Treasury Report Calls for Sweeping Changes to Financial Rules

Oct 9, 2017

Observations & Insight

Thaler, Famed for ‘Nudge’ Theory, Wins Nobel Economics Prize
Jonas O Bergman – Bloomberg
University of Chicago’s Richard H. Thaler, one of the founders of behavioral economics and finance, was awarded the 2017 Nobel Prize in Economics for shedding light on how human weaknesses such as a lack of rationality and self-control can ultimately affect markets.

Lead Stories

Treasury Report Calls for Sweeping Changes to Financial Rules
Tiffany Hsu – NY Times
The Trump administration is again taking aim at the Dodd-Frank Act, releasing a Treasury Department report on Friday that recommended a vast reworking of Wall Street rules adopted in response to the financial crisis. Some of the proposed overhauls would do away with a requirement for companies to divulge the pay ratio of chief executives to workers, streamline derivatives rules, and give companies more access to capital and investors more places to put their money.

Basel committee to ease liquidity rules ahead of January deadline
Caroline Binham – Financial Times
Large investment banks got some good news from global standard-setters, who agreed to relax liquidity rules in order to make a January deadline. The Basel Committee for Banking Supervision said on Friday that it would allow some leeway around how the so-called Net Stable Funding Ratio treats derivatives liabilities, permitting countries to slash the floor of the ratio to as low as 5 per cent, from 20 per cent.

****SD: Reuters here

Cowen Completes Integration of Cowen Execution Services’ Prime Business
Cowen Inc. today announced that it has completed the integration of Cowen Execution Services’ prime brokerage business, which was acquired as part of Cowen’s acquisition of Convergex earlier this year. FINRA approved the integration of the acquired business into Cowen’s prime services division, Cowen Prime Services LLC, in August 2017. Cowen’s prime services and outsourced trading activities are now consolidated and completely focused on delivering a comprehensive suite of global solutions and services that will assist our clients in their efforts to outperform their peers and benchmarks.

Options expert Nancy Davis said this trade is the next ‘big short’
Thomas Franck – CNBC
“I think a very common theme — and I think it’s the best sharp trade out there — has been selling volatility,” said Quadratic Capital Management’s Nancy Davis.
The CBOE Volatility Index, or VIX, fell to 9.19 Thursday, a record-low close.
Davis was speaking at the Sohn conference, a West Coast version of the investment conferences that began in New York and are best known for hedge-fund managers making market-moving presentations.

Earnings Season is Upon Us
Bob Lang – CBOE Options Hub
The big wait is over, no more guessing or hyperbole about 3rd quarter earnings. The hit parade gets started this week and we’ll have some big names reporting (banks end of week), but the tone of the market will be extremely important as will the reaction. It is usually in this particular reporting season we’ll get a glimpse of what companies foresee in the coming year. We saw a trickle of it over the past couple of weeks from the likes of Micron and a few others, but more information is always good.
The proof is ALWAYS in the pudding.

Exchanges and Clearing

Gold options will help expand the market further: MCX’s Paranjape
V Sajeev Kumar – Hindu Business Line
MCX, one of the top 10 commodity exchanges in the world, is set to launch gold options in the next two weeks. Addressing the Bullion Conclave organised by MCX, in association with BusinessLine, in Thrissur, the hub of Kerala’s gold business, Mrugank M Paranjape, MD and CEO, MCX, said: “We will be announcing the launch next week. We believe the introduction of gold options will open up the market and India will get a true price-hedging mechanism.”

Regulation & Enforcement

Treasury mulls, but comes out against SEC, CFTC merger
Sylvan Lane – The Hill
The Treasury Department discussed a potential merger of the Securities and Exchange Commission and the Commodity Futures Trading Commission ahead of a Friday report floating several rollbacks of capital markets regulations.


Positioning for Nvidia’s Next Big Move
Steven Sears – Barron’s
Nvidia is red hot in the stock market and lukewarm in the options market. This disconnect creates an intriguing opportunity for anyone who wants a piece of one of the hottest companies on Wall Street. Though shares are up some 70% so far this year, the chip maker’s options are not priced with a greed (or fear) premium, which is arguably a bit unusual. Hot stocks often have hotter options premiums, but not Nvidia (ticker: NVDA). This is probably due to a combination of stock and options trading patterns and the mathematics of volatility pricing.

Apple: Play The Dip With Call Options – Apple Inc.
Seeking Alpha
Apple Inc. (AAPL) hardly needs an introduction. The company has been at the top of Interbrand’s annual Best Global Brands report year after year. Its electronic consumer products such as the iPhone, iPad and iWatch still remain highly popular. The revenue Apple has collected in the past years has been growing steadily, just as it stock price has.

Market Lifts Off From Overbought Territory
This is what a lift-off for an extended overbought rally looks like.

Weekend Review of Russell 2000 Options and Volatility – 10/2/2017 – 10/6/2017
Russell Rhoads – CBOE Options Hub
Both the Russell 2000 (RUT) and Russell 1000 (RUI) had a solid week with both rising about 1.3%. Small caps still lag large cap stocks, but since the summer RUT has been slowly chipping away at the lead held but the Russell 1000.

****SD: Also Weekend Review of Volatility Indexes and ETPs – 10/2/2017 – 10/6/2017 and Weekend Review of VIX Futures and Options – 10/2/2017 – 10/6/2017


The most brutal rivals on Wall Street are putting their swords down for a good cause
Frank Chaparro – Business Insider
The rivalries between the biggest US stock exchanges make the Coke-Pepsi divide look trivial.
On social media and in public filings with regulators, these companies brutally attack their rivals and their business models. This reporter has witnessed first hand the degree to which folks at the four main US exchanges will go to throw serious shade at one another.

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