Stocks fall in wake of new coronavirus flare-ups; Free Trades, Jackpot Dreams Lure Small Investors to Options

Jun 24, 2020

Observations & Insight

JLN REPORTS ON IDX-V DAY ONE – The first virtual IDX conference.

FIA’s Walt Lukken Kicks off Resilient “IDX That Was”
Suzanne Cosgrove – John Lothian News

Opening the first virtual IDX conference, FIA President and CEO Walt Lukken Tuesday talked about the feelings of uncertainty overwhelming many people these days amid the COVID-19 health crisis, political risk and growing populism. “But if you only focus on the negative, you will inevitably lose sight of opportunities that change these circumstances for the better,” Lukken said.

To read the rest of this commentary, go here.

FIA IDX-V: ESMA’s Verena Ross on Regulation and Priorities During COVID-19
By Suzanne Cosgrove – John Lothian News

Verena Ross, executive director of the European Securities and Markets Authority (ESMA), said Tuesday that despite “unprecedented market reaction to the virus and government closings,” overall EU trading structures worked well during the COVID-19 crisis.

To read the rest of this commentary, go here.

Exchange Leaders at IDX-V tout technology, flexibility in weathering the COVID crisis
By Sarah Rudolph – John Lothian News

At the Exchange Leaders panel at IDX-V on Tuesday, Walt Lukken (who moderated) and the panelists patted themselves and the industry on the back – but deservedly so – for maintaining liquid, transparent markets while the world burned, so to speak. With a twofold crisis – extremes of volatility and capacity and everyone removed from physical offices because of coronavirus concerns – the industry came through mostly with flying colors.

To read the rest of this commentary, go here.

Industry Leaders Describe COVID-19’s Impact on the Markets
By Matt Raebel – John Lothian News

Day one of IDX-V concluded with a discussion about much the same topic as the panel that preceded it – that is, how the coronavirus impacted the markets, and how things will be different from now on. This time, it was a panel consisting mostly of managing directors and board members instead of exchange executives discussing how the pandemic affected derivatives trading volume and volatility, the brief short-selling ban in the European markets, and dividends.

To read the rest of this commentary, go here.

Lead Stories

Stocks fall in wake of new coronavirus flare-ups
Joshua Oliver, Philip Georgiadis, and Hudson Lockett – FT
Global markets dropped on Wednesday as rising US Covid-19 cases and new quarantine measures fuelled fears that the virus could derail an economic recovery. Markets in the US and Europe slid, with the FTSE 100 and the Euro Stoxx 50 both closing 3.1 per cent lower. On Wall Street, the S&P 500 was down 2.8 per cent and the Nasdaq Composite 2.4 per cent lower by lunchtime trading, while the dollar rallied.

Free Trades, Jackpot Dreams Lure Small Investors to Options
Gunjan Banerji and Alexander Osipovich – WSJ
Individuals looking to profit from the stock market’s explosive moves are piling into options, lured by low trading fees and a chance at mammoth payoffs. Coronavirus-fueled market swings this year have created ample opportunities for these traders, who tend to thrive when markets are more volatile. Big market moves tend to benefit traders because they increase the likelihood that stocks will jump or fall toward levels that can make their options contracts exponentially more valuable.

Day Traders Will Have Fun Until They Get Wiped Out
Noah Smith – Bloomberg
One time when I was sitting in my college dormitory, I heard a whoop of joy from down the hall. My dormmate announced that he had just made $500,000 trading in the stock market, after having invested only a few thousand dollars. When I asked him how he did it, he grinned and simply said: “Call options.” I spent the rest of the day reading about how this marvelous financial instrument could be used to make a fortune in a day with just a small initial stake. Of course, my lucky dormmate doubled down on his investment and ended up losing most of his money when the dot-com bubble burst a couple of months later.

Exchanges and Clearing

Fixed income derivatives: Introduction of options on Euro-Buxl Futures
1. Introduction
The Management Board of Eurex Deutschland took the following decision with effect from 28 September 2020: Introduction of options on Euro Buxl Futures pursuant to the Attachment The launch is subject to regulatory approval. To implement this decision, the Contract Specifications for Futures Contracts and Options Contracts at Eurex Deutschland (Contract Specifications) shall be amended as set out in the Attachment. This circular contains all information on the introduction of the new products, the adjustment of the existing products and the updated sections of the relevant Rules and Regulations of Eurex Deutschland.

Eurex Clearing welcomes new members to the Supervisory Board
Three new Supervisory Board members appointed The five most active participants in the Eurex Clearing Partnership Program continue to hold seats As of today, the Supervisory Board of Eurex Clearing, one of the largest clearing houses globally and part of Deutsche Börse Group, welcomes three new members. Tammo Diemer, Managing Director at the Federal Republic of Germany Finance Agency GmbH, will succeed Jutta Dönges.


TradingScreen’s MARKTS Partners with Deribit on Crypto Options Trading
Traders Magazine (press release)
TradingScreen Inc. (TS) subsidiary MARKTS, a cryptocurrency order and execution management system (OEMS), has teamed up with bitcoin futures and options exchange Deribit to enable institutional investors to trade cryptocurrency options for the first time on the MARKTS platform. Deribit, which owns around 70% of the open interest of the BTC crypto options market and approximately 80% of the traded options volume, will connect directly into TradingScreen’s all asset class OEMS solution. The connectivity allows institutional investors to not only buy and sell crypto derivatives but also manage their risk and downside.


Coming Soon: OCC Learning
OCC, the world’s largest equity derivatives clearing organization, is committed to providing thought leadership and education to market participants and the public about the prudent use of all OCC-cleared products. One of the ways that OCC supports its mission is through the programs and services of The Options Industry Council (OIC).


FIA highlights resilience of derivatives markets in first-ever digital conference
Jeff Reeves –
FIA hosted three hours of virtual programming at its first-ever digital conference on June 23, bringing the global cleared derivatives industry together to discuss key issues. “Resilient industries learn from times of crisis and pivot quickly to make improvements,” said FIA President and CEO Walt Lukken in his opening remarks. “That will be the focus of the next three days of IDX-Virtual: What are the lessons learned from recent market volatility and how do we adjust as an industry to make us stronger?”


FIA releases COVID-19 industry sentiment survey
Washington, DC – FIA today released the results of an industry survey to gauge the sentiment of market participants on the impact of the COVID-19 pandemic on the cleared derivatives industry. The results showed that while the industry performed well during recent market volatility, there were several issues that need to be studied and addressed to strengthen the resilience of the system. These include unpredictable changes in margin, clearing operations and trade settlements during stressed market conditions.

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