SoftBank Reveals Details of Controversial Derivatives Trading; TP ICAP cautions on flat revenue growth as trading dries up

Nov 9, 2020

Observations & Insight

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Lead Stories

SoftBank Reveals Details of Controversial Derivatives Trading
Pavel Alpeyev – Bloomberg
Fair value of futures and options positions was $2.7 billion; Held $16.8 billion in stocks, including Amazon and Facebook
SoftBank Group Corp. provided new details about its stock and options trading program, a controversial effort that roiled markets and raised concerns about the Japanese company’s financial stability. SoftBank said the fair value of its futures and options positions came to $2.7 billion at the end of September, suggesting its positions are more conservative than originally feared. That included long call options on listed stocks worth $4.69 billion and short call options on listed stock with negative $1.26 billion of value, the company said in an earnings statement on Monday.
/bloom.bg/2ImolQT

TP ICAP cautions on flat revenue growth as trading dries up
Philip Stafford – Financial Times
TP ICAP, the interdealer broker, has cautioned that revenue growth will be flat this year after trading in swaps, bonds and energy dried up following the turbulent period in global markets at the onset of the pandemic.
The UK group said on Monday that full-year turnover was likely to be in line with last year’s GBP1.8bn, on a constant currency basis, as activity in its core markets slowed markedly after a bumper spring.
/on.ft.com/3pjvWAv

Stocks hit record highs, crude prices jump, on vaccine progress
Stephen Culp – Reuters
Wall Street followed world equity indexes to record levels and crude prices surged on Monday, as promising developments toward a coronavirus vaccine and the prospect of improved trade relations under President-elect Joe Biden gave a jolt to investor risk appetite.
/bit.ly/2GMhEqw

Possible Vaccine Powers Bond-Yield Surge, Adding to Postelection Volatility
Julia-Ambra Verlaine and Sam Goldfarb – WSJ
Hopes for an end to the coronavirus crisis drove U.S. government-bond yields near new multimonth highs on Monday, fueled by traders’ latest scramble to adjust positions after the presidential election upended months of bond-market calm.
/on.wsj.com/35aS9IS

Lessons From the 2016 Election Market Response
Jesy Beeson – OpenMarkets
Market participants use futures and options to manage risk around specific events, and volatility more broadly. In 2016, we saw a significant market reaction to the results of the U.S. presidential election, particularly in equity index markets. The surge in market activity on the election news came against the background of a prolonged period of low volatility in many markets.
/bit.ly/2U6sIBX

“Think trading options is risky? Think again.” Follow-up
Jenny Andrews – TastyTrade
Meet Liz, and Jenny… two “40 something” suburban moms who drive minivans and are on the school board… oh & did we mention, they are “certified badass” option traders with over 45 years combined trading experience. In this tradeTALK, Jenny talks about life, quarantine, & trading. Looking for a new hobby, but not sure if trading is right for you. Jenny talks about taking risk, learning to trade, and becoming fearless. Want to be a better version of yourself? Check out tastytrade tradeTALK #8.
/bit.ly/3n61aJh

When a VIX Spike Doesn’t Equal Volatility
RCM Alternatives
Did it feel like the VIX was up 45% in October? It sure didn’t look like it when reviewing various “Long Vol” funds across the hedge fund space or watching the VIX futures day in and day out. Not to mention the stock market falling just little more than -2%. Which brings us to the question of just what does the VIX tell us about the volatility such programs are trying to capture.
/bit.ly/359X6BE

Exchanges and Clearing

SGX expands clearing relationship with CME Group, adding pan-Asia benchmark equity derivatives to Mutual Offset link
SGX
Singapore Exchange (SGX) is expanding the scope of its unique Mutual Offset System (MOS) with CME Group, offering global investors unmatched, round-the-clock access to trade and clear on the leading derivatives marketplaces in Asia and the United States. SGX on 23 November will launch five new regional and single-country futures contracts based on Net Total Return and Price Return indices calculated by FTSE Russell, further broadening its shelf of pan-Asia benchmark equity derivatives.
/bit.ly/38pKf01

Intercontinental Exchange Launches Clearing for CDS Index Options
Extends Monte Carlo Portfolio Framework to Higher Order CDS Derivatives
BusinessWire
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of mortgage technology, data and listings services, today announced it has launched clearing for Credit Default Swap (CDS) Index Options, bringing greater capital efficiencies, price discovery and risk management to the CDS market. Beginning today, ICE Clear Credit now offers clearing of Index Options on the CDX North American Investment Grade and High Yield indices. Index Options on the iTraxx Europe indices are expected to be added in 2021.
/bit.ly/2U5G7u1

MIAX Exchange Group – Options Markets – Corporate Action Alert: Rollins, Inc. (ROL)
MIAX Options
Rollins, Inc. (ROL) has announced a Special Cash Dividend. Associated strike price adjustments will become effective on Monday, November 9, 2020. ROL options will continue to trade without interruption on the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange. All GTC orders resting on the MIAX order books in ROL will be canceled at the close of business on Friday, November 6, 2020. Additional details about the Rollins, Inc. (ROL) dividend are provided in the attached OCC Memo.
/bit.ly/3eGfN2Z

Effective November 9, 2020 through November 13, 2020, MIAX Options and MIAX Emerald 2X Opening and Intraday Valid and Priority Quote Spread Relief in All Symbols
MIAX Options
Issue Symbol: All Symbols
Multiplier: 2X
Reason: In maintenance of a fair and orderly market.
Time: Opening and Intraday
Subject Summary: Please be advised, effective November 9, 2020 through November 13, 2020, the MIAX Regulation Department has granted 2 times opening and intraday quote parameter relief for all symbols on MIAX Options and MIAX Emerald.
/bit.ly/3lfYjge

MIAX Exchange Group – Options Markets – Delistings Effective for November 10, 2020
MIAX Options
Forum Energy Technologies, Inc. (FET), J.Jill, Inc. (JILL), and Summit Midstream Partners, LP (SMLP) will be de-listed from the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange effective on Tuesday, November 10, 2020. All GTC orders resting on the MIAX order books in FET, JILL, and SMLP will be canceled at the close of business on Monday, November 9, 2020.
/bit.ly/2U6EWuc

Options Regulatory Alert #2020 – 38
NasdaqTrader.com
Effective November 9, 2020, the updated market maker quarterly quote width requirements on Nasdaq PHLX (PHLX), The Nasdaq Options Market (NOM), Nasdaq BX (BX Options), Nasdaq ISE (ISE), Nasdaq GEMX (GEMX) and Nasdaq MRX (MRX) will be effective November 9, 2020 through November 13, 2020. The exchanges may, in their discretion, amend these requirements by providing notice to members.
/bit.ly/2IasBD3

Intercontinental Exchange Launches Clearing for CDS Options
Traders Magazine
Intercontinental Exchange, Inc., a leading operator of global exchanges and clearing houses and provider of mortgage technology, data and listings services, today announced it has launched clearing for Credit Default Swap (CDS) Index Options, bringing greater capital efficiencies, price discovery and risk management to the CDS market. Beginning today, ICE Clear Credit now offers clearing of Index Options on the CDX North American Investment Grade and High Yield indices. Index Options on the iTraxx Europe indices are expected to be added in 2021.
/bit.ly/2Ugnjbf

Regulation & Enforcement

Biden Set to Tap Gary Gensler as Adviser on Wall Street Oversight
Andrew Ackerman – WSJ
Joe Biden is expected to tap Gary Gensler to advise on plans for Wall Street oversight in a prospective administration, according to people familiar with the matter, a move that likely would please Democrats who cheered the former regulator’s tough approach to rulemaking during the Obama administration. Under President Obama, Mr. Gensler spearheaded the overhaul of derivatives markets mandated by the 2010 Dodd-Frank Act and the prosecution of big investment banks for manipulating the London Interbank Offered Rate, the benchmark for trillions of dollars in lending worldwide.
/on.wsj.com/35dlfYc

NOTICE OF SUMMARY ACTION # NYMEX-DQA-20-0469
CME Group
RE: XR Securities LLC, Respondent CRDNo. 145357
XR Securities LLC (“XR” or the “Firm”) violated: (i) NYSE American Rule 902NY(i)(l) when certain associated persons used unregistered communications devices from the NYSE American Exchange Options Trading Floor (the “Amex Floor”) from in or around September 2018 through August 1, 2019; and (ii) NYSE American Rule 320 for failure to establish and maintain a system to supervise the activities of each associated person that was reasonably designed to achieve compliance with NYSE American Rule 902NY from in or around September 2018 through August 1,2020. Consent to censure and a $55,000 fine.
/bit.ly/3oBut8d

Strategy

(Podcast) Volatility Views 422: The Volatility Crush of Volatility Crushes
Volatility Views – Options Insider Network
/bit.ly/2IkAKo8

Events

This week offers an especially wide array of webinar options. One from Cboe’s Options Institute is “Harnessing Small-Cap Volatility with Russell 2000 Options” on Wednesday, November 11, at 12 p.m. ET/11 a.m. CT. Planned speakers include Catherine Yoshimoto, director of product management for FTSE Russell, Derek Devens, senior portfolio manager, Neuberger Berman, and Matt Moran, head of Index Insights, Cboe Options Institute. Although it’s advertised for financial professions, Moran said all JLN readers are welcome. You can register here. ~SC

The Evolution of Options Trading in the Age of Algos
TABB Forum
November 11, 2020
The webinar will provide an opportunity to demonstrate the functionality of the new OptionsLive platform, while educating participants about the obstacles options traders have faced up to this point, how OptionsLive is addressing them and what the options trading landscape of the future will look like as a result. The goal is to demonstrate the key differentiators between OptionsLive and the tools that options traders have relied upon for years.
/bit.ly/35eSPNj

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