This week on The Spread – the Fed opts for higher inflation targets, the OCC gets featured, Cboe has a new options product, and more.
Produced by Mike Forrester.
Welcome to The Spread, I’m Matt Raebel. Congrats to those who bet on the Fed opting for higher inflation ahead of the big speech Thursday, when Chairman Powell confirmed that the Fed won’t be raising interest rates, but will be focusing instead on policies that are broadly about letting inflation run hotter than the Fed’s traditional 2 percent target. Maybe they got the idea from the Sun, which feels like it’s about three quarters of a mile from the face of the Earth lately. Our sponsor, the OCC, was featured in an article this week about its Renaissance Initiative, which is the ongoing process of overhauling its technical infrastructure to make it more robust and easy to adapt to changing trends and regulations, which – that process has been going on since January 2019, and it’s a novel idea: don’t wait until something is broken, but instead, improve it ahead of time so it doesn’t break at all. Cboe announced an exciting new product this week, and no, it’s not options on mini VIX Futures like I predicted last week, it’s an ESG options product tied to the S&P 500. The S&P ESG options are going to launch September 21st which should be a regular S&P ESG jubilee. Cboe also announced today that yesterday’s daily volume for Mini VIX Futures surpassed 100,000 traded contracts, which is the first time that many have been traded in one day. I’m not surprised. I usually avoid buying the bigger candy bars at the store, but then when I see a bag of mini 3 Musketeers, I always think, “what’s the harm?” And before I know it, I’ve eaten the whole bag. I don’t know what it is about small versions of things that are so enticing. Meanwhile, in Europe – after running pilots for Passive Liquidity Protection on French and German equity options back in 2019, this week Eurex rolled them out for the rest of its equity options, including its flagship index product, DAX Equity Options. Protective measures are important, after all. One last thing today: the Security Traders Association’s annual Market Structure conference is going virtual this year. They didn’t tell me what they have lined up, but I’ll bet the presenters will have a few interesting things to say given the year we’ve had. I’ll include a link for your convenience to their registration page in the “Sources” section beneath this video. That’s gonna do it for The Spread this week. There won’t be a new video next week because I’m going to be taking some time off, but we’ll be back in two weeks. Until then, as always, stay safe and happy trading.
Registration for Security Traders Association
Market Structure Conference 2020: A New Today
U.S. inflation seen rising but still below target after speech by Fed’s Powell
Kate Duguid – Reuters
Powell’s Fed Shift Allows for Higher Employment and Inflation
Craig Torres, Christopher Condon, and Steve Matthews – Bloomberg
OCC Is Making a Major Transformation to Modernize Its Tech Infrastructure. Here’s Why.
Brendan Meyer – Built In Chicago
Turbulent markets upend volatility hedge funds
Laurence Fletcher and Richard Henderson – FT
Cboe Global Markets to List New Cboe S&P 500 ESG Index Options Beginning September 21
Cboe (press release)
Mini VIX Futures Daily Volume Surpasses 100,000 Contracts for First Time
Cboe (press release)
Pushing liquidity in options products – Eurex’s Passive Liquidity Protection