The Spread: Make Way for the SA-CCR

Matt Raebel

Matt Raebel

Editor

This week on The Spread, the OCC shatters its own records (again), Senator Loeffler sells put options, the SA-CCR is adopted early, and more.

Produced by Mike Forrester

Transcript

Welcome to The Spread, I’m Matt Raebel. To start things off let’s check in with the OCC. Since Q1 is officially over, the OCC announced this week that they’ve kept the train going and shattered even more records. In March, they cleared over 670 million contracts, breaking their own record set a month ago for the highest volume of cleared options contracts in the history of the U.S. equity options industry. With how busy the options world has been lately, I’ve certainly been busier than usual these days. Everyone’s trading options, even Senators. Speaking of which, Senator Kelly Loeffler of Georgia – former CEO of Bakkt and wife of ICE CEO Jeffrey Sprecher – sold over 46 thousand dollars worth of stock in an online travel company right before Donald Trump announced the travel ban. In a new financial disclosure, Senator Loeffler shared her options trades from February and March, which reveal a sophisticated investment strategy on the part of her advisors involving the sale of put options. Spain, Italy, France and Belgium, as well as a few other European countries, started the week off on a cheerful note by imposing temporary bans on short selling Monday. The argument they are making is that during market routs, short selling makes things worse by driving prices down. Others, like SEC Chairman Jay Clayton, argue that that’s a terrible idea because it prevents the markets from functioning normally. If your toilet’s broken, removing the seat probably won’t fix the problem. On last week’s episode we discussed how a bunch of major exchanges, including Cboe, sent a letter to the Fed asking, “please sir, may we have some more?” And by more, I mean less regulatory constraint, which hopefully leads to more liquidity. Fortunately, they had better luck than Oliver Twist did; the Fed officially announced this week that it would be giving traders, market makers, and banks a little more leeway in these trying times by relaxing certain regulatory requirements, including greenlighting the early adoption of the SA-CCR. The SA-CCR is designed to be a sleek, sexy new way for banks and other big financial institutions to calculate total risk-weighted assets for derivatives trades in a way that is more risk-sensitive than the old method, which many believe will lead to greater liquidity in the options markets. Cboe President and CEO Ed Tilly seems to think so – Cboe released a statement saying the exchange was “gratified” by the decision. That’s gonna do it for this week. Hang in there, stay safe, and keep up the good work. We’ll see you next week.

Sources

OCC March Total Volume Up 62.8 Percent from a Year Ago – Highest Volume Month Ever for U.S. Equity Options Industry
OCC
https://jlne.ws/39DWcfE

SEC Chairman: Government Shouldn’t Ban Short Selling in Current Market
Paul Kiernan – WSJ
https://on.wsj.com/33Ua6ct

Georgia Senator Sold Travel Shares Ahead of Trump Flight Ban
Greg Farrell and Billy House – Bloomberg
https://jlne.ws/2xKdxpZ

Short-selling bans not useful: stock exchanges federation
Huw Jones – Reuters
https://reut.rs/3dEqa6z

Fed eases rule constricting capital for trading firms
Lynne Marek – Crain’s Chicago
https://jlne.ws/2xIYTz7

Agencies Approve Early Adoption of SA-CCR, Delay of CECL Capital Phase-In
ABA Banking Journal
https://jlne.ws/2JvEhgL

Regulatory Capital Rule: Revised Transition of the Current Expected Credit Losses  Methodology for Allowance
U.S. Federal Reserve
https://jlne.ws/39B7Ure

Standardized Approach for Calculating the Exposure Amount of Derivative Contracts
U.S. Federal Reserve
https://jlne.ws/340X6Sa

Cboe Global Markets Commends Federal Banking Agencies’ Action to Strengthen Market Liquidity in Response to COVID-19
Cboe Global Markets
https://jlne.ws/2X29cJq

John Lothian Newsletter

Today’s Newsletter

Protests Hammer U.S. Cities Still Recovering From Lockdown

Protests Hammer U.S. Cities Still Recovering From Lockdown

First Read Hits & Takes By John Lothian & JLN Staff Outrage over the killing of George Floyd in Minneapolis by a white policeman has sparked protests, violence and looting in the U.S. and protests internationally. Corporate leaders, bank leaders and others...

We visit more than 100 websites daily for financial news (Would YOU do that?)

Past The Spread Episodes

The Spread: Married to The Job

The Spread: Married to The Job

This week on The Spread – Ed Tilly gives a take on the state of the markets, an industry veteran joins the MIAX Exchange Group, open interest grows for bitcoin options at the CME, and more.

The Spread: An Eligible Bachelier

The Spread: An Eligible Bachelier

This week on The Spread, the OCC wins best equities clearing house for the third year in a row, a couple of Cboe directors bow out, we discuss the Bachelier model, and more.

The Spread: Re-opened for Business

The Spread: Re-opened for Business

This week on The Spread, several exchanges cautiously open their trading floors, the OCC’s volumes are up yet again, Cboe posts its earnings report, and more. Transcript: Welcome to The Spread! I’m Matt Raebel, just settling into the new normal like everyone else....

Pin It on Pinterest

Share This Story