This week (and last week) on The Spread – regulators publish their takes on global warming, Softbank gets in deep while Robinhood adds guardrails, and more.
Produced by Mike Forrester.
Welcome to The Spread, I’m Matt Raebel, here to bring you news from the last two weeks in the world of options trading and clearing. Last week, all the big exchanges – and the OCC – published their volumes for August. Some of the key takeaways were – surprise, surprise – equity options average daily volume was up for pretty much everybody in August. Compared to last year’s August numbers, Cboe’s ADV was up over thirteen percent, MIAX was up over seventy-two percent, and the OCC’s total cleared equity options volume was up about thirty-nine percent. Our friends at the OCC also shared with us last week that the clearinghouse once again broke its own record this year, clearing well over seven point one million trades and nearly 49 million contracts on September 3 – that’s combined futures and options contracts. The world may be literally and figuratively on fire right now, but at least the derivatives industry seems to be doing okay. Speaking of the world being on fire, the FIA and CFTC both put out reports recently saying that global warming is not only real, but it’s poised to rain on the entire financial service industry’s collective parade. Rising global temperatures cause violent weather that damages the infrastructure of the U.S., which tends to cause capital to flow in the wrong direction. Long story short: the FIA and CFTC both think market-based solutions can not only help mitigate the damage, but help humanity as a whole rain on global warming’s parade for a change! In tech news, the CME Group announced the launch of a neat new tool that will allow its users to calculate and convert listed FX options data into OTC-standard terms so you can more easily get an idea of what’s affecting prices during periods of increased volatility – kind of like Google Translate for FX options, only it will actually work. Robinhood, the trading app that’s all the rage with amateur options traders, also announced some changes to their app, including making it harder for customers to qualify for options trading accounts. They also said they’re adding more educational content and a new feature that lets you exercise options directly through the app, faster…though I think maybe they should rethink that last one. If they’re trying to make it harder for impulsive traders to get in over their heads, being able to trade faster isn’t going to help. One last tech story – people were talking about a fifty billion dollar bet on tech stocks last week, and it turned out to be SoftBank, a Japanese conglomerate known for a one hundred million dollar VC fund called the Vision Fund, which lost 17 billion dollars earlier this year. Maybe they should have quit while they were behind. Anyway…one final thing this week: the Minneapolis Grain Exchange’s board voted to demutualize the company. Demutualize is a word I just learned meaning it legally changed from a private company to a publicly-owned one – which is a necessary step in the merger between the Minneapolis exchange and MIAX, which means MIAX is one step closer to global domination. MIAX will continue to maintain trading and clearing operations of MGEX, including its hard red spring wheat contracts – try saying that ten times fast. The boards of each company had previously approved the transaction. That’s it for The Spread this week, stay safe and happy trading.
Cboe Global Markets Reports August 2020 Trading Volume
Miami International Holdings Reports August 2020 Trading Results for MIAX Exchange Group; Year-to-Date Market Share up Approximately 19% from 2019
OCC August 2020 Total Volume Up 28.7 Percent from a Year Ago
Climate Change ‘Poses a Major Risk’ to U.S. Financial System, Warns Regulator
Leslie P. Norton – Barron’s
FIA publishes policy paper on climate-related risks for financial markets and the global economy
CME Group unveils FX options volatility converter tool; New FX Options Vol Converter tool will allow users to price CME Group listed FX options liquidity in over-the-counter (OTC) terms.
Annabel Smith – The Trade
Robinhood Reveals Major Changes to Options Trading Products; Robinhood tightens eligibility requirements to make it harder for options traders to qualify to trade sophisticated products.
Aziz Abdel-Qader – Finance Magnates
SoftBank Shares Drop on Concerns About Massive Options Bet; Investors worry that a large bet on tech stocks changes the risk profile of the Japanese tech conglomerate
Phred Dvorak – WSJ
SoftBank Expects Nearly $17 Billion Loss on Tech-Focused Vision Fund
Phred Dvorak and Rolfe Winkler – WSJ
Minneapolis Grain Exchange Membership Approves Demutualization for Purposes of Merger with Miami International Holdings Press Release via New York City Biz List
MGEX membership approves merger