Observations & Insight
Walt Lukken: FIA Moves Forward After Boca Cancellation
After FIA Boca 2020 was cancelled because of the Coronavirus, JLN found some alternative ways to put together the video interviews we had scheduled. In this one, with Walt Lukken, we spoke via phone with Walt and the FIA taped their side of the interview in his office. Lukken talked about the FIA’s decision to cancel the conference and the impact of the Coronavirus on the futures and options industry. He also discussed the results of the recent FIA survey in conjunction with Greenwich Associates and how the FIA is addressing market concerns. He also spoke about FIA Tech’s response to the attack on its systems by a hacker and how it is using the incident as a teaching tool, FIA’s efforts around diversity in the workplace, and regulation of foreign CCPs.
Stock Market Volatility Tops Financial Crisis With VIX at Record
Luke Kawa – Bloomberg
Volatility in U.S. stocks surged to a record after benchmark indexes suffered the biggest rout since 1987.
The Cboe Volatility Index ended Monday at 82.69 as the S&P 500 Index tumbled 12%. The fear gauge’s prior closing high was 80.86 on Nov. 20, 2008, when lawmakers postponed a vote on a plan to save the auto industry. The gauge’s rose as high as 83.56 during the session, short of its intraday record of 89.53 reached on Oct. 24, 2008.
European countries ban short selling after markets plunge
Philip Stafford and David Keohane – Financial Times
Four European countries have applied temporary bans on betting against the prices of a range of shares in an attempt to calm markets shaken by coronavirus.
France, Italy, Spain and Belgium said overnight that they would move to stop the short selling of hundreds of stocks listed on their markets. European markets staged a brief rebound in early morning trade in Europe, before giving up the gains by lunch time.
Why Are Markets So Volatile? It’s Not Just the Coronavirus.
Gunjan Banerji and Gregory Zuckerman – WSJ
Traders like Michael Pomada help explain why the stock market is going through its most turbulent period in recent memory. Mr. Pomada was in good spirits as he drove his convertible to his office in Los Angeles’s Century City complex before sunrise on March 9. Investment funds managed by his $4.5 billion firm, Crabel Capital Management, were up about 5% for the year. He wasn’t especially concerned about financial markets or the economy, even though oil prices were tumbling that morning. Yet, all day, Crabel sold stock futures and other investments, contributing to a 2,014-point, or 7.8%, drop in the Dow Jones Industrial Average.
2019 capital markets M&A in review
2019 was a remarkably busy year for mergers and acquisitions in the capital markets sector of the global financial services industry. Several leading exchanges announced major acquisitions, the discount brokerage industry in the U.S. saw a blockbuster merger between Charles Schwab and TD Ameritrade, and there were numerous deals among the many technology providers that support banks, brokers, and other market participants.
Wall Street’s fear gauge is almost back to its 2008 level
John Detrixhe – Quartz
A measure of volatility in the US stock market is closing in on heights last seen during the 2008 financial crisis, as worries grow that the new coronavirus’s spread will take a major bite out of global economic growth. On Monday, the Cboe Volatility Index, or VIX, also known as the “fear gauge,” jumped to 77.7, hovering around the highest levels since November 2008, according to FactSet and Cboe data. Government officials are looking to ramp up their fight against the spread of Covid-19, but in the meantime investors are selling anything that smells risky. Cboe’s index, which measures price swings, tracks the 30-day implied volatility of the S&P 500 based on out-of-the-money options prices.
Markets Are Jumpy After Dow’s Biggest Drop Since 1987
Nicholas Jasinski – Barron’s
11:40 a.m.: U.S. stocks are rising in volatile trading as investors try to assess the damage from the coronavirus outbreak, as well as how effectively governments can counter it. Stocks opened higher, but then briefly fell into negative territory on Tuesday morning. Investors remain jumpy following major indexes’ worst one-day drops since 1987’s Black Monday crash.
Exchanges and Clearing
What Would It Take for Coronavirus to Shut Down the Stock Market? A Lot.
Shaina Mishkin – Barron’s
The market is plunging as coronavirus fears slow the U.S. economy and shut down business across the country. But the New York Stock Exchange won’t shut down, according to its president and other experts.
“It is important for the markets to remain open, and for them to function in a fair and orderly manner, as they have been,” NYSE President Stacey Cunningham said in a Tweet Monday afternoon.
Britain’s FCA to keep stock markets open in face of volatility
Huw Jones – Reuters
Britain’s markets watchdog said on Tuesday it wants to keep stock markets open despite the extreme sell-offs in recent sessions, which have prompted some European countries to introduce trading curbs.
“Our aim is to continue to maintain open and orderly markets notwithstanding current volatility,” the Financial Conduct Authority (FCA) said in a statement.
DBL Digital Unveils Bitcoin Managed Account Program, Offers New Cryptocurrency Investment Option; The Managed Account Program (MAP) empowers investors to capture Crypto returns through the safety and convenience of exchange-traded futures and options.
DBL Digital, a division of DrawBridge Lending, a CPO and CTA with a market and credit based approach to digital asset investing and lending, announced the release of its Bitcoin Managed Account Program (MAP) for individual and institutional investors.
Options Trader Alert #2020 – 8 Nasdaq PHLX to Allow Floor Brokers to Access Electronic Markets Via PHLX Trading Floor in Limited Circumstances
As previously announced in Options Trader Alert #2020-7, beginning Tuesday, March 17, 2020, Nasdaq PHLX (Phlx) will suspend open outcry trading on the Phlx Trading Floor and operate fully electronic. Phlx will allow Floor Brokers to utilize the Phlx Trading Floor facility, in a limited capacity, to access the electronic market using the Floor Based Management System (FBMS).
Chicago trading firms seek more capital
Lynne Marek – Crain’s Chicago Business
Some Chicago trading firms that provide liquidity in the financial markets are urging banks that have benefited from Federal Reserve actions in recent days to make more capital available for clearing trades amid the coronavirus turmoil. Many of Chicago’s high-speed trading firms are market-makers, acting as middlemen to buy and sell stocks, options, bonds and derivatives so that other investors, companies and hedgers can find ready buyers and sellers.
Bitcoin’s implied volatility drops, but Options still project restricted trades
Namrata Shukla – AMB Crypto
Bitcoin Options volumes marked new highs recently. On 12 March, as Bitcoin’s price fell from $7k levels to $4k levels, the Options market noted heightened volume, with Options contracts of about $294 million. However, as the market became more volatile, this volume shrunk and fell close to $28.8 million, at press time.
Regulation & Enforcement
CFTC to Give Work-From-Home Relief to Traders
Paul Kiernan – WSJ
Regulators are preparing for the likelihood that trillions of dollars of financial-market activity may soon move from high-tech exchanges and corporate offices to homes across America. The web of financial regulations set up after the 2008 financial crisis sought to leave banks better prepared to weather a downturn and bring transparency to derivatives markets. But one thing lawmakers and regulators didn’t anticipate was social distancing in response to a pandemic.
Investors, Keep Your Eye on the Long Run
Sarah Keohane Williamson and Mark D. Wiseman – WSJ
The spread of the novel coronavirus is an economic crisis as well as a medical one. The short-term impact is evident in stock and bond market declines and volatility. But that’s no reason to panic. The economic effects of calamitous events tend to dissipate in the long run, and the short-term market conditions create opportunities for savvy investors.
A volatile stock market has repeatedly triggered so-called circuit breakers. Here’s what they are, and what sets them off.
Carmen Reinicke – Markets Insider
On Monday, US stocks plummeted at the start of trading in New York, triggering a market circuit breaker for the third time in one week.
The S&P 500 fell as much as 8% almost immediately after the opening bell, past a key level that set off the breaker that halted trading for 15 minutes. The pause also came in a week where US stocks multiple times hit limit up and limit down levels, which result in a trading halt as well.
Update on FIA’s response to Coronavirus (COVID-19)
With the health and well-being of our society in the forefront of our minds, FIA has implemented several measures to keep members informed of issues related to the Coronavirus (COVID-19) and to continue normal operations. FIA has created a dedicated Coronavirus (COVID-19) webpage on our website at https://fia.org/covid-19. This page contains important FIA staff contact information and is currently being updated regularly with guidance from global exchanges, CCPs and regulators. This site also contains information and updates on upcoming FIA events and conferences to help with member planning.