Observations & Insight
OneChicago to close on September 18 for trading. Long live OneChicago.
By John Lothian
OneChicago was a name given to a securities futures exchange that was an idea that never lived up to its name. It was initially a collaboration between the CME, CBOE and the CBOT.
Securities futures exchange OneChicago put out a notice to members on August 14 that it would wind down trading operations and stop them entirely on September 18.
The collaboration between the CME Group, Cboe Global Markets and Interactive Brokers ultimately fell apart after 19 years. The joint venture effort imagined as a battle between Chicago (derivatives) and New York (equities) is irrelevant today based on the changes to the industry, the markets and the firms themselves.
However, adding a securities futures exchange arm to the partner firms of 2020 probably makes more sense than doing it collaboratively with competitors. We might just see one or more of the partners start a new securities futures exchange as a go-alone effort.
To read the rest of this commentary, go here.
The Spread: Running Hot
This week on The Spread – the Fed opts for higher inflation targets, the OCC gets featured, Cboe has a new options product, and more.
Robinhood’s Rise Brings Dark Side of Irate Traders, U.S. Probes
Robert Schmidt and Benjamin Bain – Bloomberg
Agencies flooded with complaints; SEC examining March outage; Robinhood says it’s committed to improving customer service
Robinhood Markets has catapulted ahead of its online brokerage rivals with a smartphone app that has attracted an army of young investors. Yet with the company’s rise has come a litany of problems: trading outages, angry customers and regulatory probes. Over the first half of the year, U.S. consumer protection agencies received more than 400 complaints about Robinhood — roughly four times more than competitors like Charles Schwab Corp. and Fidelity Investments’ brokerage unit. The grievances, obtained via a public records request to the Federal Trade Commission, depict novice investors in over their heads, struggling to understand why they’ve lost money on stock options or had shares liquidated to pay off margin loans.
S&P 500 stalls at record level, set for best August in 36 years
Medha Singh and Devik Jain – Reuters
The S&P 500 hovered near record highs on Monday as bets on an economic revival due to prolonged central bank support put the index on course for its best August in decades.
The Federal Reserve’s commitment to tolerate inflation and keep interest rates low, positive developments in vaccines and treatments for COVID-19 and a momentum-driven rally in tech-focused stocks have helped the S&P 500 and Nasdaq hit consecutive all-time highs.
In election years August tends to deliver for investors—but September and October not so much
Anne Sraders – Fortune
After a blistering August which saw new highs in the S&P 500, including a rare “perfect week,” much of Wall Street is wondering: what now?
The outlook, at least according to some analysts, may be less cheery.
LPL’s Ryan Detrick notes that the August preceding an election is typically a strong month for investors, while September and October tend to falter slightly (although any pullbacks are typically “very minuscule on average,” Detrick says, as LPL’s chart shows).
Stock Market Rally: How Long Will Bulls Win Over Bears? Strategists Give Views
Vildana Hajric and Sarah Ponczek – Bloomberg
When the stock market started to revive from the depths of the March lows, the killjoys were ready. It can’t last — just look at the state of the economy, they said. It’s going to crash again.
That message was repeated over and over even as the S&P 500 advanced more than 50% and added $10 trillion in value. Since surpassing its pre-Covid high last week, the index has notched records more than a half-dozen times.
Exchanges and Clearing
CME Group Announces Launch of Micro E-mini Options
CME Group, the world’s leading and most diverse derivatives marketplace, announced the launch of options on its Micro E-mini S&P 500 and Micro E-mini Nasdaq-100 futures contracts, which became available for trading today.
Options on the Micro E-mini S&P 500 and Micro E-mini Nasdaq-100 futures are 1/10th the size of their E-mini options counterparts. The listing cycle for the new options consists of five Friday weekly options, three end-of-month options and two quarterly options contracts.
Huobi Futures to launch bitcoin options on 1 September
The new options product follows the successful roll-out of Huobi Futures’ Perpetual Swaps earlier this year and aims to give traders more ways to create arbitrage and hedge risk in the crypto market.
Similar to options in traditional financial markets, Huobi’s BTC option is a derivative product that gives users the right, but not the obligation, to buy or sell BTC at an agreed upon price and date. Call options give the options buyer the right to buy the underlying asset at a specified price on the expiration date, while put options give options buyer the right to sell a specified amount of an underlying asset at a specified price on the expiration date.
New Zealand bourse website hit by fresh cyberattack, but keeps trading
Praveen Menon – Reuters
The New Zealand stock market was hit by a fifth day of cyber attacks on Monday, crashing its website, but maintained trading after switching to a contingency plan for the release of market announcements.
NZX Ltd (NZX.NZ) was halted for most of last week due to the attacks, which authorities have said originated offshore.
NYSE not susceptible to takedown like New Zealand exchange
Steve Zurier – SC Media
After a new threat group claiming to be Fancy Bear and the Armada Collective used a DDoS attack to take down the New Zealand stock exchange, security experts say millions of dollars in infrastructure investment make it unlikely that major stock exchanges in New York, London or Hong Kong would suffer a similar take down, though the New Zealand attack could portend a larger attack.
Not only have those high-end exchanges have invested in infrastructure, “they don’t run their trading applications on the public Internet,” said Barrett Lyon, CEO of Netography.
Regulation & Enforcement
Insider Trading Is Rife With No Regulators in Sight
Matthew A. Winkler – Bloomberg
At 6 a.m. on Aug. 3, Google bought a 6.6% stake in ADT Inc., the largest U.S. home security company, for $450 million. ADT appreciated 100% as soon as the stock market opened. But the headlines detailing the transaction weren’t a total surprise because more than a few people knew ADT was poised to benefit from an event big enough to be gaining Google’s hitherto inaccessible technology.
Three days earlier, when ADT wasn’t reporting much of anything, a series of computerized trading alerts derived from the algorithms of Bloomberg Automated Intelligence (BAI) revealed insiders’ unmistakable handiwork:
An ‘extreme’ August on the stock market might be telling us something about the November election
Barbara Kollmeyer – MarketWatch
We’re closing out what may be the best August for stocks since 2000. But Monday is starting to look a little wobbly after Friday’s records for the S&P 500 and Nasdaq Composite
Of course, autumn and winter are coming, with a U.S. election race starting to heat up and the COVID-19 battle and all that comes with it. That brings us to our call of the day, from BTIG’s chief equity and derivatives strategist Julian Emanuel, who says an extremely strong August for stocks — the S&P 500 is up 7.2% through Aug. 28 — could be telling us something about who wins the White House in November.