Volatility Spike Brews in Charts Signaling Test for Equity FOMO

Aug 8, 2022

Lead Stories

Volatility Spike Brews in Charts Signaling Test for Equity FOMO
Akshay Chinchalkar – Bloomberg
Rising volatility may be about to test the US stock market’s 13% jump from June lows.
That’s the picture painted by technical charts looking at the Cboe Volatility Index, a gauge of implied equity swings for the S&P 500 known as the VIX.

Stock Market Outlook: 2 Warning Signs After Jobs Data Reset Recession Clock
Jennifer Sor – Markets Insider
Investors may have reset the clock on their recession expectations after last week’s strong jobs report, but the market’s favorable reaction to the data on Friday shouldn’t discount two warning signals of still-looming risks to stocks, DataTrek said on Monday.

Funds break selling streak in CBOT corn, soy as futures surge
Karen Braun – Reuters
It took a historic futures rally in the final days of July to prevent speculators from exiting more bullish bets in Chicago corn and soybeans, as they have done in all but two weeks since the end of May. Although buying in the most recent week was lighter, it proved that buying in the big “up” days can still outweigh selling in “down” days, something that has not been happening in recent weeks.

European gas oil futures anticipate recession
John Kemp – Reuters
Hedge fund position changes last week in U.S. and European petroleum futures illustrate the contrasting economic outlooks on the two sides of the North Atlantic.
Hedge funds and other money managers purchased the equivalent of 3 million barrels in U.S. diesel futures and options in the week ending on Aug. 2.

MatrixPort leads $4.6 million funding round for OrBit Markets; Hedge fund Brevan Howard, which recently launched its own digital assets division, was among the participants involved in the fundraising.
Wesley Bray – The Trade
Crypto options and structured products liquidity provider OrBit Markets has raised $4.6 million in an angel funding round led by digital assets financial services ecosystem Matrixport. Brevan Howard Digital, which launched late last year, as well as New Form Capital, Maven 11 and Westridge Markets, were among the participants in the oversubscribed round.


BOX Options Market: New Options Class Symbol With Duplicate Group Names
On Monday, August 29, 2022, BOX Options Market LLC (“BOX”) will start listing new options series on ClassSymbol (UnderlyingSymbol) which are currently cleared by OCC but not yet listed on BOX.

Regulation & Enforcement

U.S. SEC proposes new rules for clearing houses
Katanga Johnson – Reuters
The U.S. Securities and Exchange Commission (SEC) on Monday proposed new rules aimed at preventing conflicts of interest in management and governance of clearing houses.
Clearing houses provide essential plumbing for financial markets, ensuring that securities or derivatives trades are completed, even if one side of a transaction goes bust.

Citigroup Sued by Loomis Sayles Over $70 Million in Trade Losses
Patricia Hurtado – Bloomberg
Loomis, Sayles & Co. sued Citigroup Inc., alleging the bank caused more than $70 million in losses while executing two separate trading orders that swamped the market.
The Boston-based investment firm says Citigroup’s global markets unit was serving as its broker in the purchase of almost 800,000 shares of Shopify Inc and sale of more than 5 million shares of Colgate-Palmolive Co. Despite being instructed to execute the trades in a manner that wouldn’t impact daily market prices, the bank allegedly placed the orders into an illiquid closing auction at the end of the day, on March 18.


ON THE MOVE: NYSE Options Tabs Meaghan Dugan for Top Job; Stanislas Beneteau to BNP Paribas
Anna Lyudvig – Traders Magazine
Meaghan Dugan has joined the New York Stock Exchange (NYSE) as Head of Options. Dugan was previously a Senior Director at Intercontinental Exchange. Prior to that she was Head of Derivatives Product Management for the U.S. options and global futures businesses for Bank of America Merrill Lynch. She returns from her “early P-Coast Market Making/Specialist days to running the NYSE Options business”, Dugan announced on her LinkedIn page.


Are We in a New Volatility Regime?
Statistically, volatility is related to the movement of both positive returns and negative returns. In the context of the equity markets, volatility is often discussed when stocks decline. When they decline, volatility indices such as VIX, VOLQ, and VSTOXX (V2X) will often rally as they all have a negative correlation to their underlying equity market.

High Yield Bond ETFs Return to Favor as Expected
To celebrate the 20th anniversary of the first bond ETFs, investors flocked to the asset class, pouring in $28 billion in July, double the amount that flowed into equity ETFs during a strong month for the U.S. stock market. Demand was widespread, with 46 products gathering at least $100 million last month. While two credit-risk-averse bond ETFs, the iShares U.S. Treasury ETF (GOVT) and the iShares 20+ Year Treasury Bond ETF (TLT), led the charge with a combined $8.5 billion of net inflows, we are particularly pleased to see many high yield ETFs also gain traction.

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