Options Traders Eye Bullish Bets on Emerging Markets; Morgan Stanley Returns to Tough Derivatives Niche in Asia

Nov 7, 2019

Lead Stories

Options Traders Eye Bullish Bets on Emerging Markets
Gunjan Banerji – WSJ
Options traders are piling into one of the biggest exchange-traded funds tracking emerging markets, paying up for options that would profit if the fund advances. The $27 billion iShares MSCI Emerging Markets ETF EEM +1.09% has risen about 12% this year. It tracks companies such as Samsung Electronics Co., Alibaba Group Holding Ltd. and Tencent Holdings Ltd.

Morgan Stanley Returns to Tough Derivatives Niche in Asia
Cathy Chan – Bloomberg
Morgan Stanley is wading back into a difficult niche of the Hong Kong stock market, betting it’s found a way to complement its business serving wealthy clients.
As protests roiled the city in recent months, the bank quietly began offering derivatives in Hong Kong known as callable bull or bear contracts, which track the performance of underlying assets without buying them directly. This week, the firm also began issuing warrants that can be traded at the Hong Kong Stock Exchange, helping fill a void left by European banks that have been pulling back from equities units with low returns.

****JB: I am unfamiliar with these, but HKEX says callable bull or bear contracts “are issued either as Bull or Bear contracts with a fixed expiry date, allowing investors to take bullish or bearish positions on the underlying asset. CBBC are issued by a third party, usually an investment bank, independent of HKEX and of the underlying asset.”

How much Reddit users have amassed from Robinhood ‘infinite money’ bug
Ben Winck – Business Insider
Traders have been using a glitch in Robinhood’s app to trade with an unlimited supply of borrowed cash — and one member of an online forum compiled a hall-of-fame list of the largest positions created through the bug.
A member of the WallStreetBets sub-reddit discovered the glitch in late October after using a $2,000 deposit to trade with $50,000 in buying power. Other forum members glorified the trade before executing similar trades. In a matter of days, users were one-upping each other to see who could amass the most borrowed cash.

****JB: What could possibly go wrong? (For those who have missed this, the bug used options to access this “infinite money”.)

Europe Will Step Up Push Into Green Finance, Dombrovskis Says
Alexander Weber – Bloomberg
The European Union is planning to step up its push to make the financial sector do its part in fighting climate change, according to the bloc’s official in charge of regulating the industry. Valdis Dombrovskis, the EU commissioner responsible for financial services, said an “updated green financing strategy” will be presented in the first half of next year. “Europe has the potential to build itself into a center of expertise to attract rising numbers of investors keen to place their funds and savings in green investment options,” he said at a Bloomberg event in Brussels.

Indices trade near flat line; VIX dips
Business Standard
Key benchmark indices were hovering in a narrow range in early afternoon trade. The Nifty received support at 11,970 level and traded above that level. At 12:27 IST, the barometer index, the S&P BSE Sensex, was up 54.17 points or 0.13% at 40,523.95. The Nifty 50 index was up 9.9 points or 0.08% at 11,975.95. Investors and traders remained cautious ahead of weekly expiry of index options today.

Exchanges and Clearing

Derivatives could revitalise China’s rustbelt – DCE
Sharon Thiruchelvam – FOW (subscription)
The Dalian Commodity Exchange chair calls on banks to encourage local industry to adopt price hedging.

Regulation & Enforcement

Binary Options Scams Spread Into Crypto, Time for US Lawmakers to Act
Henry Linver – Cointelegraph
Mainstream finance and cryptocurrency are becoming more closely intertwined with each passing day. Just over a year ago, the idea of centralized financial behemoths trialing blockchain or crypto solutions would have been unthinkable. Currently, cryptocurrency is traded like never before. In just the last few weeks, major players have launched both Bitcoin options and futures platforms, making cryptocurrency accessible to a whole new range of investors.


MayStreet to Provide Market Data for SEC’s MIDAS Platform
Trader’s Magazine (press release)
MayStreet, a modern market data platform engineered to deliver the highest-quality, most complete capital markets data commercially available, today announced it has assumed the role of market data provider for the U.S. Securities and Exchange Commission’s (SEC) Market Information Data Analytics System (MIDAS). The SEC has transferred the vendor contract by novation from the previous provider, Thesys Technologies, as part of MayStreet’s acquisition of Thesys’ business unit that operates MIDAS.

CME to deploy FIA-led effort providing execution source clarity
Jeff Reeves – MarketVoice
In November, CME Group will become the first futures exchange to require a tag on order messages that identifies the execution method—a major milestone in the industry’s efforts to standardize trading and reduce a persistent source of friction in brokerage settlement. The move is the culmination of almost a decade of work by FIA and FIA Tech to create a standard set of codes to identify widely used methods for executing trades. Those methods range from fully automated algorithmic trading to human-to-human interaction over the telephone.


Dividend Stocks Are Hot Again. Some Options Investors Are Betting They’ll Go Higher.
Steven M. Sears – Barron’s
Compared with the unicorn stocks backed by Silicon Valley’s technology hustlers, the new hot stocks are dull—so dull that you can find them in the portfolios of conservative investors who are mostly focused on safe investments. With dividend yields that exceed those of many bonds—and demonstrable earnings power—these stocks are increasingly appealing to institutional investors as the Federal Reserve keeps lowering interest rates.


Europe’s traders call for shorter working day
Philip Stafford – Financial Times
Two of the largest industry bodies in European financial markets are lobbying the London Stock Exchange and other trading venues to open later and shorten their working day by 90 minutes, in a bid to boost liquidity and improve workers’ mental health.
The associations are in early discussions with exchanges to shorten the trading day for equity markets across Europe, to 9am-4pm GMT. The calls have been led by the Association for Financial Markets in Europe (AFME), which represents banks, and the Investment Association, which represents investors, following consultations with their members.

****JB: I’m with them. Let’s unionize! Who’s with me? (Anyone?)

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