Observations & Insight
The Spread: Married to The Job
This week on The Spread – Ed Tilly gives a take on the state of the markets, an industry veteran joins the MIAX Exchange Group, open interest grows for bitcoin options at the CME, and more.
Chicago Derivatives Executive Pens Murder Mystery Thriller Set in Chicago’s Markets
Margaret Wiermanski is a longtime derivatives industry back office executive turned author. Silent Partners is a murder and financial crime mystery, and the first of three books she intends to write. The book is set in Chicago’s derivatives markets and involves former floor traders and brokers and their lives after trading floors closed. While this is fiction, some of the characters will seem real to those who work in the Chicago markets. It is a fun thriller and its sales support the Greenwood Project, a Chicago-based charity to introduce minority students to the financial industry.
Pound Traders May Be Facing Choppiest June Since Brexit Vote
Vassilis Karamanis and Anooja Debnath – Bloomberg
The pound is heading for this year’s fourth monthly slide, and a lengthening list of risks is pointing to more turbulence in June.
Sterling traders look set to face heightened uncertainty on multiple fronts next month — the end-June deadline to extend the Brexit transition period, the possibility of negative interest rates in the U.K. and the economy’s tentative exit from the pandemic lockdown.
Hedge funds target France as short-selling bans lifted
Maiya Keidan – Reuters
A cluster of big name hedge funds have started betting against French companies, moving in after the lifting of a short-selling ban imposed earlier this year to calm financial markets, an analysis of regulatory filings showed. France joined Italy, Spain, Belgium, Austria and Greece in dropping short-selling bans last week. They had banned the practice for many stocks two months ago to curb extreme stock market volatility caused by economic uncertainty that has resulted from the coronavirus lockdowns.
Funds wage CBOT selling spree as big U.S. crops and China tensions loom
Karen Braun – Reuters
Speculators were big sellers of Chicago-traded grains and oilseeds last week, as prospects for newly planted U.S. corn and soybean crops looked positive and risks mounted for agricultural exports as U.S.-China tensions escalate. Funds have grown especially bearish toward corn just as the U.S. growing season is ramping up, and that has led to short-covering rallies in past years. But corn faces unique challenges this year with U.S. stockpiles set to expand by more than 50% over the next year to 33-year highs, driving futures to the lowest pre-harvest levels since 2006.
Hedge funds build large bullish position in WTI
John Lemp – Reuters
Hedge funds and other money managers continued to accumulate bullish positions in crude oil and its products last week but almost all buying remains concentrated in WTI, with little evidence of optimism in other futures contracts. Portfolio managers purchased the equivalent of 30 million barrels in the six most important futures and options contracts in the week to May 19, exchange and regulatory data shows.
China’s Zhengzhou exchange seeks feedback on thermal coal options
China’s Zhengzhou Commodity Exchange said in a statement on Monday evening it is seeking public opinion for its thermal coal options contract.
Exchanges and Clearing
Binance Adds ETH and XRP Options Contracts
Arnab Shome – Finance Magnates
Crypto exchange giant Binance announced on Monday the addition of Ethereum and XRP options trading facility. This addition came only a month after the exchange jumped into options trading with Bitcoin contracts. The platform now supports options trading with three digital currencies.
Valuation Model Change for Four Natural Gas Option Products – Effective May 26, 2020
From CME Clearing
CME Clearing is switching the pricing model used for valuation of four options products on NYMEX European Natural Gas Futures to the Bachelier model, effective with trade date Tuesday, May 26, 2020. (Note that Monday, May 25, is Memorial Day, an exchange holiday, and hence trades executed on CME Globex beginning on the evening of Sunday May 24 will be for trade date Tuesday May 26.)
NYSE trading floor partially reopens after coronavirus closure
John McCrank – Reuters
New York Governor Andrew Cuomo donned a face mask and rang the opening bell at the New York Stock Exchange on Tuesday, marking the partial reopening of the trading floor at the iconic 11 Wall Street building, which had been closed since March 23 due to the coronavirus.
Migration of NFX Open Interest to NYMEX
In connection with Nasdaq Futures, Inc.’s (“NFX”) decision to discontinue offering Natural Gas and Crude Oil products, and in response to client demand, NFX plans to migrate existing open interest in NFX Natural Gas and Crude Oil futures and options on futures to NYMEX in late May. The transfer will be done with client consent and conducted via block trades at NFX to close existing positions, as well as block trades at NYMEX to open positions.
How to Play the Market’s Rally Without Paying Top Dollar
Steven M. Sears – Barron’s
Covid-19 has created a curious phenomenon in the stock market: upside regret.
Investors are increasingly watching stock prices trade ever higher and some are envious of the gains even though unemployment is at historic highs, and the U.S. economy has been decimated by a virus.
Amid this incredible rally—and an even more incredible economic support program from the U.S. government—investors are forced to confront the reality that many have missed out on this historic gain if they reduced risk and took profits because the Covid-19 virus scared them out of the market.
Market ‘distress’ over virus sparked emergency Wall St measures
Laura Noonan and Philip Stafford – Financial Times
More than 270 of Wall Street’s key trading staff were summoned for emergency weekend duty to clear a massive backlog of failed trades in March and April, highlighting the stress that built up in the financial system when the coronavirus crisis tore into markets.
The clean-up took place on March 28 and April 25, co-ordinated by Sifma, a US trade body that represents Wall Street brokers, banks and asset managers, using protocols that had never been tested out of a training environment before. More than 50 institutions were involved.