Surge in oil options trading; Belief in cryptocurrencies; FX vol collapsing

Nov 7, 2017

Lead Stories

Oil Options Trading Surges After Funds Buy Into OPEC’s Rebalancing
Alex Longley – Bloomberg
Brent, WTI option volumes hit multi-month highs on Monday; Funds seen drawn by tightening oil market, Mideast tensions
Options trading for crude oil this week jumped to the highest in five months as money managers backed OPEC’s effort to rebalance the oil market and as regional tensions flared in the Middle East.

****SD: More on the fund buy in from John Kemp of Reuters, who lays out more on the overall action in the petroleum realm, not just WTI and Brent. Saxo’s Ole Hansen – Speculative oil bets creating false sense of a tight market

Bitcoin ETFs Are Likely to Follow Futures, Cboe President Says
Brian Louis – Bloomberg
Cboe Global Markets Inc. sees bitcoin exchange-traded funds on the horizon.
The Chicago-based exchange operator is competing with local rival CME Group Inc. to introduce bitcoin futures. Cboe announced in August that it wanted to offer the contracts, which would use Gemini bitcoin market data, by the end of this year or early next year. Each company needs approval from the U.S. Commodity Futures Trading Commission.

FX volatility collapsing to multi-year lows
John J Hardy –
The latest developments in Saudi Arabia, as well as Riyadh’s recent exchanges with Iran, have spiked oil prices for the front months of the major oil futures by several dollars. This remarkable development has seen little spillover even into directly oil-linked currencies, with the Russian ruble finally bothering to strengthen yesterday after previously selling off on a weak emerging markets complex and the concern that the investigation into Russia’s meddling with the US election could produce new sanctions.

****SD: Here’s a link to Saxo’s FX Options Market Update. Highest risk premiums = ruble and rand.

Chicago institutional electronic trading senior executive Natasha Solis appointed Managing Director of Global Sales at Matrix Execution Technologies
Andrew Saks-McLeod – FinanceFeeds
Natasha Solis, one of Chicago’s very well connected senior executives in the derivatives technology sector, has been appointed Managing Director at Matrix Execution Technologies, responsible for global sales, in another example of the aspirations of Chicago’s refined listed venue providers to gain a worldwide audience across all sectors

BP joins Shell in helping Mexico execute oil hedge: sources
Dmitry Zhdannikov – Reuters
BP (BP.L) helped Mexico execute its 2018 oil hedge, the biggest in the industry, becoming the second major after Shell to participate in the highly coveted program and challenging the traditional role of banks in the operation.

CNBC’s Brian Sullivan Interviews Our Experts: Measuring Volatility
George Maris and Myron Scholes – Seeking Alpha
CNBC’s Brian Sullivan interviewed some of Janus Henderson’s top investment experts in an exclusive live panel on October 9.

Exchanges and Clearing

Cboe Global Markets Reports Third Quarter 2017 Results
Revenue Less Cost of Revenue of $269.7 Million, up 98 Percent, Reflects the Bats Acquisition; Net Revenue up 10 Percent Compared to 3Q16 Adjusted Combined Revenue; Organic Net Revenue of $157.1 Million, up 15 Percent, Driven by Increased Trading in VIX Futures and Index Options

****SD: Reuters breakdown – Options exchange Cboe’s profit edges past estimates

Bitcoin a new asset class, not a crypto-currency: CME’s Melamed
Tomo Uetake, Hideyuki Sano – Reuters
Bitcoin is likely to become a new asset class in its own right, such as gold or stocks, which can be traded by major investors and regulated, not simply a crypto-currency, Leo Melamed, Chairman Emeritus of CME Group (CME.O), said on Tuesday.

Cboe Global Markets Announces Planned Chief Financial Officer Retirement and Successor Appointment
Cboe Global Markets announced the planned retirement of its Executive Vice President, Chief Financial Officer (CFO) and Treasurer, Alan Dean, at the end of December 31, 2017, after 38 years of service to the company. Cboe plans to promote Brian Schell, currently Deputy CFO, to Executive Vice President, Chief Financial Officer (CFO) and Treasurer, effective January 1, 2018.

SGX reports market statistics for October 2017
Total Derivatives volume was 14.9 million, down 7% month-on-month (m-o-m) and up 29% year-on-year (y-o-y).

Regulation & Enforcement

Calls for delay on CAT
Nicole Bullock – FT
Some of the major players involved in a much-delayed surveillance system to monitor trading in the world’s largest equity market want it to face further delays. The operating committee of the CAT, or consolidated audit trail, say that the exchanges and other groups known as SROs “are discussing with the [Securities and Exchange] Commission staff an extension for the various phases of the implementation of the CAT. We believe that a new, extended timeline is in the best interests of all parties involved.”

****SD: Down to the wire – T minus eight days until SRO reporting begins.


Was Apple’s Rise Painfully Obvious? For Some Yes, Other No
Bob Lang – Cboe Blog
With Apple’s stunningly strong earnings report, higher guidance and off the charts opening sales for the new X phone in place, the company rose smartly last week, peaking at a valuation never seen or heard before – 900 billion dollars! Just under 10% more and this will be the first company ever valued at over 1 trillion dollars. It has been a great ride for Apple, its shareholders and employees.

Alibaba’s Next Big Event
Steven Sears – Barron’s
The influence of the Chinese government on that nation’s financial markets is apparently no longer perceived as a major risk factor for investors. Stocks there have continued to rally despite recent reports the government is considering taking a 1% ownership stake in various technology companies.

****SD: Strategy = sell 187.5 put, buy 190 call.


CME Group Announces Jack Bogle And Mac McQuown As The 2017 Melamed-Arditti Innovation Award Recipients
CME Group’s Center for Innovation today announced that John C. “Jack” Bogle, Founder of The Vanguard Group, Inc., and John “Mac” McQuown, Co-founder/Director and Principal of Diversified Credit Investments, are the 13th recipients of the CME Group Melamed-Arditti Innovation Award. CME Group will present the award at the 10th annual Global Financial Leadership Conference in Naples, Fla., on Tuesday, Nov. 14.


Dick Bove tells clients to dump Goldman, calls for Blankfein ouster
Jeff Cox – CNBC
Analyst Dick Bove at the Vertical Trading Group has lowered his rating on Goldman Sachs to a “sell” and thinks CEO Lloyd Blankfein should be removed.
The bank’s decision to exit its market-making role on derivatives exchanges, and its involvement with Venezuela, prompted the move.
Bove earlier in the year has called for Blankfein’s ouster amid a pattern of “bad judgment.”

Argentina’s Largest Futures Trading Market May Add Crypto to its Roster
Finance Magnates
Rofex is interested in offering custody services for Bitcoin, and the option to use Bitcoin as collateral in futures trading.

Want More Volatility? Introducing FANG+ Futures
Sick of waiting for volatility to return to the markets? Seems that the folks at ICE are too and they’re doing something about it. In two days, futures on FANG stocks – you know – Facebook, Amazon, Apple, Netflix, and Google – will be traded on the Intercontinental Exchange as a FANG+ futures contract, merging the built-in leverage and liquidity of futures contracts with the seemingly endless promise of today’s five horsemen of techno-wonder.

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