Traders revive short vol bets; Low touch in derivatives – Where do we go from here?

Apr 5, 2019

Observations & Insight

Defense rests in a “thin” case against Jitesh Thakkar; Thakkar acquitted of conspiracy
Thom Thompson – John Lothian News

In a move that surprised the courtroom, the defense in the trial of U.S. v Jitesh Thakkar rested its case shortly before 1:00 p.m. on Thursday afternoon. Thakkar’s attorney, Renato Mariotti, had called no witnesses in his defense.

For the benefit of the jury, Mariotti played about 12 minutes of excerpts from the recordings of the FBI’s two early morning surprise visits to the defendant’s home. In these recordings the jury heard, among other things, FBI Agent Brent Potter reassure Thakkar that he need not be worried, that he was not under investigation. Under cross-examination on Tuesday, Potter had testified that that had been a lie.

To read the rest of this commentary, go here.


Thinking Global – Luc Fortin, Montreal Exchange

In this video, Montreal Exchange President and CEO Luc Fortin talks about the exchange’s extended hours, potentially partnering with a firm in Asia to spread the word, and the relaunch of a key interest rate derivative.

Watch the video »

Lead Stories

Traders revive short vol bets
Christopher Whittall – International Financing Review
Investors are piling back into trades that profit from markets remaining calm – including strategies that blew up spectacularly early last year – as an about-face from central banks has quashed volatility across asset classes.

****SD: Here we go again.

Low Touch in Derivatives: Where do we go from here?
Chris Monnery, ION – FOW
Over the past few months, I’ve shared my thoughts about the evolving space of electronic flow in derivatives. But the idea I’ve not explored relates to how we as an industry providing services to buy-side clients actually go about making this change. And in particular, addressing the elephant in the room: why the buy-side need to recognise that this marks a change to the service they’ve grown up calling electronic.

****SD: This guest post is not paywalled.

How Much Does The Fed Influence Equity Volatility?
Andrew Capon – CME Group OpenMarkets
“Don’t fight the Fed” is such a wizened market phrase that the temptation is to ignore it. But for U.S. equities it seems that the Federal Reserve still has magical powers. Between late September and Christmas 2018, the S&P 500 index fell by 20 percent. Back then the market was pricing three rate rises for 2019.

Daily FX turnover jumps to record in March – Refinitiv
Average daily turnover on currencies across Refinitiv’s trading platforms hit a record in March as global central banks doubled down on their dovish guidance during a steady drip of weak economic data.

Exchanges and Clearing

NYSE Preps for Final Pillar-Migration Phase
Rob Daly – Markets Media
NYSE’s multi-year migration to its Pillar integrated trading platform is onits final leg as the exchange operator prepares for the mid-year launch of its NYSE Pillar Gateway. The platform enables users to connect to NYSE’s equities and options markets using a single platform.

MSCI and Eurex – a winning combination: record quarter for our MSCI segment
The first quarter 2019 once again confirmed our very successful strategy on MSCI derivatives. Being one of our core strategic pillars, the MSCI product suite broke a new record with 4.7 million traded contracts – the highest level of MSCI contracts ever traded at Eurex in one single quarter.

DRW Securities, L.L.C.
Cboe Disciplinary Notice
…During the approximate period from in or about February 2009 through in or about May 2013, DRW, on a limited number of occasions, failed to grant priority to the highest bid and/or lowest offer when such bid or offer was displayed. 9. During the approximate period from on or about June 1, 2013 through on or about June 30, 2016, DRW, on a limited number of occasions, failed to grant priority to the highest bid and/or lowest offer when such bid or offer was displayed.

****SD: A paltry $2,500 fine.

SGX welcomes Aarna Capital as Derivatives Trading Member
Singapore Exchange (SGX) today welcomed Aarna Capital Ltd. as a Trading Member of its derivatives market, the first from the Middle East.

Euronext announces volumes for March 2019
In March 2019, the overall average daily volume on derivatives reached 597,534 contracts, up +1.7% compared to March 2018 and down -7.0% compared to the previous month. I

Regulation & Enforcement

CFTC asks Court to impose monetary penalty of $13.4m on binary options scammers
Maria Nikolova – FinanceFeeds
The CFTC gets close to the end of an action against a maze of binary options entities, promising clients “the most profitable click they’ll ever make”.


OpenGamma To Grow Products And Geographies
Shanny Basar – MarketsMedia
OpenGamma has raised $10m (EUR8.9m) in venture capital funding as the next phase of the uncleared margin regulation is due to go live in September this year and boost the derivatives risk analytics provider’s client base.


How to Protect Yourself From the End of the Bull Market
Steven M. Sears – Barron’s
The S&P 500 index just completed its best first quarter since 1998. Stock prices have rallied so far since the financial crisis that making loads of money in the markets seemed to require no real skill. Yet many institutional investors are worried that the market has advanced too far, too fast. They note that this past Wednesday was the 100-day mark since the 2018 closing low in U.S. equity markets. The S&P 500 has since rallied 22% since thenóperformance that would be considered a great year for investors, let alone a great quarter.


After jobs report, the bull narrative is winning the argument and could take market to new highs
Bob Pisani – CNBC
The strong March jobs report will reinforce the bull narrative that has come to dominate trading in the past month. The bull narrative is China and Europe economic weakness is bottoming, there will be a trade deal with little or low tariffs, earnings growth in the U.S. for 2019 will be in the low-single digits, inflation will be moderate and ó most importantly ó the chances of a recession in 2020 is very low. However, the global slowdown story is not dead.

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