Observations & Insight
MWE SHORT: Richard Sandor – The Building Blocks of the Financial Industry
Dr. Richard Sandor, chairman and CEO of Environmental Financial Products LLC, talks about inventing markets and the evolution of exchanges such as the CME, CBOE and ICE. Sandor gives a detailed look at the various elements that gave each exchange its identity and reflects on how the innovations of the past have made the financial industry what it is today.
‘Volatility vortex’ slams into $24tn US government bond market; Key measure of turbulence in Treasuries reaches highest level since 2020 coronavirus crisis
Kate Duguid and Adam Samson and Colby Smith – Financial Times
The $24tn US Treasury market has been hit with its most severe bout of turbulence since the coronavirus crisis, underscoring how big swings in international bonds and currencies and jitters over US rate rises have spooked investors. The Ice BofA Move index, which tracks fixed income market volatility, has reached its highest level since March 2020, a time when deep uncertainty about how the pandemic would affect the world economy set off massive fluctuations in US government bonds.
The U.K. Economy Is Having a Meltdown. The Bank of England Had to Intervene.
Brian Swint – Barron’s
The recent chaotic swings in the British pound and in U.K. government bonds mean traders are at panic stations, forcing the Bank of England to step in to calm things down.
The spectacular drops within the past week were sparked by Prime Minister Liz Truss’s dramatic policy decision to borrow billions to cut taxes in the hopes of supercharging economic growth. But markets judged that the plan doesn’t have much chance of success.
S&P 500 falls to two-year low, bear market rally snuffed out
Chuck Mikolajczak – Reuters
The S&P 500 (.SPX) fell to its lowest level in almost two years on Tuesday on worries about super aggressive Federal Reserve policy tightening, trading under its June trough and leaving investors appraising how much further stocks would have to fall before stabilizing.
Stocks have been under pressure since late August after comments and aggressive actions by the U.S. Federal Reserve signaled the central bank’s top priority is to stamp out high inflation even at the risk of putting the economy into a recession.
It’s Been an Abysmal Year for Stocks, Bonds
Gunjan Banerji – WSJ
It’s been a punishing stretch for both stocks and bonds.
The three major U.S. indexes are on track for their worst performance through September of any year since 2002, around the time the dot-com bubble burst. The Dow Jones Industrial Average has shed more than 18%, while the S&P 500 and Nasdaq Composite have lost around 23% and 30%, respectively.
Door slams on Fed ‘put’ as market pain takes back seat to inflation fight
Howard Schneider – Reuters
In the month since Federal Reserve Chair Jerome Powell laid down a hard line on inflation, stocks have suffered double-digit losses, chasms have opened in global currency markets, and yields on the safest U.S. government debt have surged to their highest levels since the dark days of the financial crisis nearly a decade and a half ago.
When It Rains, It Pours
JJ Kinahan – Forbes
It’s been a rough start to the week for markets. The S&P 500 ended Tuesday down a little more than 1% for the week so far, while the Nasdaq 100 is down just under 1%. At the same time, volatility continues climbing with the VIX now trading just over 33 in the premarket.
With all the negative news and fall in prices, bulls are calling for a bottom. However, market bottoms tend to be marked by panic selling and we really haven’t seen that yet, in my opinion. On Friday, we did see what felt like panic selling early in the day, but that was quickly met with opportunistic buying. It didn’t feel like the type of panic selling that accompanies a true market bottom.
Dun dun . . . dun dun . . . dun dun dun dunnnnnnnnnnnnn!
Robin Wigglesworth – Financial Times
Overnight, according to our Refinitiv terminal, the 10-year US Treasury yield finally breached the 4 per cent level for the first time since 2010.
It has since slipped back to 3.9781 per cent, but the wildness of the move from about 1.5 per cent at the start of the year — and the sub-1 per cent level it held for much of 2020 — is incredible.
Behold, the scariest chart in financial markets:
Ethereum Project Ribbon Finance Launches Crypto Options Exchange to Boost Growth
Shaurya Malwa – CoinDesk
Decentralized finance (DeFi) protocol Ribbon Finance, known for its on-chain structured products, said it is launching an options exchange to boost demand for its services among savvy crypto traders. Announced at Token 2049 in Singapore, Aevo will allow users to initially trade ether (ETH) options, with plans to launch options for bitcoin (BTC) and other tokens in the coming months.
Nasdaq Restructures into Three Divisions
Nasdaq, Inc. announced that it is organizing its business units into three divisions: Market Platforms, Capital Access Platforms, and Anti-Financial Crime. This new structure will align the company more closely to the foundational shifts that are driving the evolution of the global financial system and evolving client needs.
Goldman Sachs launches new options price discovery and trade idea generation tool; New tool, Visual Structuring, aims to provide faster price discovery, detailed scenario analysis and improved collaboration on trades and ideas.
Wesley Bray – The Trade
Goldman Sachs has launched a new tool for options price discovery and trade idea generation, named Visual Structuring, which is available through Goldman Sachs Marquee. Initially with FX options, the new tool offers a mobile-first approach to speedily price variations, assess scenarios, conduct back-testing analysis and enhance collaboration between colleagues.
Goldman Sachs Announces the Launch of Visual Structuring
Today, Goldman Sachs announced the launch of Visual Structuring, a patent-pending new tool for options price discovery and trade idea generation, available through Goldman Sachs Marquee. Starting with FX options, Visual Structuring provides a mobile-first way to quickly price variations, assess scenarios, run backtesting analysis, and collaborate with colleagues wherever they are.
SpiderRock selects Eventus for trade surveillance solution
Eventus, a leading global provider of multi-asset class trade surveillance and market risk solutions, announced today that SpiderRock Technology Services, a high-performance algorithmic execution and risk management technology provider to institutional trading clients, as well as agency broker-dealer and market data provider, has deployed the Validus platform for trade surveillance, initially for the firm’s client activity in futures and options on futures contracts. SpiderRock serves large hedge funds, bank trading desks, proprietary trading firms and other institutional clients globally with its flagship equity and options offering and now growing futures business.
The Put/Call Ratio Says ‘Get In The Market Now!’
George Calhoun – Forbes
“The Put – Call Ratio remains one of the most important and parsimonious information variables used by traders to predict the market return.”
“This trading signal handily beats the S&P 500 composite index.”
“The most common way in which traders lose money is by buying Calls when they think the market is bullish and buying Puts when they think the market is bearish.”
This Was the Most Popular Options Trade on Tuesday
Gunjan Banerji – WSJ
The most popular options contract on Tuesday wasn’t a bet tied to the S&P 500 or stocks like Tesla Inc. or Apple Inc.
It was a put option tied to investment-grade corporate bonds.
Activity tied to the iShares iBoxx $ Investment Grade Corporate Bond Exchange-Traded Fund, which goes by the ticker LQD, exploded while the ETF slid for a fourth consecutive day. Put options with a $90 strike were the most actively-traded contracts in the entire listed options market, according to Cboe Global Markets data.