Robinhood has a ‘free money cheat’; Miami International Holdings Acquires Controlling Interest in the Bermuda Stock Exchange

Nov 6, 2019

Observations & Insight

The Spread: Stocks rise and snow falls

JohnLothianNews.com

A Halloween snowstorm plays a trick on FIA Expo; new research says the stock market has become more volatile each year since 1958, but the VIX was down significantly the week of Oct. 28 – Nov. 1 after a positive jobs report sent the Nasdaq and S&P 500 to record heights.

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Lead Stories

Robinhood has a ‘free money cheat’ that allowed one user to grow $4,000 into $1 million through ‘infinite leverage’
Ben Winck – Markets Insider
Robinhood Markets’ app has a bug that allowed users to trade with an unlimited amount of borrowed cash, creating what one user called an “infinite money cheat code.”
The bug was first uncovered by members of the WallStreetBets sub-reddit. A Monday post showed user MoonYachts exploiting the glitch to turn a $4,000 stake into a $1 million position. He laid out how he pulled off the trades through the “free money cheat,” and told other users “DON’T DO THIS.”
/jlne.ws/2JVw3Pj

****JB: Buying and selling options was intrinsic to pulling this off. We will repeat what the article warns and we hope would go without saying: DO NOT TRY THIS!

Miami International Holdings Acquires Controlling Interest in the Bermuda Stock Exchange
MIAX International Holdings, Inc. (press release)
Miami International Holdings, Inc. (MIH), the parent holding company of the MIAX, MIAX PEARL and MIAX Emerald options exchanges (the MIAX Exchange Group), and the Bermuda Stock Exchange (BSX) today announced that MIH has acquired a controlling interest in the BSX. The controlling interest aligns directly with MIH’s corporate strategy and allows the company to expand its worldclass technology, derivatives trading and regulatory expertise.
/jlne.ws/32otprT

Stock Market Remains Near Highs, And Investors Await Fresh Catalyst For Next Move
JJ Kinahan – MarketWatch
As hump day dawns, investors and traders seem to be looking for a catalyst now that earnings season is mostly behind us, the Fed’s rate cut is in the rear view, and we don’t have much in the way of trade war-related news this morning. Early indications suggest that the market could have another flattish day today but remain around all-time highs unless headlines spark a move one way or the other. The Financials sector could get some attention again today as bonds try to make a comeback. Yields are lower after moving higher yesterday, but that doesn’t appear to be because of market nervousness sparking safe-haven buying.
/jlne.ws/36E5UhR

Exchanges and Clearing

Nasdaq Launches Smart Options
Trader’s Magazine (press release)
Nasdaq (Nasdaq: NDAQ) recently announced the launch of Nasdaq Smart Options, a service that allows for easier access to essential options market data. Nasdaq Smart Options provides a more manageable and less resource-intensive data feed from the U.S. options markets in real time, drawing the essential data from the standard Options Price Reporting Authority (OPRA) data feed.
/jlne.ws/2qpjvsS

Exchanges Need to Justify High Data Fees
Neill Vanlint – MarketsMedia
Across global financial markets, it is hard to think of a more contentious issue right now than the prices exchanges are charging for their trading data. Some high-profile potential acquisitions, including the London Stock Exchange’s $27bn bid to buy Refinitiv, means that there could soon be more market data monopolies than ever before. Let’s face it, regardless of the providers, market data has never exactly been cheap but prices are getting higher for traders. And with just a few firms currently dominating, there is no question that banks need to ensure they are getting more for their money.
/jlne.ws/2NIzLNs

Euronext announces 2020 holiday calendar for its cash and derivatives markets
Euronext
Amsterdam, Brussels, Dublin, Lisbon, London, Oslo and Paris – 5 November 2019 – Euronext today announced the 2020 trading days for its markets in Amsterdam, Brussels, Dublin, Lisbon, London and Paris.
/jlne.ws/2qosAlI

New Zealand’s NZX delays market opening due to ‘systems issues’
Reuters
New Zealand stock exchange operator NZX Ltd delayed the opening of markets for almost three hours on Wednesday because of “systems issues” in the derivatives market.
/jlne.ws/2WNtq7H

Regulation & Enforcement

U.S. SEC proposes rules that could limit shareholder voices
Katanga Johnson and Jessica DiNapoli – Reuters
Wall Street’s top regulator on Tuesday proposed a pair of long-awaited rules that would set new limits on shareholders’ ability to call for corporate changes on thorny issues like climate change disclosures and executive compensation.
/jlne.ws/2NMLgmV

****JB: Imagine that…telling shareholders, the literal owners of a given company, that they have limited say in what that company does.

Technology

Data Costs Are Huge, and There’s Nothing Anybody Can Do About It…
RCM Alternatives
We’ve talked at length about the move to algorithmic trading, the quant revolution and the billions of dollars that investors have been pouring into the space. But all isn’t rainbows and lollipops in the quant world these days. While the growth and general spend on quants is still growing, the data costs associated with these guys are crippling their profits, as outlined in a recent efinancial careers post: The newly released accounts for Qube Research and Technologies, the quant hedge fund that spun out of Credit Suisse in 2017, underscore the trend.
/jlne.ws/32n1851

Moves

FINRA Board of Governors Appoints Peter Fisher as Newest Governor
Trader’s Magazine (press release)
The FINRA Board of Governors has appointed Peter R. Fisher as a new public Governor. Fisher currently teaches at the Tuck School of Business at Dartmouth, where he is a clinical professor. Fisher’s term on the FINRA Board begins immediately. In addition to his positions at Dartmouth, Mr. Fisher is a director of the John F. Kennedy Library Foundation and of the Peterson Institute for International Economics. He is also a member of the Advisory Committee on Systemic Resolution of the Federal Deposit Insurance Corporation and the Advisory Board of the MIT Golub Center for Finance and Policy.
/jlne.ws/36CUyus

Strategy

How Buffett Used This Simple Strategy To Boost Returns
Amber Hestla – Street Authority via Nasdaq
Among Warren Buffett’s biggest all-time winners is Coca-Cola. Buffett owns 400 million shares of the stock, and paid a split-adjusted average price of less than $3.25 a share. Today, that stake in KO is worth about $20 billion, which means Buffett has made nearly than 1,500% on his investment.
/jlne.ws/2NqSi21

Russell Rhoads’ Look Forward: Structured Outcomes with Options on Futures
TABB Forum (VIDEO)
Most market participants gravitate toward equity or index options when targeting a specific risk-return profile. In this week’s look forward, TABB Group head of derivatives research Russell Rhoads discusses how options on futures may be used for the same purposes and opens the floor for suggestions of other strategies to explore. For more in-depth analysis of the topic, download a complimentary copy of Rhoads’ recent report, “Structured Solutions Using Options on Futures.”
/jlne.ws/2rf3JRy

Events

Webinar registration: LIBOR fallbacks for Eurodollars
CME Group
Join us for a discussion of our proposed methodology for LIBOR fallbacks in CME cleared-products, with a special focus on Eurodollar futures and options.
/jlne.ws/32oC39V

Miscellaneous

The Reddit geek who raked in $100,000 with 2 trades credits his parents, likes tech stocks, and says the ‘hardest part’ was cashing out
Theron Mohamed – Markets Insider
The Reddit geek who raked in more than $100,000 with two trades told Markets Insider he credited his parents for his success, liked tech stocks, and found it hard to walk away with his profits. Eddie Choi, a 25-year-old business analyst in San Diego, made a splash when Bloomberg reported that he turned $766 into nearly $108,000 by purchasing puts on Roku stock and SPY — the S&P 500 exchange-traded fund — then profiting enormously when they dropped.
/jlne.ws/2oSgQY6

Wall Street increasingly weighs risk from climate change
David Randall – Reuters
In the wake of two years of devastating wildfires in California, Wall Street is incorporating a new risk metric when evaluating companies: climate resiliency.
Investors, analysts, research firms and companies are putting more emphasis on how climate issues ranging from rising sea levels to record heatwaves will affect profits and revenues in the United States and what companies are doing to address those risks.
/jlne.ws/2oWDoXO

The Italian Connection — An Options Journey Comes Full Circle
Tony Saliba – Medium.com
In the ’90s, when I made the pre-euro European Union a frequent home, I was busy evangelizing about risk management and the benefits of options trading with my educational firm, International Trading Institute, while also spreading the word about my firm’s technology, an options trading front end. That period of time in European markets offered tons of opportunities for the entrepreneurially minded as regional markets for options trading began to develop, partially due to the success of OM (now a part of Nasdaq Nordic) in Sweden.
/jlne.ws/2PTHvyM

****JJL: We have an Open Outcry Traders History Project video with Tony too. We will publish it soon.

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