Are You Ready For RFQs In Electronic Trading?
Pat Gardner, Sales Director, Vela
Although the trading of options on futures has been predominantly electronic for some time, it is only since the CME Group (and the ICE soon thereafter) moved to a user-defined spread model initiated by a Request for Quote (RFQ) that we have seen significant growth of electronic spread trading in these markets. By avoiding the need to formally list all possible instrument combinations, the RFQ function has instantly allowed the exchange to realize massive bandwidth savings and less daily maintenance in regards to settlement pricing. It has also facilitated the growth of more profit-generating uses of bandwidth, such as weekly and even daily option expires.
Stock Exchanges Accuse Government of Ethics Lapse in Market-Data Fight; NYSE, Nasdaq say senior SEC official Brett Redfearn has ethical conflicts because of prior Wall Street work
Dave Michaels – WSJ (SUBSCRIPTION)
The New York Stock Exchange and Nasdaq Inc. on Monday accused a senior regulator who supervises them of having ethical conflicts, raising the ante in a battle with Washington over how the companies sell market data. The feud stems from a regulatory decision last year on data fees that could crimp exchanges’ profits from selling products that display current market prices and trading interest. The exchanges have appealed the Securities and Exchange Commission’s move to the U.S. Court of Appeals for the District of Columbia Circuit, a group of judges who often referee legal fights between companies and the federal government.
Two Sigma aims to unlock ‘unique ways to make money’ in China
Henny Sender – Financial Times (SUBSCRIPTION)
Two Sigma, one of the biggest hedge funds in the US, is building out its office in Shanghai, as it seeks to take advantage of a wave of foreign investment in the world’s second biggest equity market.
****SD: In the piece: “Chicago-based Citadel Securities plans to ramp up its presence in Shanghai, both as a market maker and as an investor, according to people briefed on its plans.”
Is There a Big Short in Bitcoin? Trading activity has grown in CME’s bitcoin futures in recent months, along with the rebound in the cryptocurrency’s price CME bitcoin futures
Alexander Osipovich – WSJ (SUBSCRIPTION)
Hedge funds and other big traders are betting that bitcoin will fall, even as the digital currency has risen above $10,000 on a new wave of crypto-optimism. That is the picture that emerges from bitcoin futures listed on CME Group Inc., the biggest U.S. exchange operator. Futures are contracts that let traders bet on whether an assetóin this case, bitcoinówill rise or fall. Hedge funds and other money managers held about 14% more bearish “short” positions in CME bitcoin futures last week than they did bullish “long” positions, according to a recent Commodity Futures Trading Commission report.
****SD: I’ll point readers to the site https://www.sk3w.co/options – its options metrics are based off of Deribit’s exchange data.
Pound Looks Worse Than the Euro, With 2017 Lows in Sight
Charlotte Ryan – Bloomberg (SUBSCRIPTION)
The pound will tumble to levels not seen since 2017 against the euro as Brexit turmoil outweighs a dovish European Central Bank, according to analysts.
Worth Watching: What Matters in the Week Ahead as June Comes to a Close
Kevin Davitt – Cboe Blog
With so much going on in the world, it’s hard to know what deserves your attention, so we narrowed it down for you. Here’s what we’re watching this week and why it matters. From the events that have market-moving potential to the indexes that will give you a glimpse into what’s on everyone’s mind, here’s what you need to know as we end June.
Stock Rally Is a Game of Catch-Up
Robert Burgess – Bloomberg (SUBSCRIPTION)
Market participants have tied themselves up in knots trying to explain why stocks in the U.S. and globally have enjoyed one of their strongest rallies in years this month. The consensus is that central banks led by the Federal Reserve have turned more dovish. But central banks are signaling lower interest rates in part because their economic outlooks have deteriorated, a circumstance that should weigh on equities. That’s especially true with earnings growth having stalled. Now comes JPMorgan Chase & Co. with perhaps the best, most logical explanation for what’s going on the stock market.
China ETF Trading Evokes Memories of 2018 G-20 Days Before Event
Elena Popina – Bloomberg (SUBSCRIPTION)
A method to play the trade war shows investors are positioning for a positive outcome to talks between the U.S. and China during a G-20 summit in Japan.
Days before the U.S. and China officials are set to meet in Osaka, bullish bets on the iShares China Large-Cap ETF are going up. The demand for options betting the exchange-traded fund will rise made bullish calls pricier and pushed the cost of protection against a 10% loss in the fund to the lowest level since early December. That was when Donald Trump and Xi Jinping agreed to a temporary truce in the trade spat during a G-20 summit in Buenos Aires.
Exchanges and Clearing
CFTC Approves LedgerX to Settle Futures in Real Bitcoin
Nikhilesh De – Coindesk
The Commodity Futures Trading Commission (CFTC) has cleared bitcoin derivatives provider LedgerX to offer physically settled bitcoin futures contracts. The CFTC said Tuesday it had approved LedgerX’s application for a designated contract market (DCM) license, meaning the company can now offer the new futures contracts. LedgerX is the second company to receive approval to offer physically settled bitcoin futures; other firms, such as Intercontinental Exchange’s Bakkt, Seed CX and ErisX plan to enter this market. (While Bakkt’s own futures contracts have been self-certified, the firm is waiting for the New York Department of Financial Services to license its warehouse).
****SD: Bloomberg has Retail Derivatives That Pay Out With Bitcoins Approved by CFTC.
Exchanges prepare to cut Swiss stocks amid escalating EU tension
Samuel Agini – Financial News
EU stock exchanges are warning they could be forced to pull Swiss stocks from their trading venues within weeks because of Switzerland’s political stand-off with the European Union ó while the country’s own leading stock exchange warned the EU will “probably” play hardball. On June 24, UBS, Cboe and Aquis Exchange said they could have to suspend trading in Swiss shares from June 30, the expiry date of the current agreement between Switzerland and the EU.
Intercontinental Exchange Launches NYSE Board Advisory Council to Advance Board Diversity
The New York Stock Exchange (NYSE), a wholly-owned subsidiary of Intercontinental Exchange (ICE), announced the launch of the NYSE Board Advisory Council, which will proactively address the critical need for inclusive leadership by connecting diverse candidates with companies seeking new directors.
Regulation & Enforcement
Wall Street Criticizes Bernie Sanders’ Student Debt Plan
Shahien Nasiripour, Nick Baker and Elizabeth Rembert – Bloomberg (SUBSCRIPTION)
Bernie Sanders wants Wall Street to pay off America’s student debt. Wall Street, predictably, says that’s a bad idea.
Patent self interest aside, Wall Street has a point, economists say. Even before Sanders formally made his proposal to cancel $1.6 trillion in student debt and make public colleges free by levying a tax on trading, analysts have warned that it could make markets more volatile and that the costs — much like President Donald Trump’s tariffs — would ultimately be borne by American households.
Jump Trading latest to launch FX pricing engine in Singapore
Hayley McDowell – The Trade
Jump Trading is set to bring its FX pricing and trading engine to Singapore later this year, making it the latest financial institution to expand FX trading operations in the region.
Credit Suisse shuffles global markets prime services leadership
Joe Parsons – The Trade
Credit Suisse has reorganised its global markets prime services top brass by appointing two of its most senior prime brokerage executives to jointly lead the division. John Dabbs and Ryan Nelson have been promoted to Credit Suisse’s equities management committee, with responsibility for global markets prime services, The TRADE understands.
Gold Prices Can Keep Rising. Here’s How to Play It With Stock Options.
Steven M. Sears – Barron’s
Last week in Namibia, I sat around a campfire high in the Khomas Highlands with executives from the construction and safari industry. The end of day talk turned to the sorry state of the world, and why shouldn’t it?
Europe is struggling with political and economic weakness. America is so politically divided that Democrats and Republicans essentially live in different counties. Africa, as the Namibians observed, has its own perennial struggles, while Asia, especially China, seems to be getting ever more powerful. Meanwhile, national currencies are wobbly, and may weaken further if central banks lower interest rates to stimulate moribund economies.
****SD: “With GLD at $133.60, investors can sell the October $130 put for about $2.16 and buy the October $135 call for $4.10. The risk reversal – selling a put and buying a call with the same expiration but a higher strike – costs $1.94.”
Stock-market investing strategy, cheap stocks to buy: Goldman Sachs
Akin Oyedele – Business Insider Prime (SUBSCRIPTION)
Bargain hunting in the stock market isn’t what it used to be.
The strategy of buying stocks that are trading cheaply relative to the broader market, so-called value investing, has lagged since the financial crisis. In this lengthy bull market, investors have earned greater returns by buying richly valued stocks that hold the promise of strong earnings growth, particularly those in the technology sector.
Warning to Bond Traders: Consensus Trades Usually End Badly
Stephen Spratt, Bloomberg via Yahoo
Bond strategists are almost unanimous about the outlook for global yield curves: The risk is a one-sided trade.The most influential names on Wall Street are almost as one in predicting the U.S. curve will steepen as the Federal Reserve cuts interest rates, while those in other developed markets will flatten as global growth slows.
Most Refiners Unprepared for End of `Golden Age’, Deloitte Says
Andres Guerra Luz – Bloomberg (SUBSCRIPTION)
The vast majority of oil refiners and chemical makers are ill-prepared for the looming end of the industry’s “golden age” amid the shale boom and shifting demand trends, according to Deloitte LLP.
With electric vehicles and stricter environmental regulations poised to encroach on refiners’ traditional markets, just 5% of the 1,350 companies analyzed by Deloitte have made substantial changes to their risk assessments in the past half decade.