Markets Brace for U.S. Election Volatility. Well, Some of Them

Aug 7, 2020

Lead Stories

Markets Brace for U.S. Election Volatility. Well, Some of Them
Carter Johnson – Bloomberg
It’s crunch time for traders betting on the prospect of market upheavals around the U.S. presidential vote.
With less than three months until polling day, the commonly-traded options and futures contracts that typically match that timeframe are now firmly in play. But currency and interest-rate bets reflect quite a different view to equities, leaving some wondering which signals to trust.

‘I’m so bearish, I’m bullish’: BofA says ‘maximum liquidity’ will push stocks to new all-time highs, but a COVID-19 vaccine will mark the ‘big top’
Matthew Fox – Markets Insider
“I’m so bearish, I’m bullish.”
That’s how Bank of America strategist Michael Hartnett summed up his thinking on the markets in a note published on Friday, as the S&P 500 is just 1% away from making new all-time highs just as Main Street enters a recession, according to the note.

What’s with gold backwardation?
Izabella Kaminska – Financial Times
The fact the gold price is zooming in the face of record monetary expansion and debt issuance is hardly surprising though. It is, after all, precisely the sort of economic environment that should bring out gold enthusiasts who have long predicted the dollar-supported western financial system is due a collapse.
But could they — at least this time — have a point?

Investors say negative real yields are driving the ‘everything rally’
Tommy Stubbington and Robin Wigglesworth – Financial Times
A collapse in real yields — the return that bond investors can expect once inflation is taken into account — is rippling through global financial markets and driving record rallies in assets from gold to technology stocks, investors say.
The yield on 10-year inflation-linked US government bonds, known as Tips, sank below minus 1 per cent last week to a historic low, as investors bet that a surge in coronavirus cases would prolong the damage to the world’s biggest economy — and that the Federal Reserve’s efforts to stimulate demand could stir inflationary pressures.

Corporate Bond Investors Still Wary of Coronavirus Volatility
Paul J. Davies – WSJ
Bond investors are wary about a return of coronavirus-induced volatility, despite central banks’ efforts to backstop credit markets.
This fear is keeping yields on investment-grade corporate bonds elevated compared with the cost of insuring them against defaults in derivatives markets. That is because the indexes of corporate debt derivatives have proven to be easier to trade than cash bonds since the market meltdown in March.

From niche to mainstream – the growing market demand for listed derivatives (Part II)
In response to market demand, listed derivatives are getting more and more versatile in terms of products and functionality. In this second part of a two-piece interview, Megan Morgan, Global Head of Equity and Index Sales at Eurex, talks about benchmarks, product strategies and the future of derivatives exchanges.

Exchanges and Clearing

A. Single Stock Futures: Introduction of five Single Stock Futures; B. Single Stock Futures/Single Stock Dividend Futures/Equity Options: Name change
Due to previous corporate actions, the Management Board of Eurex Deutschland took the following decisions with effect from 17 August 2020:

Miami International Holdings Reports July 2020 Trading Results for MIAX Exchange Group; July Market Share up Approximately 19% over 2019
Miami International Holdings
Miami International Holdings, Inc. (MIH) today reported July 2020 trading results for its three fully electronic options exchanges – MIAX, MIAX PEARL and MIAX Emerald (together, the MIAX Exchange Group). The MIAX Exchange Group collectively executed over 66.4 million equity option contracts in July for a combined average daily volume (ADV) of 3,020,609 contracts, representing a total U.S. equity options market share of 11.41%.

July monthly figures at Eurex and EEX
All classes of financial derivatives at Eurex recorded declines in the number of contracts traded in July 2020 compared to July 2019, with the largest fall coming in European equity derivatives. Here, the ongoing uncertainty made dividend pricing still a challenge. The OTC Clearing space reports mostly positive figures. Notional outstanding volumes were up 53% in July 2020 compared to the same month last year. While average daily cleared volumes declined by 13% primarily driven by reduced volumes in Forward Rate Agreements, interest rate swaps were a solid performer, with average daily cleared volumes up 27% year-on-year.


Q2 PFOF Craziness: Robinhood Becomes Parody of E*Trade Commercial, Competes with TikTok for Attention…
Paul Rowady – Alphacution blog
Someday, sufficiently far into the future, when we have somehow broken free of the illusion, we are going to look back on this chapter in world history and wonder how we had entered into such a collective state of insanity in parallel with such profound technological advancement… The Fed has all but said that it will prevent markets from declining (and plug whatever economic holes it needs to plug and lubricate whatever financial gears it needs to lubricate), no matter how much money it needs to print, debts and deficits be damned. This is not a characteristic of free markets, nor is it a feature of a capitalist system…


A ‘golden cross’ has formed in the Dow Jones Industrial Average
Mark DeCambre – MarketWatch
A golden cross formed in the Dow Jones Industrial Average, more than five months after a bearish chart pattern materialized in the aftermath of the carnage wrought by the COVID-19 pandemic.
A golden cross occurs when the 50-day moving average for an asset price trades above the 200-day MA, while a so-called death cross, comparatively, is when the 50-day falls below the long-term average.


Resilience and adaptability: The key to meeting the new challenges for ETD markets in Asia-Pacific
12 August 2020 • 9:30 AM – 11:00 AM SGT • Webinar
2020 has been an unprecedented year in the history of the exchange traded derivatives industry. With organizations facing unique and wide ranging challenges during the global pandemic and its impact on global markets, we seek to gather the insights from regional CCPs and other industry leaders to discuss what worked well, what could be improved, and what is needed to ensure the safety and security of markets in the future.


(Podcast) TWIFO 211: Feeling Precious About Nat Gas
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