2018 Record Year for US Options Industry
Tabb Options Liquidity Matrix
This past year marks the first year on record that the US options industry topped 5 billion contracts traded. A combination of further acceptance of the use of listed options, combined with several bouts of increased volatility, contributed to the record-setting year. The final number of contracts traded was 5,137,201,519, which was an increase of almost 1 billion from 2017 and 12.5% higher than 2011’s total, the previous record volume year. Each of the five exchange groups shared in the volume increase.
****SD: The industry’s average bid/ask spread in December was .341 cents. One trend of 2018 was the continued shift of market share from Cboe and Nasdaq to BOX, MIAX and NYSE.
Risky Assets Move in Tandem, Stoking Fears More Volatility Lies Ahead; Such patterns have come near major market turning points in the past
Ira Iosebashvili and Amrith Ramkumar – WSJ (SUBSCRIPTION)
Stocks, bond yields, commodities and other risky assets have continued moving in lockstep lately, raising hopes that this year’s nascent rebound will continue but also fueling worries momentum could once again reverse. Correlations across assets have hit their highest level in almost a year, with the S&P 500, the 10-year U.S. Treasury yield and U.S. crude oil moving in tandem in nine of the last 12 sessions. A six-day run of declines for the asset classes earlier this month was the longest streak since June, according to Dow Jones Market Data.
Dash Names Scott Patrick Chief Financial Officer
Dash Financial Technologies, the industry’s leading capital markets technology and execution provider, today announced the addition of Scott Patrick as Chief Financial Officer. Reporting directly to CEO Peter Maragos, Mr. Patrick will be responsible for leading financial operations and strategic planning for the firm.
****SD: JLN had a chance to catch up with Dash’s Chief Growth Officer Glenn Lesko at STAC’s Midwinter Meeting – look for that video down the road.
FX Traders ‘Flying Blind’ After a Month Without Positioning Data
Katherine Greifeld – Bloomberg via Yahoo
As the partial U.S. government shutdown drags into its 33rd day, analysts are getting creative when it comes to gauging which way certain financial markets are leaning. The last U.S. Commodity Futures Trading Commission positioning data covered the week through Dec. 18, meaning the most recent snapshot of currencies, commodities and financial contracts preceded last month’s Federal Reserve decision. The figures — typically unveiled each Friday — indicate whether speculators are potentially stretched and vulnerable to a reversal.
****SD: So whaddya do? Look at risk reversals. Also from Bloomberg – Shutdown Deprives Data-Dependent Fed of Data It’s Dependent On
Oil: Surging Implied Volatility Sending a Signal? (VIDEO)
Erik Norland – CME Group
The selloff in oil late last year triggered a surge in implied volatility. What lies ahead for the market amid concern over slowing global growth?
Money-Losing VXX Will Expire Soon. This Is What You Need to Know.
Gunjan Banerji – WSJ (SUBSCRIPTION)
One of the first exchange-traded products that allowed investors to bet directly on future stock swings will expire this month, a milestone for the increasingly popularóbut riskyópractice of trading volatility. Launched in 2009, the iPath S&P 500 VIX Short-Term Futures Exchange-Traded Note enables investors to bet on the size of swings in the S&P 500. Known as VXX for its ticker symbol on the New York Stock Exchange, it tracks an index linked to the daily readings of Wall Street’s so-called fear gauge, the Cboe Volatility Index, or VIX.
****SD: Let’s be clear – it sure ain’t no money-loser for Barclays. For a better look at the playing field, see this Jan. 10 story from the FT Wall Street battles for supremacy in volatility market.
Eurekahedge: The Grinch Stole December’s Returns
The Eurekahedge Hedge Fund Index was down for the month of December 1.31%, and that this brought the total decline of 2018 down to 3.85%, according to the January 2019 report. Part of the reason for the bad December numbers was a broad concern about the yield-curve inversion in US Treasuries. This, combined with the presumption that the Federal Reserve will continue its recent money supply tightening habit into 2019, triggered an equity market sell-off.
****SD: “December was a good month to be long volatility. The CBOE Eurekahedge Long Vol Hedge Fund Index was up 6%. On the flip side, the Short counterpart was down 5.49%.”
Exchanges and Clearing
China exchange to launch cotton options on Jan. 28
The Zhengzhou Commodity Exchange has released details on cotton options contracts and listing, with the options to be open on Jan. 28.
Dalian Commodity Exchange Holds Corn Options Training In Hangzhou
***SD: Included as an indicator of what the Chinese exchanges are doing to build awareness about its nascent options markets.
Revolution Enterprises Appoints Tony Hunter and Jim Oliff to Board of Directors N
Revolution Enterprises (“Revolution” or “Company”), a national leader in the cannabis industry, is pleased to announce the appointment of Mr. Tony Hunter and Mr. Jim Oliff to its Board of Directors. Mr. Hunter, former CEO of Tribune Publishing and Publisher of the Chicago Tribune, and Mr. Oliff, former Vice Chairman and Board Member of CME Group, will join the company to help its growth in the emerging national cannabis market.
****SD: An industry vet pivots to cannabis.
Regulation & Enforcement
Five US market regulation forecasts for 2019 Davis Polk lawyers expect changes to Volcker rule and guidance on cryptocurrencies
Annette L Nazareth – Financial Times (SUBSCRIPTION)
While the new Democratic-controlled House of Representatives makes legislative reforms in financial regulation very unlikely, we predict the financial regulators will continue to effect change in key areas.
SEBI Considers Reducing Number Of Strikes To Prevent Misuse Of Options
Sajeet Manghat – BloombergQuint (SUBSCRIPTION)
The stock market regulator is considering reducing the number of strikes allowed in an options contract to prevent their misuse for negotiated trading. The Securities and Exchange Board of India has sought views from its secondary market advisory committee that met on Monday, said an official aware of the development. The person didn’t want to be identified as he isn’t authorised to speak to the media about regulatory issues.
Wall Street Braces for MiFID-Style Rules Descending on the U.S.
Benjamin Bain – Bloomberg (SUBSCRIPTION)
Capital Group, T. Rowe will eat costs of outside research; ‘Cat is out of the bag’ due to Europe’s sweeping rule changes
The firewall that Wall Street hoped would protect its U.S. stock and bond analysts from tough European rules is starting to crack. At issue are European Union regulations that took effect last year that forced banks to start charging clients separately for trading and research, rather than bundling the services into one bill. In October 2017, U.S. brokers scored a major win when the Securities and Exchange Commission issued a legal reprieve that at least temporarily kept the rules from spreading to America.
Aside From Geopolitics, How About Those Earnings? Fresh Batch in Focus
JJ Kinahan -The Ticker Tape
Like a rubber band, it appears stocks are ready to snap back from Tuesday’s sharp losses as investors ponder a fresh set of earnings news. At the same time, nothing else seems to have really changed much. The same old stew of geopolitics continues to be the backdrop, with little progress to report on China talks, the government shutdown, or Brexit. Economic news continues to be grim out of Asia, with the latest batch coming from Japan (see more below).
****SD: From the WSJ – Stock Market’s Next Hurdle: Tech and Industrial Earnings