Observations & Insight
The Spread: Charity Begins At Cboe
This week on The Spread, Cboe celebrates its 47th anniversary with charitable donations and extends a bountiful business deal, the NYSE Arca options trading floor is rumored to reopen next week, and more.
US options exchanges prepare to reopen trading floors; Arca in San Francisco and Box in Chicago will throw open their doors on Monday
Philip Stafford – FT
Traders will be allowed back on to the floors of two US options exchanges on Monday in a move that will test the industry’s appetite to return to workplaces after weeks of stay-at-home orders. The New York Stock Exchange’s Arca options floor in San Francisco and the Box Options Exchange in Chicago will both open for business, albeit with fewer people and a series of precautions.
OCC April 2020 Total Volume Up 42.9 Percent from a Year Ago
OCC, the world’s largest equity derivatives clearing organization, announced today that April 2020 total cleared contract volume was 551,538,080 contracts, up 42.9 percent from April 2019. OCC’s year-to-date average daily total cleared contract volume is 27,865,203 contracts.
Stocks will likely be trapped in a ‘fat and flat’ range until pandemic-led economic fallout fades, Goldman says
Ben Winck – Markets Insider
After a “faster and stronger than expected” market recovery, Goldman Sachs expects stock returns to take a breather.
The combination of slowing COVID-19 infection rates and trillions of dollars in stimulus policy lifted equities through April. The S&P 500 and Dow Jones Industrial Average posted their best month since 1987, but the looming threat of lasting economic damage has investors wondering how much further the relief rally can run.
Good News for Investors Who Bet on Volatility
Nick Ravo – WSJ
The exchange-traded funds and notes that track stock-market volatility are, so far this year, quietly doing what they were designed to do: rewarding investors who bet there would be increased volatility.
Funds buy WTI in bet worst is over for oil: Kemp – Agricultural Commodities
John Kemp – Reuters
Hedge funds and other money managers bought petroleum derivatives last week in the cautious hope the industry may have passed the worst point of the coronavirus-induced lockdowns.
Money managers purchased the equivalent of 41 million barrels in the six most important petroleum futures and options contracts in the week ending on April 28, exchange and regulatory records showed.
Hong Kong Oil ETF’s Broker Refuses to Let It Buy Futures
Jonas O Bergman – Bloomberg
The manager of a $500 million oil exchange-traded fund said its broker refused to let it increase holdings of crude futures, a sign of continued risk aversion in global oil markets after last month’s historic plunge below zero.
Exchanges and Clearing
Will U.S. exchange trading floors still be relevant post-coronavirus?
John McCrank – Reuters
The coronavirus pandemic has upended U.S. equities trading with unprecedented market volatility and forced bourses like the New York Stock Exchange to close their trading floors, raising questions about the need for such spaces.
The NYSE, which is owned by Intercontinental Exchange Inc , closed its stock and options trading floors in New York and San Francisco in March 23 after traders and an ICE employee tested positive for the virus. Rivals CME Group, Cboe Global Markets Inc and Nasdaq Inc also closed their options and futures pits in Chicago and Philadelphia.
One year Eurex EnLight extension – review and outlook
While it first launched in June 2018, one year ago Eurex extended its selected RfQ-based service to cover all equity and equity index options, as well as the corresponding futures. What has happened since then and are there new extensions in the pipeline? We spoke to Randolf Roth, Member of the Executive Board of Eurex Frankfurt AG.
CME Group Reports April 2020 Monthly Market Statistics
CME Group – Markets Insider
CME Group, the world’s leading and most diverse derivatives marketplace, today reported April 2020 market statistics, showing it reached average daily volume (ADV) of 17.8 million contracts during the month. Open interest at the end of April was 119.7 million contracts. Market statistics are available online in greater detail at https://cmegroupinc.gcs-web.com/monthly-volume.
In Case You Missed It: Monthly Highlights from Cboe
Despite our “new normal,” April was a busy month at Cboe™, and we have plenty of updates and market innovations to share — starting with a new #CboeListed product and ending with some thought leadership from Ed Tilly. Follow us on Twitter for daily updates as we continue defining markets and check back here at the end of May for our next monthly update.
Regulation & Enforcement
Tighter scrutiny of derivatives clearers proposed amid standoff with banks
Huw Jones and David Henry – Reuters
Global regulators have proposed tighter scrutiny of clearing houses handling trillions of dollars in derivatives trades after calls from banks for them to be better funded to withstand extreme stress.
The Financial Stability Board (FSB) proposed on Sunday a more detailed checklist for regulators to assess whether clearers hold enough funds to deal with big losses, and asks whether there are still gaps to plug.
The ETFs That Might Offer Protection in a Market Plunge
Derek Horstmeyer – WSJ
With U.S. stocks having rebounded 20% or more from their market lows five weeks ago, many investors might be thinking about taking a bigger position in stocks, even as they remain wary that the coronavirus scare could lead to another market plunge.
With that in mind, what type of exchange-traded funds would allow an investor to be in equities but also offer some protection should the market tank again suddenly?
Get Ready For A Wild Week Of Earnings
Week 4 of earnings season starts today. ORATS tracks the historical weekly price moves of firms and the moves expected by the options market. Typically, this week 4 has the highest moves in stocks versus what is implied by options prices.