OCC adds liquidation cost to margin model

Jun 19, 2019

Observations & Insight

Breaking Down Eurex’s Latency Protection
In this video from FIA IDX, Eurex Executive Board Member Randolf Roth discusses Eurex’s plans for latency protection (a speed bump) in its French and German equity options markets.
Watch the video »

Lead Stories

OCC adds liquidation cost to margin model
Louisa Chender – FOW (SUBSCRIPTION)
Additional margin to close out defaulting members’ positions could reduce knock-on effects

Wild Ride for Asia Tech Stock Investors Unlikely to End Soon
Divya Balji – Bloomberg (SUBSCRIPTION)
Investors in Asia tech stocks have needed a strong stomach to deal with this year’s ups and downs. And it isn’t getting any better.
The trade conflict between the U.S. and China, concerns surrounding Huawei Technologies Co. and the back-and-forth on whether the demand for memory chips will revive has sent volatility soaring 300% on the MSCI Asia Pacific Information Technology sector since its May low. That level is now the greatest among all sectors in Asia and the highest since April 3.

SPIKES Options Market Maker Fee Waiver Program
MIAX has waived certain non-transaction fees applicable to Market Makers that trade in Proprietary Products (including options on the SPIKES Index) until September 30, 2019. This includes Membership Application Fees, monthly Market Maker Trading Permit Fees, Member Application Programming Interface (“API”) Testing and Certification Fees, and monthly MEI Port Fees.
Download the fee document HERE

SPIKES Market Turner Incentive Program
Under the Market Turner Incentive Program, MIAX will pay a per contract rebate to the Market Turner for each contract that executes as the MBB (MBO). The amount of the rebate shall be:
(i) $0.20 per executed contract, for options having a premium price greater than $0.10, or
(ii) $0.05 per executed contract, for options having a premium price of $0.10 or less.
The term “Market Turner” means a Market Maker simple quote (not eQuote) that establishes and maintains the new MIAX best bid (the “MBB”) or the MIAX best offer (“MBO”) in a SPIKES option.
Download the document to learn more HERE

Citigroup cuts list of FX trading partners after $180m scare
Samuel Agini – Financial News
US investment bank has been reviewing how it serves clients in the $5.1tn-a-day global currency markets

Worried Fund Managers Are Good for the Stock Market
Teresa Rivas – Barron’s
According to F. Scott Fitzgerald, only a first-rate intelligence has the ability to hold two opposed ideas in mind at the same time while still being able to function. Perhaps, then, it is a compliment to investors that the S&P 500 can be less than 1% from its all-time high at the same time that a new Bank of America Merrill Lynch survey found that fund managers are the most bearish they’ve been since the financial crisis in 2008.

Exchanges and Clearing

File No. USRI-8679/20160502034, CIBC World Markets Corp.
Cboe Disciplinary Notice

****SD: A censure and $100,000 fine pertaining to the S&P trading and hedging activities of Christopher Lee (see disciplinary notice below) and related supervisory lapses.

File No. USRI-8679/20160502034, Christopher S. Lee
Cboe Disciplinary Notice

File No. USE-1731/20160487717, SG Americas Securities, LLC
Cboe Disciplinary Notice

****SD: A $40,000 fine for reporting, supervisory and record keeping infractions pertaining to manual customer options orders.

File No. USRI-8696/20170560699, SG Americas Securities, LLC
Cboe Disciplinary Notice

****SD: A censure and $50,000 fine for Large Option Position Reporting (LOPR) infractions.

File No. USRI-8708/20160513267, BNP Paribas Securities Corp.
Cboe Disciplinary Notice

****SD: A censure and $50,000 fine for anticipatory hedging infractions in relation to a large GOOGL options order.

File No. USRI-8680/20160511651, Morgan Stanley & Co. LLC
Cboe Disciplinary Notice

****SD: A $20,000 fine and $108,501 disgorgement due to a partial tender offer infraction.

File No. USRI-8697/20170566526, Marathon Trading Group, LLC
Cboe Disciplinary Notice

****SD: A censure, a $20,000 fine and $29,287 disgorgement for supervisory violations in relation to partial tender offers.

File No. USRI-8707/20160491749 and 20170523838, Simplex Trading, LLC
Cboe Disciplinary Notice

****SD: A censure and $40,000 fine for practices related to dissolving a joint account.

LME electronic pricing trial fails to boost volumes – sources
Eric Onstad – Reuters
The London Metal Exchange’s three-month trial of switching to electronic closing prices for one of its benchmark base metal contracts has failed to lift volumes, industry sources said, lending further support to traditional open outcry trading

Nasdaq to adopt basket approach to ESG
James Thursfield – FOW (SUBSCRIPTION)
Nasdaq are to implement a custom-made, basket approach to offering ESG derivative products in September


ASX recruits Eurex’s European clearing sales head for new derivatives role
Joe Parsons – The Trade
Fiona Tramontana joins ASX in Sydney to work within its rates, derivatives and OTC markets business.

Regulation & Enforcement

SEC rule merely pays lip service to investor protection
Benjamin Edwards – TheHill
Nearly a decade after getting authority from Congress and a divided vote, the Securities and Exchange Commission (SEC) finalized new rules for financial advice.
Misleadingly termed Regulation Best Interest, the new brokerage regulations and other changes hand Wall Street a marketing windfall while doing little to address the conflicts and kickbacks that cause bad advice to regularly burn retirement savers.


What `Highly Unusual’ Markets Are Watching Into Fed Decision
Joanna Ossinger – Bloomberg (SUBSCRIPTION)
Wednesday’s Federal Reserve rate decision, set to be announced at 2 p.m. New York time, carries more wild cards than most. While market participants don’t expect a rate cut this time around, they do see lower rates this year.

How Benchmarking Could Hurt Market Efficiency
Adrian Buss – Barron’s
Institutional investors—endowment funds, commercial banks, mutual funds, hedge funds, pension funds or insurance companies—now hold the majority of U.S. equity. In 1950, they held a mere 7% of America’s wealth. By 2017 that had rocketed to a whopping 80%. With this amount of control over equity, institutional investors have a substantial impact on asset prices—and not always a positive one. Recent research I’ve conducted suggests that the increase in institutional investing could lead to a decline in the efficiency of the markets.

What’s It Take for a New Hedge Fund to Make It? $250 Million
Hema Parmar and Katia Porzecanski – Bloomberg
For a baby sea turtle there’s a 1 in 1,000 chance of making it to adulthood. If you’re starting a hedge fund, the odds may look just as daunting.
Only the fittest survive in the fund business — and that means starting up with at least $250 million, according to a report from Goldman Sachs Group Inc. that’s making the rounds on Wall Street. It’s a tough bar, made all the more challenging by today’s volatile markets, mounting set-up costs and investors who are tightening their purse strings.

Foot-dragging over ditching Libor could be punished, regulator says
Huw Jones – Reuters
Banks could be punished if they don’t switch enough contracts from the Libor interest rate benchmark to a Bank of England alternative by the end of 2021, a senior British regulator said on Wednesday.
The Financial Conduct Authority has told each bank to nominate a senior manager who is accountable to regulators for ensuring that contracts switch from referencing the London Interbank Offered Rate, or Libor, to the BoE’s sterling overnight rate, Sonia.
The FCA has the authority to fine or remove a senior banker’s licence.

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