Observations & Insight
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Quadruple Witching Roils Stock Market, Sparking Bursts of Volume
Lu Wang – Bloomberg
In a year that’s seen the market bombarded by wild swings and violent rotations, traders just got blasted by a surge of trading volume.
Equity transactions spiked Friday amid a quarterly event known as quadruple witching, when options and futures on indexes and equities expire. During the first 20 minutes of trading, volume on S&P 500 stocks was about 50% above the average for that time of day over the past 30 sessions as the benchmark slipped 0.3%.
Cboe Options Exchange to List Mini-Russell 2000 Index Options in First Quarter 2021
Cboe Global Markets, Inc., a market operator and global trading solutions provider, today announced plans to launch trading in Mini-Russell 2000 Index options on Cboe Options Exchange in the first quarter of 2021, subject to regulatory review.
With the planned addition of new mini options on the Russell 2000 Index, Cboe continues to expand its offerings of smaller-sized, tradable index products that help enable market participants to gain more efficient and cost-effective exposure to the broad U.S. equity market. The planned launch also underscores Cboe’s longstanding relationship with FTSE Russell, building upon its successful franchise of index-based, cash-settled options tied to the FTSE Russell global indices.
Deribit’s New Options Allow Bitcoin Traders to Bet on Rally to $100K
Omkar Godbole – Coindesk
Bitcoin traders can now bet on a potential price rise to $100,000 via crypto derivatives exchange Deribit’s new options contracts. Call and put options at the $100,000 strike price expiring on Sept. 24, 2021, went live on Deribit Thursday. “A few trades have taken place, as thus far 45 [call option] contracts have been traded,” Luuk Strijers, chief commercial officer at Deribit, told CoinDesk.
Dow skids 230 points as Washington lawmakers race toward COVID fiscal aid deal
William Watts and Mark DeCambre – MarketWatch
Stocks added to losses Friday morning, a day after benchmark indexes closed at record highs, with investors focused on talks in Washington over another round of economic relief.
Friday also marks what is known as “quadruple witching day” — the date when stock-index futures, stock-index options, stock options, and single-stock futures expire simultaneously, a potential source of volatility. The inclusion of Tesla Inc. into the S&P 500 at the conclusion of trading Friday and a rebalancing of portfolios is also likely to add some choppiness to markets, analysts said.
Tesla Joins the S&P 500: Five Things to Watch
Gunjan Banerji and Michael Wursthorn – WSJ
Tesla will officially join the S&P 500 Monday, likely precipitating a frenzied Friday afternoon in markets. The electric-car maker will be by far the largest firm by market value ever to join the S&P, the most widely tracked stock index. Tesla’s inclusion will prompt the dozens of index funds that track the S&P to seek to purchase tens of billions of dollars of stock at Friday’s closing price, in a bid to track the index as closely as possible. Because of the firm’s size and the volatility of its shares, Tesla’s addition may ripple through the market in additional, unpredictable ways, traders said.
Exchanges and Clearing
OCC to Provide Year-End Refund for Clearing Member Firms
OCC, the world’s largest equity derivatives clearing organization, today announced that its Board of Directors has approved a refund of $156 million to be paid to clearing member firms on April 19, 2021.
“As part of our ongoing efforts to strengthen OCC’s resiliency while also delivering operational excellence and efficiency, OCC’s Board of Directors approved this refund for our clearing member firms,” said John Davidson, OCC Chief Executive Officer.
Cryptocurrency exchange Coinbase files with regulators to go public
Coinbase Inc said on Thursday it had confidentially applied with the U.S. Securities and Exchange Commission to go public in a move that would make it the first major U.S. cryptocurrency exchange to list on the stock market.
Coinbase’s announcement comes as Bitcoin hit a record high on Thursday, just a day after passing the $20,000 milestone for the first time, amid surging interest from larger investors.
TriOptima Completes First Benchmark Conversion Risk Replacement Trades at Japan Securities Clearing Corporation
TriOptima, a leading infrastructure service that helps to lower costs and mitigate risk in OTC derivatives markets, has announced the completion of the first triReduce enhanced compression Japanese yen cycle, which includes Tokyo Overnight Alternative Rate (TONA) risk replacement trades. The cycle took place on December 4, 2020 at the Japan Securities Clearing Corporation (JSCC).
Miami International Holdings Acquires 100% Ownership of The Bermuda Stock Exchange
Miami International Holdings
Miami International Holdings (MIH), the parent holding company of MIAX, and the Bermuda Stock Exchange (BSX) today announced that MIH has acquired 100% ownership of the BSX. MIH previously announced the acquisition of a majority interest in the exchange in November 2019. The BSX will continue its operations as a wholly owned subsidiary of MIH.
Regulation & Enforcement
Robinhood Pays $65 Million Fine to Settle Charges of Misleading Customers
Nathaniel Popper and Michael J. de la Merced – NY Times
Robinhood, a fast-growing financial app, has attracted millions of young customers in recent years by making it fun and free to trade stocks, as well as riskier investments like options and Bitcoin.
Now the same practices that drove Robinhood’s success are increasingly leading to fines, complaints and scrutiny from state and federal regulators.
Options Regulatory Alert #2020 – 47 PHLX, ISE and GEMX – Bid Ask Differentials for NDX Option Class through March 19, 2021
Effective December 21, 2020, the below market maker quote width requirements for options overlying NDX on Nasdaq PHLX (PHLX), Nasdaq ISE (ISE) and Nasdaq GEMX (GEMX) will be effective through March 19, 2021. The exchanges may, in their discretion, amend the bid/ask differentials by providing notice to members.
Cboe Global Markets Announces Election of Ivan Fong and Alexander J. Matturri, Jr. to Board of Directors
Cboe Global Markets, Inc. (Cboe: CBOE), a market operator and global trading solutions provider, today announced its Board of Directors elected Ivan Fong, Senior Vice President, General Counsel and Secretary of 3M Company, and Alexander J. Matturri, Jr. former Chief Executive Officer of S&P Dow Jones Indices LLC, as new members to its Board of Directors. Mr. Fong and Mr. Matturri are elected to fill a vacancy on the Cboe Global Markets board and increase the number of directors to 15. Ed Tilly, Chairman, President and Chief Executive Officer of Cboe Global Markets, said: “We are pleased to welcome Ivan Fong and Alex Matturri to Cboe Global Markets’ board of directors. Each brings a wealth of knowledge and experience that will add to the leadership and counsel of our board. Their addition strengthens our ability to execute strategic initiatives that grow our global business, serve the needs of our customers and deliver sustainable returns and long-term value to our shareholders.”
(Podcast) OBC 116: Trading Juicy Skew in TSLA, NIO, AAPL and more
Options Boot Camp – Options Insider Network
On this episode, Mark and Dan explore how options traders can take advantage of elevated volatility skew in popular names like Tesla, Apple and NIO.
2020 Annual Trends in Futures and Options Trading
27 January 2021 • 10:30 AM – 11:30 AM ET • Webinar
This webinar will highlight the main trends in trading activity in 2020 in the global exchange-traded derivatives markets, with category and regional breakdowns as well as exchange and contract rankings.
Moderator: Will Acworth, Senior Vice President of Publications, Data & Research, FIA