Observations & Insight
Leticia Manos, Ray Mckenzie and Nils-Robert Persson
Election 2020: Tight Races Set Stage for Continued Period of Volatility
By Suzanne Cosgrove – John Lothian News
Here’s how the presidential election 2020 is unfolding in its final days: A massive early voter turnout is outpacing that of 2016, an estimated 11 million more Democrats than Republicans have requested mail-in ballots, and both President Donald Trump and former Vice President Joe Biden spent Thursday barnstorming the state of Florida.
“We recognize this is a highly contested race,” said Nasdaq CEO Adena Friedman in a webcast interview on Thursday.
Speaking on a panel on “The Economics of the 2020 Election” sponsored by Nasdaq, Jim O’Sullivan, chief U.S. macro economist at TD Securities, noted the final outcome of the race offers a number of potential pros and cons for the economy.
To read the rest of this story, go here.
FIA-Chicago Fed Panel Addresses the Lack of Diversity in U.S. Financial Markets
By Sarah Rudolph – John Lothian News
The low number of African Americans in high positions in the financial markets is shocking, but not surprising. And not much progress has been made, though not for lack of effort. What does the landscape look like, and what can be done about it?
One big problem is that African Americans are not represented in the agencies that regulate the financial industry. Chris Brummer, a law professor at Georgetown University, researched data on the number of Blacks who have served as federal regulators. He spoke on a panel Thursday on “Diversity in the financial markets” hosted by the FIA and the Chicago Federal Reserve.
“Financial regulation has a direct impact on the lives of African Americans,” Brummer said. “It determines how trillions of dollars in assets are regulated, as well as what companies should disclose, how investors are protected, plain language disclosures, and who gets financial assistance in times of distress.”
To read the rest of this story, go here.
Volatility Markets Flash Signs of Distress After Turbulent Week
Justina Lee and Yakob Peterseil – Bloomberg
Between a fresh surge in coronavirus cases and disappointment over Big Tech’s earnings, there are suddenly a lot of reasons for investors to be fearful.
The volatility curve is flashing a sign of distress last seen in April, and exchange-traded funds that bet on turbulence saw heavy trading in the pre-market this morning. Systematic strategies that use volatility as a trigger are poised to sell more, which could potentially add more pressure on the market, according to analysts at Nomura Holdings Inc.
Bitcoin Traders Can Now Bet on $40K Price With New Deribit Options
Omkar Godbole – Coindesk
Crypto derivatives exchange Deribit has listed bitcoin options contracts that allow traders to bet on a potential price rally to $40,000 next year. Options at a $40,000 strike price expiring in March 2021 and June 2021 went live on Deribit early on Friday, as noted by research firm Skew. In effect, the new contracts will allow market participants to express a long-term bullish view on bitcoin. They will appeal to traders expecting a price rally to above $40,000 on or before the above expiries.
Susquehanna Will Take Your Election Bets, Up to $100 Million; The quant trader, known for its interest in the statistics of gambling, is ready to be on the other side of big presidential wagers.
Annie Massa – Bloomberg
With the onset of an historic U.S. presidential election, a quantitative trading firm has been trying to pique hedge funds’ interest in casting big bets in political-prediction markets. Susquehanna International Group, based in Bala Cynwyd, Pa., is a big player in options and the exchange-traded fund market, but its founders have long had an interest in the statistical side of gambling. The firm runs its own blog on gaming and poker strategy tips and has been building up a sports-betting operation in Ireland. It’s recently gauged funds’ interest in bets on election outcomes. Although few have gotten involved, Susquehanna is willing to take the other side of wagers on the presidential race for up to $100 million per bet, says a person familiar with the firm, speaking on the condition of anonymity because the plans are not public.
Global equities markets on course for worst week since March tumult
Adam Samson and Camilla Hodgson – Financial Times
Equities markets were set to cap a volatile trading week on a gloomy note on both sides of the Atlantic after broadly upbeat earnings from America’s tech giants failed to impress investors.
A sell-off on Wall Street gathered pace an hour after the opening bell, sending the large-cap S&P 500 down 1.9 per cent and the tech-heavy Nasdaq Composite 2.3 per cent lower.
Exchanges and Clearing
Cboe Global Markets Reports Results for Third Quarter 2020
Cboe Global Markets
Third Quarter 2020 Highlights*
• Diluted EPS for the Quarter of $1.01, Up 7 Percent; Adjusted Diluted EPS¹ for the Quarter of $1.11, Down 14 Percent; Net Revenue for the Quarter of $292.0 Million, Down 1 Percent; EBITDA Margin for the Quarter of 72.6 Percent Compared to 65.2 Percent in 2019; Adjusted EBITDA Margin for the Quarter of 65.9 Percent Compared to 70.9 Percent in 2019; Returned $88 Million to Shareholders Through Share Repurchases and Dividends
Cboe Global Markets, Inc. (Cboe: CBOE) today reported financial results for the third quarter of 2020. “Our third quarter results highlight continued robust engagement among retail customers offset by decreased trading among institutional investors as a result of ongoing uncertainty regarding the global macro-environment. We continued throughout the quarter to diversify our products and services for customers of every type by advancing key growth initiatives, including the expansion of our market data offering and the completion of our MATCHNow and EuroCCP acquisitions, which will enable us to further leverage our index product expertise and broaden our customer reach in new geographies.
CME Inclusion of Options on Eurodollar Futures in Portfolio Margin Program with Interest Rate Swaps (IRS) Products – Effective October 29, 2020
CME is expanding its portfolio margining offering for IRS Products to include Options on Eurodollar futures in addition to existing eligible futures products: Eurodollar Futures, Fed Funds Futures, Treasury Futures and Deliverable Swap (MAC) Futures. This extension is available in CME’s testing environment beginning October 28th, 2020 with a target Production date of December 7th, subject to regulatory approval.
Nodal and IncubEx to Expand Environmental Markets with Seven New Renewable Contracts
Nodal Exchange and IncubEx today announced the upcoming launch of seven new Renewable Energy Certificate (REC) futures and options on November 17, 2020.
Keeping markets on an even keel: How clearinghouse strength provides resilience
John Davidson, Chief Executive Officer, OCC – The World Federation of Exchanges
For most people, the name Lehman Brothers evokes the worst days of the 2008 financial crisis. For OCC and other central counterparty (CCP) clearinghouses, it represents an inflection point that demonstrated how crucial CCPs are in providing operational and financial resiliency for financial markets. Throughout volatile times, including those seen so far this year, centrally cleared markets have continued to deliver stability and market integrity for investors.
NYSE AMERICAN LLC LETTER OF ACCEPTANCE, WAIVER, AND CONSENT NO. 2019-03-00051
XR Securities LLC (“XR” or the “Firm”) violated: (i) NYSE American Rule 902NY(i)(l) when certain associated persons used unregistered communications devices from the NYSE American Exchange Options Trading Floor (the “Amex Floor”) from in or around September 2018 through August 1, 2019; and (ii) NYSE American Rule 320 for failure to establish and maintain a system to supervise the activities of each associated person that was reasonably designed to achieve compliance with NYSE American Rule 902NY from in or around September 2018 through August 1,2020. Consent to censure and a $55,000 fine.
MIAX Exchange Group – Options Markets – Delisting of Hertz Global Holdings, Inc. (HTZ)
Hertz Global Holdings, Inc. (HTZ) has been de-listed from the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange effective on Friday, October 30, 2020. All GTC orders resting on the MIAX order books in HTZ have been canceled effective on Friday, October 30, 2020.
MIAX Exchange Group – Options and Equities Markets – Daylight Saving Time – November 2020
Please be advised the MIAX Exchanges are scheduled to end Daylight Saving Time at 2:00 AM on Sunday, November 01, 2020. The MIAX will adjust the system times back 1 hour for trading beginning Monday, November 02, 2020.
Regulation & Enforcement
SEC decision on leveraged ETFs sparks concern for retail investors; SEC commissioners reveal sharp disagreements on move to abandon proposed controls
Chris Flood – FT
New rules covering the use of derivatives by investment managers have triggered sharp disagreements among top US regulators after the Securities and Exchange Commission unexpectedly abandoned proposals for controls on the sale of leveraged exchange traded funds to retail investors.
Goldman Sachs and JPMorgan will freeze software updates around the US election to minimize service outages, report says
Shalini Nagarajan – Markets Insider
Goldman Sachs and JPMorgan will freeze software updates to their retail and investment banking systems around next week’s US presidential election on Tuesday to minimize outages, the Information reported.
Bank customers who use these systems to manage their accounts will not be interrupted by any software updates on Tuesday, the final day of the presidential vote.
Sterling Trading Tech Announces Integration With Linear Investments
Sterling Trading Tech
Sterling Trading Tech (STT), a leader in compliance, risk and infrastructure solutions for equity, options and futures trading, announced today that it completed integration with Linear Investments, a global trading firm and full-service prime broker with offices in London, Hamburg and Dubai.
A top strategist says investors should stay in stocks hit hardest by the pandemic despite recent painful downturn
Emily Graffeo – Markets Insider
Tom Lee, Fundstrat Global Advisors head of research, told CNBC that investors should stay in cyclical stocks despite the recent market downturn.
As the S&P 500 slipped 3% on Wednesday, the strategist doubled down on his view that stocks hit hardest by the pandemic, what he calls “epicenter stocks,” will rebound once the US economy reopens. This summer, he said sectors like travel, leisure, and hospitality are all part of the epicenter of the pandemic crash.
(Podcast) Who Would Want to Sell Options, with Mark Adams of Warrington Asset Management
RCM Alternatives blog
For every option buyer, there is a seller. The brave souls who are accused of picking up pennies in front of a freight train. But are they dumb? Crazy? Or just better at timing the market than the rest of us? Understanding option strategies which involve collecting premium seems easy, but there’s way more that goes into this recipe. As Jeff Malec asked our guest in this pod “Give it to me straight, partner” (42:16 mark) in the world of options selling. Mark Adams, Assistant Portfolio Manager and Chief Quantitative Officer at Warrington Asset Management is here to break down exactly what means to be an options specialist and the struggles and successes of operating options-based strategies.
Register now and join us virtually this November.
10 November 2020 – 12 November 2020 • 7:30 AM – 2:00 PM CST
Since March the futures community has shown its resiliency and ability to adapt to the challenges of today. Expo-V focuses on shaping what’s next in the cleared derivatives industry as we continue to move forward and change. Whether leading voices analyzing the most pressing issues or ground-breaking fintech startups, the virtual 36th Annual Futures & Options Expo is your destination to build partnerships, spot trends and define what’s next for our industry.
From keynote addresses to 1:1 interviews with exchange leaders and panels as well as the Innovators Pavilion and virtual trade show, Expo-V will bring you:
Ways to harness recent lessons learned to build a stronger tomorrow
Cutting-edge startups and new applications that are changing the face of the industry
Opportunities to diversify the industry from people to principles
Register now and join us virtually from November 10-12 for Expo-V!
(Podcast) TWIFO 223: FX Options Tools, Trades and Trends
This Week In Futures Options – Options Insider