Observations & Insight
CFTC v. Kraft/Mondelez: Agency Reserves Its 5th Amendment Rights Against Self-Incrimination; Agrees to Remove Offending Statements From Website
Thom Thompson – John Lothian News
Attorneys for the U.S. Commodity Futures Trading Commission appeared in court Monday to answer a motion filed by Kraft and Mondelez (K&M). K&M are asking that the court order the CFTC to comply with all parts of their agreement, especially Paragraph 8 of the order’s Section I which gags the agency, and for the court to sanction the CFTC for its breaches. Paragraph 8 (“the gag order”) says, “Neither party shall make any public statement about this case other than to refer to the terms of this settlement agreement or public documents filed in this case, except any party may take any lawful position in any legal proceedings, testimony or by court order.” K&M is also seeking sanctions against the CFTC.
On Wednesday last week the parties agreed to a settlement of the case the CFTC brought in 2015 against K&M for their alleged manipulation of the CBOT wheat futures contract in 2011. The U.S. Federal Court in Chicago entered the agreement as a consent order on Thursday.
To read the rest of this report, go here.
****SD: This has turned into quite the kerfuffle.
Many of you support A Leg To Stand On, the charity that helps provide prosthetics and limb procedures for children. The organization announced yesterday that it has added three new countries to its list by partnering with medical care organizations in Laos, India and Uganda. ALTSO now operates 11 programs in 10 developing countries across Asia, Africa, and Latin America. ALTSO’s annual charity events are set for Chicago on October 10 and New York on October 24th. Get your tickets now to help kids in need.
U.S. regulators finalize changes easing post-crisis ‘Volcker Rule’
Pete Schroeder – Reuters
Two U.S. banking regulators on Tuesday approved changes easing a rule introduced after the 2007-2009 financial crisis that bans banks from trading on their own account, giving Wall Street one of its biggest wins under the Trump administration.
****SD: From the piece: “The rewrite aims to clarify which trades qualify for safe harbors, such as when banks facilitate client trades and hedge risks, and to expand those exemptions. The final rewrite scraps a proposed new test for identifying proprietary trading that banks complained would have made the rule even more complicated.” For the WSJ, go here.
Recent Strides in OCC’s Transformation
Craig Donohue, Executive Chairman, John Davidson, OCC Chief Executive Officer, Scot Warren, Chief Operating Officer – OCC
There have been significant transformation efforts undertaken at OCC by our colleagues during the last several years. OCC’s transformation is a broad, multi-year undertaking covering every aspect of our organization: our financial resiliency, our people, our processes, and our technology. While our colleagues have overcome many challenges and accomplished a great deal, we still have more to do. We would like to share their progress with you.
Traders Bet on Falling Volatility as Stocks Rebound
Gunjan Banerji – WSJ (SUBSCRIPTION)
Stock volatility has receded in recent days, and some investors have bet the tranquility will persist.
Derivatives traders have increased positions that pay out if market swings dwindle and stocks continue to climb.
****SD: From the piece: “Leveraged funds like hedge funds recently increased bearish wagers on futures linked to the VIX to the highest level since September, Commodity Futures Trading Commission data as of Aug. 13 show. There are almost five bearish contracts outstanding for every bullish one held by leveraged funds, the data show.”
Market is `underpricing’ risk of more stock turmoil, BofA says
Liz Kiesche – Seeking Alpha
The options market is underestimating stock market volatility, especially in a week with events that can spur activity, such as Fed Chair Jerome Powell’s speech at Jackson Hole on Friday, according to Bank of America’s derivative analysts.
SPY, the ‘People’s Fear Gauge,’ Separates Truth From Turbulence
Eric Balchunas – Bloomberg (SUBSCRIPTION)
The next time it seems as if the sky is falling, pull up the trading volume in the SPDR S&P 500 ETF Trust (ticker: SPY) for a reality check.
Chief tech officer at Trading Technologies set to depart
Hayley McDowell – The Trade
Trading Technologies’ chief technology officer, Drew Shields, is set to leave the firm after just over five years with the company, The TRADE understands.
Volatility for Retailers Isn’t Over, Options Indicate
Gunjan Banerji – WSJ (SUBSCRIPTION)
It has been a wild earnings season for retailers, and options traders are bracing for bigger stock swings for some shops.
Shares of big retailers such as Home Depot, Inc., Kohl’s Corp. and TJX Cos. recorded large moves in trading early Tuesday and were some of the biggest winners and losers in the S&P 500.
Chicago titan Citadel just keeps growing. The rest of the city’s hedge fund industry, not so much.
Lynne Marek – Crain’s Chicago Business
Tired of paying hefty fees for mediocre returns, investors have pulled money out of hedge funds in recent years. With less capital to go around, Chicago’s hedge funds are caught in the $3.1 trillion industry’s consolidation that increasingly favors megafirms. Many of the local firms, including No. 2 Magnetar Capital Partners, have fewer assets today than at their peak, and one returned investors’ money this year as it shut down trading for outside clients. At the same time, few new hedge funds have sprung up.
There’s no future for traders who don’t know Python
Sarah Butcher – efinancialcareers
Raoul-Gabriel Urma could have been a trader. He could have been a top technologist in an investment bank. Or he could have worked for Google. He could have done a lot of things, but instead he’s chosen to proselytize about the need to know Python and data science techniques if you want your trading career to have a whiff of a future.
Itiviti And Blaze Portfolio Partner To Deliver Superior Trading Connectivity And TCA Services
Itiviti, a leading technology and service provider to financial institutions worldwide, has partnered with Blaze Portfolio, a software provider focusing on scalable investment portfolio rebalancing and real-time trade order management technology. Partnering with Itiviti enables Blaze Portfolio to offer their clients access to Itiviti’s NYFIX suite of services including, its world-class FIX connectivity network, monitoring and execution reporting.
Exchanges and Clearing
Where’d all the stocks go? Nasdaq’s CEO on shrinking market
Stan Choe – AP
The stock market is a much less crowded party than it used to be. In the late 90s, when a bevy of hot dot-com companies were rushing to sell their shares on public markets, investors had more than 7,500 U.S. stocks to choose from. The dot-com bust culled many of those stocks, though, and the number has continued to shrink steadily, now down more than half from its 1998 peak.
Exchange Speed Bumps: An Indirect Way to Reduce Buy-Side Trading Costs
Jeff Bacidore – Traders Magazine
Speed bumps have been a popular topic recently. The most recent discussion has centered around asymmetric speed bumps, like the one proposed for CBOE EDGA. Such speed bumps would slow incoming “take” orders by a few milliseconds, effectively giving potential resting counterparties extra time to cancel or modify their existing orders. The benefit to liquidity providers is obvious – they have a greater opportunity to adjust their quote in moving markets and avoid being “adversely selected” by faster traders. The net effect on other traders, however, is less clear.
WFE: Sustainability & Commodity Derivatives White Paper
The World Federation of Exchanges
The WFE has published a white paper on sustainability and commodity derivatives. The white paper explores sustainability in the context of commodity derivatives markets, and is intended to stimulate discussion amongst the WFE membership and the wider commodity derivatives industry about how they might respond to the potential impact of sustainability issues on commodity markets.
Taking aim at rivals, CBOE Europe’s closing auction debuts with tiny volume
Josephine Mason – Reuters
Europe’s latest share trading platform debuted with a whimper this week as just 23,000 euros ($25,460) worth of stock changed hands in Monday’s first closing auction, but its parent Chicago-based CBOE said plenty of customers were lining up to use it.
Regulation & Enforcement
Seoul to take preemptive actions if needed to stabilize markets
Yonhap News Agency
The financial authorities will take “preemptive and stern” actions to stabilize markets if volatility increases, with a lengthy trade war between Washington and Beijing fueling fears of a global recession, a senior government official said Tuesday.
Insurgent Chris Flint wins contested Finra election for big-firm board seat; Linde Murphy wins small-firm board seat that was also subject of contested election
In a contested election for a large-firm seat on the board of the Financial Industry Regulatory Authority Inc., insurgent candidate Chris W. Flint has won over incumbent Andrew S. Duff, who was selected to run by the Finra board’s nominating committee.
It’s a Great Time to Bet on GE Stock Going Up – or Down
Steven M. Sears – Barron’s
Battle lines have been drawn around General Electric’s stock, and the options market is handsomely rewarding investors for choosing sides.
GE’s options are inflated with a big fear premium since Harry Markopolos, one of the whistleblowers on the Bernie Madoff fraud, released his anti-GE report on Thursday. GE has staunchly defended itself against the accusations, but that has done little to calm a key measure of the stock.
The OIC is offering a free one-hour webinar about “Options Strategies for Higher Volatility” on Wednesday, August 21, 2019 at 03:30 PM Central Daylight Time. Brushing up on your toolkit for volatility could only be a good idea heading into what looks like a volatile fall trading season.
Asia-Pacific Derivatives Community To Gather In Taiwan For ‘FIA Forum: Taipei 2019’
The Taiwan Futures Exchange (TAIFEX), together with FIA, will host the FIA Forum: Taipei 2019, on Thursday, 5 September 2019 in Taipei, Taiwan.