Observations & Insight
Mexico’s Annual Oil Hedge Is in Progress
Devika Krishna Kumar and Javier Blas – Bloomberg
Mexico is in the process of locking in its income from next year’s oil production, people familiar with the matter said, in what’s one of the most closely watched deals among the world’s energy traders.
The country has been purchasing put options, which grant the right to sell at a predetermined price, at a price range of about $60 to $65 a barrel, the people said, asking not to be identified because the trade is private.
Strategists Keep Faith in Stocks, View Fed-Hike Bets as Overdone
Joanna Ossinger – Bloomberg
Markets are bracing for a pivotal Federal Reserve meeting that’s expected to lay out a roadmap for tapering pandemic-era stimulus and perhaps provide clues about the timing of a liftoff in interest rates.
The prospect of rising borrowing costs to fight inflation has roiled bonds and flattened the Treasury yield curve, suggesting a slower economic recovery lies ahead. But global stocks are near record highs, cushioned by solid company profits.
With Fed taper expected, investors brace for rate hikes on horizon
Karen Pierog and Saqib Iqbal Ahmed – Reuters
As the U.S. Federal Reserve gears up to taper its huge asset purchases, investors reeling from gyrations in the bond market are scanning the road ahead for signs of how effectively the central bank can tighten policy to deal with stubbornly high inflation.
At their meeting this week, Fed policymakers are expected to give the green light to reducing the central bank’s bond purchases which have seen it hoover up $120 billion a month in government-backed bonds in a bid to steady the economy after the hit from the pandemic.
Fed Prepares to Taper, but Markets Crave More Insight on Rate Rises
Nick Timiraos – WSJ
The Federal Reserve is likely to announce Wednesday that it will begin steadily reducing its bond-buying program, the biggest step the central bank has taken toward reversing its pandemic-era stimulus.
The decision to wind down, or taper, those purchases this month has been so heavily telegraphed by Fed officials that the focus of the two-day meeting that ends Wednesday has shifted toward how they will characterize inflation risks—which carries important implications for how soon they might raise interest rates.
Zillow shares crumble over shock move to dump home-buying business
Shares of Zillow Group Inc were set to open at over a 14-month low on Wednesday, as analysts expressed shock over the online real-estate firm’s move to exit its business of buying and selling homes due to unpredictable home prices, three years after it was expected to disrupt the real estate market.
Zillow’s Class A shares were down 14.1% at $73.39 premarket.
OCC Clears New Annual Exchange-Listed Options Volume Record in October
OCC, the world’s largest equity derivatives clearing organization, announced today that October 2021 total cleared contract volume was 825,572,627 contracts, and total cleared contract volume to date in 2021 reached 8,128,660,661, surpassing the U.S. exchange-listed annual options volume record of 7.52 billion contracts set in 2020.
FIA releases blueprint to modernize trading processes
FIA today released a report calling on participants in the futures and options industry to work together on a major initiative to improve the efficiency of the trading and clearing process for exchange-traded derivatives.
The report, “Modernizing the Listed Derivatives Workflow: A Blueprint for Change”, addresses the challenge of achieving industry-wide improvements by establishing a framework for building consensus and collaboration among all segments of the industry, including clearing firms, executing brokers, exchanges, clearinghouses, customers and technology vendors.
“When Covid abruptly shut down the world economy in March 2020, the global futures and options markets experienced record trading activity and extreme volatility,” said Walt Lukken, FIA President and CEO. “This period of stress exposed several long-standing bottlenecks in the trading and clearing infrastructure that cause costly delays in the processing of trades.”
MEFF launches derivatives on Fluidra shares and new monthly maturities on the dividend futures already listed
MEFF, the BME Spanish derivatives exchange, launches Futures and Options contracts on Fluidra shares. With this incorporation, BME’s derivatives market completes the list of shares that make up the IBEX 35, following the latest review of its composition to make its tracking with derivatives easier for both institutional and retail investors.
Regulation & Enforcement
UK crypto derivatives ban fails to protect retail investors; Regulators need to take a more flexible approach
Ian Taylor – FT
The valuation of cryptocurrencies has increased dramatically in the past 12 months, as has their adoption by investors around the world — individuals as well as institutions.
A former CFTC commissioner will lead policy and regulatory strategy for FTX US, as crypto industry continues to hire former watchdogs
Carla Mozée – Business Insider
FTX.US, the US affiliate of crypto exchange FTX, has hired a former commissioner at the US agency that oversees the derivatives market, highlighting moves by crypto firms to bring abroad former regulators as they move to expand or secure the services they offer.
Exec accused of ‘shadow trading’ says case stretches law
Jody Godoy – Reuters
A pharmaceutical executive said the U.S. Securities and Exchange Commission stretched insider trading law when it sued him over trades in an outside company, asking for the case to be dismissed.
JPMorgan renews prediction that bitcoin could hit $146,000 – and says it’s acting more like digital gold than ever
Harry Robertson – Markets Insider
JPMorgan recently published a deep dive into digital assets and it makes for happy reading for crypto fans – albeit with a few caveats.
The US’s biggest bank has renewed its prediction that bitcoin could surge to $146,000 in the long term, if volatility subsides and institutions start preferring it to gold in their portfolios. That’s roughly 130% above Wednesday’s price of $63,160.