Observations & Insight
IDX 2021 Panel: EU and U.S. Regulated Exchanges Tackle Crypto, ESG Challenges
Suzanne Cosgrove – John Lothian News
The FIA’s IDX panel of executives from U.S. and EU derivatives exchanges on Tuesday quickly turned to a discussion of meeting the challenges of several of the new products currently demanded by investors and traders.
In response to questions from moderator and FIA CEO and President Walt Lukken, who asked the panelists to address how their exchanges were approaching cryptocurrencies, Zubin Ramdarshan, head of equity and index product design for Eurex, noted that “by and large, most bitcoin are traded on unregulated exchanges … (and) connectivity to a regulated environment is a healthy development.”
Stéphane Boujnah, CEO and chairman of the managing board, Euronext N.V., said offering crypto products was an “operation risk decision.” Euronext is striving to offer its customers “indirect exposure” to these assets, he said.
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Options Trading Hits Record Highs, Triggering Volatility Concerns
Retail traders are piling into the options market
Daniel Liberto – Investopedia
Options are now all the rage among regular retail investors. These financial instruments—which essentially give you the right, but not the obligation, to buy or sell a security at a predetermined price prior to or on an expiration date—used to be exclusively the domain of expert traders. Now everyone appears to want a piece of the action and make a quick buck off of share price movement without having to cough up the full cost of buying company stock.
Retail Dip Buyers Go Missing Right as Upheaval Convulses Markets
Katherine Greifeld – Bloomberg
Retail traders put just 43% of options volumes on upside bets
Rocky September has ‘dented’ investor optimism: Goepfert
Some of the stock market’s most reliable dip-buyers are getting cold feet.
It’s happening in the options market, where retail traders spent just 43% of their total volume on bullish calls last week, according to Sundial Capital Research. That’s down from as much as 55% in February and the lowest share devoted to call options so far in 2021. Meanwhile, purchases of puts — which protect against downside — have increased.
Hedge funds score taper trade hat trick
Jamie McGeever – Reuters
Ahead of the Fed’s policy meeting last week, hedge funds sold Treasuries, positioned for a steeper 2s/10s yield curve, and increased their bullish bets on the dollar.
Going by markets’ initial reaction to the Fed’s hawkish turn, the combination play was perfectly timed.
The question now is whether this really is the beginning of a sustained move up in yields and steepening of the curve, or yet another false dawn.
Natural Gas Soars Most Since Last Winter on U.S. Scarcity Fears
Gerson Freitas Jr. – Bloomberg
Natural gas prices surged to a fresh seven-year high in the U.S. as the expiration of October options added momentum to a rally fueled by escalating concerns about tight winter supplies.
Q&A: Exchange Leaders Discuss China’s Evolving Markets, Managing Global Risks
China has in recent years begun to liberalize its markets. One effect has been the growth of still nascent futures and options exchanges. Today, China has five domestic derivatives exchanges and trading volumes have been on an upward trajectory as domestic investors become more familiar with futures and options, and demand from foreign investors increases.
Dow Notches 4-Day Winning Streak While Tech Stocks Fall
The Dow Jones Industrial Average rose Monday as bond yields rose and oil prices climbed to their highest level in three years.
The Dow Jones Industrial Average gained 72 points, or 0.2%. The S&P 500 dropped 0.3% and the Nasdaq Composite declined 0.5%.
Oil prices rise above $80 a barrel for first time in three years
Hudson Lockett, Tom Wilson, Neil Hume and Derek Brower – Financial Times
Coal, carbon and European gas prices have all hit record highs as crude oil pushed above $80 a barrel in the clearest signs yet that the world is heading into an energy crunch likely to weigh on economic growth.
Brent, the international benchmark, rose as much as 0.9 per cent to $80.22 a barrel on Tuesday morning, hitting a three-year high for the second consecutive day and bringing crude’s gains for the year to date to almost 55 per cent.
To check freak trades, NSE does away with stop loss-market order in options
Suresh P Iyengar – Mumbai – The Hindu Business Line
This facility will, however, continue for futures
In a move that could partially address concerns over frequent freak trades, the National Stock Exchange has removed the stop loss-market (SL-M) facility in options contracts from Monday.
Orders placed with SL-M, if any, will be rejected by the exchange with a message “function not available”. The change is applicable only for orders placed in index options and stock options contracts.
Regulation & Enforcement
Robinhood CEO Unwittingly Inspired $1 Million Meme Stock Fraud
Nick Baker and Matt Robinson – Bloomberg
It was easy-money arbitrage fueled by this year’s meme stock mania. Some brokerages were essentially offering free cash, while others weren’t clawing any of the funds back for the second leg of the wager.
And the traders who did it got the clever idea from Robinhood Markets Inc. Chief Executive Officer Vlad Tenev, who unwittingly inspired them with a remark he made at a high-profile congressional hearing in February.
FIA releases principles for cross-border regulation
FIA believes that cross-border fragmentation is reduced by regulatory recognition
London, UK—FIA today released a policy paper outlining seven principles to guide the regulation of cross-border activity in the derivatives markets. FIA is issuing the paper to address the threat of market fragmentation due to conflicts, inconsistencies, and duplication in cross-border regulation. Policymakers and regulators in many parts of the world are re-examining their approaches to cross-border activity, and some are favoring more insulated national policies that favor direct oversight of domestic and foreign entities. As FIA points out in the paper, these national approaches do not defer to home country regulation, and the resulting overlap of regulation on cross-border activity will lead to less efficient markets and higher costs for end-users.
United States: SEC Denies Exchanges’ Application For Stay Of Market Data Plan
Cadwalader, Wickersham & Taft LLP – Mondaq
The SEC denied a joint application from Nasdaq Stock Market LLC, Nasdaq BX, Inc., Nasdaq PHLX LLC, New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago, Inc., NYSE National, Inc., Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., and Cboe Exchange, Inc. (the “Exchanges”) to stay the effect of an SEC order authorizing the implementation of a National Market System plan on consolidated equity market data (“the CT Plan Order”). The Exchanges sought a stay of the CT Plan Order pending the resolution of their petitions for judicial review of the CT Plan Order, as well as a related SEC order, by the U.S. Court of Appeals for the D.C. Circuit.
Dan Berkovitz to Become SEC’s New General Counsel Under Gensler
Benjamin Bain – Bloomberg
Dan Berkovitz will join the U.S. Securities and Exchange Commission as the Wall Street regulator’s general counsel in November.
Berkovitz, who previously said he plans to leave his seat on the Commodity Futures Trading Commission next month, will replace John Coates, who had been serving as the SEC’s top lawyer, the agency said in a statement Tuesday. Since September 2018, Berkovitz has been serving as a Democratic CFTC commissioner and earlier in his career was the derivatives regulator’s general counsel.
Eventus announces more key hires in EMEA
Eventus press release via Killeen Daily Herald
Ollie Cadman joins as Chief Product Officer; David Griffiths and Martin Appiah as Director of Regulatory Affairs
Eventus Systems, Inc., a leading global provider of multi-asset class trade surveillance and market risk solutions, today announced several key hires in Europe as part of the firm’s continued growth in the region and globally. Bringing extensive experience into the new roles are Ollie Cadman as Chief Product Officer, and David Griffiths and Martin Appiah, both as Director of Regulatory Affairs. Based in Stockholm, Cadman reports to Eventus CEO Travis Schwab, while Griffiths and Appiah – both based in the UK – report to Joseph Schifano, the firm’s Global Head of Regulatory Affairs.
The Evergrande crisis and Fed tapering are both warning signs that stock market risk is increasing, according to the world’s biggest asset manager. Here are 3 alternatives for investors to juice up their returns heading into the end of the year
George Glover – Business Insider
Stock markets were roiled last week when China’s second-largest property developer Evergrande struggled to cover liabilities of $300 billion and the
announced it will begin scaling back asset purchases “soon”.
Both events point to looming stock market risks, according to Mark Haefele, the chief investment officer at the Swiss investment bank UBS – the world’s biggest asset manager.
MIAX Exchange Group – Options & Equities Markets – Reminder: Reg SCI / SIFMA BCP Testing on Saturday, October 23, 2021
As previously announced in the April 12th and September 2nd Alerts, the MIAX Exchange Group will be participating in the 2021 SIFMA BCP Testing on Saturday, October 23, 2021. All members that are required to test with MIAX Options, MIAX Pearl Options, MIAX Emerald Options and/or MIAX Pearl Equities Exchanges in accordance with Regulation Systems Compliance and Integrity (Regulation SCI) have been notified. However, all members are encouraged to test.
Janet Yellen warns US risks running out of money by October 18
Colby Smith – Financial Times
Treasury secretary Janet Yellen has warned that the US risks running out of money by October 18 ahead of her joint congressional hearing with Federal Reserve chair Jay Powell on Tuesday.
“At that point, we expect Treasury would be left with very limited resources that would be depleted quickly,” she said in a letter to congressional leaders. “It is uncertain whether we could continue to meet all the nation’s commitments after that date.