Observations & Insight
Jitesh Thakkar agreed today to settle the charges filed against him by the CFTC in January 2018. The settlement calls for a penalty of about $72K. Edge, Thakkar’s software company, is also banned from providing software services to futures traders for two years. (Looks like quite a victory for Thakkar!) Thanks to John Lothian’s good friends for alerting us to the filing, which the commission has not yet published on its website, but you can see it here. ~Thom Thompson
Art Margulis – Open Outcry Traders History Project – MarketsWiki Education
Art Margulis answered a job advertisement in the Chicago Tribune for a research analyst position at the Chicago Board Options Exchange after graduating from Princeton. That was his entry into the world of open outcry trading.
At the CBOE, Margulis met Blair Hull, who was in the process of starting up his own firm, Hull Trading, and needed a research analyst. Margulis joined Hull Trading and progressed to become a trader and eventually a partner in the firm.
At Hull, they were early pioneers in the team trading approach and Margulis helped Hull develop traders in Chicago’s trading pit and beyond. Margulis only traded in the CBOE’s SPX pit for the equivalent of three years but was on a membership badge for many more.
After Hull Trading was sold to Goldman Sachs, Margulis joined Goldman. However, he would go on later to found his own firm, Cognitive Capital. Here is the story of Art Margulis for the MarketsWiki Education Open Outcry Traders History Project.
Miami International Holdings and MGEX Announce Plan of Merger; MGEX to Join MIAX Exchange Group
Miami International Holdings (MIH), the parent holding company of the MIAX Exchange Group, and the Minneapolis Grain Exchange (MGEX), a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), today announced that they have entered into a definitive agreement and plan of merger under which MIH has agreed to acquire MGEX for a combination of cash and MIH common stock following a demutualization of MGEX by its members. As a result of the acquisition, MGEX will become a wholly owned subsidiary of MIH. MIH will continue to maintain the trading and clearing operations of MGEX, including its hard red spring wheat contract, while adding new futures products.
Sen. Elizabeth Warren demands ‘corruption’ probe after report of Amazon options purchase by Postal Service chief Louis DeJoy
Dan Mangan – CNBC
Sen. Elizabeth Warren on Thursday demanded that the U.S. Postal Service’s internal ethics watchdog investigate what she suggested was “corruption” in the purchase of Amazon stock options by Postmaster General Louis DeJoy after his appointment to that job.
Another Exchange-Traded Note Is Being Liquidated. Why ETFs Are Marching to the Grave.
Ivan Castano – Barron’s
Exchange-traded notes never made it to the mainstream, and this year’s market volatility has likely put the last nail in its coffin. Case in point: The news that Credit Suisse Group plans to liquidate a leveraged inverse natural gas ETN that skyrocketed in recent days and failed to reflect the value of the assets it owned.
Exchanges and Clearing
Transition Back to Whaley and Black 76 Options Pricing Methodology – Effective Trade Date August 31, 2020
Further to Clearing Advisory 20-171 dated April 21, 2020, CME Clearing will revert its options pricing and valuation methodology, currently based on the Bachelier model, effective for trade date on Monday, August 31, 2020. Products will transition from Bachelier back to Whaley or Black 76, depending on the product.
ETD Volume – July 2020
Worldwide volume of exchange-traded derivatives was 3.85 billion contracts in the month of July, down 3% from the previous month but up 33% from July 2019.
On a year-to-date basis, volume in the first seven months of the year was 25.72 billion contracts, up 32.2% from the first seven months of 2019.
Total open interest at the end of June was 942.4 million contracts, up 3% from the previous month and up 2.6% from a year ago.
Crypto derivatives exchange BitMEX is set to implement know-your-customer procedures
Frank Chaparro – The Block
Crypto derivatives exchange BitMEX announced Thursday it would start asking users to verify their identities at the end of the month. Known for being a pioneer in crypto derivatives and high-leverage trading, BitMEX typically facilitates the trading of $1 billion worth of crypto a day, per data provided by Skew. In a blog post, the firm said it would launch its new User Verification Program on August 28. BitMEX said that “all customers will be asked to complete ID checks within the next 6 months.”
MIAX Options – New Related Futures Cross (RFC) Order Type
MIAX Exchange Group
MIAX Options will implement a new Related Futures Cross (“RFC”) order type. RFC orders will provide market participants with the ability to exchange a corresponding futures position with a SPIKES options position, and to exchange a SPIKES options position for a corresponding futures position. Details regarding the implementation will be communicated in a Trading Alert at a future date.
Regulation & Enforcement
Libor Pains Deepen as Deadline for Benchmark’s Demise Approaches
Julia-Ambra Verlaine – WSJ
No one said replacing the London interbank offered rate would be easy, but many regulators and investors contend the cumbersome process remains on track despite setbacks including the coronavirus pandemic.
Get Ready for RFRs: Preparing for the LIBOR Transition in the Derivatives Market
Arnaud Nekam – Traders Magazine
The LIBOR transition for vanilla products may be straightforward, but the road ahead for complex derivatives will be challenging. There are additional challenges that participants in the derivatives market must bear in mind, centered around market data, pricing models and risk and position management This article presents viable solutions to these challenges With the 2021 sunset of LIBOR looming on the horizon, the clock is ticking for banks and derivatives market participants to prepare for the transition to risk-free rates (RFRs).
Former Goldman executive appointed revenue chief at Dalzell Trading; Lance Meyerowich joins US outsourced trading firm Dalzell Trading as chief revenue officer with more than 20 years’ experience in the industry.
Annabel Smith – The Trade
US outsourced equity and options trading desk, Dalzell Trading, has appointed a former Goldman Sachs executive and veteran as its new chief revenue officer.
Cboe Global Markets Announces Election of Jennifer McPeek to Board of Directors
Cboe press release
Cboe Global Markets, Inc., one of the world’s largest exchange holding companies, today announced its Board of Directors elected Jennifer McPeek, former Chief Financial Officer of Russell Investments and Janus Capital Group, as a new member to its Board of Directors. Ms. McPeek was elected to fill a vacancy on the board, bringing the number of directors on the board to 13.
What Data Do Traders Use In A Pandemic?
Scott Bauer – OpenMarkets
More than five months into the COVID-19 pandemic, the market is even more event-driven and tied to news than it was earlier in the year. Pair that with the pace of news and how quickly it affects economic conditions, and traders may be looking for new or more reliable sources of instant information to make decisions.