Observations & Insight

March Marketshare via OCC
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No Garfield Needed – A Good Case of the Mondays at CME
Spencer Doar – JLN

Yesterday was the first trading day for CME’s Monday weekly options on the S&P 500 and E-Mini S&P. The launch comes after the success of the Wednesday weeklies that were launched in September 2016 — now some 50-60k of the Wednesday contracts are traded daily.

The CME debuted Mondays this month ahead of the French elections after seeing how much trading activity other political events of 2016 caused during off-hours.

“What’s interesting is that even though S&P 500 is a U.S. index, it is a global benchmark. With CME being open for business 24 hours a day, we are seeing people across the globe turning to CME and using Globex during these nighttime events,” said Tim McCourt, CME’s global head of equity products.

The Mondays are a complement to the other weekly expirations and a more precise way to manage risk around weekend events, according to McCourt.

Current trading activity is mostly in the minis. In aggregate — there are four contracts on the mini listed at the moment — the most put activity is at the 2340 (~360 contracts) and 2345 (~300 contracts) strikes. Call activity is focused on the 2400 (~240 contracts), 2405 (~210 contracts), 2410 (~210 contracts) and (~190 contracts) 2420 strikes. There are about 230 puts and 230 calls open at the at-the-money 2355 strike.

Check out the CME’s press release below for some trading numbers and activity.

(Note: I’ll have to tease readers for one more day regarding some light hearted commentary. Let’s just say that in doing options searches you stumble across a variety of very-much non-options related material. I’ll give everybody a rundown. In the words of the administration – stay tuned!)


CME Group Announces First Trades of Monday Weekly Equity Index Options
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced the successful launch of S&P 500 and E-mini S&P 500 Monday Weekly options on futures. The total volume through the first two trading days was 5,490 contracts with participation from 10 firms. Open interest reached 5,319 as of April 4.

Lead Stories

Uncovering the Secret History of Wall Street’s Largest Oil Trade
Javier Blas – Bloomberg
The men huddled in the same first-floor conference room as always, only this time they’d decided to make their annual oil bet bigger and bolder than ever before. Fewer than a dozen representatives from three Mexican government ministries and Petróleos Mexicanos, the state energy company, were about to make a wildly contrarian play. If it paid off, the profits would be enormous. And if they were wrong? They would have spent a small fortune in vain.

****SD: Cool story about a unique setup. Think about what could happen in futures and options markets if only one other large oil-producing nation started a large hedging program.

Cowen Group to Buy Brokerage Firm Convergex for $116 Million
Chad Bray – NY Times
The Cowen Group said on Monday that it had agreed to acquire the brokerage firm Convergex Group as it looks to bolster its sales and trading business. The New York financial services company said that it would pay $116 million in cash and stock to acquire Convergex from the private equity firm GTCR, Bank of New York Mellon and other investors.

****SD: It’s official.

Hedge funds square up most of their former record bullish position in oil: Kemp
John Kemp – Reuters
Hedge funds have continued liquidating their large bullish position in crude amid doubts about the pace and timing of any rebalancing in the oil market. Hedge funds’ net position in Brent and WTI has been cut to 642 million barrels, down from a record 951 million barrels on Feb. 21 (tmsnrt.rs/2nvXl0M).

This Volatility Warning Has a Different Ring to It Today
Steven Russolillo – WSJ
Extreme volatility hasn’t played out like James Dimon predicted a year ago, but low volatility is creating a whole bunch of new concerns

It’s a Big Week for One of the Most Important Debates in Markets
Patricia Laya – Bloomberg
The world will have a better idea by the end of this week, but probably no definitive answer, on whether the U.S. economy’s boom in “soft” data is being reflected in the “hard” stuff.

What The VIX Is Telling Us About This Correction
Bryan Rich – Forbes
As we discussed last week, we should expect more volatility in markets in the coming months, with the continued discovery surrounding Trump Policies (timing, size) and with U.K./EU Brexit negotiations officially opening. That’s a dose of unknowns that should send stocks swinging around quite a bit more than we’ve seen for the past four months.

Reading the VIX: More Short-Term Volatility Than Long-Term
Crystal Kim – Barron’s
VIX futures inverted on the front end with shorter-term April futures trading higher than May futures with both below 14, yesterday.

Interactive Brokers Group Reports Brokerage Metrics and Other Financial Information for March 2017, includes New “GLOBAL” Composition
Business Wire
Interactive Brokers Group, Inc. an automated global electronic broker, today reported its Electronic Brokerage monthly performance metrics for March.

****SD: Average commission on an IB options trade is $6.21.

Koruna Volatility Shows Danger Zone for Cap Exit Over Next Month
Krystof Chamonikolas – Bloomberg
Currency options are giving an insight into investors’ expectations for the end of the Czech central bank’s cap on koruna gains.

Exchanges and Clearing

CME Group Reached Average Daily Volume of 16.9 Million Contracts in March 2017, up 18 Percent from March 2016
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that March 2017 average daily volume (ADV) reached 16.9 million contracts, up 18 percent from a March 2016. CME Group March 2017 options volume averaged 4 million contracts per day, up 47 percent versus March 2016, with electronic options averaging 2.3 million contracts per day, up 52 percent over the same period last year. Open interest at the end of March was 114 million contracts, up 8 percent from the end of March 2016.

Wall Street braces for rough ride as exchanges seek more speed bumps
John McCrank – Reuters
U.S. stock exchanges that spent decades speeding up markets with cutting-edge technology are now rushing to slow them down.

Trading statistics August 2016
Eurex Group
In August 2016, the international derivatives market Eurex, part of Deutsche Börse Group, recorded an average daily volume of 4.1 million contracts (August 2015: 5.8 million). In total, 93.6 million contracts were traded at Eurex in August.

****SD: Related – US tightening pushes demand for risk hedging says Eurex

The Mexican Stock Exchange Deploys Market Data Access in Equinix New York Data Center
Equinix, Inc. (Nasdaq: EQIX), the global interconnection and data center company, today announced that the Mexican Stock Exchange (BMV Group) is the first Latin American exchange to deploy a Point-of-Presence (POP) in the Equinix NY5 International Business Exchange (IBX) data center, located in Secaucus, NJ.

Nasdaq ISE Announces ISE FIX Bridge Production Port Transition Schedule
Options Technical Update #2017
In an effort to prepare for the Nasdaq ISE (ISE) launch on INET, ISE will be transitioning current ISE production FIX and FIX Drop Ports to the INET FIX Bridge between April 24 and May 5, 2017. All T7 FIX and FIX Drop connections utilized on ISE will be migrated to the INET FIX Bridge during this transition.

Euronext and Intercontinental Exchange sign agreement for derivatives clearing
Euronext, the leading pan-European exchange in the Eurozone, announces it has signed a binding heads of terms with ICE Clear Netherlands, a subsidiary of Intercontinental Exchange (NYSE: ICE) for the provision of clearing services for its financial derivatives and commodities markets.

****SD: In case you missed it yesterday.


Citadel Securities hires ex-SEC official as general counsel
Nicole Bullock – Financial Times
Stephen Luparello, the former director of the division of trading and markets at the Securities and Exchange Commission, will join Citadel Securities next month as general counsel.

ON THE MOVE: Yeh Rejoins Citadel; Weisberger Lands at Viable Markets
Traders News
David Weisberger joined Viable Markets as its new Head of Equities. Weisberger, a 33 year veteran of the trading markets, comes onboard after forming his own consultancy firm, Equam. Before this, he served as Managing Director at IHS Markit, RegOne Solutions, Two Sigma Securities and Lava Trading. He is a regulator market commentator and contributor to Traders Magazine.

Regulation & Enforcement

MiFID II RTS published in the EU Official Journal
The following Regulatory Technical Standards (RTS) and Delegated Acts were published in the EU Official Journal (OJ) on 31 March 2017. All apply from 3 January 2018 except where noted.

Senate Banking panel votes in favor of Clayton’s SEC nomination
Sarah N. Lynch – Reuters
The U.S. Senate Banking Committee voted on Tuesday to advance Jay Clayton’s nomination as the next head of the U.S. Securities and Exchange Commission to the full Senate for approval.

Exclusive: CySEC Head Scolds Industry Leaders – “Be Ashamed of Yourselves”
Finance Magnates
A previously announced meeting between Demetra Kalogerou, Chairwoman of the Cyprus Securities and Exchange Commission (CySEC) and a consortium of brokerage executives has gotten underway. However, the early indications of the meeting suggest a heightened level of friction between the regulator and industry brokers.

It ain’t over till it’s over – some binary options brokers do not let go of sports partnerships
Maria Nikolova – FinanceFeeds
Even after its deal with France’s PSG came to an end, OptionWeb finds a way of touting its partnership with the football club.


The Machines Are Eating Wall Street
Nathan Vardi – Forbes
The world’s five biggest hedge funds today all use systems-based approaches to trade financial markets. This computer domination of the richest corner of the investment management industry has been building steadily for years, but it has accelerated together with the problems that have hit some of the most prominent human hedge fund traders.

Sucden Financial picks BSO for network connectivity into Hong Kong
International FX and derivatives broker Sucden Financial has selected BSO to provide clients with unrivalled low-latency connectivity to execute derivative trades between London and Hong Kong.

Banks deploy cloud technology to flush out rogue traders
The Trade
Major global banks are increasing their adoption of cloud technology in an effort to monitor the actions of traders and avoid future scandals, according to new research.


Emerging Market Trades For Bulls and Bears
Steven M. Sears – Barron’s
Later this week, Chinese President Xi Jinping will meet President Donald Trump at his Palm Beach mansion. They are likely to discuss America’s trade deficit with China, currency valuations, and other tensions between the world’s two largest economies. North Korea, which exists in China’s safe shadow, is also likely to be a major issue. Trump recently said he was ready to unilaterally confront an increasingly bellicose North Korea.

The record run for tech stocks is far from over, analysts and traders say
Annie Pei – CNBC
The tech surge is far from over, say analysts and traders who see even more record highs ahead for some of the sector’s biggest names.


Trader Routines Revealed: Nothing Wrong with Good Habits
The Ticker Tape
Like most people, traders are creatures of habit. Those lucky enough to be living with the market-obsessed might even argue that traders are a species entirely of their own. In all seriousness, pre-market and post-market routines can be what makes or breaks a trading approach.


Ag Economy Barometer: Producer sentiment slips in March
CME Group
Producer sentiment toward the agricultural economy dropped to 124 in March marking the second consecutive month of decline, according to the Purdue University/CME Group Ag Economy Barometer.

The five markets charts that matter for investors
Financial Times
Here is a selection of five charts that FT Markets believes are important signals for investors as the second quarter begins.

Brazil’s black market pipeline: Gangs hijack Petrobras’ oil, fuel
Rodrigo Viga Gaier – Reuters
In September, police investigating a wave of killings in the northern Rio de Janeiro suburbs followed a tip to the isolated scrubland near the massive Duque de Caxias oil refinery. Police presumed the killings were linked to turf battles between criminal gangs in the run-up to municipal elections the following month. They found a different explanation buried beneath the grass: a system of tubes to siphon fuel from underground pipelines leading from the refinery, owned by state-run oil company Petrobras

****SD: I saw a VICE documentary about Venezuela-Colombia gas smugglers a ways ago. Crazy stuff, so not surprised it’s highly organized and an issue in other LatAm countries. Quote from Rio police chief – “Not even Petrobras knows how much is being stolen.” This is also a testament to the holes in some granular data about oil stocks. I started thinking about it a ways back when there were so many stories about ISIS’ oil smuggling revenues. One way or another, consumers get their fuel. There’s a reason “Mad Max” movies are popular.

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