Observations & Insight
The Spread: To The Moon And Back
This week on The Spread, Michael Bolton wants you to break up with your brokerage, Rocket Companies become “GameStop 2: Electric Boogaloo,” and more.
JJL: The word is that the CME Group, in a move that harkens back to their livestock trading roots, will be publishing a new boxed beef index starting today. The index follows their launch of Pork Cutout futures and options last fall. Look for news about it soon.
Volatility Markets Flash Reassuring Signals for Stock Dip Buyers
Yakob Peterseil – Bloomberg
After the $1.5 trillion wipeout in technology shares in less than a month, Wall Street fear gauges are flashing encouraging signals for would-be dip buyers.
Expectations for how much the Nasdaq 100 will move around in the coming weeks remain well below their January highs, after the biggest price swings in four months.
GameStop Frenzy Emboldens Supporters of Stock-Trading Tax; Proponents say tax could help fund infrastructure programs, while Wall Street groups contend it would hurt investors
Alexander Osipovich – WSJ
The wild volatility in GameStop Corp. shares this year has emboldened Democrats who support a tax on stock trades. A financial-transaction tax, or FTT, would raise money by collecting a fraction of the value of securities trades. Proponents say such a tax could help fund programs like President Biden’s $2 trillion infrastructure plan, while reining in high-frequency trading and excessive speculation. Critics, including Wall Street lobbying groups, say it is a flawed policy that would hurt investors.
Will the Fed Really Tolerate Inflation? Markets May Soon Find Out.
Larry Hatheway – Barron’s
Sooner or later we all encounter the type. It’s Oscar Wilde’s person, the one who knows the price of everything and the value of nothing.
I recently sold my home to that person, someone determined to haggle every detail, never realizing that in his persistent pursuit of price he sacrificed something of far greater value, his integrity.
Investors fear new Treasury auctions will set off repeat bout of selling
Colby Smith – Financial Times
Investors are bracing themselves for a trio of large US government debt auctions this week, after a recent sale of seven-year notes flopped and set off a bout of frenetic trading.
The Treasury department is set to issue $120bn of new bonds beginning on Tuesday, selling $58bn of three-year notes, $38bn in 10-year debt and $24bn at the 30-year mark.
Hedge fund positioning shifts in expectation of oil price peak
John Kemp – Reuters
Hedge funds sold petroleum for the second week running as crude prices topped $65 a barrel, the highest level since before the COVID-19 pandemic.
The equivalent of 11 million barrels in petroleum futures and options were sold by hedge funds and other money managers in the week ending March 2, according to records published by regulators and exchanges.
Nothing the Stock Market Does Ever Scares Its Retail Daredevils
Sarah Ponczek – Bloomberg
Apple Inc. has slumped 15% since late January. Tesla Inc. has lost more than a quarter-trillion dollars in market value in three weeks. And more than $1.5 trillion has been wiped off the Nasdaq 100 in less than a month. And yet, none of it has been enough to rattle the retail investor. Instead, to borrow a Reddit phrase describing bullish gumption, they’ve had diamond hands. Since the market peaked a few weeks ago, retail traders have plowed cash into U.S. stocks at a rate 40% higher than they did in 2020, which was a record year. They’re opting for parts of the market that have suffered the most, doubling down in arguably risky ways with triple-leveraged tech funds and options galore.
Exchanges and Clearing
The Latest Post-Brexit Finance Fight Puts Everyone at Risk
Elisa Martinuzzi and Marcus Ashworth – Bloomberg
The post-Brexit war over financial services — and to what degree Europe can lure business away from the City of London — is far from over. The latest battle is derivatives clearing. But compromise is possible and would serve everyone best. Set up in the aftermath of the global financial crisis, central counterparty clearing houses (CCPs) act as middlemen between institutions trading derivatives, minimizing counterparty risk. So if one party were to default, CCPs should still have access to collateral and liquidity to prevent a domino effect of subsequent blow-ups, as happened when Lehman Brothers went bankrupt in 2008. Though not big money spinners per se, CCPs are part of an industry that surrounds more than $1 quadrillion worth of derivatives.
CME Group Announces New Micro E-mini Equity Index Futures Trading Volume Records
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that Micro E-mini Equity Index futures reached record trading volume of 5.1 million contracts on March 4 across all four indexes – the S&P 500, Nasdaq-100, Russell 2000 and Dow Jones Industrial Average Indexes. These new highs surpassed the prior record of 4.4 million contracts set on February 26, 2021.
Our Cboe: Celebrating Women and Challenging Bias
In celebration of International Women’s Day and Women’s History Month, Cboe associates pledged to challenge gender bias and inequality, and shared heartfelt responses about women who inspire them. In an effort to help advance women worldwide, Cboe committed to donating $12,500 each to Catalyst, Inc. and Nomi Network. Additionally, Cboe is matching associate donations to either organization at a rate of 1.5x through its Matching Gift Program. Learn more about the important work these organizations are doing below. Internally, The Cboe Women’s Initiative is celebrating International Women’s Day with a variety of events geared toward empowering women in their professional and personal lives.
OTC FX options market gears up for faster electronification
Natasha Rega-Jones – Risk.net (Subscription required)
Good things are meant to come to those who wait. Those waiting for greater electronification of over-the-counter foreign exchange options have been waiting unusually long, but good things are finally on the horizon. The $297.5 billion market is dominated by voice trading. The reasons include the products’ inherent complexity, lack of standardisation and low volatility, as well as the market’s relatively small size.
HSBC launches FX hedging analytics tool for buy-side
Annabel Smith – The Trade
UK-based investment bank HSBC has launched an analytics tool aimed at improving the effectiveness of foreign exchange (FX) hedging strategies for institutional investors. Named FX HEAT (Hedge Efficiency Analytics Tool), the next-generation data service gives asset managers and institutions automated access to independent analytics reports. The analytics include an overview of the performance divergence contributors between currency hedged and non-currency hedged investment returns, including market-driven and operational factors. The bank said that through using the tool FX clients will be able to make decisions on optimising the FX hedging efficiency of their investments, a process which it added was essential during recent market turbulence.
Itiviti’s Linda Middleditch wins Gender Equality / Diversity Award from WatersTechnology
Itiviti, a leading trading technology and service provider to financial institutions worldwide, today announced that Linda Middleditch, Chief of Product Strategy and Engineering at Itiviti, has won the Gender Equality/Diversity Professional of the Year Award (vendor) in the Women in Technology & Data Awards 2021. Organized by WatersTechnology, this award recognizes a person who has made a significant effort to improve equality and diversity in their organization.
ON THE MOVE: Capitolis Hires James Kibbe; TraditionDATA Adds Michael Kirby
Capitolis, an SaaS platform that drives financial resource optimization for capital markets, appointed James Kibbe as Head of Structured Funding Origination. Kibbe will lead the origination and execution of a suite of opportunities for banks, asset managers, hedge funds and insurers that will enable these firms to address some of their biggest challenges, including capital, funding, and balance sheet needs, across asset classes. Before joining Capitolis, Kibbe – a 25-year industry veteran – was a Managing Director at HSBC where he served in a variety of roles including Head of Rates, Repo/Derivative Financing; Co-Head of Institutional Sales for the Americas; and Head of Macro Sales.
How to Get Started Trading Options
Timothy Collins – The Street
For many traders, options are a foreign concept. For new traders, they typically appear as either an object of terror, or a gold mine ready to be harvested. The truth lies somewhere in between. Like all financial products, options have a time and a place. The fear part stems from a lack of education, understanding or risk management. When used properly, options can help an investor define their risk, protect their investments and enhance their income or returns. When used improperly or with a high level of risk, however, they can quickly and completely decimate an entire portfolio.
Micro E-mini Equity Futures and Options Webinar
Join CME Group on Thursday, March 11 for a webinar on Micro E-mini Equity futures and options.
During this webinar, David Lerman, Director of Education at CME Group, will discuss the contracts’ trading performance and rise in liquidity as well as provide his insight on the following:
How are traders using Micro E-mini futures and options and why are they a capital efficient tool to manage risk? How have Micro E-mini futures and options traded since launch? In what ways are active traders using these new contracts? Are they only a speculative tool or are there other strategies traders employ? What are the impacts of recent market volatility on options and how can you align volatility with the correct strategy? How will the new administration affect the markets in 2021 – and beyond? What is the role of short-dated options?
Registration is open! – FIA Boca 2021
A New Virtual Experience
The Options Industry Conference is Going Virtual in 2021. Join OCC and the options exchanges for the 39th annual Options Industry Conference, April 28-29, 2021. While the conference will be held virtually for the first time in history, the focus will continue to be the key topics facing the options industry today, from the regulatory shifts in the U.S. and Europe to the technological developments that are driving monumental change in markets around the globe.
FIA announces 2021 Futures Hall of Fame inductees
Washington, DC— FIA today announced the induction of eight new members into the FIA Futures Hall of Fame. This year’s class joins 157 other honorees in the Hall of Fame, which was established in 2005 on FIA’s 50th anniversary. The new members will be honored at an awards ceremony during FIA’s annual flagship Boca International Futures Industry Conference.
GameStop Stock Is Flying Again. The Transformation Is on the Way.
Connor Smith – Barron’s
GameStop said Monday that Chewy co-founder Ryan Cohen is chairing a new committee geared toward transforming the retailer into a technology business. The stock is soaring.
GameStop (ticker: GME) said the board of directors formed the strategic planning and capital-allocation committee that includes Cohen, former Chewy (CHWY) executive Alan Attal, and Kurt Wolf. Cohen, and Attal joined the board in January, along with Jim Grube, another former Chewy executive. Wolf, managing member and chief investment officer of activist investor Hestia Capital Management, was elected to GameStop’s board in June 2020.
Lack of confidence is impeding women’s financial literacy, study finds
Patrick Jenkins and Claer Barrett – Financial Times
It is four years since Fearless Girl, a bronze statue commissioned by asset management group State Street Global Advisors, was erected in New York to promote the cause of women in business and finance.
But the defiant youngster created by sculptor Kristen Visbal — standing sure-eyed opposite the New York Stock Exchange — still has a long way to go to accomplish her mission.
Gmail, Zoom or Slack? How to Pick a Communication Tool That Fits the Situation
Suzanne Oliver – WSJ
When it comes to collaborating with colleagues these days, choosing the right communication tool can be as important as the communication itself. Send an email, and you might not get a timely reply. Post a question in Slack, and you might miss information from a colleague who never checks your team channel. Schedule a videoconference when a phone call would have sufficed, and you’ll annoy everyone who’s exhausted by living life online. How do you assess the relative strengths of your communication options, the preferences of colleagues and your own digital skills?
(Podcast) Volatility Views 437: Tesla Turns as VIX Implodes
Options Insider Radio Network
Host: Mark Longo, The Options Insider Media Group
Co-host: Mark Sebastian, The Option Pit