OCC Rebranding; Accidental HFT Firm; VIX Curve; Trade Tensions
Observations & Insight
Treasury Secretary Mnuchin says investment restrictions will apply to ‘all countries that are trying to steal our technology’
Evelyn Cheng – CNBC
Treasury Secretary Steven Mnuchin said Monday that a forthcoming statement from the government related to reports of investment restrictions will apply to China and other countries that threaten U.S. intellectual property rights on technology.
****SD: I thought Mnuchin was supposed to be the moderating influence with Cohn gone?
The Accidental HFT Firm
Matt Hurd – TABB Forum
To many, high-frequency trading remains a mystery. According to Matt Hurd, it is simply the law of big numbers that lets an HFT make money every day. That same law dictates that if an HFT loses enough edge, it either ends up unable to trade, or it loses money every day. It’s a tough industry, plumbing the depths of market infrastructure and microstructure to improve its efficiency. In this article from the early days of HFT, Hurd offers a bit of his trading story, revealing some of the inner workings of the industry, and provides some advice for asset managers.
****SD: I’m not sure why this blog was posted today on TabbForum – this entry has been around for a while. That does not mean you should not read it. If you have the time (it is quite long – about 12,000 words) it is a highly enjoyable, albeit rather technical, story about taking advantage of opportunity when it knocks. Matt Hurd’s blog, Meanderful, has a ton of good content going back to 2013. I’m guessing the republishing has something to do with the fact that the author is raising money to expand the post into a book. It looks like he reached the Kickstarter goal so that book will come to be. It’s safe to say it will be a much better representation of what happens in the industry than that other well known HFT book…
The Spread – Week of 6/18 to 6/22
We’re back with our weekly options news recaps!
OCC Launches New Brand Identity Aligns With Growing Role as Industry Thought Leader and Influencer
OCC, the world’s largest equity derivatives clearing organization, announced today the launch of a new brand identity that aligns with its increasingly visible role as a systemically important financial market utility, influential thought leader, and steward of the U.S. exchange-listed options industry.
****SD: Now our OCC branded swag is out of date.
Rare Shift in ‘Fear Gauge’ Shows Depth of Market Angst
Luke Kawa – Bloomberg (SUBSCRIPTION)
Trade wars have brought fear back to the fore for U.S. equities — and it’s showing up in volatility markets.
An uncommon phenomenon resurfaced amid Monday’s sell-off, which has driven the S&P 500 Index down as much as 1.3 percent this morning: The futures contract on the Cboe Volatility Index maturing in August is trading lower than the one maturing in July, in defiance of the common positive spread between front- and second-month contracts. The VIX is often referred to as Wall Street’s “fear gauge.”
U.S. rate allure sparks record hedge fund dollar buying, euro capitulation
Jamie McGeever – Reuters
Hedge funds are loading up on bullish dollar bets at the fastest pace on record, taking the Fed’s recent hawkish signal on interest rates at face value and going long the greenback for the first time in a year.
Speculators cut bullish U.S. crude bets to lowest since October
Jessica Resnick-Ault – Reuters
Hedge funds and other money managers cut their bullish wagers on U.S. crude futures and options in the latest week to the lowest in nearly eight months as crude fell 1.4 percent and U.S. production soared.
Exchanges and Clearing
MCX sees options volumes growing to 60% of underlying futures in 6 months; While gold options have risen sharply in turnover the past two months via liquidity enhancement scheme, options in other commodities have been lackluster
Dilip Kumar Jha – Business Standard
India’s largest commodity futures trading platform, the Multi Commodity Exchange of India (MCX), expects “options” volumes to grow to a minimum of 60 per cent of underlying futures contracts within six months.
Eurex Clearing adds first US listed derivatives clearing member
Louisa Chender – Global Investor Group (SUBSCRIPTION)
INTL FC Stone has become the Deutsche-Boerse owned exchange’s first US-based clearing member for listed derivatives
Three Kids and a Flute. How India, Singapore Can End Index Feud
Andy Mukherjee – Bloomberg (SUBSCRIPTION)
Political diplomacy can resolve the dispute over trading in Nifty 50 futures.
Regulation & Enforcement
Quintenz rejects “disingenuous claim” about regulatory arbitrage
Louisa Chender – Global Investor Group (SUBSCRIPTION)
ICE Futures Europe did not move contracts to the US because it became a “regulation-free haven”, CFTC Commissioner Quintenz said
Tax Change May Spoil Appetite for US Equity Derivatives
Speaking at the Vantage Melbourne rise of AI and automation conference last quarter, Telstra’s head of innovation, Stephen Elop, said that the “path to disruption is paved by unintended consequences.” This sound bite by no means only applies to the world of telecoms, it also relates to financial firms getting their houses in order for the impending 871(m) tax regulations.
CAT NMS Provides Progress Update on the Consolidated Audit Trail
The Consolidated Audit Trail NMS, LLC (CAT NMS) today reports on progress towards completing infrastructure milestones for the Consolidated Audit Trail (CAT). The CAT will enable exchanges, FINRA (together, the SROs) and the U.S. Securities and Exchange Commission (SEC) to more efficiently track securities trading activity throughout U.S. markets by collecting how orders are processed, and trades executed.
EU watchdog tells banks to speed up Brexit preparations
Huw Jones – Reuters
Banks have failed to make enough progress on their Brexit preparations and should not expect “miracle” public intervention to help them, the European Union’s banking watchdog said on Monday.
Goldman Sachs has updated its winning strategy for raking in huge returns when markets are going haywire
Akin Oyedele – Business Insider Prime (SUBSCRIPTION)
Goldman Sachs’ equity strategists anticipate that a trade war and higher interest rates would increase volatility in the stock market.
Morgan Stanley Thinks the Turkish Lira Is Headed for Record Lows
Constantine Courcoulas – Bloomberg (SUBSCRIPTION)
Buying the Turkish lira may have been an easy punt after Sunday’s election, but it may be better to sell a rally in the currency.
ICE Brent Crude Marks 30th Anniversary As Leading Global Benchmark; TAIFEX To Launch Taiwanese Dollar Brent Futures
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, marked the 30th anniversary of its Brent futures complex, which serves as the primary reference price for global crude oil.
Oil Hedge Funds Under Attack From Algo Invasion
Stephanie Yang – WSJ (SUBSCRIPTION)
Raw materials have staged a powerful rally over the past year, but that hasn’t helped some of the biggest commodities hedge funds, which are closing up shop to a degree not seen since at least the turn of the century.
In 2017, closures of commodities hedge funds outnumbered launches for the first time in data going back to 2000, according to data provider Eurekahedge—a trend that has continued into this year.