Shortwave trading; Robinhood’s $2b a day options biz; Mammoth bond wager
Observations & Insight
A little-known business at Robinhood has exploded, and now it’s launching a service to go after the most serious traders
Frank Chaparro – Business Insider Prime (SUBSCRIPTION)
Robinhood’s options-trading business is exploding, according to Chris O’Neil, a product manager at the California broker.
Now the firm, which says it has seen $2 billion in options-trading volumes since launch, is upping the ante with the rollout of multileg options.
The move shows the company is seriously going after the business of more experienced traders, says Devin Ryan, an analyst at JMP Securities
****SD: First of all, not a “little-known” business. Second, they are really putting some pressure on entrenched participants.
Prepare for stock market weirdness when these teams play in the World Cup
Eshe Nelson, Jason Karaian – Quartz
Even the most casual sports fan can’t help but get sucked in by the World Cup. In 2014, 3.2 billion people watched the matches. This year, even more people are expected to tune in to the tournament in Russia. The pull of World Cup is so strong that it has a noticeable effect on financial market activity as tradersólike everyone elseóturn their attention from work to play.
****SD: Wow. To those trading non-U.S. markets – the results of this study point to a crazy drop in liquidity. Be prepared.
Shortwave Trading – Part II
Bob Van Valzah – Sniper In Mahwah
I have previously claimed that trading over shortwave radio is real and presented the story of the first evidence I found of it. It was pleasantly surprising to see the story picked up by IEEE Spectrum, Hacker News, Hackaday, and others. But since I hadn’t anticipated such a diverse audience, I didn’t provide details needed to understand shortwave trading in context so a lot of questions were raised. I’ll provide some background here, answer the questions, and also document two other shortwave trading sites I’ve found around Chicago. Traders can skip ahead while I fill in the broader audience.
****SD: Now this – this is fun stuff and amazing detective work. Part I can be found here. From the comments and links in the story, you can do some of your own hunting. For example, once you know one company behind a shortwave setup is called 10Band LLC, you can look at a provided link to a tax document to find that its address is in Chicago. Google that address to find it matches with a company called World Class Wireless, LLC. Go to WCW’s website to find it is a subsidiary of KCG Holdings…
10-Year Yield at 2.6%?; Market’s Abuzz Over Huge Options Wagers
Katherine Greifeld and Edward Bolingbroke – Bloomberg (SUBSCRIPTION)
Bets costing premiums of over $75 million emerged this weeks; Next test comes with Wednesday’s Federal Reserve decision
Hours before a crucial Federal Reserve decision, a bullish trade is gaining momentum in the market for options on Treasury futures. Over the first three days of this week, traders paid more than $75 million combined to buy almost 200,000 call options on 10-year futures. Coming just weeks after 10-year yields set an almost seven-year high above 3 percent, the bets amount to a bold call targeting a drop to as low as about 2.6 percent before the biggest chunk of the contracts expire Aug. 24.
U.S. shale firms miss out on $70 oil after hedging at $55
Ayenat Mersie, David Gaffen – Reuters
Many top U.S. shale oil producers are missing out on the rally in oil prices to more than $70 a barrel – because they sold their oil through futures contracts at about $55 last year when that looked like a good deal. Now, it looks cheap.
****SD: It’s easy to kick yourself in hindsight, but nobody ever went broke taking profits. In broad terms, the magic number to cover production costs, etc. in the shale world is ~$30. (I’ll also point out that this article cites a consultancy named PetroNerds.)
One Area of ETFs Is Not Growing: Options
Nathan Reiff – Investopedia
While digital currencies tend to dominate the headlines for their flashy, highly volatile price antics, many investors have turned their attention to exchange-traded funds (ETFs). Over the past several years, ETFs have grown at an astonishing pace. With well over 2,000 of these funds available to investors now, and with more launching all the time, the total assets funneled into the ETF space could reach as high as $25 trillion by 2025, according to some estimates.
****SD: Not to be confused with options on ETFs, which always seem to be growing.
AI post-trade derivatives platform launches after first buy-side transaction; Trades by JP Morgan and Citadel processed by ‘no-touch’ platform designed to remove post-trade manual processes. John Brazier – The Trade
A ‘no-touch’ trade processing system for derivatives has launched after it processed its first buy-side transaction involving JP Morgan and hedge fund giant Citadel.
Exclusive: Exxon Mobil breaks with past, bulks up energy trading to boost profit
Liz Hampton, Ernest Scheyder, Dmitry Zhdannikov – Reuters
Exxon Mobil Corp (XOM.N) is pushing deeper into energy trading, building a global cadre of experienced traders and beefing up risk-management systems to lift profit, according to executive recruiters and people familiar with the business.
Dash Financial Technologies Names Glenn Lesko Chief Growth Officer
Dash Financial Technologies, provider of one of the industry’s most advanced multi-asset trading technology and execution services platforms, today announced the appointment of Glenn Lesko as Chief Growth Officer. Reporting directly to CEO Peter Maragos, Mr. Lesko will be responsible for driving the firm’s revenue growth objectives globally, both organically and inorganically.
Exchanges and Clearing
Resurgent trading helped global exchanges’ revenues hit record in 2017: report
A surge in trading and booming demand for information services drove global exchange revenues to a record high in 2017, a report by Burton-Taylor International Consulting said on Tuesday.
SGX-NSE Battle Could Become a Long War; The exchanges are currently undergoing arbitration regarding the launch of SGX’s new futures contracts meant to succeed the outgoing SGX Nifty 50 suite of products.
Wei-Shen Wong – WatersTechnology (SUBSCRIPTION)
The current skirmish between the Singaporean and Indian stock exchanges could turn out to be a drawn-out war if an upcoming court battle fails to resolve the dispute.
B3 launches data provision services for analyses, studies and statistics; Products include interactive data dashboards, historical data and end-of-day data
B3 is introducing in the Brazilian financial market a data solution package containing market transaction analyses geared to the production of studies and reports. B3’s goal is to help investors make better business decisions.
Regulation & Enforcement
Emir review “bends over backwards” to industry demands – MEP Carthy
Jack Ball – Global Investor Group (SUBSCRIPTION)
Proposed changes to the European Market Infrastructure Regulation (Emir) go too far in satisfying the demands of the derivatives industry, MEP Matt Carthy has argued.
Speaking during a plenary session of the European Parliament in Strasbourg on Monday evening, Carthy, who represents Irish Republican party Sinn FÈin, said: “Emir, the post crisis legislation for over-the-counter (OTC) derivatives has its problems certainly but it is a crucial instrument for ensuring financial stability.”
EU temporary measures on CFDs and binary options
On 22 May 2018, the European Securities and Markets Authority (“ESMA”) adopted two decisions implementing temporary product intervention measures. These decisions restrict the marketing, distribution and sale of contracts for difference (“CFDs”) and binary options to retail clients in the European Union.
These decisions only apply for a period of three months, starting from 1 August 2018 and 2 July 2018 respectively.
New York’s Top Court Limits Time Frame for Martin Act Lawsuits Image
Matthew Goldstein – NY Times
A powerful law used by New York’s top prosecutor to bring fraud charges against Wall Street firms was reined in by the state’s highest court on Tuesday, a decision that could imperil an $11 billion lawsuit against Credit Suisse and blunt a favored tool for pursuing wrongdoing by banks and their executives.
Lime Brokerage Signs with Trillium Surveyor for Trade Surveillance
Trillium announced today that Lime Brokerage will now use Trillium’s Surveyor platform for trade surveillance.
****SD: Recall that Lime combined with Lightspeed Trading at the beginning of the year.
AI M&A deals surge in Q1 2018, predictive analytics on the rise
Venture-backed AI companies have secured more than $1.9 billion investment in Q1 2018, with some of the biggest deals in robotic automation, autonomous vehicles and predictive analytics, according to a recent report from M&A advisory firm, Hampleton Partners.
Financial Services Industry Spends $1.7 Billion on Blockchain
Janine Wolf – Bloomberg (SUBSCRIPTION)
Greenwich Associates releases report on annual spending; Three-quarters of projects expected to go live within 2 years
Here’s proof financial services companies are taking blockchain technology seriously.
Morgan Stanley’s CEO let it slip just how many billions the bank is spending on tech
Frank Chaparro – Business Insider Prime (SUBSCRIPTION)
Morgan Stanley is spending billions both to bolster its existing technology infrastructure and to invest in new technologies.
Specifically, the bank’s tech spend is about $4 billion per year, CEO James Gorman said.
BlackRock Woos Wealth Managers With Risk ‘X-Ray’ Tool
Annie Massa – Bloomberg
Morgan Stanley, UBS wealth units among those who’ve signed on; Top pension funds, insurers, rivals already use the software
Almost three decades ago, BlackRock Inc. created software to obsessively monitor the then-fledgling firm’s financial risks. Now, after turning it into an essential tool on Wall Street, the firm is zeroing in another kind of client: financial advisers.
Bond Traders Brace for Major Moves in Aftermath of FOMC
Alex Harris and Edward Bolingbroke – Bloomberg (SUBSCRIPTION)
Market split on whether FOMC to signal 3 or 4 hikes in 2018; Fed funds futures show traders leaning toward IOER shift
For a Federal Reserve meeting where a rate hike is seen as a given, the stakes are still huge for bond traders heading into Wednesday’s decision.
****SD: Ugh. Another “dot plot” day. Meanwhile – ECB on course to begin QE exit plan despite headwinds
Stock market investors could hardly ask for better conditions
Carmel Wellso – MarketWatch
About 80% of S&P 500 Index companies reported first-quarter earnings that exceeded analysts’ estimates. Yet the U.S. stock index dropped 1.2% in the year through March as investors grew worried that a recession was imminent.
The trigger was a return of implied volatility, as the CBOE Volatility Index VIX, briefly surged to 37 in February after averaging 11 in the previous 12 months. While the S&P 500 rose or fell by more than 1 percentage point only eight times in 2017, already this year it has swung by that magnitude on 35 days. That’s led some to question whether 2019 will mark the end of the second-longest bull market.
Tesla short sellers $2 billion in the red for June as shares soar
Saqib Iqbal Ahmed – Reuters
The surging share price for automaker Tesla Inc (TSLA.O) this month has slammed short-sellers of the stock with more than $2 billion in losses on paper so far in June, according to financial analytics firm S3 Partners.
****SD: If there’s one thing I’ve learned about Elon it’s that he’s memeworthy.
Here’s a sign stock-market volatility is going to remain under wraps in the months ahead
Anora M. Gaudiano – MarketWatch
Stock-market volatility has subsided after a February spike, and there’s a reason to think it will remain under wraps in the near term. That’s because the exceptionally low volatility that prevailed in 2017 could be explained by the equally low correlation between S&P 500 sectors. A downward shift in correlation ó a measure of the degree to which assets move in relation to each other ó points to less volatility in the coming months, according to Nick Colas, co-founder of DataTrek Research.
****SD: I like to have a story like this followed by a story like the Aviva one below.
Aviva Investors CEO Munro tells industry to expect more volatility; More intense periods of market turbulence are on the way, says Euan Munro
David Ricketts – Financial News (SUBSCRIPTION)
The chief executive of Aviva Investors has warned asset managers to be alert for more extreme bouts of market volatility, with brief periods of turbulence such as those experienced in the wake of the Italian crisis and the G7 summit likely to intensify.
The Siren of Statistics
Highly Evolved Vol
A siren was a mythological being who lured sailors with their enchanting music to shipwreck on the rocky coasts of their island. Their songs were almost impossible to resist. But more generally a “siren” is a bad thing that we are attracted to, either physically or psychologically.
Tether Used to Manipulate Price of Bitcoin During 2017 Peak – New Study
Matt Robinson and Matthew Leising – Bloomberg (SUBSCRIPTION)
Study examines Bitcoin’s run to almost $20,000 last year; Data suggests a ‘conscious strategy to provide price support’
Tether, one of the most-traded cryptocurrencies, shows a pattern of being spent on Bitcoin at pivotal moments, helping to drive the world’s first digital asset to a record price in December, according to research by a University of Texas professor known for flagging suspicious activity in the VIX benchmark.
****SD: Shady behavior in the cryptocurrency world?! Unbelievable. Also, this University of Texas professor really knows how to pick some hot topics. Here’s a link to the full study. NY Times on the subject here.
Leverage Angst Worse Than 2008 Seizing Stocks, Ignored by Bonds
Sid Verma – Bloomberg (SUBSCRIPTION)
Weakest companies trail in S&P 500, even as their bonds win; More investors see excessive leverage than at crisis peak
Equity and debt investors are placing opposing bets on Corporate America’s financial health. The rift is unlikely to last.
****SD: I’m partway through reading “When Genius Failed: The Rise and Fall of Long-Term Capital Management,” published in 2000. Leverage can be overly demonized, but then again, sometimes there be demons lurking… (If you haven’t had the pleasure, I highly recommend that book, even though I’m unsure what the exciting conclusion holds, hah!)
Powell Weighs Taking Questions After Every Fed Meeting; Investors have come to expect little policy action from the Fed at meetings without a press conference
Nick Timiraos – WSJ (SUBSCRIPTION)
Federal Reserve Chairman Jerome Powell is considering holding a press conference after every policy meeting rather than every other meeting, and his appearance Wednesday could help him decide whether it’s worth the trouble.