Mifid II regime shines light on trading relations

Apr 30, 2018

Observations & Insight

Regulatory Issues Confronting the Options Industry

The OCC has a number of regulatory initiatives it would like to see implemented in the coming years, and in this video Craig Donohue, OCC executive chairman and CEO, talks about two key calculations that need changing. First, regulators need to adopt a risk weighted asset calculation that better reflects the true exposure of a clearing member firm. Second, the supplemental leverage ratio needs to include customer initial margin. The OCC is working on potential interpretive relief or narrowly tailored rulemaking in the interim to help ease the burden. These issues and more will be discussed at this year’s Options Industry Conference, which starts this Wednesday.

Watch the video »


The Spread – Week of 4/23 to 4/27

Who likes TV show theme songs (especially older ones that still live on through syndication)? If you don’t, well, shame on you, but watch this week’s episode of The Spread anyway for some updates on happenings in the options world.

Watch the video and see the stories referenced here »

Lead Stories

Mifid II regime shines light on trading relations; Drive to reveal which brokers asset managers use for majority of trades
Philip Stafford and Hannah Murphy – Financial Times (SUBSCRIPTION)
Fund managers in Europe may face tough conversations with some brokers this week after a regulatory drive to publicly disclose more information on their trading relationships begins.
From Monday, asset managers must show the top five brokers they have used for trading over a calendar year, for each class of financial instrument

****SD: Drama! Feels kind of like getting to look at someone’s call history.

MIAX Options Begins Publishing SPIKES Volatility Index on OPRA
MIAX Options today announced that it has begun publishing the SPIKES Volatility Index (Ticker: SPIKE), following a successful launch of the Index. Transmission of the underlying Index value is being done via OPRA, with an option settlement value to follow at a later date.

Citadel Securities names Nazarali global head of business development
John McCrank – Reuters
Citadel Securities said on Friday it named Jamil Nazarali global head of business development of the trading and market-making firm, effective immediately.

Hedge funds trim positions in crude but boost fuels
John Kemp – Reuters
For all the bullish chatter, hedge fund managers have become cautious about increasing their exposure to crude oil, though they are becoming increasingly optimistic about the outlook for refined fuels again. Hedge funds and other money managers cut their combined net long position in the six most important futures and options contracts linked to petroleum by six million barrels in the week to April 24.

Exchanges and Clearing

Canada stock market shutdown pushes investors to explore options
John Tilak and Fergal Smith – Reuters
A rare outage at Canada’s major stock exchanges could dent the credibility of operator TMX Group Ltd and encourage investors to explore alternative trading channels, fund managers and traders told Reuters.
Canada’s stock market suffered a partial shutdown on Friday, forcing TMX to halt trading more than an hour early. TMX has since said the exchanges will resume trading on Monday after “internal technical issues” were resolved.

****SD: TMX statement on the outage here.

NYSE could be more competitive via Chicago Stock Exchange
Lynne Marek – Crain’s Chicago Business
The Chicago Stock Exchange is about to be swallowed by the New York Stock Exchange and become part of that company’s international trading complex.
The $70 million NYSE purchase likely will mean major shrinkage for the 80-employee, all-electronic Chicago operation. But it will play a role in a bigger industry battle between the dark and the light, or between standard “lit” exchanges, in which trading prices are displayed for all to see, and “dark” trading venues, not visible to the public.

NSE seeks US regulatory nod for GIFT derivatives
Nishanth Vasudevan, Reena Zachariah – ET Bureau
India’s largest stock exchange NSE has approached the top US derivatives regulator for approval of its futures and options contracts that will be traded at the Gujarat International Finance Tech (GIFT) City. The move is aimed at getting American investors to trade in the contracts at the emerging financial centre after Indian exchanges jointly decided to scrap licences that allowed foreign bourses to offer their derivative contracts offshore in February.


A bunch of former KCG staffers have found a new home at Wall Street broker Instinet
Frank Chaparro – Business Insider Prime (SUBSCRIPTION)
Instinet, the brokerage firm owned by Japanese investment bank Nomura, has hired William Wiley as an executive director and head of strategy.

Regulation & Enforcement

Sebi disposes of fraud trade case against Indiabulls Securities
Press Trust of India via Business Standard
Markets regulator Sebi has disposed of allegations of fraudulent trading against Indiabulls Securities over a case related to irregularity in the trading in futures and options segment at the leading exchange NSE.


FENICS Selected by Dah Sing Bank for FX Options Pricing & Distribution
BGC Partners, Inc. (NASDAQ: BGCP) (“BGC Partners,” “BGC” or “the Company”), a leading global brokerage company servicing the financial and real estate markets, announced today that FENICS, the award winning provider of FX options solutions, has been selected by Dah Sing Bank, a leading local Hong Kong-based bank, to power the institution’s FX options pricing and distribution.

Activ Financial Inc Joins BT Radianz Cloud
ACTIV Financial Inc, a leading financial market data vendor, today announced that as part of a drive to expand its customer base, it has joined the BT Radianz Cloud, one of the world’s largest financial cloud communities.


Non Farm Payroll Preview
Jason Pfaff – Nadex
One of the most widely watched global economic indicators, the monthly change in non farm payrolls, will be released on Friday in the United States. After a disappointing report in March that was well below expectations, we anticipate solid potential for a surprise to the upside in the April numbers.
Given the recent volatility in this data, there are several potential opportunities for binary event trades.


Mayor Emanuel and CME Group Award Scholarship for Star Scholars to Continue at Four-Year Institutions
CME Group
Mayor Rahm Emanuel and CME Group, the world’s leading and most diverse derivatives marketplace, today will present 25 Chicago Star Scholars with scholarships to go towards continued education at a four-year college or university. Once students graduate from City Colleges of Chicago (CCC) with an associate degree, they will receive a two-year, $5,000 scholarship.


Next liquidity crisis could be hiding in plain sight
Amin Rajan yesterday – Financial Times
“The paradox of liquidity is that it disappears as soon as one is in serious need of it,” says Pascal Blanqué in The Economic and Financial Order. He pulls no punches when reviewing the weakness of modern portfolio theory, the guiding star of investors.

ICE Benchmark Administration Becomes Authorised Benchmark Administrator under EU Benchmark Regulation
Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced that ICE Benchmark Administration Limited (IBA) has been authorised as a regulated benchmark administrator under the EU Benchmarks Regulation (BMR).
Authorisation was granted by the UK’s Financial Conduct Authority (FCA) on April 27, 2018.

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