Observations & Insight
Options Exchange Market Share (from the OCC)
OCC September Cleared Volume Up 11.3 Percent – Highest September on Record
OCC (press release)
OCC, the world’s largest equity derivatives clearing organization, announced today that total cleared contract volume in September reached 406,444,790 contracts, an 11.3 percent increase compared to last September, and the highest total volume for September on record. OCC’s year-to-date average daily cleared contract volume is 19,741,303 down 2.3 percent compared to 2018’s record-breaking pace.
Short sellers gain from bets against US brokerages
Richard Henderson and Jennifer Ablan – Financial Times
The intensifying price war over commissions among the US’s top stock-trading platforms has delivered a $191m boost to investors betting against the sector.
Short sellers, who profit when a stock drops in price, enjoyed the gains from bets against Charles Schwab, TD Ameritrade, Interactive Brokers and ETrade, according to data from S3 Partners.
TD Ameritrade fires back at Schwab by cutting commissions to zero
Jeff Benjamin – Investment News
Just 10 hours after Charles Schwab announced it was eliminating trading commissions on U.S. stocks, exchange traded funds and options starting Oct. 7, rival TD Ameritrade Holding Corp. upped the ante by cutting the same commissions starting Oct. 3. TD’s announcement late on Tuesday, which mimics the Schwab news right down to the 65-cent option contract fee, followed a day that saw the company’s stock price lose 25.8% in a market reaction to anticipated reduced commission revenue.
***See also: The Best Just Got Better: TD Ameritrade Introduces $0 Commissions for Online Stock, ETF and Option Trades (TD Ameritrade press release), and The Hidden Costs Of Commission-Free Trading, from Forbes.~MR
Stocks just delivered a reminder about October’s reputation for volatility
William Watts – MarketWatch
The radio disc jockeys got it right — this month would more accurately be known as Rocktober, particularly for stock-market investors.
As shown in the chart below from Wells Fargo Investment Institute, which tracks the standard deviation of daily returns of the S&P 500 index SPX, -1.71% dating back to 1928, October has historically been the most volatile month for U.S. equity markets.
Here’s how the stock market tends to trade in the rest of the year after an ugly October start
Mark DeCambre – MarketWatch
October is what we thought it was!
That is to paraphrase the late Dennis Green, who more than a decade ago, famously declared of the NFL’s Chicago Bears: they “are who we thought they were. And we let them off the hook.”
Stock-market investors may be sharing that sentiment after seemingly having victory in sight on Tuesday like the Arizona Cardinals then-coached by Green back in 2006.
But there may be hope yet for Wall Street.
Money-Market Volatility Shows Risks of Libor’s End for Loan Market
Alexandra Scaggs – Barron’s
No one thought it would be easy to retire Libor, the global interest-rate benchmark that was the center of a manipulation scandal. But recent money-market volatility could make the process tougher.
Regulators want to replace Libor, the daily London interbank offered rate, by the end of 2021. That means officials and industry executives have about two years to smooth a path for adopting a successor. In September, their chosen overnight replacement rate briefly spiked to 5.25%, far above its usual range.
Ex-Societe Generale Traders’ Hedge Fund to Shut Down
Bei Hu – Bloomberg
An ex-Societe Generale SA trader is shutting his less than four-year-old multistrategy hedge fund because of high running costs and difficult capital-raising environment.
Three Stones Capital Ltd. plans to return money to investors by the end of the year, Hong Kong-based Chief Investment Officer Jong Beum Kim said. The firm’s multistrategy hedge fund, which began trading in late 2015, oversaw $99 million as of July.
Exchanges and Clearing
CME Group Averaged 20.2 Million Contracts Per Day in Third-Quarter 2019, Up 30% from Third-Quarter 2018
CME Group, the world’s leading and most diverse derivatives marketplace, reached average daily volume (ADV) of 20.2 million contracts during third-quarter 2019, up 30% from third-quarter 2018. September 2019 volume averaged 19.7 million contracts per day, up 13% from September 2018. Open interest (OI) at the end of September was 127 million contracts, up 10% from year-end 2018 and up 6% from September 2018.
Eurex expands pioneering role in sustainable investing
Eurex (press release)
The derivatives exchange Eurex extends its pioneering role in ESG derivatives by adding the first exchange-traded ESG options on a European benchmark to its product range. Launch of the new options, which are based on the leading STOXX Europe 600 ESG-X Index, is scheduled for October 21. Michael Peters, Member of the Eurex Executive Board: “Options are the next logical step to extend our ESG offering on European benchmarks.
Regulation & Enforcement
Two brokerages are fined $25 million in U.S. over foreign exchange options
Jonathan Stempel, Chizu Nomiyama – Reuters
Two brokerage firms will pay a combined $25 million in penalties to settle charges they employed fraudulent practices to solicit and accept orders from traders to buy and sell foreign exchange options, two regulators in the United States said on Wednesday.
Hedge Fund Quits a Sleepy Swiss Town and Trounces Quant Rivals
Justina Lee – Bloomberg
In 2017, Patrick J. Aregger took over an obscure hedge fund based in a sleepy Swiss town. He moved its base to Zurich, shook up operations — and trounced the trend-following competition.
Quantica Capital AG’s flagship fund is up 26% in 2019, compared with a 9% gain for an index of commodity trading advisors, a breed of quant that uses futures contracts and typically surfs market momentum. In September the firm attracted about $100 million of new money, taking assets under management to $550 million.