Virtu Financial to buy independent brokerage ITG for $1 billion
(Reuters) – High-speed trading firm Virtu Financial Inc is buying independent brokerage Investment Technology Group Inc (ITG) for about $1 billion, ITG said on Wednesday as Virtu looks to add more big institutional investors.
****SD: There were reports in early October that the two were in talks. Virtu announced its third quarter earnings today, too. Other sources with the ITG/Virtu news are Financial News, Barron’s, the WSJ, The Trade, and the Financial Times.
Not Just Midterms: Investors Bracing for Packed November Calendar
Amrith Ramkumar and
Gunjan Banerji – WSJ (SUBSCRIPTION)
Investors looking beyond Tuesday’s U.S. midterm elections are focusing on trade, earnings and interest rates, reflecting an expectation that economic and market trends likely will continue to play a bigger role in stocks’ direction through the end of 2018 and thereafter.
****SD: I am very much looking forward to watching sporting events with normal commercial breaks. I have never been more excited to see Flo from Progressive, the Geico gecko, the Bud Knight, and all those other promotional gods back on the screen in lieu of a flood of negative political ads. What’s in my wallet? Am I in good hands? I need to know!
Well, That’s Over With: VIX Shows Post-Midterm Investor Relief
Joanna Ossinger – BloombergQuint
Volatility investors appear to be as happy as anyone that the U.S. midterm elections are over. The Cboe Volatility Index fell as much as 16 percent to the lowest level in almost a month, dropping as low as 16.76 during early trading hours on Wednesday. It was at 17.30 as of 7:33 a.m. in New York.
****SD: The VIX futures term structure is reverting to more normal conditions.
The Pound’s Rally May Be Ignoring a Big Risk
Charlotte Ryan and Shoko Oda – BloombergQuint
BlueBay, which is short pound, sees election within six months; Vote set to be ‘real knife-edge affair,’ says CIBC’s Stretch
The pound’s rally this month on growing optimism for a Brexit agreement may be ignoring a big risk: getting any deal through Parliament.
****SD: This is why you must heed the phrase concerning overweight sopranos and opera finales.
Record share buybacks should be raising alarms
The Editorial Board – Financial Times (SUBSCRIPTION)
When even the Sage of Omaha is doing it, the trend for companies to buy back their own shares seems unstoppable. Warren Buffett’s Berkshire Hathaway reported at the weekend that it repurchased $928m of its own stock in the third quarter. That is a drop in the bucket compared to total buybacks by S&P 500 companies, set to reach a new record of almost $900bn this year. This is a record not to be celebrated.
****SD: So if we have the Fed Put, is this the Buyback Put?
Exchanges and Clearing
TMX Group Consolidated Trading Statistics – October 2018
MX Group Limited today announced October 2018 trading statistics for its marketplaces – Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange (Alpha) and Montréal Exchange (MX).
****SD: Derivatives volumes at the Montreal Exchange were up substantially both month-over-month, year-over-year and year-to-date.
Diwali Muhurat trading: NSE, BSE to hold special 1-hour session today
A special Muhurat trading session will be held by the NSE and BSE on account of Diwali Laxmi Pujan today. Muhurat trading, conducted on the auspicious occasion of Diwali, would be held between 5:30 pm and 6:30 pm today, the stock exchanges said. The pre-opening session would start from 5:15 pm, 15 minutes prior to the 1-hour normal market session, the stock exchanges said. All trades executed in this Diwali Muhurat trading session would result in settlement obligations, the NSE said in a statement.
NZX trading activity climbs in October
…NZX’s derivatives futures registered an 11 percent drop in lots traded to 23,135 in October from a year earlier, while options trading soared 267 percent to 6,970. Open interest rose 11.7 percent to 57,391.
Regulation & Enforcement
SA-CCR for US Banks
Chris Barnes – Clarus Financial Technologies
The Federal Reserve, OCC and FDIC have launched a joint consultation on SA-CCR, the Standardised Approach to Counterparty Credit Risk.
The three agencies are proposing to introduce SA-CCR for the purposes of “calculating the exposure amount of derivative contracts under the agencies’ regulatory capital rule”.
****SD: Risk.net has Banks scent margin offset in US SA-CCR proposal. The full 248-page PDF of the Fed rule proposal can be found here.
Ex-JP Morgan trader pleads guilty to manipulating metals markets
Hugh Son and Dan Mangan – CNBC
An ex-J.P. Morgan Chase trader has admitted to manipulating the U.S. markets of an array of precious metals for about seven years — and he has implicated his supervisors at the bank.
****SD: The case involved precious metals futures, but as spoofing is not a futures-only practice, I keep an eye on it. This line at the end of the DOJ’s release on the case is telling – “In pleading guilty, Edmonds admitted that he learned this deceptive trading strategy from more senior traders at the Bank, and he personally deployed this strategy hundreds of times with the knowledge and consent of his immediate supervisors.” I hope they called themselves “The Spoof Troop” (obligatory Youtube link to the “Goof Troop” theme song).
Nasdaq Wins Three Waters Technology Buy-side Technology Awards
Nasdaq, Inc. (Nasdaq: NDAQ) was presented with three awards at Waters Technology’s annual Buy-Side Technology Awards ceremony in London. The wins, which focused on the Nasdaq Buy-Side Compliance solution, were for the following categories: best overall buy-side product, best buy-side market surveillance tool/platform and best buy-side artificial intelligence (AI) platform/tool of the year.
Analyzing Index Volatility Around Earnings
Sage Anderson – tastytrade blog
Although the holiday season is approaching, one of the most important seasons for traders is already well underway – earnings season!
A Loss-Buffering ETF that Offers Exposure to the S&P 500
Ben Hernandez – ETF Trends
In October, U.S. equities were put through the wringer as deep declines were experienced by most sectors, especially technology, as sell-offs ensued and volatility ruled the capital markets. It’s a reminder to investors that even in the midst of a seemingly unstoppable bull market, protecting the downside is necessary – enter the Amplify BlackSwan Growth & Treasury Core ETF (NYSE Arca: SWAN).
Swedroe: Understanding Risk & Return
Larry Swedroe – ETF.com
Because investors are, on average, risk averse, we should expect that there is a positive relation between expected returns and expected volatility—the greater the expected volatility, the greater the rate of return required. Conversely, we should expect to see a negative relationship between returns and unexpected volatility as investors increase the discount rate they use to value future expected earnings on risky assets.
Wall Street’s Two Midterm Market Calls Are Off to a Strong Start
Luke Kawa – BloombergQuint
Chalk up a win for pollsters — and Wall Street.
The midterm election went as predicted: the Republicans retained the Senate, while the Democrats gained control of the House of Representatives. By and large, strategists weren’t willing to stick their necks out and issue high-conviction calls on the outcome after being bitten twice in 2016 after votes for Brexit and President Donald Trump that didn’t go according to expectations. But the two main consensus views on what awaited markets after the midterm vote — dollar down, stocks up — have been vindicated big league in early going Wednesday.
****SD: Also from Bloomberg: Bond Traders’ Roadmap After Midterms: Fed Hikes and Supply Risks
Louis-Dreyfus Reaches Key Deal to Buy Out Other Family Members
Dylan Griffiths and Andy Hoffman – Bloomberg (SUBSCRIPTION)
Chairwoman of trader doesn’t rule out ‘strategic partnerships’; Russian heiress needed about $900 million to meet deadline
Margarita Louis-Dreyfus, chairwoman of Louis Dreyfus Company Holdings BV, said she has secured financing to buy out other family members as a deadline for the transaction loomed next month.
****SD: Not the only big news out of the ABCDs of grain this week. See Bloomberg’s How a 205-Year-Old Grain Dynasty Won Activist Victory Over Bunge from Sunday.