Two Market Giants Tried to Create a $75 Billion Mega-Exchange
Matthew Leising – Bloomberg
CME, ICE discussed a merger after Deutsche Boerse-LSE’s deal; They’re no longer negotiating, unclear why talks broke down
The world’s biggest exchanges are still looking for deals even though the merger of Deutsche Boerse AG and London Stock Exchange Group Plc was scuttled by European regulators.
****SD: Speaking of tie-ups, there was this story about a potential deal last week from Business Insider – TCI’s Chris Hohn on LSE – ICE deal
The Mystery of the Stubbornly-Low Volatility Index Is Deepening
Dani Burger – Bloomberg
Call it the curious case of the tail wagging the VIX. The U.S. stock market’s main volatility gauge — the CBOE Volatility Index, better known as the VIX — is at its lowest level since 2007. That seems strange in light of the geopolitical anxiety surrounding the French elections, the saber rattling with North Korea and the mixed fiscal and economic signals coming from the U.S.
***SD: This starts peeling back some layers of the VIX onion — talks about the role of VIX ETPs, which are a $3 billion industry. For some irrelevant context, depending on the production year, that is about the size of California’s almond industry (which provides some 80% of the world’s almonds). Take that for data!
Ex-Credit Suisse Trader Lures $1.6 Billion of Client Cash
Donal Griffin – Bloomberg
Options trader Kapoor sets up Volaris firm to advise clients; Kapoor joined by two colleagues who have also quit Swiss bank
Vivek Kapoor, a trader in complex equity products, has left Credit Suisse Group AG’s asset-management unit to run his own firm with about $1.6 billion of assets he oversaw, a person familiar with the matter said.
****SD: Bloomberg with an onslaught of stories today!
Euro Zone VSTOXX ETNs Land on U.S. Beaches!
VIX and More
Think the market is too complacent about this weekend’s election in France? Worried that the euro area is going to crumble under the weight of Italy’s struggles? Convinced that Greece, Portugal or Spain are just one more kicked can away from a disaster? As of tomorrow, investors in the U.S. will have another way to translate these ideas into actionable trades with tomorrow’s launch of two new exchange-traded notes (ETNs) – EVIX (long euro zone volatility) and EXIV (inverse euro zone volatility) – from VelocityShares and UBS that put a European face on existing U.S. VIX-based products such as VIIX and perennial favorite XIV.
****SD: Here’s a link to the WSJ article (via Yahoo) on them too.
CFA Institute mulls adding ‘big data’ to financial analyst exam
Trevor Hunnicutt – Reuters
The CFA Institute will weigh changing its formidable exam to tackle artificial intelligence and the “big data” investors cull for an edge in markets, a senior official from the U.S. accrediting group said on Tuesday.
****SD: Starting Sunday they’ll be discussing the idea at a workshop in Chicago
Euro Traders Are Less Gloomy on French Vote Than at First: Chart
Vassilis Karamanis – Bloomberg
Investors in the currency options market are less worried about the outcome of the French election run-off than they were before the first round and the U.K.’s referendum on the European Union.
Exchanges and Clearing
CBOE Holdings Reports April 2017 Trading Volume
CBOE Holdings, Inc. (BATS: CBOE | NASDAQ: CBOE) today reported April monthly trading volume.
London Stock Exchange Attacks EU Grab for Clearing Post-Brexit
Annie Massa – Bloomberg
London Stock Exchange Group Plc warned against a move from the European Union to limit euro clearing in its home city, saying the attempt would put investors and financial firms at risk.
****SD: I’m imagining a parent swatting a kid’s hand away from the cookie jar. Also from Bloomberg today, Brexit’s Clearing Battle
Monthly Report: Eurex Product Array Sees Volume Boost Post French Poll
Global capital market relief at the result of the first round of the French election prompted rallies in equity markets around Europe, while fixed income markets also saw sharp corrections. The moves provided the primary driver for strong increases in volumes in some of Eurex’ newest derivative products, with volatility derivatives being the standout performer. Monday April 24th – the day after the French poll – set a new all-time peak, with 271,930 contracts traded at Eurex, Europe’s largest derivatives exchange that is part of Deutsche Börse Group.
Intercontinental Exchange Reports April Statistics; ICE ADV up 26% y/y Driven by Financials ADV up 62% y/y, Commodities ADV up 7% y/y
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today reported April 2017 trading volume and related revenue statistics, which can be viewed on the company’s investor relations website at http://ir.theice.com/ir-resources/supplemental-information in the Monthly Statistics Tracking spreadsheet.
Vietnam to launch covered warrants in Q3
Nikkei Asian Review
The local stock exchange plans to launch covered warrants in the third quarter to expand investment choice and attract more foreign capital to the market. Foreign investors are only allowed to hold 30-49% of some companies. As such, warrants will offer them another avenue to gain exposure to those stocks without breaching limits. Covered warrants, also known as options, give investors the right to buy or sell stock or an underlying asset at a particular price within a set time period.
Regulation & Enforcement
SEC, CFTC Funding Unchanged in Congressional Spending Plan
Andrew Ramonas and Richard Hill – Bloomberg BNA
The SEC would get $1.605 billion and the CFTC would receive $250 million for fiscal 2017 under a congressional spending proposal that would maintain their 2016 funding levels.
****SD: Not the best, but better than a decrease, which would have hampered Giancarlo’s new tech initiatives.
Having decided to allow options trading in commodities, SEBI will have to tighten the regulations to rein in rampant speculation
OCC Congratulates Clayton on Confirmation as SEC Chairman
OCC, the world’s largest equity derivatives clearing organization, today congratulated Jay Clayton upon his confirmation by the U.S. Senate as Chairman of the U.S. Securities and Exchange Commission (SEC).
****SD: I’ve looked at a good deal of congratulatory press releases over time, and one of these days I’d like to see, when applicable, the opposite tone — “Organization XYZ Slams New Regulatory Appointment as Unqualified; Will Work With Him/Her Under Protest.”
Pennsylvania Resident Charged by CFTC with Defrauding 4 People of $825,000
Victor Golovtchenko – Finance Magnates
The US Commodity Futures Trading Commission charged William H. Powderly IV with fraudulently soliciting four investors. According to an official announcement made by the regulator, the individual that is a resident of New Hope, Pennsylvania defrauded his victims with at least $825,000.
****SD: Included because the case hinges on backtesting.
FPGA Market Size Estimated at $9.98 Billion by 2022
John D’Antona Jr. – Traders News
The field programmable gate array (FPGA Market) size is expected to reach $9.98 billion by 2022, according to a new research report by Global Market Insights.
****SD: Soooo many applications for FPGAs across many sectors and industries. Time to buy XLNX? I’d say Altera but that company is under the IBM umbrella now.
QuantConnect announces open-source support for futures and options
QuantConnect, an open-source, cloud-based algorithmic trading platform, has announced the launch of futures and options support on the platform, enabling users to backtest, research and live trade the new asset classes. QuantConnect users can design strategies that use multiple asset classes for increased diversification and alpha generation. QuantConnect now supports five asset classes: equities, cash foreign exchange, futures and options from opening tick to daily resolution.
5 Ways Technology Is Driving Market Data Consumption
Lynn Martin, ICE Data Services – TABB Forum
Today’s electronic markets, coupled with increased market fragmentation, have multiplied the volume of market data exponentially. And in response to the increased amount of information available, the way we use technology to consume data has evolved. ICE Data Services’ Lynn Martin examines the key data and technology trends.
Hedge funds lose faith in OPEC
John Kemp – Reuters
Hedge funds are losing faith that OPEC can accelerate the rebalancing of the oil market even if the group agrees to extend output cuts when it meets later this month. Hedge funds and other money managers cut their combined net long position in the three main futures and options contracts linked to Brent and WTI by 139 million barrels in the week to April 25 (tmsnrt.rs/2p10Ih8).
****SD: I am always leery of trusting a “cartel.” Just so many bad associations…
JPMorgan Quant Says Buy Bank Puts Before Jobs Data, French Polls
Adam Haigh – Bloomberg
Investors should buy put options on an exchange-traded fund of financial shares before Friday’s U.S. jobs report and the upcoming French presidential election on Sunday, according to JPMorgan Chase & Co.’s quantitative and derivatives strategy research team.
****SD: That reminds me, I need to Venmo my friend for dinner the other night…
The Perils Of Selling Volatility When Volatility Is So Low
Vineer Bhansali – Forbes
Once the piece I wrote yesterday went online (“Why Is Volatility So Low and What Should We Do Now?”), I received a number of questions on why now is the time to quit selling volatility and be careful. Couldn’t we have said the same thing a few months, or maybe a few years ago? The straight answer is that I don’t really know, but the risk vs reward of being short volatility now is immensely skewed in the wrong direction. The answer boils down to option arithmetic and participant behavior.
What Nassim Taleb Can Teach Us
Jeff Deist – Mises Institute
Nassim Nicholas Taleb does not suffer fools gladly. Author of several books including The Black Swan and Antifragile, Taleb is known for his incendiary personality almost as much as his brilliant work in probability theory. Readers of his very active Medium page will experience a formidable mind with no patience for trendy groupthink, a mind that takes special pleasure in lambasting elites with no “skin in the game.”
SEC approves request to list and trade quadruple-leveraged ETFs
The Securities and Exchange Commission on Tuesday approved a request to list and trade quadruple-leveraged exchange-traded funds, marking a first for the growing market for such funds in the United States.
****SD: Matt Levine takes a good look at the 4x product and its relation to the passive vs. active trend in his “Money Stuff” column today. To me, they sound like a great way to make someone else money.