Observations & Insight
OptionMetrics Accepting Submissions for Strategic Investment Methodologies
Now, more than ever, investors are wondering how to combat volatility through strategic methodologies. As such, OptionMetrics, an options database and analytics provider for international institutional investors and academic researchers, will host its 8th Annual OptionMetrics Research Conference (ORC2019) on Monday, October 28, at Fordham University, Lincoln Center Campus, New York City.
Traders cut their bets against sterling but no-deal fears still loom; Analysts fear ‘wildly volatile’ September and October for pound
Philip Georgiadis – Financial Times (SUBSCRIPTION)
Investors have cut their bets against the pound for the first time since the beginning of June as the currency has recovered off near-historic lows, but analysts warn that volatility still looms with the Brexit deadline just 10 weeks away. Traders are grappling with how to price the currency amid deep political uncertainty as the chances of a disruptive exit have risen under Boris Johnson’s premiership. Opposition efforts to stop the UK crashing out of the EU have offered the pound some respite, although many in the foreign exchange market are deeply sceptical about their chances of success.
****SD: Short positions stand at 95,820 contracts, down from a two-year high of 102,720 the previous week, per CFTC data. From the story: “Kit Juckes, global head of foreign exchange strategy at Societe Generale in London, said the data suggested that ‘100,000 is about as big a net sterling short as the market can cope with.'”
Dealers dip toe into Sonia swaptions market
Ben St. Clair – Risk.net (SUBSCRIPTION)
In another milestone for the sterling market’s Libor transition, at least two banks have traded Sonia-linked swaptions and a third is actively showing prices for the instruments.
NatWest Markets is understood to have executed a trade last month to hedge a balance-guaranteed swap – a transaction in which the swap notional reduces at a rate linked to the amortisation of a reference security.
CyrusOne Is Said to Explore Sale After Takeover Interest
Gillian Tan and Kiel Porter – Bloomberg (SUBSCRIPTION)
The shares rose as high as 16.6% in biggest gain since 2013; Dallas-based REIT has a market value of about $8.2 billion
CyrusOne Inc. is considering a potential sale after receiving takeover interest, according to people familiar with the matter, as digital infrastructure companies such as data center operators increasingly garner buyout interest from rivals and private buyers.
****SD: This is big news pertaining to the home of the CME’s matching engines in Aurora, Ill.
FIA responds to CFTC’s “Foreign Futures and Options Transactions” proposal
On Aug. 5, FIA filed a comment letter with the U.S. Commodity Futures Trading Commission in response to the CFTC’s “Foreign Futures and Options Transactions” proposal. The proposal would codify the process by which the CFTC may terminate exemptive relief issued under CFTC Regulation 30.10 governing futures and options traded on non-US exchanges that are offered and cleared for US customers. FIA’s letter generally supports the CFTC’s efforts to codify the process, but asks that the agency provide more robust notice of its intention to terminate the relief to market participants that rely on it.
Will Crypto Options Trading Trigger The Biggest Institutional Wave Thus Far?
Ofir Eyal Bar – Benzinga
The global derivatives industry in the traditional investment space is a multi-trillion dollar arena. Whether it’s commodities such as gold and silver, fiat currency pairs like GBP/USD, or conventional blue-chip equities – options are a hugely beneficial asset vehicle for investors.
A Year of Stock Market Fury, Signifying Nearly Nothing
Matt Phillips – NY Times
The stock market is having a banner year.
The stock market has barely budged in the past year.
Both of those statements are true: The S&P 500 is up about 15 percent in 2019, a great performance by historical standards, but it is essentially flat since last August. And that is just one of the many paradoxes bedeviling investors this strange summer.
Exchanges and Clearing
The World Federation Of Exchanges Publishes H1 2019 Market Highlights
The World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, today published its H1 2019 Market Highlights report. Global market capitalisation was up 1.6% at the end of H1 2019 compared to H1 2018.
LSE needs to beat Bloomberg at its own game; Schwimmer is betting on Refinitiv and financial data revolution to unseat incumbent
Philip Stafford – Financial Times (SUBSCRIPTION)
David Schwimmer’s grand vision of financial data has received the enthusiastic backing of the London Stock Exchange’s shareholders. Since news of the LSE’s impending $27bn acquisition of data provider Refinitiv broke three weeks ago, the exchange’s shares have risen 20 per cent as chief executive Mr Schwimmer acted on his belief that “data capabilities will define the success of financial market infrastructure business”.
Banking and investment bodies begin talks to cut stock market trading hours
Samuel Agini – Financial News
Banks and asset managers are working on revolutionary proposals to cut stock market trading hours across Europe, Financial News has learnt. Proponents say the plans can help to end the testosterone-fuelled culture that has deterred women from pursuing a career on the trading floor. Critics point out that simply reducing hours may not be enough to attract more women to the industry.
Last orders: Rise of closing auctions stirs worries in European stock markets
Josephine Mason – Reuters
The final five minutes of trading have become the busiest time of day for stock market traders in Europe.
Regulation & Enforcement
Financial regulator to check on banks’ sales of certain derivative products
Yonhap News Agency
South Korea’s financial regulator said Monday it will check on banks’ sale of certain derivative products after local investors appear likely to report a huge loss.
The Financial Supervisory Service (FSS) said 3,654 individual investors and 188 businesses were found to have bought 822.4 billion won (US$677.8 million) worth of so-called “derivatives-linked fund” options sold by banks as of Aug. 7.
Volcker Revamp Could Free Banks to Boost Investment Fund Stakes
Jesse Hamilton and Benjamin Bain – Bloomberg (SUBSCRIPTION)
Regulators poised to adopt overhaul of proprietary trading ban; FDIC sets Aug. 20 vote on final rule, other agencies to follow
Wall Street banks will be given clearer rules for how they can invest in private equity and hedge funds when U.S. regulators roll out their overhaul of Volcker Rule trading restrictions next week, according to people familiar with the matter.
Rival Systems makes push for all asset classes
Louisa Chender – Global Investor Group (SUBSCRIPTION)
US tech firm to roll out cash Treasuries, cash FX, crypto amid plans to offer the complete picture
DSB to step up cybersecurity processes
Louisa Chender – Global Investor Group (SUBSCRIPTION)
Derivatives industry calls for adoption of international best practice on cybersecurity governance
NYSE Owner to Offer Futures Paying Out in Bitcoin Next Month
Benjamin Bain – Bloomberg (SUBSCRIPTION)
Bakkt venture launched in 2018 includes Starbucks, Microsoft
Goal is for Bakkt to serve as backbone of payment system
Intercontinental Exchange Inc., the parent of the New York Stock Exchange, won an approval that clears the way for its Bakkt unit to allow investors to buy derivatives that pay out with Bitcoins for the first time.
****SD: Also see the Financial Times and the WSJ. A blog on the development from Bakkt’s Kelly Loeffler can be found here.
Would ECB Buying Equities Really Be a Good Idea?: Taking Stock
Ksenia Galouchko – Bloomberg
Just when the market is looking for a positive catalyst to revive its rally, the European Central Bank’s Olli Rehn seems to think it’s a good move to float the idea of equity purchases as a means of stimulus. But a number of investors and strategists aren’t too thrilled and warn of the risk of artificially overvalued assets.
Meet the 8 people with new ideas about data, fees, and tech who are shaking up the $3.2 trillion hedge fund game
Bradley Saacks – Business Insider Prime (SUBSCRIPTION)
The hedge fund industry is often slow to embrace change. Sure, funds start and close every year, and managers tweak investment strategies and fee structures, but many have been sticking to the same basic approaches for decades. We found eight people who are actively trying to change things up when it comes to data, fees, sustainable investments and more. They work at places like JPMorgan, APG Asset Management, and Acadian Asset Management, among others. Some have been at their mission for years while others are just starting out, but all of them are doing something that turns conventional thinking in the hedge fund space on its head.