MIAX Partners with Firms for Equities Exchange; Next frontier for credit traders is shorting volatility

May 17, 2019

Observations & Insight

T.G.I.Friday’s Gambling Notes
Spencer Doar – John Lothian News

Sometimes when browsing an assortment of derivatives-related websites I find a fun surprise (read: rabbithole).

Today’s entry comes from Susquehanna. I did not realize it has a blog dedicated to games and gambling called Raise Your Game. Posts include “How Do We Quantify the Value of a Defensive Basketball Player?,” “NHL Draft Pick Probability,” and “Poker Tournament Tips for New Players.”

But this isn’t really surprising considering SIG’s focus on the application of game theory in trading. Per its site, the team has three employees that have won World Series of Poker bracelets. Green traders have weekly “strategic gaming classes” with board games like Settlers of Catan and an array of popular poker variants like Limit Hold’Em. And campus recruiting events frequently take the shape of gaming tournaments.

Bloomberg’s Annie Massa – who is the winner of the inaugural STA Women in Finance Committee’s Excellence in Journalism Award (cool!) – wrote a long(ish) form story about SIG at the end of 2018 that mentioned some of the above: The Poker Aces Playing a Key Hand in the $5 Trillion ETF Market.


POP goes the speed bump!
Thom Thompson – John Lothian News

ICE Futures US tried to certify (that is, to fast-track) to the CFTC a change to the order execution rules in the central limit order books for its two-year old daily gold and silver futures contracts. The changes are designed to protect market makers in these low volume contracts. The exchange hopes that the change will help increase volume in the contract. The rule changes establish a delay in execution of an incoming order against a resting order – passive order protection or POP – giving the trader a chance to cancel and/or reprice the order before it is matched. It is a precedent-setting disruption to otherwise strictly observed orderbook priorities. ICE Futures US, one of a number of futures and equities exchanges belonging to the same company that owns the New York Stock Exchange, is not a major silver and gold trading exchange.

Right away, the change was controversial with some market participants, especially the FIA’s Principal Traders Group or PTG. ICE, which was required to report any opposing views in its new rule certification, noted the opposition in its certification to the CFTC. Instead of allowing the rules to go forward, the CFTC took the somewhat unusual step of publishing them for public comment until March 15. ICE’s POP is the first “speed bump” proposal to come before the CFTC.

To read the rest of this commentary, go here

****SD: Regular readers know what I’m going to plug: our video with CTC’s Steve Crutchfield – The Thorny Speed Bump Question.


Gender Diversity: The Need for Early Intervention – Diane Saucier, Hitachi Vantara

In order for gender diversity in financial services to really flourish, future generations of women need to have access to the resources to build the right skillset earlier than college or high school. In this video, Hitachi Vantara Senior Solutions Marketing Manager Diane Saucier, a founding board member of Women In Listed Derivatives (WILD), talks about the problems the industry faces when it comes to gender diversity as well as what WILD is doing to help.

Watch the video and see the stories referenced here »

Lead Stories

Miami International Holdings Partners with Leading Equities Firms to Launch Cash Equities Exchange
Miami International Holdings, Inc. (MIH), the parent holding company of the MIAX, MIAX PEARL and MIAX Emerald options exchanges (the MIAX Exchange Group), today announced that it has partnered with a number of industry-leading liquidity providers and market makers to launch a cash equities exchange under MIAX PEARL’s exchange license. MIAX PEARL Equities is expected to launch in Q2 2020, subject to SEC approval.

****SD: How fitting! We just rolled out a video with MIAX’s Shelly Brown.

Next frontier for credit traders: shorting volatility
Christopher Whittall – Thomson Reuters, International Finance Review
Betting on markets remaining calm has long been a popular, though risky, trade in finance. Now, a growing number of banks is looking to bring such strategies to corporate credit markets, the last major asset class where so-called short volatility trades are rare. JP Morgan updated its credit volatility index earlier this year with an eye on bringing systematic credit volatility strategies to a wider audience, spawning an exchange-traded fund launch in late March.

****SD: Not to be confused with the space, the final frontier.

Wall Street Braces for More Volatility as Investors Seek Hedges
Ksenia Galouchko – Bloomberg (SUBSCRIPTION)
No more easy optimism.
After four months of cruising ahead, stocks are facing choppy waters. UBS Wealth Management on Friday advised its clients to buy protection against trade war-fueled volatility, which it says is here to stay. Nomura Holdings Inc. in turn warned that this week’s recovery in global equities could be short-lived and price swings will return in late May.

****SD: Traders are pretty lucky the President is a tweeter and not a memo-writer. If 102 words about tariffs can do what it did, can you imagine what a page would do?

tastytrade Launches tastyworks Australia, a New Brokerage Firm Providing Direct Access to U.S. Markets for Self-Directed Investors in the Region; tastyworks Australia Will Be Headed by John Ezzy as CEO and Glenn Hall as COO
tastytrade, Inc., the award-winning, innovative financial media company and parent to financial subsidiaries, announced opening tastyworks Australia, allowing self-directed investors to access the U.S. markets with high-speed executions and low and capped commissions through tastyworks in the U.S. Access to free engaging educational content, that empowers investors, will be provided through tastytrade. Currently tastytrade reaches over 165 countries.

Here’s one reason Wall Street’s ‘fear gauge’ didn’t explode amid the stock market’s recent skid
Mark DeCambre – MarketWatch
Stocks are in a phase of apparent recovery after a tariff-sparked selloff threatened to put a lasting end to the bull run for U.S. equity markets.
The downdraft – which commenced on the heels of fresh presidential threats for increased tariffs, promising reinvigorated U.S.-China trade aggressions – has raised as many questions about the resiliency of the uptrend for stocks, as has the ability of a closely watched volatility gauge to pivot from flashing red to signaling relative calm.

‘All Clear’ Memo Didn’t Reach Emerging Markets
Robert Burgess – Bloomberg (SUBSCRIPTION)
Regulatory filings show that hedge funds in the first quarter more than doubled their investments in the three largest exchange-traded funds that buy stocks in emerging markets. Too bad. On Thursday, the MSCI EM Index fell to its lowest since mid-January even as the broader MSCI All-Country World Index surged the most since the start of April.

Stability Breeds Instability
Arcadia Research – Seeking Alpha
Last week’s massive inversion in the VIX curve was the largest since 4Q.
These “flash crashes” are becoming more and more common in the post-GFC era where volatility is continually suppressed.
Systematic selling, poor liquidity, dealer hedging, and a record amount of short vol futures all played a role in last’s week drawdown.

Exchanges and Clearing

Cboe Global Markets Announces 2019 Annual Meeting Results
Cboe Global Markets, Inc., one of the world’s largest exchange holding companies, today announced the shareholder voting results from its 2019 Annual Meeting held today.

Cboe Global Markets Declares Second-Quarter Dividend
Cboe Global Markets, Inc., one of the world’s largest exchange holding companies, today announced its Board of Directors has declared a quarterly cash dividend of $0.31 per share of common stock for the second quarter of 2019. The second-quarter 2019 dividend is payable on June 14, 2019, to stockholders of record as of May 31, 2019.


CME Group Appoints Trey Berre as Global Head of Data Services
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the appointment of Trey Berre to Global Head of Data Services.
Reporting to Bryan Durkin, President of CME Group, Berre will be responsible for overseeing CME Group’s portfolio of historical, real-time and derived data products and services. This includes the development of new data products, data distribution methods and analytics, as well as the integration of NEX data offerings into CME Group. He will continue to be based in Chicago.

Regulation & Enforcement

Sebi fines 2 entities for manipulative trade in BSE stock options segment
Press Trust of India
Markets regulator Sebi Friday imposed a total fine of Rs 11 lakh on two entities for executing manipulative trades in the illiquid stock options segment on the BSE.


Oil Prices Will Face More Volatility
Myra P. Saefong – Barron’s
Oil trading has been particularly volatile lately, as concerns mount about threats to both global supplies and demand.
“The geopolitical risk environment is dangerously close to the levels we haven’t seen since the early stages of Operation Iraqi Freedom” in 2003, warns Robbie Fraser, a senior commodity analyst at Schneider Electric.

Stock picks from Goldman Sachs: 16 at-risk companies with cheap hedges
Joe Ciolli – Business Insider Prime (SUBSCRIPTION)
Clients of Goldman Sachs are spooked.
So says the firm’s derivatives team, which says it has seen a “sharp increase” in requests for attractively priced hedging ideas in recent weeks.


Hedge Fund With Harvard Ties Shutting Down
Dawn Lim and Juliet Chung – WSJ
A hedge fund with ties to Harvard University’s endowment is closing down after roughly two years, said people familiar with the matter.
Boston-based Cambridge Square Capital LP has delivered roughly flat performance since it started, the people said. Harvard invested more than $200 million with the firm, they said.

****SD: “The hedge fund employed derivative trading strategies intended to take advantage of volatility in foreign exchange and interest rates. Profits proved challenging as volatility in some markets remained low, said a person familiar with the firm.”

Warming World Will Need to Farm a Whole New Egypt to Feed Itself; Scientists say trade rules would have to loosen to balance food and water security with the needs of a growing population.
Jonathan Tirone – Bloomberg (SUBSCRIPTION)
Agricultural commodity traders will be among the winners as global temperatures warm so long as policy makers ease trade rules to allow them to adapt the food supply to climate change.

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Past Newsletters

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