OBSERVATIONS & INSIGHT
Jeffrey Maron of MarkitSERV Talks Plumbing: How SEF Reporting Infrastructure Works
With the official launch of swap execution facilities (SEFs) on October 2, a new trading structure for OTC products is underway. Today, with almost 20 SEFs operational or in the works, the question for many market participants is how will all the trading and reporting work? JLN editor-in-chief Jim Kharouf sat down with Jeffrey Maron, managing director, product management for MarkitSERV, to talk about the reporting aspect of these swaps transactions.
The Wisdom of Unseen Bulls
Steven M. Sears – Barron’s
Beyond the worry and tumult in stock markets, the options market shows signs of optimism among sophisticated investors.
Options Complexity Gives Pause
Active proprietary traders and other options market participants have mostly gone along with increasing market-structure complexity. But at a certain point, the situation needs to be closely looked at for its potential detrimental effect on market quality.
VIX Jumps, but Volume Shows Complacency
Kaitlyn Kiernan – The Wall Street Journal
The market’s so-called fear gauge jumped to its highest intraday level since June 25 early Monday, underscoring worry that the debt-ceiling fight will go down to the wire or beyond. But low volume suggests many investors are still sitting on their hands.
Wall Street falls as no progress seen to resolve shutdown
Ryan Vlastelica – Reuters
U.S. stocks fell on Monday, extending two weeks of losses, as a lack of progress in ending the partial U.S. government shutdown or the debt-ceiling standoff kept investors nervous.
DEUTSCHE BANK: We Expect A Debt Ceiling Deal After We Hit It
Sam Ro – Business Insider
Congress has yet to address the debt ceiling, which is the point when the U.S. Treasury will no longer be able to borrow money by issuing debt. Treasury Secretary Jack Lew says the U.S. will hit the ceiling on October 17.
However, October 17 is not when the Treasury is expected to run out of cash and default on its liabilities.
**If nothing else Obama could invoke the 14th Amendment. There’d be hell to pay for that but there is always that out. -JB
Videocast: ‘Lot of volatility’ ahead
Why the arcane business of swaps is good for Chicago
Lynn Marek – Crain’s Chicago Business
The $630 trillion swaps market is beginning to flow into Chicago, bringing with it hundreds of millions of dollars in trading activity and the jobs to support it.
In the weeds on the rocky road to an electronic OTC market
The system to electronically identify, trade and clear swaps has been designed by the CFTC, albeit in “consultation” with the industry’s many constituent and competing self-interests.
In summary, it is an attempt at designing an automated market that bridges the mechanisms of interoperability of the fragmented infrastructure of the equity market with the vertical silo structure of the listed futures markets.
Glitches and low volumes stall US equity options exchange growth
Richard Henderson – The Trade
Over-confidence in US equity options led a steep growth in venues since 2010, but new entrants will face stricter barriers to entry as technology requirements increase and trading volumes continue to plateau, a report has found.
Second Exchange Delays FX Market Launch
Anish Puaar – The Wall Street Journal
Eurex, the giant European derivatives exchange, is postponing the launch of its new currency-derivatives segment because of issues with one of its third-party service providers.
REGULATION & ENFORCEMENT
Finra to Consider Requiring Brokerages to Carry Arbitration Insurance
Jean Eaglesham and Rob Barry – The Wall Street Journal
The Financial Industry Regulatory Authority said it will consider requiring brokerage firms to carry insurance to cover the payment of arbitration awards to investors.
Finra, a Wall Street self-regulator that oversees brokerage firms, knows there is “frustration” over nonpayment of arbitration awards, said Susan Axelrod, Finra’s executive vice president of regulatory operations, in an interview with The Wall Street Journal.
Four Potential Candidates for CFTC Chairman
Michael R. Crittenden, Scott Patterson and Jamila Trindle – The Wall Street Journal
After nearly five years on the job, Commodity Futures Trading Commission Chairman Gary Gensler plans to leave the agency by the end of the year. The question now is who will be his replacement.
The widely anticipated departure will end a tumultuous tenure highlighted by a drastic revamping of the derivatives market mandated by the 2010 Dodd-Frank law and the prosecution of big investment banks for manipulating the interest-rate benchmark called the London interbank offered rate.
Here’s a look at a list of possible successors:
**Not on this list but JLN believes Scott O’Malia would be the best choice for the next chairman of the CFTC. -JB
Gensler Assesses U.S. Swap Rules Debut by Phone in Shutdown
Silla Brush & Robert Schmidt – Bloomberg
Gary Gensler spent much of the past month fending off Wall Street’s campaign to slow the move to electronic swaps trading. So when the platforms went live last week, the top U.S. derivatives regulator wasn’t going to let a government shutdown stop him from monitoring its progress.
**At least the phones still work in Washington. -JB
Shutdown Shuts Down Commitment of Traders Reports From CFTC
David Bird – The Wall Street Journal
A weekly window into who’s doing what in commodities and foreign-exchange markets closed Friday as the government shutdown prevented the release of widely watched commitment of traders reports.