Observations & Insight
*****SC: The Depository Trust & Clearing Corporation (DTCC) this week published a white paper that looked at how capital markets operations responded during the COVID-19 pandemic, as well as where firms are focused in a post-pandemic future. Among the findings was evidence that cash fixed income and cash equities were the most impacted by pandemic-related market volatility. Some 30 percent to 35 percent of buy-side and the sell-side firms reported operational post-trade processing challenges, the research found. Read the paper, “Managing through a Pandemic: The Impact of COVID-19 on Capital Markets Operations,” here.
Nasdaq is giving day-traders a new way to invest in the market’s biggest tech stocks
Carla Mozée – Markets Insider
Exchange operator Nasdaq said Thursday it’s reaching for retail investors wanting exposure to the Nasdaq-100 index by launching options on its Nasdaq-100 Micro Index.
The company said the options are cost-efficient and are listed on the Nasdaq PHLX options exchange along with other trading platforms that support index options.
One Lots Can Be a Lot: Where We Are and Options Market “FOMO”
Tony Saliba – Matrix Execution Technologies
This is part II of our two-part “One Lots Can Be A Lot” blog series by our CEO Tony Saliba. We concluded part I having discussed some reasons behind the options market’s continued growth. The players are a new army of individual traders alongside a cohort of institutions that had already invaded options markets as the global search for yield intensified post-GFC. The ability for these participants to amp up their activity stems from more widely available high quality technology and lower commissions. These participants are catered to by an increasingly concentrated group of liquidity providers whose quoting requirements mean they must cope with large intraday notional risk.
Bitcoin (BTC USD) Cryptocurrency Price Selloff Was a Long Time Coming
Bitcoin has rewarded investors with massive gains all year, but now the cryptocurrency’s famous volatility is back.
The token plunged below $50,000 in Friday trading for its worst week in almost two months as a proposed tax hike for wealthy Americans intensifies an industry selloff.
ETFs: why tracking difference usually matters more than tracking error
Emma Boyde – Financial Times
Most exchange traded funds are passive vehicles that seek to track the performance of their chosen benchmark. That benchmark could be anything from a well-known index, such as the S&P 500, to a specially constructed index of securities, such as clean energy stocks.
ETF providers often talk about historical index returns when promoting their products. In reality, investors should not expect to enjoy the same returns as the index because of a variety of factors including the fund’s total expense ratio (TER), trade execution costs, management fees, cash drag, foreign exchange rate volatility and rebalancing costs.
Exchanges and Clearing
CME unveils term SOFR in face of ARRC doubts; Exchange group says benchmark aligns with ARRC principles – but committee has pushed back endorsement plans Risk.net montage
Helen Bartholomew – Risk.net
CME has forged ahead with its term version of SOFR – the official replacement for US dollar Libor – just a month after a regulator-backed working group said it would not be able to endorse such a rate before year-end. The Alternative Reference Rates Committee, which is tasked with weaning US markets off Libor, last month pushed back its planned June 2021 endorsement of a term SOFR benchmark. It argued the rate would not be robust as there was not enough volume in the derivatives that would
Regulation & Enforcement
CFTC Staff Issues Conditional Relief from Reporting Fully Collateralized Binary Option Data to Swap Data Repositories
The Commodity Futures Trading Commission today announced that the Division of Data, the Division of Market Oversight, and the Division of Clearing and Risk have provided no-action relief to KalshiEX LLC, a designated contract market, and LedgerX, LLC, a derivatives clearing organization, from reporting to swap data repositories, data for binary option transactions executed on or subject to the rules of Kalshi and cleared by LedgerX. The no-action relief also exempts Kalshi and LedgerX from certain related recordkeeping requirements, and is consistent with staff-level relief previously provided to other similarly situated designated contract markets and derivatives clearing organizations.
Tokenist Expands IG Partnership to Include Nadex, Amplifying U.S. Derivatives Coverage
The Tokenist, a dynamic fintech and blockchain gateway into the world of finance, has added another entity to its growing list of partnerships: Nadex. Standing for North American Derivatives Exchange, Nadex is formerly known as Hedge Street. Following the Tokenist’s strategic milestone with IG US, partnering with Nadex is the logical next step as this CFTC-compliant exchange is owned by London’s IG Group.
A Crude Oil Cornucopia: Covid, Crack, CSOS & Contango With Brent Belote of Cayler Capital
RCM Alternatives blog
COVID affected a lot of ways that we interacted with the world – it changed how we worked, how we socialized, how we entertained ourselves….and if you’ve been tuned into the markets over the past year, it also changed our expectations on how in the world Oil prices could have ever gone NEGATIVE.
Fundamentals of Futures & Options (also applicable to Series 3 Exam)
For more than 30 years, IFM has consistently provided learners with a solid foundation and understanding of futures and options markets and trading including terminology, risk management, pricing, and basic trade strategies. This instructor-led virtual course includes lectures from an engaging instructor with real-world expertise and supported by class discussion, practice exercises and educational materials. The course fee includes two must-read industry books, “Futures and Options” and the “Guide to U.S. Futures Regulation.”
Dates: May 10, 2021 through May 14, 2021, 12:00 p.m. to 2:00 p.m.
Location: Virtual Live. 2-hour sessions over 5 days.
Instructor: Marti Tirinnanzi
Class size registration is limited to approximately 20 participants to promote student participation and interaction.
Clearing 101: Exchanges, Clearinghouses and CCPs
Dates: Sep. 15, 2021 12:00 p.m. – Sep. 16, 2021 1:30 p.m.
Location Virtual Live. Two 90-sessions over 2 days.
Instructor: Marti Tirinnanzi
Registration is limited to approximately 20 participants to promote student participation and interaction.
Join us for a short program (90 minutes each day for 2 days) that explains the multilateral systems that provide the infrastructure for transferring, clearing and settling payments, derivatives and other financial transactions among financial institutions and end users. Following Dodd Frank, clearinghouses became designated as Systemically Important Financial Market Utilities, vital to the operations of the financial markets and subject to heightened regulatory scrutiny. Buyers and sellers in exchange transactions rely on clearinghouses to intermediate transactions and to manage credit risks between trading parties. As such, clearinghouses promote transparency, efficiency, and stability by providing market-based pricing, daily settlement, and ensuring adequate capitalization for markets to function.
Q1 2021 ETD Volume
May 5, 2021; 10:00 a.m. to 11 a.m. ET
The webinar will highlight the main trends in trading activity in Q1 2021 in the global exchange-traded derivatives markets, with category and regional breakdowns as well as exchange and contract rankings. The webinar also will feature two guest speakers from UBS discussing the rise of retail participation in the U.S. ETD markets.
A New Virtual Experience
The Options Industry Conference is Going Virtual in 2021. Join OCC and the options exchanges for the 39th annual Options Industry Conference, April 28-29, 2021. While the conference will be held virtually for the first time in its history, the focus will continue to be the key topics facing the options industry today, from the regulatory shifts in the U.S. and Europe to the technological developments that are driving monumental change in markets around the globe.
The Covered Call Options Strategy
Date: Wednesday, May 12, 2021
Time: 3:30 p.m. CT
Duration: 1 hour
Mark Benzaquen – Principal, Investor Education – OCC
For options investors, the covered call is one of the core strategies for income generation, but there are many details to consider before opening a position. On May 12, join The Options Industry Council’s Mark Benzaquen, a former pit broker who now focuses on options education, for a detailed overview of the covered call.
Wall Street stocks turn lower on reports of Joe Biden’s tax rise
Naomi Rovnick and Aziza Kasumov – Financial Times
Wall Street stocks turned lower following reports that US president Joe Biden planned to raise capital gains tax for wealthy individuals.
The S&P 500 index gave up morning increases and closed the trading day down 0.9 per cent following a Bloomberg report stating that people earning more than $1m would pay a capital gains rate of 39.6 percent, up from 20 percent. The tech-heavy Nasdaq Composite followed the blue-chip benchmark lower, falling 0.9 percent.
Et tu, boomer? Millennial stock-traders aren’t all that different, one analyst argues
Andrea Riquier – MarketWatch
Ever since they reached adulthood, millennials have gotten a lot of blame for a lot of things. Recently, through the dreary days of the pandemic lockdown, they’ve taken the heat for causing wild swings in the stock market as they day-trade their fiscal stimulus checks.
In a Thursday note, a boomer, DataTrek’s Nicholas Colas, spoke up for the young’uns. “In reality, they are no ‘dumber’ than baby boomers during the 1980s – 2007 bull markets,” he writes. Market structure was different, the technology is night and day, and the financial products of choice back then are dinosaurs now. But, in Colas’ words, “every generation does some dumb stuff, but then learns and comes out OK.”
(Podcast) TWIFO 246: The Rise of Ags
This Week In Futures Options – Options Insider
Host: Mark Longo, The Options Insider Media Group Co-Host: Sean Smith, FTSE Russell
On this episode, Mark and Sean discuss the movers and shakers this week in futures options, top volatility movers, ags/corn and soybeans, equities/small caps/Russell 2000, energy/ crude oil, and much more
SGX RegCo, NUS Business School, KPMG in Singapore study shows ESG, particularly climate, important in key financial institutions’ asset allocation, lending and underwriting
Financial institutions (FIs) in Singapore place significant importance on Environmental, Social and Governance (ESG) performance, with a heavy focus on climate considerations. Majority of them said they evaluate clients’ sustainability disclosures, especially in the environmental factors of energy, water, waste and effluents, as part of their decision-making process. This is among findings from a joint study by Singapore Exchange Regulation (SGX RegCo), the National University of Singapore (NUS) Business School’s Centre for Governance and Sustainability (CGS) and KPMG in Singapore on “Perspectives of Financial institutions on Sustainability Disclosures”.