Observations & Insight
After topping 150 for a record 4 straight days, Cboe’s SKEW Index has simmered down a bit, closing yesterday at 137.
That is still much higher than the average daily close (since 1990) of 119.
A BloombergQuint piece notes that in the middle of a bunch of turmoil, volatility in Indian equities jumped 35 percent in September so far.
OCC has a video out called “What we do” featuring Craig Donohue.
Redefining the Derivatives Market: Q&A with Cboe’s Chris Concannon
Russell Rhoads – Tabb
VIX volumes are slowly building again after falling in the wake of February’s volatility surge. The decline in volume is likely due to a decrease in the assets under management held by volatility-based ETPs, according to Cboe Global Markets President Chris Concannon. Recently, Concannon gave TABB Group director of derivatives research Russell Rhoads an exclusive interview centered on Cboe’s various business lines. The discussion touched on VIX, trading platform migration, retail participation in options, and even MiFID II.
Crypto Startup LedgerX Eyes Ethereum Options, Awaiting CFTC Approval
Nick Chong – NewsBTC
In spite of the ever-tumultuous market, crypto investment services providers have continued to eye the expansion of their product lineup in a bid to entice prospective investors to allocate capital to this space.
Dash Financial Technologies Launches Advanced Portfolio Trading Solution
Dash Financial Technologies, the industry leader in order routing transparency, visualization and customization solutions, today announced the launch of its next-generation portfolio trading (PT) algorithm, a highly customizable workflow and execution solution with real-time transparency and analytics, allowing institutional clients to achieve their portfolio trading performance goals, however they choose to define them.
China’s Neoglory Holdings defaults on exchange-traded bond payments
Chinese apparel and accessories retailer Neoglory Holdings Group has defaulted on payments on an exchange-traded bond, the company said. In a statement posted to the website of the Shanghai Stock Exchange on Tuesday, the company said it was unable to pay back principal to bondholders exercising put options on bonds worth 1.74 billion yuan ($253.20 million), out of an initial issuance of 2 billion yuan.
****SD: This is part of the ongoing debt saga caused by puttable bonds. It’s only going to get worse in 2019 as “creditors could exercise put options on 1.5 trillion yuan of China local bonds next year,” according this Bloomberg piece from March – China Inc. Feels Heat From $668 Billion Puttable Bond Cooker.
Lower Volatility On Lower Correlation
Bespoke Investment Group – Seeking Alpha
As equities have rallied this year, volatility has fallen as seen through the VIX. Currently sitting just under 12, the VIX is nowhere near the extreme single-digit lows from earlier in the year, but it is still far lower than a level of over 16 back in June.
Goldman Sachs Pours Cold Water on Talk of $100 a Barrel Oil
David Marino – Bloomberg
Another supply catalyst needed to push prices higher: analysts; Bank sees Brent crude back in $70-$80 range end-year
Oil at $100? Not so fast, says Goldman Sachs. The bank’s analysts said in a note Tuesday that “another supply catalyst beyond Iran would likely be needed for prices to meaningfully break to the upside.”
****SD: Also from Bloomberg – Bulls Dominate as Oil Traders Wrap Up Their Annual Asian Shindig
Exchanges and Clearing
Cboe Global Markets Supports Conversation on Market Data and Access
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, welcomes the announcement by the Securities and Exchange Commission (SEC) that its Division of Trading and Markets will host a two-day roundtable covering market data and access on October 25 and 26, 2018.
Exchange Seed CX to break into crypto derivs
Louisa Chender – Global Investor Group (SUBSCRIPTION)
Beeks Financial Cloud announced it is adding connectivity to the Chicago-based exchange
Intercontinental Exchange Appoints Andrew Surdykowski as General Counsel, Elizabeth King as Chief Regulatory Officer, and Octavia Spencer as Corporate Secretary
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, announced today that Andrew Surdykowski has been named the company’s next General Counsel, succeeding Johnathan Short, who intends to retire after 14 years in that role. Surdykowski, currently the company’s Senior Vice President and Associate General Counsel, joined ICE’s legal team in 2005, overseeing a range of matters for Intercontinental Exchange.
Goldman trading executive Bash-Polley to depart at year-end: memo
Stacy Bash-Polley, who plays a key role with clients in Goldman Sachs Group Inc’s (GS.N) trading business, plans to retire at year-end, according to an internal memo sent on Tuesday.
Consolidated Audit Trail Selects Exegy Packet Capture Service
Exegy Inc., a provider of managed services and low-latency technology for market data normalization and distribution, has announced today that its Packet Capture Service has been selected as the source of high-precision historical Securities Information Processor (SIP) market data for the Consolidated Audit Trail (CAT).
IHS Markit Cancels Derivatives Unit Sale
James Rundle, Anthony Malakian – WatersTechnology (SUBSCRIPTION)
The information provider will now keep MarkitSERV, despite putting it up for sale earlier this year.
Turkish Volatility Showed Value of Alt Data
Shanny Basar – MarketsMedia
In the middle of the summer vacation on Friday 10 August, Turkey’s lira plunged by one-fifth, leading to fears that the country’s crisis would spread to other markets. The US had suddenly imposed tariffs on Turkish steel in protest against the imprisonment of an American pastor, which added to investors’ existing concerns about President Tayyip Erdogan taking increasing control over the Turkish economy. The steep jump in volatility highlighted the value of investors receiving early insights on news that can impact markets, intelligence that is increasingly being delivered first through alternative data sources.
Regulation & Enforcement
Wall Street Regulator Facing Cash Crunch Offers Staff Buyouts
Benjamin Bain and Robert Schmidt – Bloomberg (SUBSCRIPTION)
CFTC seeks to shrink its headcount amid budget shortfall; Agency oversees derivatives, swaps and futures markets
The main U.S. regulator of complex derivatives that helped fuel the 2008 financial crisis is offering some of its employees buyouts after lawmakers refused years of agency requests to increase funding.
Big Week in Spoofing Enforcement
Michael Friedman, Trillium via Tabb
Equities and futures regulators announced four significant fines for spoofing last week: (1) FINRA and the major stock exchanges fined and suspended a man the Wall Street Journal dubbed “the Czar of Overseas Day Trading”; (2) the CFTC fined Chicago proprietary trading firm Geneva Trading $1.5 million for spoofing by three former traders in a wide variety of products; (3) the CFTC fined a New Jersey asset manager and a former trader $2.3 million for spoofing metals and oil contracts; and (4) the CFTC fined Mizuho Bank $250,000 for spoofing Treasuries and Eurodollar rates. The overseas day trading case and the metals spoofing case are the most interesting.
How Delta Strategist Biggam Is Trading the S&P 500 ETF
Tim Biggam, lead options strategist at Delta Derivatives, discusses the performance of stocks ahead of the Federal Reserve’s interest-rate decision and his options strategy with Bloomberg’s Abigail Doolittle on “Bloomberg Markets: The Close.”
****SD: I feel like Bloomberg never gives enough time for its options segment.
STA Preps for Annual DC Market Structure Conference
As the leaves prepare for their yearly turn of color, hundreds of the industry’s biggest names from the world of market structure will soon gather in the nation’s capital for the Security Traders Association’s annual conference. This year’s event – titled “Shaping the Future” – will again be held at the JW Marriott, from October 3-5, and feature the usual bevy of panelists and speakers from the trading community’s leading regulators and buy-side, sell-side, exchange and vendor firms. The conference’s agenda can be found here. In an interview with Traders Magazine, STA President and CEO Jim Toes noted that the impact of the pace of regulatory and technology change will continue to be a key theme of the event.
FIA Announces Fintech Startups Chosen for Fourth Annual Innovators Pavilion
FIA today announced that 15 companies have been chosen to exhibit in the FIA Innovators Pavilion at the 34th Annual Futures & Options Expo, which will take place in Chicago on Oct. 16-18.
Sonic Takeover Yields a 660% Profit for Options Investor
Gregory Calderone – Bloomberg (SUBSCRIPTION)
One Sonic Corp. options investor appears to be locking in a 660 percent gain on the October $40 calls after Inspire Brands announced it would acquire the restaurant company for $43.50/share.
Death of equity keeps stock market bull alive
Sujata Rao, Helen Reid and Chuck Mikolajczak – Reuters
Amid all the brickbats thrown at one of the longest bull markets in history, the remarkable buoyancy of world equity prices may simply be down to a shortage of shares.
Trade wars, an unpredictable White House, a messy Brexit and rising interest rates have all failed this year to knock stock markets off their collective perch for very long. Wall Street indices are at record highs and global equity benchmarks are less than 4 percent from the year’s peaks.
Investors betting against weed stocks are getting crushed – but they refuse to throw in the towel
Graham Rapier – Markets Insider
High-flying marijuana stocks have already cost short sellers more than $900 million this year, but those skeptics don’t appear to be giving up anytime soon.
There’s at least $1.7 billion riding against the sector, according to data from the financial-analytics firm S3 Partners, and very few of those investors have bought shares outright in order to cover their wagers.