Observations & Insight
There’s still time to register for this year’s FIA-SIFMA Asset Management Derivatives Forum February 7-9 in Dana Point, California. FIA and SIFMA AMG are bringing together market participants from all sides of the trade to examine the latest developments impacting the use of derivatives by asset managers. The event will feature keynote sessions with Bank of England Deputy Governor Sir Jon Cunliffe and former CFTC Chairman Timothy Massad. This year’s program also covers UMR, ESG, global considerations, clearing trends, the future of work and more. You can get more information and register here.~SR
More online traders betting on options and futures, IG says
Sinchita Mitra – Reuters
Online traders are increasingly turning to options and futures amid high stock prices, dealing platform IG Group said on Thursday, as an easing in market volatility slowed its half-yearly profit growth. Chief Executive June Felix also told Reuters that more people were trying their hand at other asset classes such as oil and other commodities.
Powell’s Hawkish Determination Is Firing Up Bets on the Dollar
Libby Cherry and Vassilis Karamanis – Bloomberg
A more hawkish and less predictable Federal Reserve is adding more fuel to a rally in the dollar.
An index of the greenback’s strength jumped to a five-week high on Thursday as investors said Fed Chair Jerome Powell’s comments reveal a surprisingly aggressive stance to tightening monetary policy.
Retail traders keep the faith during Wall Street’s turbulent January
Joshua Oliver and Madison Darbyshire – Financial Times
Retail investors have leaned into this year’s market gyrations, pumping cash into US equities even as share prices have tumbled from the historic highs recorded at the start of January.
Smaller investors have been net buyers of US equities and exchange traded funds every trading day this month, according to data from VandaTrack. The scale of daily inflows stood above the 2021 average on all but two days since the start of the year.
U.K. Retail Trading Platforms See Renewed Demand in Wild Markets
Joe Easton – Bloomberg
A volatile start to the year for global stock markets is breathing new life into U.K. trading platforms, which had seen fading interest amid less stringent pandemic restrictions.
Behind the Stock Market Turmoil: A High-Speed Investor U-Turn
Gregory Zuckerman, Gunjan Banerji and Michael Wursthorn – WSJ
The Federal Reserve is about to end America’s era of easy money. That is prompting investors to reverse course on two years of investing strategies, kicking off this month’s broad market rout, the worst selloff since the early days of the pandemic.
Major U.S. stock indexes have dropped between 6% and 13% in January, through Wednesday, with some investor favorites during the pandemic—including Covid-19 vaccine maker Moderna Inc., Peloton Interactive Inc. and Netflix Inc. —falling around two or three times as much. Wall Street’s fear gauge, the Cboe Volatility Index of expected market swings, has nearly doubled this year. Some well-known hedge funds are down 10% or more, said people familiar with the results.
Further stock market selloff wouldn’t be surprising – IMF markets chief
Greg Robb – MarketWatch
The head of the International Monetary Funds market oversight division said Thursday he wouldn’t be surprised by a further selloff in U.S. equity markets this year, as the Federal Reserve moves to tighten financial market conditions in an effort to control inflation.
“For monetary tightening to impact inflation, you have to slow down the real economy and to slow down the economy you have to tighten financial conditions. There’s no question about that,” Tobias Adrian, head of the IMF’s monetary and capital markets department said, in an interview.
Stock Market Volatility Can’t Be Blamed on COVID-19 Anymore
James A. Anderson – Time
The market cares less about COVID-19 than you think. The recent volatility in global financial markets may seem like the latest pandemic-induced shocks, but there are signs that investors are growing accustomed to the idea that some form of the virus is part of our new norm.
The market has moved on to other, more pressing concerns, say many investment professionals. At the beginning of the pandemic, investors fixated on the virus’ every move. They poured over data on company lockdowns and vaccine advancements to assess how well individual companies were strategically positioned to profit. The resulting calculations sorted the business world into neat categories of winners – like Peloton – and losers – such as cruise ship operators. But over the past 22 months, the market’s herd mentality has evolved into a herd immunity of sorts. As a result, Wall Street’s worldview is now what finance strategists call an “endemic”—rather than “pandemic”—mindset.
It’s Hard to Tell When the Crypto Bubble Will Burst, or If There Is One
Emily Flitter – NY Times
Since late November, some of the world’s savviest cryptocurrency investors have been hooked on a game that has cartoon sheep, cartoon wolves, a digital currency called $wool — and the potential to make real money.
Graham Friedman, a self-described crypto evangelist, is among them. Mr. Friedman put up more than $20,000 of his own money to buy one wolf and one sheep — or, rather, unique digital images of them called nonfungible tokens.
Eurex EnLight: our roadmap for 2022
Andre Eue, Head of Market Development at Eurex, gives an overview of Eurex EnLight’s recently introduced new functionalities, including Staging of RFQs that allows for enhanced member access. He also talks about the more intuitive GUI and outlines the upcoming availability of Options Volatility Strategies (OVS) in single stock options. In addition, he explains the focus on increasing the distribution in the Dealer-to-Dealer and the Dealer-to-Client space in 2022.
Nasdaq Builds Revenue Opportunity with AWS
Shanny Basar – Traders Magazine
Adena Friedman, president and chief executive of Nasdaq, said the partnership with cloud provider Amazon Web Services is “unique” as it involves expanding the company’s primary data center, which will lead to long-term revenue opportunities.
In November last year Nasdaq announced a multi-year partnership with AWS to migrate its North American markets to the cloud provider in a phased approach, starting with Nasdaq MRX, a US options market. Nasdaq will use a new edge computing solution that is co-designed with AWS specifically for market infrastructure.
Regulation & Enforcement
Fidelity Failed to Vet Options Traders in Meme Stock Frenzy, Regulator Says
Evie Liu – Barron’s
Massachusetts’ top securities regulator on Wednesday accused Fidelity Brokerage Services, or FBS, of “unethical and dishonest” practices that led to the improper approval of some options and margin trading applications of retail customers who were ineligible to do so.
FBS is a securities broker-dealer and subsidiary of Boston-based Fidelity Investments. As of Sept. 30, 2021, it had more than 30 million retail brokerage accounts and $11 trillion of assets under management.
Deutsche Bank traders’ Libor-rigging convictions are thrown out in New York
Jonathan Stempel – Reuters
A U.S. appeals court on Thursday threw out the convictions of two former Deutsche Bank AG (DBKGn.DE) traders for rigging Libor, once among the world’s most important financial benchmarks, and ordered acquittals for both men.
The 2nd U.S. Circuit Court of Appeals in Manhattan found a lack of evidence that Matthew Connolly and Gavin Black caused Deutsche Bank to make false Libor submissions.
SEC rejects application for Fidelity’s Wise Origin Bitcoin Trust spot ETF
Turner Wright – CoinTelegraph
The United States Securities and Exchange Commission has disapproved asset manager Fidelity’s Wise Origin Bitcoin Trust spot exchange-traded fund (ETF) application.
According to a Thursday filing, the SEC rejected a proposed rule change from the Cboe BZX Exchange to list and trade shares of Fidelity’s Wise Origin Bitcoin (BTC) Trust. The regulatory body said any rule change in favor of approving the ETF would not be aimed at preventing “fraudulent and manipulative acts and practices” nor would it necessarily “protect investors and the public interest.”
This Options Strategy Pays You to Buy Stocks for the Long Run
Steven M. Sears – Barron’s
Federal Reserve meetings come and go, but time and volatility last forever.
Investors should be mindful of that fact and consider using short-term volatility to advance long-term goals, rather than obsessing over what is right in front of them.
Opinion: Warren Buffett’s advice for a volatile market: patience pays
Mitch Tuchman – MarketWatch
Certainly you’ve been watching the stock market over the past few days. It would be hard not to.
Even the most hands-off investor has likely noticed the scare headlines popping up on the evening news, counting out thousand-point drops and flashing downward-sloping charts in bright red. There’s nothing the media likes more than a disaster, after all.
Options trader lays out huge bet on Apple into earnings
Tyler Bailey – CNBC
As the tech teardown continues, one of the industry’s marquee names is gearing up for a pivotal earnings report scheduled for after the bell Thursday.
Apple has fallen victim to the market’s rapid rise in volatility, dropping nearly 9% already this year. That’s a harrowing number, given that 2022 is less than one month old, but one options trader is taking a sunnier view of the situation. They’re betting that the bottom is in.
Fed Missed ‘Golden Opportunity’ to Telegraph Plan for Rates: El-Erian
Hamza Fareed Malik – Business Insider
The Federal Reserve should have been clearer on its plans to tackle rising inflation at its first policy meeting of the year, according to famous economist Mohamed El-Erian.
The Fed, led by Chair Jerome Powell, indicated on Wednesday after a two-day meeting that it will raise US interest rates as early as March, when it also intended to wind down its asset-purchasing program.
‘No more Mr Nice Guy’: Fed chair signals tougher stance on inflation
Colby Smith – Financial Times
Jay Powell had always said that if inflation was in danger of spiralling out of control, the Federal Reserve would be willing to bring out the hammer to knock prices down.
On Wednesday, in his most hawkish press conference since the start of the pandemic, the chair of the Fed gave the clearest signal yet that such a moment was fast approaching.