Lead Stories

Threats to US ag trade with China, Mexico ‘far bigger deal’ than TPP’s loss
Threats to US trade with China or Mexico, which have been raised by Donald Trump’s US presidency, look far more serious than the loss of the TPP deal, a senior CME Group executive said, foreseeing a jump in ag price volatility. Erik Norland, executive director and senior economist of CME Group, downplayed President Trump’s decision on Monday to withdraw the US from the TPP, the Trans-Pacific Partnership free trade deal, saying that “I do not think it really changes very much”.

****SD: Among other points – “Mr. Norland said that his concern was that ‘going into the later part of this decade, the cost of options on a variety of products like corn, wheat and soy might begin to rise very, very substantially.'” Speaking of ags, from TradingFloor.com Will hedge fund buying keep driving agricultural commodities?

No Coat, No Tie Leads to Rough Start for Accused Insider Trader
Christian Berthelsen – Bloomberg
On Monday, John Afriyie failed to show up at court for the start of his trial on insider-trading charges. He refused to bring his expected court attire when U.S. marshals arrested him. When he finally arrived in federal court in Manhattan late Monday, dressed in Under Armour workout gear, he tried to fire his lawyers. On Tuesday, he listened in silence as a prosecutor laid out the evidence against him — wearing a jacket, shirt, tie and pants that his mother brought him.

****SD: In lieu of a snarky comment, here is a list of the clothes Afriyie was brought by his mother: “three pairs of slacks, one jacket, five shirts, four ties, seven pairs of socks, five pairs of underwear, a pair of shoes and a belt, to be kept at the jail to wear to court each day.”

The stock market’s ‘fear index’ may have nowhere to go but up
Sue Chang – Marketwatch
The CBOE Market Volatility Index, a measure of fear in the market, is trading at an extremely subdued level that is more symptomatic of a carefree market. But the mood on Wall Street is anything but, suggesting that the VIX’ volatility index’s foray below 20 may be a sign of turmoil ahead.

****SD: Hah! I include this for a couple of reasons. It embodies a common market sentiment that just hasn’t happened since the post-election rally began. (I realize this is more of a midterm article, but…) when this was written yesterday the VIX was 11.4 — as of this writing it’s 10.75. I could reiterate the “nowhere to go…” sentiment and probably see the VIX hit 9.99 tomorrow (though I think everybody will agree that is a bargain level if there was one). Let’s just say there are plenty of people out there with almost no choice but to be long volatility and they are getting crushed.

Dow hits 20,000 as Trump and earnings reignite rally
Yashaswini Swamynathan, Rodrigo Campos and Chuck Mikolajczak – Reuters
The Dow Jones Industrial Average was higher in midday trading after hitting 20,000 for the first time on Wednesday as strong earnings and President Donald Trump’s pro-growth initiatives reignited a post-election rally. Trump has made several business-friendly decisions since taking office on Friday, including signing executive orders to reduce regulatory burden on domestic manufacturers and clearing the way for the construction of two oil pipelines.

****SDD: On a similar note, here’s JJ Kinahan’s market outlook In the Pipeline: Trump’s Keystone Order Brings New Highs, Optimism and from TheStreet So We Hit Dow 20K, Now What?

Lukken requests comprehensive review of all financial reform regulation
FIA president and CEO Walt Lukken sent an open letter to President Trump and key congressional and regulatory leaders calling for a comprehensive review of all financial reform regulation. The letter notes that after the financial crisis, the Dodd-Frank Act has generated more than 22,000 pages of regulations and fundamentally changed the regulatory structure of financial markets.

****SD: I wish Walt the best in this endeavor but there is one huge problem: How do you condense 22k pages of material into a one-page bullet pointed list for the President?

Time to review currency hedges given volatility, say consultants
Investment & Pensions Europe
Pension funds should see recent volatility in sterling and other currencies as a prompt to review their hedging positions, consultants have said. A measure of weekly volatility of sterling showed expectations about the UK currency last week were at their most uncertain point since the country voted to leave the European Union.

Exchanges and Clearing

BlackRock’s Hildebrand sees euro clearing leaving London post-Brexit
Clearing of euro-denominated financial contracts will have to leave London and stay inside the European Union when Britain leaves the bloc’s single market, BlackRock’s Philipp Hildebrand said on Tuesday.

Regulation & Enforcement

CFTC Plays Four Corners with Reg AT
Tom Lehrkinder – TABB Forum
Newly appointed acting CFTC Chairman Christopher Giancarlo is channeling his inner coach Dean Smith and applying a little North Carolina four corners tactics to stall Regulation Automated Trading and break down the defense.

Firms face tough calls over March margin deadline
Merle Crichton – Futures & Options World
Firms must make decisions ahead of the March variation margin rules – panel
The introduction on March 1 of new rules that mandate the allocation of variation margin poses some tough questions for derivatives users, a panel of experts has warned. A panel of derivatives experts at Clearstream’s Global Funding and Financing Summit in Luxembourg said on Wednesday the global rule changes slated for early March are causing serious headaches for firms. “The fact is we’re not far from that date at all, and there is a huge amount of work still to be done,” said panel moderator Bill Hodgson, founder of magazine The OTC Space.

How Safe Should the Financial System Be?
Ryan Tracy – WSJ
As U.S. policy makers debate changes to financial regulatory policy, a senior Federal Reserve staffer says something is missing: clear instructions from Congress about how safe the U.S. financial system needs to be.

U.S. asset managers seek delay on new variation margin rule
U.S. asset managers pleaded on Tuesday for a delay to international rules on variation margin, the collateral posted for swaps, saying in a letter to international regulators that many will not be ready by the March 1 start date.

Peer-to-Peer Binary Options Platform Fairtrade Appeals ISA Order in Court
Avi Mizrahi – Finance Magnates
An interesting development in the Israeli binary options industry has been uncovered today. Fairtrade, a recently launched peer-to-peer (P2P) binary options trading platform is resisting the Israeli Securities Authority (ISA) attempt to shut it down. This is in stark contrast to other providers that decided to close shop rather than make a case for their business (most notably Banc De Binary).


Writing Covered Calls With ETFs
Lara Crigger – ETF.com
Based in Naples, Florida, Capital Wealth Planning is a third-party investment manager serving financial advisors that work with the institutional market. Since its founding in 2005, CWP has specialized in the use of covered calls, particularly on ETFs. Recently, we sat down with founder and CIO Kevin Simpson to learn more about his firm’s signature offering, the ETF Hedged Covered Call portfolio.

Is Volatility Set to Turn? (VXX, XIV)
Michael Foster – Investopedia
Is the SKEW Index hinting at an upcoming spike in volatility? The CBOE Volatility Index, or VIX, has plummeted over 21 percent year to date and remains at its 52-week low amid growing market complacency that the Trump rally is here to stay.

Oil: Play Brent’s appreciation through foreign exchange rates
Sandeep Kanihama – FXStreet
Analysts at Natixis note that since the agreement reached by OPEC producers on 30 November 2016, Brent has resumed its ascent, setting a high at $57/bbl at the start of January 2017.


GEAPS Exchange 2017
Susan Reidy – World Grain
The Grain Elevator and Processing Society (GEAPS) is coming back to Kansas City, Missouri, U.S., Feb. 25-28, for the 88th International Technical Conference and Exposition, commonly referred to as GEAPS Exchange.


Wall Street Is Hiring … in Florida
Jonathan Levin – Bloomberg
When Deutsche Bank sent senior Wall Street executive Leslie Slover to run its expanding outpost in Jacksonville, Fla., she wasn’t entirely ready for the lifestyle. Gone were the skyscrapers and subways. In their place was a corporate campus with a pond and vast parking lots, flanked by rows of new town houses, some inhabited by employees. The on-site culinary options? A cafeteria and some food trucks. Suddenly, Slover had to relearn to drive.

****SD: It took me an embarrassingly long time to realize that the rapper Flo Rida’s name was in fact just Florida broken into two parts…. (To be fair, I did not see his name in print – or his back tattoo – for quite some time.)

What Is ‘Quantamental’ Anyway?
David Weisberger – TABB Forum
The concept of integrating human judgment with the best techniques of quantitative managers for generating or capturing alpha is gaining strength as a trend in the financial industry. But there are many misconceptions about quantitative management, how such managers trade and pick stocks, and what quantitative techniques can achieve.

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