Observations & Insight
JLN Exchange Leader Series 2017: SGX’s Syn Says Trade Barriers Mean Opportunities for Offshore Exchanges
Singapore Exchange’s Michael Syn says that when economic barriers to open trade come down, offshore jurisdictions like SGX can benefit by showing their worth for hedging exposure. The “big three” Asian markets – India, Japan and China – taken together account for about 25 percent of world GDP and 40 percent of world population. But each is regulated very differently and therefore the elements of risk in those countries will not be proxies for each other, Syn said. Each will behave in a distinct way.
****SD: Editor’s Note: In the copy corresponding to yesterday’s London Stock Exchange Group Exchange Leader Video, LSEG’s U.S. headcount was mistakenly attributed to LCH. It is LSEG as a whole that has nearly 500 employees, not LCH.
VIX Owner Plots New Fear Gauge to Help Measure European Fright
John Detrixhe – Bloomberg
A new European fear gauge is on the drawing board. CBOE Holdings Inc.’s VIX is already the flagship product for betting on price swings in the U.S. stock market. Now, armed with a big European stock exchange picked up when it acquired Bats Global Markets Inc. this year, the Chicago-based market operator thinks it can eventually expand the VIX franchise.
****SD: “One of the main things in Europe is connecting the legacy CBOE sales team to a wide range of Bats Europe sales contacts,” Hemsley said.
Two Exchange Whizzes Try to Tackle CBOE’s Challenges
Gunjan Banerji – WSJ
The unlikely deal combining CBOE Holdings Inc. and Bats, which closed in February, puts two industry heavyweights at the top of one enterprise: Chief Executive Edward Tilly, a trader who ascended the ranks at CBOE, the biggest U.S. options platform, and Chris Concannon, a market-structure veteran with experience in regulation, high-frequency trading and exchanges.
Dutch alternative derivatives platform TOM to be wound up
Amsterdam-based equity derivatives trading venue TOM is to be wound up, with all open interest positions to be transferred to the Euronext exchange on closure, after existing shareholders failed to find a strategic partner for the venture.
****SD: Aww, I guess this means we won’t have more Euronext/TOM beef over options pricing reports…
Mysterious trader known as “50 Cent” bets millions on volatility spike
Alex Rosenberg – CNBC
A pattern of huge, near-daily trades on the VIX is turning heads in the options market. What’s most notable is that even after losing some $75 million by betting on a volatility spike, the huge options buyer known as “50 Cent” shows no signs of slowing down.
****SD: “Many Men” are “Patiently Waiting” while betting more than “Just A Lil Bit” in the hopes they will be heading “Straight To The Bank” after a vol pop. (Sorry, I had to do that.) This isn’t new news so much as an update. Bloomberg ran a story at the end of January about “50 Cent.” At that point he or she had purchased some $33 million of VIX calls.
The Hedging Strategy That’s Cheaper Than Hedge Funds
Julie Segal – Institutional Investor
Public pension funds have come under fire for their willingness to pay high fees for hedge funds, even as their performance has been disappointing in recent years. Now some of these pensions are looking to a rarely used but quickly growing options strategy not only to decrease the risk in their portfolios, but also to replace a part of their hedge fund allocation.
Calmest Market in More Than Decade on VIX Quarterly Drop: Chart
Cecile Vannucci – Bloomberg
Just a week ago, it looked as if the dormant CBOE Volatility Index was awakening. Fast-forward five days, and the gauge known as the VIX is closing in on its lowest quarterly average since the final months of 2006. The measure has lost 18 percent this year through Thursday as the S&P 500 Index climbed 5.8 percent.
Trump, Xi Meeting Seen Tame by Currency Options Traders: Chart
Luke Kawa – Bloomberg
U.S. and Chinese relations have at least one good thing going ahead of President Xi Jinping’s meeting with President Donald Trump next week in Florida: options aren’t pointing to a big increase in currency volatility.
Exchanges and Clearing
China launches first exchange-traded commodity options
Tom Hancock – Financial Times
China launched its first ever exchange-traded commodity options product on Friday as the commodity exchange in the city of Dalian began offering options for soymeal, a chief ingredient in tofu — part of a drive by Beijing to promote more complex agricultural trading instruments.
Conversion of SPXPM Options to Symbol SPXW
CBOE is planning a change to the symbol for existing SPXPM option series to option symbol SPXW in both the Regular Trading Hours (RTH) and Extended Trading Hours (ETH) session. The change is scheduled to be effective May 1, 2017. This conversion is designed to allow greater ease of access for those looking to place spreads from week to week. We have received some very positive feedback from institutional investors on this change to the symbol SPXW.
Stock exchange chief to make GBP5m from failed Deutsche Boerse deal
Harry Wilson – The Times
The boss of the London Stock Exchange will receive a GBP5 million boost from the collapse of the merger with Deutsche Boerse because he will not waive share options that he agreed to give up if the deal went through.
Why is NSE bogged in negatives? Maybe it needs to put protocol first
On February 28, Securities and Exchange Board of India (Sebi) chairman UK Sinha’s last day in office, the markets regulator wrote to the National Stock Exchange (NSE) asking it to expand an ongoing investigation into futures and options to the cash and currency segments.
MIAX Options – Price Protection Process
MIAX Options has filed a proposal to amend Exchange Rule 515, Execution of Quotes and Orders, regarding improvements to the MIAX Options price protection process, which will become effective on Monday, April 3, 2017.
Pioneering CCP transparency to maintain safer markets
The Public Quantitative Disclosure (PQD) is an internationally agreed format defined by CPMI-IOSCO with the intention of enhancing CCP market transparency.
Sterling Trading Tech Appoints New Director of Risk and Derivatives
Sterling Trading Tech (STT) is pleased to announce the appointment of new Director of Risk & Derivatives, Ravi Jain. Mr. Jain joins the STT team and will manage STT’s Risk Product line as well as the LiveVol X platform, which STT recently acquired from the CBOE and renamed Sterling VolTrader.
Wall Street’s New Favorite Way to Swap Secrets Is Against the Rules
Laura J Keller – Bloomberg
Dirty jokes and NSFW GIFs. Snaps of unsuspecting colleagues on the trading floor. Screenshots of confidential client positions. All that — and, on occasion, even legally dubious information — is increasingly being trafficked over the new private lines of Wall Street: encrypted messaging services like WhatsApp and Signal.
Trading Technologies Extends TT Platform into London
Trading Technologies International, Inc. (TT) announced today that its TT futures trading platform now has execution and connectivity services through Interxion’s London data center. This move strengthens TT’s presence in Europe, improving the platform’s accessibility and providing users with regional resiliency and enhanced performance.
Regulation & Enforcement
CAT and President Trump’s Executive Order 13771
Tom Jordan – TABB Forum
If the CAT NMS Plan were proposed today, would it meet the requirements of President Trump’s Executive Order? Ultimately, CAT will enable elimination of a variety of regulatory reporting systems, as they are replaced with the comprehensive CAT system. Until such time, however, the costs and burdens to implement CAT will be significantly increased and magnified if duplicative reporting is necessary for an extended period of time.
Treasury Options Show Reflation Trade in Zombie Mode for Now
Tanvir Sandhu – Bloomberg
The reflation trade is in zombie mode, waiting to be revived. Options that would move into the money on either a revival of the reflation trade or on a rally in Treasury bonds are now trading at the cheapest level in almost three years. This may be underpricing the potential for yields to break out of range given the uncertain outlook, with inflation likely to have peaked and a Fed terminal rate that has failed to gain traction.
One of the world’s best-known oil traders is predicting prices to recover to $70 a barrel
Karen Tso – CNBC
Oil prices are not capped around $55 as is widely assumed but rather are on track to hit $70 per barrel later this year, according to Pierre Andurand, managing partner at Andurand Capital Management.
****SD: Well, he would say that because that’s what he wants and needs to make some ducats — been singing this tune for a while. Great performance last year (+22%), but he lost some $130 million in the first two months of the year due to this same overly bullish sentiment.
Current Market Maker Views Of The VIX Index And Volatility
These pros use the VIX Index options for gross market-balance hedging. Very little else provides such acute price sensitivity to S&P 500 Index prospects. Current actions place strong support under general equity market prices near term (next few months).
Credit Suisse Raided, Client Assets Seized in Tax Probe
Jan-Henrik Foerster and Joost Akkermans – Bloomberg
Credit Suisse Group AG, the second-largest Swiss wealth manager, faces a sweeping tax evasion and money laundering investigation spanning five countries and potentially involving thousands of account holders.
****SD: Is this at all surprising?