Observations & Insight

Arrival (not with Amy Adams, Jeremy Renner and Forest Whitaker)

(Click for larger image)

Notice anything?

MIAX Pearl opened up yesterday, bringing the grand total of U.S. options exchanges to 15. When MIAX announced its plans for Pearl, Jim Kharouf wrote a story about the exchange’s planned structure and a bit about MIAX’s background. It’s worth a revisit (though you will undoubtedly notice that Pearl did not in fact open in Q4 2016, as was initially planned).

But seriously, the movie Arrival is solid — two thumbs up.


MIAX PEARL Successfully Launches Trading Operations
PR Newswire
MIAX PEARL, the newest U.S. equity options exchange, today announced a successful launch of trading operations with the rollout of options on its first symbol, IBM. MIAX PEARL will continue listing options on IBM for its first week of trading and then begin rolling out additional symbols thereafter. MIAX PEARL is the second exchange of the MIAX exchange group following the launch of MIAX Options in December 2012 by its parent holding company Miami International Holdings, Inc. (MIH).

Lead Stories

In Shadow of Le Pen and Brexit, Traders Redraw European Strategy
David Goodman, Sid Verma and Anooja Debnath – Bloomberg
“The consequences of a bad outcome may be severe.” Some would call that an understatement. Marco Valli, the chief euro-area economist at UniCredit SpA in Milan, was reflecting on the chances of an upset in one of this year’s three major elections in Europe.

****SD: From Reuters – Euro implied volatility rises as French election comes in range

How Wall Street gauges fear in a time of Trump
Mark DeCambre – MarketWatch
Fear. It is one of the prevailing themes Wall Street is focusing on as they survey a U.S. stock market that has staged a steady, albeit measured, assault on all-time highs over the past few months and as President Donald Trump settles deep into his chair in the Oval Office.

Global derivatives industry calls for phase-in of new rule
The world’s $544 trillion derivatives market warned on Tuesday of potential market disruption without a six-month phase-in for a new rule requiring trades to be backed by cash in case of default.

Markets do not respond to travel bans
Jeff Greenblatt – Futures Magazine
Markets started selling last week and the mainstream media blamed President Trump’s travel ban. Nothing could be further from the truth. Let me say straight up I just got my copy of Prechter’s new masterpiece The Socionomic Theory of Finance. Long time readers of this column know I’m a big fan of socionomics. This is an 800-page masterpiece. Did I say that word again? Let me put it to you this way, if you’ve read his earlier socionomic works, this one is The New Science of Socionomics on steroids.

What should be on Top of a Beneficial Owner’s To-do List for 2017?
Chip Dempsey – OCC
At OCC, we see that stock lending is becoming less profitable for the borrowing banks that facilitate such transactions, which has diluted their incentive to provide clients with better service.

Hedge funds make record bet on rising oil prices
Anjli Raval and Dan McCrum in London – Financial Times
Hedge funds have amassed the biggest ever bet on rising oil prices as investors back Opec’s bid to tighten the crude market and seek protection against fears of inflation. Data from regulators and exchanges showed speculators have built long positions equivalent to almost 1bn barrels of crude across the major contracts, while short positions amount to just 111m barrels.

****SD: From Bloomberg over the weekend – Top Trader Vitol Sees Oil Rattled as Trump Makes Market Fret

Trump’s policies to drive FX, but strong dollar here to stay: Reuters Poll
Rahul Karunakar – Reuters
The dollar will resume its upward climb in the coming year, but extreme near-term moves in either direction are possible, driven more by U.S. President Donald Trump’s expected fiscal stimulus than by his words, a Reuters poll found.

****SD: Related Reuters content – ECB’s Villeroy says Trump’s administration should refrain from FX comments

Trump Tax Plan Seen More Wash Than Windfall for S&P 500 Earnings
Lu Wang – Bloomberg
As much as anything, tax breaks promised by Donald Trump have fueled the rally in U.S. stocks since Election Day. A few strategists drilling down on the proposals are wondering what everyone’s so excited about.

Volatility Update: Volatility erosion persists
Georgio Stoev – TradingFloor.com
Blame it on post-election results, stronger earnings from corporate America, strong US non-farm payrolls, and so forth — volatility in the market is just barely present at the moment. There are still some earnings ahead of us which could spark some volatility in the market, but it’s likely to be short-lived.

Exchanges and Clearing

WFE calls for clarity on CCP resolution
Helen Bartholomew – Reuters
The World Federation of Exchanges has urged lawmakers to ensure that authorities tasked with the orderly wind-down of failed clearinghouses only invoke resolution proceedings as a last resort.

CBOE Holdings Reports Fourth-Quarter 2016 Financial Results
CBOE Holdings, Inc. (NASDAQ: CBOE) announced today its financial results for the fourth quarter and full year ended December 31, 2016.

Deutsche Boerse, LSE merger costs top $375 million
Deutsche Boerse (DB1Gn.DE) and London Stock Exchange (LSE.L) expect their planned merger to cost more than 350 million euros ($375 million) in fees for bankers, lawyers, accountants and public relations, according to a regulatory filing made while doubts swirl about the 25 billion euro deal.

SGX reports market statistics for January 2017
Total Derivatives volume was 11.7 million, down 12% month-on-month and down 34% year-on-year.

ICE chief Sprecher bullish on regulation, Trayport
Julie Aelbrecht – Futures & Options World
The Atlanta-based exchange giant reported a 27% rise in revenue for 2016
The Intercontinental Exchange’s chief executive Jeffrey Sprecher has said he is optimistic about the prospect of regulatory reform in the US and reiterated his hope that Brexit could prompt a similar re-evaluation of British and European rules. During an earnings call on Tuesday, the chief executive and chairman of the US group expressed his support for the new regulatory regime in the US and the prospect many of the rules introduced in the US since the financial crisis of 2008 could be rolled-back.

****SD: Funny to think about the current market environment as people going long deregulation.

OCC Welcomes MIAX PEARL Options Exchange
OCC, the world’s largest equity derivatives clearing organization, today congratulated MIAX on the launch of MIAX PEARL, which began operations on Monday. This successful launch brings the total number of U.S. options markets to fifteen.

Member Account Information Required for ISE, ISE GEMINI and ISE MERCURY
To ensure accurate billing practices post INET migration, any Member of ISE, ISE Gemini, and ISE Mercury who gives up trades to other clearing firms at The Options Clearing Corporation should request Nasdaq Membership label each applicable EAM Business Unit as “acting as Agent.”


OptionsPlay Teams with Grigoletto Financial Consulting
PR Web
OptionsPlay, LLC, a leading invest-tech company providing platforms for individual investors, discount brokers, advisors and asset managers, announces today a formal partnership with Grigoletto Financial Consulting, led by Alan Grigoletto. As one of the leading authorities on options and compliance, Grigoletto brings his expertise in trading, education and consulting with the most sophisticated investing firms and government regulatory bodies to the OptionsPlay platforms.

Regulation & Enforcement

Regulator warns of enforcement over NYSE’s 2015 outage – ICE
The New York Stock Exchange received notice that staff at the top U.S. securities regulator recommended an enforcement action against the exchange related to a nearly four-hour trading halt on July 8, 2015, NYSE’s parent company said on Tuesday.

Trump banking review raises fears for global standards talks
Huw Jones – Reuters
President Donald Trump’s review of post-crisis banking rules could sound the death knell for new global standards now being finalised and rip apart a common approach to regulating international lenders, bankers and regulators said.

If Trump repeals Dodd-Frank, it would be a ‘monumental mistake’—commentary
Bart Chilton – CNBC
President Donald Trump recently efforted (through an executive order and related memorandum) to make good on his call for repeal of the Wall Street Reform and Consumer Protection Act of 2010, otherwise known as Dodd-Frank.

Currency Hedging Survives ESMA UCITS Share Class Cull
Dechert LLP – Lexology
For the past two years, the European Securities and Markets Authority (“ESMA”), Europe’s main securities regulator, has had UCITS share classes in their sights. It has issued two discussion papers on the topic and has now finalised its work with the issue of its final opinion on – “Share classes of UCITS” issued on 30 January 2017 (the “Opinion”).


Buy Side Cross-Asset Trading Technology: Putting the Pieces Together
Brad Bailey – Traders News
Celent has released a new report titled Buy Side Cross-Asset Trading Technology: Putting the Pieces Together. The report was written by Brad Bailey, a Research Director with Celent’s Securities & Investments practice. In this report, Celent looks at the forces driving the buy side to “desilo” trading desks to maximize effectiveness across asset classes. The buy side is remapping their trading desks in order to leverage the growing similarities in market structure across equities, options, derivatives, fixed income, and foreign exchange.

Clearing the Four Most Common Trading Analytics Hurdles
Peter Simpson, Datawatch – TABB Forum
Data analytics and visualization solutions have been transforming the world of capital markets for years, but a number of challenges still hamper the trading effectiveness of exchanges and buy-side and sell-side firms. Following are four of the most common trading analytics obstacles.

Blockchain to disrupt market infrastructure providers
Merle Crichton – Futures & Options World
Esma said clearing firms will be disrupted but not made redundant by DLT
Distributed ledger technology could transform the role of market infrastructure providers but not eliminate the need for firms such as clearing houses, according to a new report by Europe’s main financial regulator. A majority of respondents to the discussion paper by regulator the European Securities and Markets Authority said distributed ledger technology (DLT) will change how market infrastructure such as central counterparties (CCPs) and central securities depositories (CSDs).

Absorbing Today’s Fintech Wave
Michael Bodson, DTCC – TABB Forum
Disruption and transformation were a common theme at the recent World Economic Forum. While it’s true that banking is rapidly transforming due to new technologies, however, the reality is that this is simply a continuation of a long history of financial services adapting to innovation.


Breaking Some Bad Trading Habits – Part 2
Bob Lang – CBOE Options Hub
Last week we gave out a few bad trading habits that many of us seem to suffer from. However, we are all different and have certain habits that make us feel comfortable. Yet, some habits should be broken and not encouraged, as they will make us vulnerable. I asked some of my close colleagues in the chat room what habits they could identify that hinder their performance, and which ones they need to break. Some of these are below. Your job – if you identify with any of these, change your behavior to create a positive outcome.

Why Betting on Higher Volatility Is Not a Good Idea
Alex Barrow – GuruFocus
The trading community has been yapping away about the Chicago Board Options Exchange Volatility Index (VIX) trading sub-11 and the extreme number of speculative shorts involved. They are saying it has got to burst higher. Their proclamations are presented with a chart like the one below, which measures net nominal non-commercial positioning.


Mind the Gap
Leo Murphy – Trading Technologies
When I spend time on college campuses as the manager of the TT CampusConnect program, the questions I field from educators typically revolve around the best way to equip students with the skills needed to ensure a smooth transition from the classroom to career. While my experience in this regard is limited to the world of futures and options, I’m sure the same is true for any discipline: to set students up for success after graduation, create a learning environment that mirrors the workplace as closely as possible.

****SD: This is exactly why I was so grateful to have hands on newsroom experience in college.


Trump’s $1 Trillion Plan May Buy Less Metal Than You Think
Luzi-Ann Javier and Joe Deaux – Bloomberg
Infrastructure spending ‘a drop in ocean’ of demand amid glut; U.S. projects probably will take years to pick, design, build
Anyone expecting more from the Donald Trump rally in metals should probably consider just how much $1 trillion in government spending will actually buy.

Ag barometer: Producer sentiment skyrockets again
CME Group
Agricultural producer sentiment hit a record high for the second consecutive month, according to the January Purdue/CME Group Ag Economy Barometer.

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