Oil Options Traders Buy Record Bullish Contracts Amid OPEC Moves
Javier Blas, John Deane and Brian Wingfield – Bloomberg
Oil investors traded a record number of bullish options contracts for benchmark U.S. crude, a signal that the market is positioning for a potential OPEC deal to limit production and boost prices. The total volume of calls giving investors the right purchase West Texas Intermediate crude rose to the equivalent of 303 million barrels on Tuesday, according to preliminary CME Group Inc. data compiled by Bloomberg. That far exceeded a prior record of 221 million, set five and a half years ago. The heaviest trade was concentrated in the first half of next year, with several individual contracts setting all-time highs.
Options Back in Vogue as Uncertainty Permeates Global Markets
Option markets experienced anemic volumes in 2016 through October, but Donald Trump’s win in the US presidential election seemingly changed that overnight. Complacency has been the watchword for financial markets in 2016. But with the sudden turn in the US political environment, volatility is back in vogue, and with the tectonic shifts expected in economic, legislative, regulatory and economic policies, the markets likely will enjoy a period of sustained instability in the months and years ahead.
SEC Approves Consolidated Audit Trail to Detect Market Manipulation
Dave Michaels – WSJ
U.S. market regulators on Tuesday unanimously approved the establishment of an extensive digital warehouse of all stock and options orders to boost their oversight of market manipulation and mayhem, kicking off a final race to decide who will build and manage the $2.4 billion system. The consolidated audit trail will track the life cycle of every trade in the U.S. market, accounting for billions of transactions, canceled orders and quotes. The project has faced multiple delays since regulators demanded its construction after struggling to explain a chaotic trading session May 6, 2010, when the Dow Jones Industrial Average plunged nearly 1,000 points in a few minutes before rebounding.
****SD: Reuters — SEC approves ‘Hubble Telescope’ for securities markets. More on the CAT can be found in the statements included in our Regulation section.
If a Trump Presidency Is Scary Why Is VIX So Low?
Russell Rhoads – CBOE Options Hub
The world continues to adjust to the idea of a Trump presidency and there seems to be a lot of fear abounding. For instance, I recently heard an economist state that he didn’t think even Donald Trump knows what action he’ll take as President. We will all know the answers to what he’s going to do soon enough. A question I recently got was, “If Trump is so scary why is VIX low?” That’s a question I can answer.
CFTC: ‘too-big-to-fail’ clearinghouses resilient to shocks
John McCrank – Reuters
The top five financial derivatives clearinghouses overseen by the U.S. Commodity Futures Trading Commission and deemed “too-big-to-fail” showed resiliency to market shocks in a series of stress tests, the regulator said on Wednesday.
****SD: Full CFTC release is under our Exchanges and Clearing section.
Fed Rate-Hike Odds Approach 100% in Anticipation of Trumponomics
Analysts spent early November warning a Trump victory in the U.S. presidential election would make the Federal Reserve less likely to raise interest rates. What happened instead is that it made a December increase a near certainty.
****SD: Pfft. Like I’m going to believe any odds when there’s a Trump variable in play.
War of the asset classes: Bond market freaks out while stocks see smooth sailing ahead
Alex Rosenberg – CNBC
As stocks jumped following Donald Trump’s electoral win, equity anxiety has fallen precipitously. Contrary to predictions that a Trump win would lead to a jump in volatility, the CBOE Volatility Index, which measures the size of expected moves and more generally the level of nervousness around stocks, has slid significantly.
****SD: Well, which asset is more closely tied to the government? Stocks have a degree or two more of separation.
How Hedging and a Certain Someone Upended the Year of the Peso
Jessica Brice and Isabella Cota – Bloomberg
For the Mexican peso, 2016 wasn’t supposed to end this way. At the beginning of the year, most currency forecasters agreed: The peso was grossly undervalued. Estimates compiled by Bloomberg at the time put it on course for the biggest gain among major currencies. Bank of America said things would get better; Citigroup and HSBC Holdings said they certainly wouldn’t get any worse. Yet as 2016 draws to a close, the peso isn’t an emerging-market standout. Instead it’s the world’s worst performer.
****SD: That headline is one step away from “Mr. President-Elect-Who-Must-Not-Be-Named”
Exchanges and Clearing
Euronext Launches “Best Of Book”, Delivering Superior Execution To Retail Investors
Euronext, the leading pan-European exchange in the Eurozone, today announced the launch of Best of Book, Euronext’s next generation best execution service . Best of Book intends to give access to unrivalled execution quality and to provide retail investors with significant price improvement on Euronext stocks within the secure and transparent environment of the regulated market.
CME Group Cashing In On Globalization
Valuentum – Seeking Alpha
Security and commodity trading firm CME Group (NASDAQ:CME) is seeing its investments in globalization pay off. Electronic average daily volumes in Europe and Asia have grown steadily from 2012 with no sign of slowing any time soon. Long-term growth trends in a variety of its environments are not expected to let up. Pro forma average daily volume has advanced at a 14% CAGR from 1972 to 2015. Some may be anticipating a plateauing of the pace of globalization, but the continued development of financial systems in emerging markets bodes well for CME Group. Though CME Group’s long-term demand drivers appear to be stable, the same cannot be said for its annual dividend.
Incoming Nasdaq CEO says Trump policies may benefit Wall Street
John McCrank – Reuters
Nasdaq Inc’s (NDAQ.O) incoming chief executive officer, Adena Friedman, said on Tuesday that President-elect Donald Trump’s economic policies may boost trading and allow banks to take more risks, including lending more to businesses.
CFTC Staff Issues Results Of Supervisory Stress Test Of Clearinghouses
The Staff of the U.S. Commodity Futures Trading Commission (CFTC) today issued a report detailing the results of a supervisory stress test of major clearinghouses. The purpose of the analysis was to assess the impact of a hypothetical set of extreme but plausible market scenarios across multiple clearinghouses and their clearing members.
Total Return Derivatives: Can Repo Emerge as a New Asset Class?
Interview with Antoine Porcheret, Senior Equity & Derivative Strategist at BNP Paribas
Former New York Stock Exchange Executive announced as CEO of Conotoxia, Inc.
Conotoxia, Inc., a North American subsidiary of the Cinkciarz Group – one of the European leaders in the online currency exchange market – which is anticipating offering innovative money transfer services to its American customers, announced the appointment of Paul Finnegan as Chief Executive Officer.
Regulation & Enforcement
Industry Preps for SEC Holding Pattern
Rob Daly – MarketsMedia
Until the Trump administration names its SEC appointees and the Senate approves them, not much should be expected from the regulator.
****SD: Part of the “anything” in “anything can happen” is nothing.
A post-Trump SEC could shake up current policy
Sarah N. Lynch – Reuters
It will be a new day at the U.S. Securities and Exchange Commission after President-elect Donald Trump installs his choice to run the agency. With Trump’s transition team already in regulatory-relief mode and promising to revamp the Dodd-Frank financial reform legislation, some rules already are marked for death or dialback.
U.S. state securities regulators gird for action during Trump era
Suzanne Barlyn and Tim McLaughlin – Reuters
State securities regulators say they will try to fill any void in policing banks and finance companies that break the rules if President-elect Donald Trump and a Republican-controlled congress roll back reforms introduced after the financial crisis.
SEC Approves Plan to Create Consolidated Audit Trail
The Securities and Exchange Commission today voted to approve a national market system (NMS) plan to create a single, comprehensive database known as the consolidated audit trail (CAT) that will enable regulators to more efficiently and thoroughly track all trading activity in the U.S. equity and options markets.
****SD: More of the nitty gritty can be found in the following releases from the meeting: SEC Chair Mary Jo White’s statement, SEC Commissioner Kara M. Stein’s statement and SEC Commissioner Michael S. Piwowar’s statement.
CFTC Approves Supplemental Proposal to Regulation Automated Trading
Kari Larsen, Peter Malyshev and Michael Selig, Reed Smith – JDSupra
The Commodity Futures Trading Commission issued a supplemental proposal on automated trading November 4, 2016, that revises a number of the regulations proposed by the Commission in its initial proposal. The Supplemental Proposal includes six significant changes to the proposed regulatory framework for automated trading
Energy Traders Said to Be Probed in U.K. Over Spark Spoofing
Liam Vaughan and Rachel Morison – Bloomberg
The U.K.’s energy regulator is investigating whether traders manipulated some derivatives prices, according to documents seen by Bloomberg News and a person familiar with the situation.
Israel Fines an Unlicensed Binary Options Provider for the First Time
Avi Mizrahi – Finance Magnates
The Israeli Security Authority (ISA) revealed today that it issued an enforcement action against a firm for the first time since the passing of new regulations that ban binary options and require licensing from FX brokers. D.G.I. Media Ltd has been fined a total of NIS 500,000 (over $125,000) and its owner and CEO is now banned from holding a similar position for two years.
****SD: Some Canadian action today too, Canada’s MSC Warns against Two Binary Options Brokers
SEC Panelists on “Astonishing” but “Not Very Sexy” Blockchain: Achieving Network Effect Will Produce Winners
Milt Capps – Bitcoin Magazine
Distributed Ledger Technology (DLT) is recognized as amazing to some and potentially valuable to many others in the financial services sector, according to various panelists in the Fintech Forum of the U.S. Securities and Exchange Commission (SEC), held November 14.
Euromoney TradeData Bows Derivatives Tax Dataset
Max Bowie – WatersTechnology
Derivatives data aggregator and reference data provider Euromoney TradeData has released a new dataset of futures and options contracts falling in scope of the US markets’ new Withholding Tax on Derivatives, IRS Section 871(m), which comes into force on Jan. 1, 2017.
Accelerating Big Data Analytics – The Real-Time Imperative
Monica Summerville – TABB Forum
Even as capital markets firms scramble to implement big data solutions, some business executives are questioning the return on investment. There is a growing realization that simply having all the data is not enough if the insight gained comes too late to be useful to the business. Once just a requirement in the front office, the need for real-time insight is spreading throughout the organization, especially as use cases for machine learning and other forms of artificial intelligence grow.
Monetary Authority Of Singapore, R3 And Financial Institutions Experimenting With Blockchain Technology
The Monetary Authority of Singapore (MAS) today announced that it is partnering R3, a Blockchain technology company, and a consortium of financial institutions on a proof-of-concept project to conduct inter-bank payments using Blockchain technology. This project could potentially avail a payment system for participants to transact in different global markets round-the-clock that are today limited by time zone differences and office hours.
IPC To Offer Connexus Cloud Customers Secure, Seamless, Global Access To Equinix Cloud Exchange
IPC, a leading global provider of secure, compliant communications and networking solutions for the financial markets community, today announced the expansion of its relationship with Equinix. IPC has joined the Equinix Cloud Exchange (ECX) to provide direct, scalable and reliable access via its Connexus Cloud solution to cloud providers available in Equinix International Business Exchange (IBX ) data centers in North America, Europe, and the Asia Pacific region. Customers can access the Equinix eco-system of more than 500 cloud service providers delivered via IPC’s Connexus Cloud, one of the world’s largest secure, private financial markets network with over 200,000 users across 6,000 market participant locations in 700 cities.
Yield-Hungry Investors Explore CBOE’s Option-Selling Benchmarks During Bond Market “Rout”
Matt Moran – CBOE Options Hub
I recently spoke with several investors and advisors who are interested in yield-oriented investments that have the potential for positive returns in a rising interest rate environment, and there appears to be increased interest in CBOE’s option-selling benchmark indexes, such as BXM, PUT, BXR, and WPUT.
Trader Q&A: Profiting With Bollinger Bands
Celeste Taylor – Schaeffer’s Research
Prior to the recent presidential election, investors saw the market’s “fear gauge” — the CBOE Volatility Index (VIX) — spike sharply, reflecting growing expectations for market volatility. To hone in on stocks or exchange-traded funds (ETFs) that could be on the verge of a big move, many traders utilize Bollinger Bands. Against this backdrop, I sat down for a Q&A with three of our best and brightest — Schaeffer’s Senior Equity Analyst Joe Bell, CMT, Senior Options Strategist Tony Venosa, CMT, and Senior Trading Analyst Bryan Sapp — for the “inside scoop” on how to utilize this popular technical indicator.
We asked traders what the Trump victory means for their market
Tamarah Webb – Futures Magazine
Risk aversion swept across the financial markets during early trading on Nov. 9, after the unexpected Donald Trump presidential victory soured investor risk appetite. With risk-off sentiment amid the Trump victory becoming a dominant theme across the board, stock markets could have been be left depressed for prolonged periods, but most markets seemed to have recovered by the following day.