ICE) global network of exchanges, today announced a new initiative to support companies and their boards in navigating the ever evolving economic, business and regulatory landscape. FORGE – the Future of Responsibility, Governance and Ethics – is a quarterly forum of executives, directors and industry influencers that will produce actionable insights and meaningful data on the most pressing boardroom topics.

Regulation & Enforcement

Judge Turns Up Heat on Accused Spoofer Oystacher
Janan Hanna – Bloomberg
U.S. commodities regulators can seek to stop alleged spoofer Igor Oystacher from trading before a trial is held in their lawsuit pursuing a ban, a federal judge decided Thursday.

Fund managers brace for SEC proposal on derivatives
Trevor Hunnicutt – Reuters
A potential move by the U.S. Securities and Exchange Commission to broaden regulation of derivatives use has industry officials worried it could hamper the ability of exchange-traded funds and mutual funds to amp up returns.
The SEC put the derivatives question on the agenda for its meeting on Friday, noting only that it would consider a proposed rule governing how funds use derivatives.


Thomson Reuters Teams With Eze Software Group for Workflow Optimization
Thomson Reuters (NYSE:TRI) has teamed up with independent order management system (OMS) provider, Eze Software Group, to help optimize a number of workflows via the Eikon Server API, according to a Thomson Reuters statement.


3 Joys of a SPX Weekly Iron Butterfly?
Dan Sheridan – CBOE Options Hub
Definition: Iron Butterfly is a trade where one puts on an at-the-money call credit spread and an at-the-money put credit spread.

Relevant trading-focused information authored by key players in the futures, options and forex industries
Fred Oltarsh – Inside Futures
There are numerous options trading strategies, but choosing the right strategy to meet your directional bias can often be difficult. Selling options for income is popular, but the risks often outweigh the rewards. Purchasing outright options has substantial risk of decay and one’s timing is essential. The key is finding a directional bias one is committed to and then establishing a trade which meets their risk/reward parameters. Analyzing options’ implied, historical and volatility skew is essential in order to establish the appropriate options position.

‘Big Boys’ Bet Goldman Jumps on Fed Rate Hike
Steven M. Sears – Barron’s
Recent options trading patterns reveal unusual bullishness on prospects for Goldman Sachs in coming months.
Goldman Sachs (ticker: GS ) is the latest hot trade in the options market, as investors remain intensely focused on stocks that could rally if the Federal Reserve raises interest rates next week. When the stock was around $180.67, an investor bought 3,500 December $182.50 calls that expire Dec. 31 for about $4.25. At the same time, the investor closed out a position of 3,500 December $190 calls in an apparent effort to more closely align the trade’s strike price with the current stock price.

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