Observations & Insight
What a Trump Impeachment Battle Means for Financial Markets
Neil Irwin – NY Times
On Tuesday afternoon, some analysts attributed a drop in major stock indexes, as well as a rally in Treasury bonds, to the opening of the impeachment inquiry. But these historical episodes of impeachment drama show that any moves driven by political headlines tend to be modest and short-lived. Economic fundamentals matter a lot more.
****JB: Not strictly options-related, but we can’t ignore the elephant in the room.
Options Markets Are Already Gearing Up for 2020 Election; Markets have been forecasting increased stock volatility, but traders may be getting ahead of themselves
Gunjan Banerji – WSJ
Options investors are already bracing for higher stock volatility around the 2020 U.S. presidential elections, but it is a tricky event to trade.
Terror of $2 Trillion Loss Makes Stock Traders Fear Year-End
Ksenia Galouchko – Bloomberg
Pain from the sell-off at the end of last year is still fresh in the minds of European stock traders, making them especially nervous about the latest string of bad omens.
As the anniversary of 2018’s market carnage approaches, investors wonder whether they should fear an encore of the panic that wiped out as much as $2.1 trillion from the European benchmark, fueled by higher rates and growth concerns. At first glance, things couldn’t be more different: the European Central Bank has just boosted stimulus measures and investors aren’t expecting a U.S. recession until at least next year.
Brexit’s $74 Trillion Battle Over Derivatives Is Heating Up
Alexander Weber and Silla Brush – Bloomberg
Industry groups want extended access to London clearinghouses; FIA and AFME say solution is needed before end of this year
London’s dominance of the derivatives market is under threat, with European firms at risk of being blocked from using clearinghouses in the British capital within six months.
Investors Scramble for Pound Hedges as Brexit Drama Flares Up
Charlotte Ryan – Bloomberg
As U.K. Prime Minister Boris Johnson hardens his no-deal rhetoric and fuels mounting anger in Parliament, the hunt is back on for hedges to protect against the worst-case scenarios for Brexit.
The dash is showing up in currency market derivatives, with one investor betting a notional 190 million pounds ($235 million) that sterling will fall more than 10% to $1.108 by the Halloween deadline for leaving the European Union. Options remain the most efficient pound bets amid the possibility of a chaotic divorce and a left-wing Labour government, according to Allianz Global Investors.
Bitcoin Options Planned, New Futures Derivative Launched. But Is There Demand?
Even as Bitcoin’s recent spike appears to be burning out, there are still some exchanges that continue to believe in the future adaption of the largest cryptocurrency by market cap.
The Chicago Mercantile Exchange Group (CME), which already provides a Bitcoin futures derivative product, has announced it plans to launch options trading on its Bitcoin futures contracts in the first quarter of 2020. CME cited an increase in “client demand” as the reason for the new derivative. Regulators, however are still reviewing the product.
Four Collision Courses for the Global Economy
Nouriel Roubini – Project Syndicate
Between US President Donald Trump’s zero-sum disputes with China and Iran, UK Prime Minister Boris Johnson’s brinkmanship with Parliament and the European Union, and Argentina’s likely return to Peronist populism, the fate of the global economy is balancing on a knife edge. Any of these scenarios could lead to a crisis with rapid spillover effects.
What Options Activity Signals for Markets in the Fourth Quarter
In this edition of “Options Insight,” Bloomberg’s Greg Bender examines the options activity around the S&P 500 Index and high-yield bonds. He speaks with Bloomberg’s Abigail Doolittle on “Bloomberg Markets: The Close.”
Exchanges and Clearing
SGX to launch price collars for opening, midday and closing auctions
Singapore Exchange (SGX) plans to introduce price collars during the securities market opening, midday and closing auction routines so as to guard against risk of severe price dislocations during auctions. This follows support from a majority of respondents to a public consultation on the matter, where price collars and price-triggered time extensions were proposed for the auction sessions.
IEX loses a battle but not yet the war
TECHNOLOGY HAS robbed stock exchanges of their theatrics. Opening days are an exception. Blue-chip firms listing on Nasdaq, America’s second-biggest exchange, get an hour of exclusive advertising on its tower in Times Square. On the New York Stock Exchange (NYSE), the biggest, they earn the right to be deafened by a bell above a 116-year-old trading floor.
The World Federation of Exchanges & SSE launch blueprint to support exchanges in embedding sustainability
World Federation of Exchanges
The World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, has partnered with the United Nations Sustainable Stock Exchanges (“SSE”) initiative to define ‘How exchanges can embed sustainability within their operations: a blueprint to advance action’.
Regulation & Enforcement
Credit Suisse defeats lawsuits over huge U.S. ‘volatility’ crash
Jonathan Stempel – Reuters
A U.S. judge on Wednesday dismissed three lawsuits accusing Credit Suisse Group AG (CSGN.S) of misleading investors about a complex product for betting on stock market swings, and causing huge losses when it lost 96% of its value in one harrowing day.
U.S. District Judge Analisa Torres in Manhattan said Credit Suisse had warned investors about risks in its VelocityShares Daily Inverse VIX Short-Term Exchange-Traded Notes (“XIV Notes”), and the investors did not show that the Swiss bank intended to defraud them.
Australia FX brokers seek experienced investor provisions under new CFD rules
Swati Pandey – Reuters
Australia’s foreign exchange brokers are lobbying regulators to create provisions for experienced retail investors to trade high-risk currency derivatives under a proposed tightening of trading rules, people familiar with the matter told Reuters.
The Australian Securities & Investment Commission (ASIC) last month proposed some restrictions on the sale to retail clients of contracts for difference (CFD), which brokers say would cripple an industry with an annual gross turnover of A$22 trillion ($15 trillion).
SIX taps Refinitiv managing director to head up Financial Information business; Marion Leslie to join SIX as head of the Financial Information business unit as of 1 January 2020, replacing Robert Jeanbart.
John Brazier – The Trade
Swiss exchange group SIX has announced the appointment of Marion Leslie to head up its Financial Information business.
SpiderRock Advisors Teams With State Street Global Advisors SPDRs To Serve Individual Retirement Accounts And Financial Advisors’ Non-Taxable Business
SpiderRock Advisors, LLC, a rapidly growing asset management firm focused on providing customized option overlay strategies to advisors and institutions, today announced a new model offering “SpiderRock Advisors Qualified Solutions Portfolios. Built with SPDR ETFs.” This unique solution enables qualified accounts with access to State Street Global Advisors SPDR ETFs model portfolios, to utilize SpiderRock Advisors option overlay strategies.
The feud at Credit Suisse that has shaken Swiss banking; Car chases and rows over cocktails: the fallout threatens CEO Tidjane Thiam
Stephen Morris – FT
The staid world of Swiss banking has been rocked by lurid details of the breakdown in the relationship between Credit Suisse chief executive Tidjane Thiam and Iqbal Khan, who ran the bank’s wealth management division.
****JB: Not options related but the story is too tabloid-tastic to not share.
Traders React to a Study That Says It’s Virtually Impossible to Day Trade for a Living
Kiril Nikolaev – CCN
Academic researchers in Sao Paulo, Brazil have studied the likelihood of success in day-trading for a living. The results weren’t positive.