VIX bets surging; LCH begins credit options clearing; Fast moving stocks

Dec 19, 2017

Lead Stories

Stock market volatility, VIX bets are surging
Joe Ciolli – Business Insider
Traders are betting more and more that the stock market will soon snap out of its prolonged slumber.
This can be seen through a measure called skew, which looks at bullish CBOE Volatility Index, or VIX, options contracts compared with bearish ones. It’s at its highest level in two years, having risen swiftly in recent weeks, indicating an expected volatility spike.

****SD: Mentions 50 Cent – in 2018, I hope we get more hip-hop themed volatility traders.

LCH begins credit options clearing
Helen Bartholomew – Reuters
LCH has become the first clearinghouse to begin clearing credit options, with the service being offered on contracts referencing two key European credit default swap indices.

****SD: The meta-derivatives.

Stocks Are Rallying So Fast That Not Even Analysts Can Keep Up
Lu Wang – Bloomberg
To see how powerful the rally in equities has been, look at where stocks stand relative to analyst expectations.
At Monday’s close, 30 percent of the companies in the S&P 500 traded above their average analyst price target, data compiled by Strategas Research Partners show. In other words, stocks already reached levels where they’re expected to be 12 months from now.

Hedge funds show signs of exhaustion in oil: Kemp
John Kemp – Reuters
Hedge fund managers have boosted their bullish positions in Brent futures and options in response to the shutdown of the Forties oil pipeline, according to an analysis of regulatory and exchange data.
But bullishness in Brent cannot completely conceal the increasing staleness of long positions in the rest of the rest of the petroleum complex, as prices fail to rise further and the end of year approaches.

****SD: Check this out – “Fund managers still hold more than eight long positions in petroleum for every short position, up from a ratio of less than 2:1 at the end of June.”

Bitcoin Futures Are a Great Way to Not Own Bitcoin
Matt Levine – Bloomberg
Do you remember, like, two weeks ago, when people were talking about how the launch of bitcoin futures at Cboe Global Markets Inc. and CME Group Inc. would allow for efficient short-selling of bitcoin and finally deflate the bubble? Smart hedge-fund money was lining up to bet against bitcoin, the thinking went, but had no convenient way to do it on the actual bitcoin exchanges. The only people trading bitcoin were the true believers, so of course it kept going up, but once it was opened up to normal financial players that would end. “The futures reduce the frictions of going short more than they do of going long, so it’s probably net bearish,” said Craig Pirrong.

****SD: For other coin news, see Bloomberg’s Bitcoin Climbs as Futures Debut Fails to Incite Attack by Shorts and CNBC’s Peterffy: Bitcoin futures’ launch on two reputable exchanges will make bitcoin ‘even more popular’

Exchanges and Clearing

Shareholders criticize LSE for ‘very sorry affair’ over CEO spat
Reuters Staff – Reuters
Shareholders criticized the London Stock Exchange’s (LSE.L) board on Tuesday for its handling of a row with activist shareholder TCI over the future of the company’s senior management.

****SD: The most British of headlines.

Launch of NDXP PM-settled “End of Week Options” on the Nasdaq-100 Index on January 4, 2018
On Thursday, January 4, 2018. Nasdaq PHLX will commence the trading of NDXP PM-Settled “End of Week Options” on the Nasdaq 100 Index for the following expiries:

SGX to report 2Q FY2018 results on 19 January
Singapore Exchange (SGX) is reporting its second-quarter (2Q) results for Financial Year 2018 (FY2018) after the market closes on 19 January 2018.

NZX to extend trading hours for dairy derivatives
The National Business Review
NZX says it plans to extend the trading hours for dairy derivatives market in July 2018 to reach more traders in Asia and Europe.

****SD: More time for market mooves.

Regulation & Enforcement

CFTC and European Commission Implement Common Approach on Certain Derivatives Trading Venues
Both U.S. and European Union (EU) law require that certain swaps and derivatives trades take place only on approved trading platforms. On October 13, 2017, Commodity Futures Trading Commission (CFTC or Commission) Chairman J. Christopher Giancarlo and Valdis Dombrovskis, the European Commission’s (EC) Vice President for Financial Stability, Financial Services and Capital Markets Union, announced a common approach to their respective mandates for trading on certain derivatives trading venues.

EU watchdog reassures on continuity of trading under new rules
Investment firms and trading platforms in the European Union can continue operating even if their home state has not written new EU rules into national law by their January start date, the bloc’s securities watchdog said on Monday.

FIA: The Impact Of A No-Deal Brexit On The Cleared Derivatives Industry
Press Release
The purpose of the white paper is to promote a better understanding of the impact of Brexit on cleared derivatives in the event that no agreement is reached between the UK and EU27 prior to 29 March 2019. The paper also considers ways in which policymakers and participants in the cleared derivatives industry could seek to mitigate the impacts of a no-deal scenario during a transition period.

ETX Capital cuts back Binary Options trading to just FX products
LeapRate has learned that FCA regulated broker ETX Capital is making some changes to its trading product lineup, ahead of new MiFID II regulations which come into effect early next year.
In addition to January 2018 heralding the onset of MiFID II regulations across Europe, the new year will also see the transfer of responsibility for regulation of Binary Options in the UK transfer from the UK Gambling Commission to the financial regulator, the FCA.

****SD: Nice to see a binary options story that involves taking regulation into account, rather than flouting it.


Equinix to buy Australia’s Metronode data center group for $791 million
U.S. data center group Equinix Inc on Monday said it was buying Australian data center company Metronode from the Ontario Teachers’ Pension Plan in an all-cash deal worth A$1.035 billion ($791.15 million).

dxFeed Launches Data Packages for CBOE and CME Group Bitcoin Futures
Victor Golovtchenko – Finance Magnates
Market data provider dxFeed is launching a new product that can be useful to parties interested in Bitcoin. The firm is launching data packages for CBOE and CME Group’s Bitcoin futures. The company is also committing to offer data from the NASDAQ NFX once the New York-based exchange deploys its own futures contract to the market.


Pound-to-Euro to be Volatile in Year Ahead say J.P. Morgan but Directional Calls Best Avoided For Now
Pound Sterling Live
JPMorgan has walked away from a bet against the Pound-to-Euro rate after the British currency received a boost in November from anticipations of progress in the Brexit negotiations, which saw derivatives that the bank’s strategists were holding become worthless at their expiry date.

TradeStation: Close to Half of Bitcoin Futures Traded on Platform Are Shorts
Donna Fuscaldo – Investopedia
Bitcoin futures have come to a handful of online and discount brokerages thanks to Cboe World Markets and as of Monday CME Group Inc. (CME). But when it comes to trading these cryptocurrency futures, many investors seem to be betting against them.

Investor equity valuation worries grow
Julien Ponthus, Helen Reid – Reuters
Two-thirds of investors believe U.S. tax cuts will boost equity markets, which are already increasingly seen as over-valued, a monthly survey by Bank of America Merrill Lynch showed on Tuesday.


Thomson Reuters announces E-learning MiFID II compliance courses
Automated Trader
Thomson Reuters has expanded its e-learning capabilities with new compliance training courses designed to give organizations a clear, concise understanding of the regulatory framework mandated by the European Securities & Markets Authority (ESMA).

****SD: It’s possible to get a “clear, concise understanding” of MiFID II?!?


Central banks, trade and bubbles threaten the 2018 status quo
Jeremy Gaunt – Reuters
After a year of relatively healthy global economic growth, economists are predicting pretty much the same for 2018 — a neither too-hot nor too-cold Goldilocks scenario, but with little sight of the three bears.

Trump: Economist Justin Wolfers Schools President on Dow Highs
Hallie Detrick – Fortune
Justin Wolfers is not taking President Trump’s stock-market claims lying down.
On Monday, as the market again reached a new record high, Trump tweeted that the first year of his presidency had seen 70 record closes (presumably he meant 70 record-high closes), which he said was more than any previous year. Wolfers, professor of economics and public policy at the University of Michigan and several other institutions, soon shot back saying the stock market performed better under Obama than under Trump at the same point in their presidency. Wolfers cited the S&P 500 instead of the Dow and looked at relative gains under each president rather than all-time nominal value.

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