Observations & Insight
2016 Could Be The Year Of The CEO
By Jim Kharouf, JLN Editor-in-Chief
Forget the Chinese New Year plunge, Brexit, The Donald or even the Cubs. This is also shaping up as the year of the new CEO, with exchanges and clearinghouses especially, in moves that could reshape our markets in the coming years.
The two biggest CEO changes came within days of each other, with Terry Duffy taking the reins as CEO at CME Group from Phupinder Gill and Adena Friedman at Nasdaq, taking over from longtime CEO Robert Greifeld at the start of 2017. They are not alone in exchange CEO transitions. Dominic Stevens from the Australian Securities Exchange took the CEO post this summer, while Thomas Book was named CEO of Eurex in March. An honorable mention goes to Trabue Bland, president (not CEO) of ICE Futures US, named to the post in February.
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Steve Hamilton, CurveGlobal – Demystifying the Current Trading Environment
Steve Hamilton, COO of CurveGlobal, doesn’t buy the over-the-top headlines about the state of trading. To him, the evolution of the market has been logical, and not as drastic as some would have you believe. The bottom line is that people still make trading decisions based upon risk taking and risk mitigation, and then discover price in order to execute their strategy. The change has been the venue where this occurs — a screen rather than a pit.
In this video from JLN’s MarketsWiki Education event in London, Hamilton runs through the shift from the pits to the screen, while admitting he doesn’t get some of the semantic games happening in trading.
“I don’t know what high frequency trading is. It doesn’t make any sense to me. I know what automated trading is,” he said.
Hamilton thinks the HFT moniker gets bandied about all too, well, frequently. People use the phrase to describe all sorts of low-latency electronic trading, something Hamilton would prefer was simply called automated trading. Hamilton would know: he came to Curve from the HFT firm — make that AT firm — DRW.
Market Calm Back as Short-Term Volatility Falls Most Ever – Chart
Cecile Vannucci – Bloomberg
Options traders are betting on stock-market tranquility for the next few days. While the CBOE Volatility Index has alternated between gains and losses since Donald Trump’s election, its short-term version has slumped for seven straight days, putting it on track for the biggest two-week decline on record.
OCC News October/November 2016
Inside this issue: OCC Company Updates, The Importance of Proactively Managing Business Continuity for OCC and the Listed-Options Industry, Blockchain Could Create Efficiencies for Markets, The Options Industry Council Hosts LEAPS Options Webinars for Investors, OCC Sponsorships and Industry Events and From Capitol Hill.
Post-Trump About-Face Triggers 2 Rare S&P Signals
Andrea Kramer – Schaeffer’s Research
Ahead of the U.S. presidential election, the CBOE Volatility Index (VIX) — also known as the market’s “fear barometer” — went on a record-long rally, reflecting the growing uncertainty on Wall Street. However, despite a knee-jerk reaction to the downside following Donald Trump’s surprise win, stocks ultimately went on a tear, with the Dow just recently snapping its record-setting win streak. In the midst of this seismic sentiment shift, two rare signals just went off for the S&P 500 Index (SPX).
Derivatives traders forced to provide $27bn collateral post-Brexit
Joe Rennison, Gregory Meyer and Philip Stafford – Financial Times
Derivatives traders were forced to stump up tens of billions of dollars the day after Britain’s vote for Brexit to cover volatile price movements, testing the foundations of the market’s post-financial crisis architecture.
ICAP’s EBS Platform Handled $240 Billion on Trump Victory Night
Leading interdealer broker ICAP Plc, soon to be named NEX Group Plc, saw a huge $240 billion in trading volumes on its forex platform EBS as markets reacted to considerable volatility set off by the U.S. presidential elections on Wednesday. ICAP disclosed the figure in a trading update on Thursday.
****SD: I first thought it read “… Platform ‘Handed’ $240 Billion…” Talk about a bank error in your favor.
KCG Announces Share Exchange With General Atlantic
KCG Holdings, Inc. today announced that it has entered into a strategic transaction with General Atlantic, a global growth equity firm. Under the terms of the transaction, KCG will exchange 8.9 million shares it owns of Bats Global Markets, Inc. for all of General Atlantic’s 18.7 million shares and 8.1 million warrants of KCG. In 2007, General Atlantic invested in GETCO, a predecessor to KCG. The transaction is expected to close by the end of November, with a portion of the warrants to be settled in early January 2017.
Exchanges and Clearing
Goldman’s ICE Clear Brexit play?
William Mitting – Futures & Options World
What does Goldman Sachs’ joining ICE Clear Netherlands say about Brexit and the sale of TOM? Sometimes a news item raises more questions than it answers. The announcement that Goldman Sachs will become a clearing member of ICE Clear Netherlands was such an item. Neither Goldman nor ICE are giving any details but there are a number of levels of intrigue around this, as one would expect when the two smartest firms in the room get together.
****SD: Basically, did Goldman join ICE Clear Netherlands expecting ICE to acquire TOM? Of note: “Rumours of the price tag of TOM are in the low single digit millions of euros reflecting its reliance on its existing customer base.”
Bats Reports New Record In U.S. Options Trading In October
Bats Global Markets, Inc. today reported October data and highlights, including a new record month for U.S. options trading at 11.8% and strong single-leg equity options market share at 18.2%. During the month, Bats also announced the successful migration of BZX Options to Bats’ next generation matching engine. Both Bats’ options markets now operate on the latest proprietary technology.
****SD: If October was a record, what will November’s numbers bring?
True blue veteran becomes first woman to head Nasdaq
Nicole Bullock – Financial Times
Adena Friedman bleeds Nasdaq blue, a former colleague said of the exchange’s newly named chief executive. Ms Friedman began her professional career as an intern at Nasdaq, whose logo is blue, more than two decades ago when the exchanges operator itself was a young upstart.
“It was the company that listed Microsoft,” and, to the business school grad, “it sounded cool and up and coming.”
****SD: Just like sports — rare to see someone in the same organization for that long these days.
Why CME Group Hit The Wall
Kurt Dew – Seeking Alpha
Recently, here, I discussed the distinguished history of CME Group, up to the Exchange’s ground-breaking shift to electronic trading circa 2000. The remaining important chapter of CME’s development to date is its consolidation of other US futures exchanges. But that chapter is unfinished. CME acquisitions have come to a screeching halt. What is the future of the CME? How will the competition between the CME and ICE, the other acquisition-minded clearing manager, play out? The answer will depend largely on the parallel competition between the Commodity Futures Trading Commission and the SEC.
CME starts trading volatility-quoted FX options
CME’s dealing method allows users to enter a trade by selecting a volatility level instead of a price through the CME Globex trading platform. The Globex platform then performs an “auto-hedge” into the underlying futures contract, whereby participants exchange a standard option premium and futures hedge.
CME to amend livestock futures options minimum listed range of exercise prices
CME Group plans to amend rules governing minimum listed range of option exercise prices for its livestock options contracts to reflect a percentage range relative to the options exercise values closest to the settlement price of the previous day’s underlying futures contract, the exchange said on Thursday.
Hong Kong-Shenzhen stock link to start in days as China opens up markets more
A long-awaited stock trading link between Hong Kong and Shenzhen will go live in coming days, the CEO of Hong Kong’s bourse said, further opening up China’s capital markets to global investors and giving them access to some of its fastest growing companies.
Former Citigroup futures head is now CEO at London-based fintech firm
Paul Clarke – efinancialcareers
John Macpherson, the former European head of listed derivatives at Citigroup, who left the role after just a couple of months in June 2015 has been out of the market since. He’s now just re-emerged as CEO of a UK fintech firm. Macpherson is CEO of BMLL Technologies Ltd as of earlier this month. BMLL says that it uses a machine learning platform to provide deep data analytics on historical limit order book data to individual securities on individual trading days.
MOVES-Barclays hires six in emerging markets push – Finance News
Steve Slater – London South East
Barclays said it has made six senior hires in its emerging markets business and moved more than 10 people internally as part of a push to build up its EM rates and foreign exchange businesses.
****SD: Ben Hamdani is EM FX options head.
Regulation & Enforcement
Europe to approve margin rules on Monday – lawyer
Julie Aelbrecht – Futures & Options World
Introduction of clearing rules was delayed in June by the European Commission
The European Council is set to finalise the margin requirements for uncleared derivatives on Monday November 21, according to a legal expert. “The hope is the European Council will give its approval on Monday. The signs are good that they will push forward with finalising the rules, so that there is no more delay, given the short time the market will have to prepare between now and March,” said Jonathan Haines, finance partner at law firm Ashurst.
‘Best Ex’ Raises Bar on Analytics
Terry Flanagan – Traders News
Show, don’t tell. That’s the widening regulatory mandate to securities brokers regarding executing client trades as efficiently and as fairly as possible. De rigueurclaims of best execution in marketing materials are all well and good, but brokers will soon (if they don’t already) need to prove ‘best ex’ empirically, faster, and for more asset classes.
Bank sector regulation should not be rolled back: Draghi
The global banking sector needs to be well regulated and measures already decided should not be rolled back, European Central Bank President Mario Draghi said on Friday as concerns grow that the new U.S. administration would ease bank rules.
Exchange Real-time Monitoring – From Silos to Enterprise Level
Rohan Vartak – Traders News
Typically, stock exchanges around the world have grown organically. They start with a stock exchange business unit and then a systems department. This systems department caters to all the IT needs of the business unit. It usually consists of a team made up of network and hardware engineers, system administrators and application teams who perform development, as well as operations tasks (DevOps).
Behind the 4 million dollar bet on oil plunge
Heidi Chung – CNBC
Nathan noted that in an eyebrow-raising trade on Wednesday, someone bought 93,000 of the December 33-puts for 42 cents each. That is a nearly $4 million bet that oil and gas stocks will fall below $32.58 by December expiration — 15 percent lower from current levels. “That’s a long ways from here, especially if you consider how well these stocks are acting,” Nathan explained.
After copper it’s zinc’s turn to feel the speculative Chinese heat
Andy Home – Reuters
Last week it was copper. This week it has been zinc to feel the speculative heat emanating from China. On the London Metal Exchange (LME) benchmark three-month metal has whipsawed through a $200 per ton range, hitting a near six-year high of $2,684.50 on Tuesday before falling back to the $2,500 level this morning.
****SD: Everytime I see copper and zinc in a story together I think of my junior high science project about the effect of different electrodes on voltage. It wasn’t as easy as you might think to find a couple of long strips of zinc.