Observations & Insight
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Lead Stories
Wall Street ‘fear gauge’ offers no silver lining as bear market looms
Saqib Iqbal Ahmed – Reuters
A surprising lack of panic in the U.S. stock market as measured by Wall Street’s “fear gauge” is keeping some investors from calling a bottom on an already bruising equity selloff.
Since 1990, the Cboe Volatility Index (.VIX) has hit an average level of 37 at market bottoms, compared with its most recent level of around 32.
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Traders ready for wilder swings as rate rises stoke volatility
Dhara Ranasinghe, Saikat Chatterjee and Davide Barbuscia – Reuters
Traders in the world’s largest markets are having to navigate wild intra-day swings and shrinking deal sizes as central banks rapidly withdraw stimulus measures, in a small-scale reminder of a pandemic-driven financial seize-up just two years ago.
The U.S. Federal Reserve said in a report this week that liquidity had “deteriorated” further than what might be expected at current levels of volatility, with noticeably poor conditions in treasury, commodity and equity markets.
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S&P 500 Falls to Brink of Bear Market Before Rally (SPX)
Vildana Hajric – Bloomberg
More hair-raising volatility in the S&P 500 pushed the index within spitting distance of a 20% drop, a decline that puts markets on covers of newspapers and holds ominous meaning for the economy.
Down as much as 1.9% Thursday and 30 points from a bear market before a last-hour rally, the benchmark appears destined to decrease for a sixth straight week, something it hasn’t done since June 2011. Growing certainty that the Federal Reserve’s efforts to halt inflation will send the economy into a recession has lopped nearly $10 trillion off equity values in 18 weeks.
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Nomura Starts Offering Bitcoin Derivatives to Clients in Asia
Cathy Chan – Bloomberg
Japan’s biggest brokerage is offering non-deliverable forwards and non-deliverable options settled in cash, and can now trade Bitcoin futures and options, Tim Albers, head of forex structuring in Asia ex-Japan, said in an interview. Nomura carried out its first digital trade on CME Group Inc.’s platform this week with Cumberland DRW LLC, a market-maker in Bitcoin and other cryptocurrencies. That trade was made despite a recent meltdown in the crypto sector after the collapse of the TerraUSD stablecoin triggered a flight from many popular digital tokens.
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Options-Market Cyberhacks on the Rise
Traders Magazine
Cyberhacks in the U.S. options market have increased from about 10-20 per year a few years ago to upwards of 1,000 currently, and companies and individuals need to step up vigilance, according to Gene DeMaio, Executive Vice President, Options Regulation & Trading Execution at FINRA.
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Twitter (TWTR) Short-Sellers Add $136 Million to Month’s Paper Profits
Bailey Lipschultz – Bloomberg
The confusion surrounding Elon Musk’s takeover bid for Twitter Inc. has delivered millions in paper profits to short sellers betting that the world’s richest person won’t follow through on his purchase of the social media platform.
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The beginning of the end of the stock market’s correction could be near
Mark Hulbert – MarketWatch
The end of the U.S. stock market’s correction is looking a lot closer. That’s the conclusion of a contrarian analysis of market timer sentiment. It’s encouraging, from a contrarian perspective, that the market timer community in recent days has become extremely pessimistic — as pessimistic, in fact, as it has been at prior market bottoms.
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Reasons why the tech stock crash may be far from over
Richard Waters – Financial Times
For anyone who watches the stock market for a living, the recent car crash in tech stocks has been mesmerising. There are plenty of reasons to believe it isn’t over.
This is not so much an issue for Big Tech, though the wealth erased since the start of the year is significant. Between them, the five biggest tech companies have shed nearly $2.6tn. That is a decline of 26 per cent, twice the drop in the Dow Jones Industrial Average.
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OBTV Episode 35: Social.Trade Startup Spotlight
Tradier – YouTube
Lex interviews Joe Masson of Social.Trade. Check out this fantastic leader platform where you can find your favorite traders and follow their stock and options trades!
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Cryptocurrency meltdown continues as investors exit risky market
CBS News
The massive downturn in cryptocurrencies continued Thursday, as the price of Bitcoin plunged to its lowest point since 2020. Peter Smith, CEO and co-founder of Blockchain.com, joins CBS News’ Lilia Luciano to discuss the recent volatility.
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Cryptocurrencies Melt Down in a ‘Perfect Storm’ of Fear and Panic
David Yaffe-Bellany, Erin Griffith and Ephrat Livni – NY Times
The price of Bitcoin plunged to its lowest point since 2020. Coinbase, the large cryptocurrency exchange, tanked in value. A cryptocurrency that promoted itself as a stable means of exchange collapsed. And more than $300 billion was wiped out by a crash in cryptocurrency prices since Monday.
The crypto world went into a full meltdown this week in a sell-off that graphically illustrated the risks of the experimental and unregulated digital currencies. Even as celebrities such as Kim Kardashian and tech moguls like Elon Musk have talked up crypto, the accelerating declines of virtual currencies like Bitcoin and Ether show that, in some cases, two years of financial gains can disappear overnight.
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Exchanges
Cboe Global Markets Announces 2022 Annual Meeting Results
Cboe
Cboe Global Markets, Inc. (Cboe: CBOE), a leading provider of global market infrastructure and tradable products, today announced the preliminary shareholder voting results from its 2022 Annual Meeting held today.
/bit.ly/3l5xuNB
Cboe Global Markets Declares Second-Quarter 2022 Dividend
Cboe
Cboe Global Markets, Inc. (Cboe: CBOE), a leading provider of global market infrastructure and tradable products, today announced its Board of Directors has declared a quarterly cash dividend of $0.48 per share of common stock for the second quarter of 2022. The second-quarter 2022 dividend is payable on June 15, 2022, to stockholders of record as of May 31, 2022.
/bit.ly/3Ne8gs8
MarketNYSE American options, NYSE ARCA options
NYSE
Beginning on May 20, 2022 for NYSE Arca Options, and on June 6, 2022 for NYSE American Options, Done-for-Day (“DFD”) message delivery will be modified to begin at 4:15 PM ET (1:15 PM ET on early close days).
/bit.ly/3lqtirX
Regulation & Enforcement
Statement to House Ag Committee Regarding “Changing Market Roles: The FTX Proposal and Trends in New Clearinghouse Models”; FIA President and CEO Walt Lukken’s prepared statement before the US House of Representatives Committee on Agriculture
FIA
Chairman David Scott, Republican Leader G.T. Thompson, and Members of the Committee, thank you for the opportunity to testify about the US derivatives market structure and the unique proposal set forth by FTX US. I am President and CEO of the FIA, a leading global trade organization for the futures, options and centrally cleared derivatives markets. As someone who also served on the Commission for many years, I am proud of the CFTC’s long history of supporting innovation and competition in the derivatives markets.
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U.S. regulators see ‘endgame’ to LIBOR phaseout
Jim Tyson – CFO Dive
Financial institutions and companies seeking loans are sunsetting LIBOR after years of pressure from the Fed and other regulators worldwide. The subject of a manipulation scandal in 2012, LIBOR is the reference rate for trillions of dollars in mortgages, derivatives, business loans and other financial contracts. It is derived from London banks’ estimates of what they would be charged when borrowing from other banks. SOFR is based on overnight repurchase agreements secured by U.S. Treasurys.
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Strategy
Bitcoin Has Survived Worse. This Crypto Crash Could Offer Opportunities.
Jack Denton – Barron’s
A cryptocurrency crash has wiped away $600 billion in value in the past week, as the largest digital asset, Bitcoin, plummeted by more than 25%. The scale of the selloff is massive, but this isn’t the first time cryptocurrencies have seen intense volatility. And, already, some on Wall Street are eyeing opportunities. Bitcoin slid 11% over the past 24 hours to $28,000, having dipped below $26,000 in earlier trading. Just last week, the largest crypto was changing hands around $40,000. Six months ago, it was sitting at its all-time high near $69,000—more than double its current level.
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Miscellaneous
FTX’s Bankman-Fried and CME’s Duffy square off on crypto futures in Capitol Hill hearing; CME chief says bitcoin futures proposal would be ‘catastrophic’ for U.S. economy
Chris Matthews – MarketWatch
Major players in the commodity futures industry appeared before Congress Thursday to protest a proposal by cryptocurrency exchange FTX to allow customers to buy leveraged crypto derivatives around the clock, with the head of the CME Group arguing that allowing such a move could be “catastrophic” for the U.S. economy and retail investors. The FTX proposal asks that the Commodity Futures Trading Commission amend its registration to allow it to lend money to its customers to buy bitcoin and ether futures 24 hours a day, 365 days per year.
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The 60/40 Portfolio Is Having Its Worst Year Ever. What to Buy Instead.
Lauren Foster – Barron’s
The heyday of the 60/40 portfolio, an allocation of 60% stocks and 40% bonds, is over. According to Bank of America Securities, the popular investment strategy is having its worst year ever.
“Sustained weakness across bond and equity markets further supports the ‘end of 60/40’ thesis,” BofA analysts said in a report. “Adjusting for inflation, a 60/40 portfolio is on pace to lose 49% this year, which would be the worst annual return on record. The correlation between stocks and bonds turned positive in March and is now the highest in a quarter-century.”
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