Wall Street Fights Stock Machines With Trend-Chasing on Steroids
Justina Lee and Yakob Peterseil – Bloomberg (SUBSCRIPTION)
Wall Street is fighting the robot revolution by chasing the billions of dollars of stocks bought and sold on autopilot in the dying minutes of every trading day.
UBS Group AG and Societe Generale SA are among institutional managers exploiting wild markets near the closing bell as programmatic players — quants, ETFs and index trackers — execute orders en masse. They’re offering newfangled trend-following strategies to big-money investors that work over the course of hours and minutes, rather than the traditional timeframe of months and weeks.
Currency Volatility Stays in the Doldrums After U.S. Jobs Data
Anooja Debnath – Bloomberg (SUBSCRIPTION)
Currencies were trapped in an anemic range just a day after stronger-than-forecast U.S. jobs data roiled stocks and bonds.
A gauge of implied price swings in the euro against the dollar held near its lowest in more than a decade even as traders were conflicted on whether to price in more than a 25-basis point rate cut by the Federal Reserve when it meets later this month. Europe’s shared currency largely shrugged off European Central Bank Executive Board member Benoit Coeure’s statement that policy makers could restart quantitative easing if needed.
JPMorgan Sees Rising Risk of Bond Tantrum That Could Hit Stocks
Cormac Mullen – Bloomberg (SUBSCRIPTION)
There’s a significant risk of an abrupt sell-off in the bond market, which could also engulf stocks, according to JPMorgan Chase & Co.
A gradual increase in bond volatility, a deterioration in market liquidity and vulnerable investor positioning risk sparking a “bond tantrum,” given the low level of global yields, strategists including Nikolaos Panigirtzoglou wrote in a note Friday. The current environment brings back memories of episodes of sudden volatility spikes, such as the one seen in 2013, the year of the taper tantrum, they said.
Stocks Are Winners When Wall Street Analysts Agree
Al Root – Barron’s
Sometimes Wall Street analysts can’t agree on a stock—and long-term investors might want to stay away when that happens. (Because Barron’s found volatility picks up without any compensation for added risk in the form of higher returns.) Sometimes, however, Wall Street analysts agree on a stock—and that seems to be a recipe for lower volatility as well as higher returns.
Shanghai bears send tin tumbling to three-year lows: Andy Home
Andy Home – Reuters
The tin market was last week rudely awakened from its previous range-trading slumber.
On the London Metal Exchange (LME), three-month tin collapsed 7% over the course of Tuesday to $17,585 per tonne, the lowest print since August 2016.
Hedge funds sell crude as economy fears trump OPEC cuts: Kemp
John Kemp – Reuters
Hedge funds sold more Brent futures and options last week as concerns about the global economy trumped the decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies to extend output cuts.
Hedge funds and other money managers sold another 7 million barrels of Brent derivatives in the week to July 2, according to position data published by ICE Futures Europe.
Exchanges and Clearing
Miami International Holdings Reports May 2019 Trading Results for MIAX Exchange Group
Miami International Holdings, Inc. (MIH) today reported the May 2019 trading activity for its three fully electronic options exchanges – MIAX , MIAX PEARL™ and MIAX Emerald™ (together, the MIAX Exchange Group™). The MIAX Exchange Group collectively executed over 38 million equity option contracts in May for a combined average daily volume (ADV) of 1,727,481 contracts, representing a total U.S. equity options market share of 9.36%.
Euronext announces volumes for June 2019
In June 2019, the overall average daily volume on derivatives reached 555,310 contracts, down -4.6% compared to June 2018 and down -3.1% compared to the previous month. In detail:
– the average daily volume on equity index derivatives reached 228,099 contracts, down -6.3% compared to June 2018 and down -9.3% from the previous month,
– the average daily volume on individual equity derivatives reached 275,769 contracts, down -0.4% compared to June 2018 and up +4.6% from the previous month,
– the average daily volume on commodity derivatives reached 51,442 contracts, down -17.4% compared to June 2018 and down -11.3% from the previous month.
Year-to-date, the overall average daily volume on Euronext derivatives stood at 578,686 contracts (-3.2% compared to 2018 YTD) and the open interest was up at 15,746,263 contracts (-12.1% compared to the end of June 2018).
Regulation & Enforcement
FIA, ISDA, GMFA Comment on Position Limits in Europe
FIA, jointly with ISDA and GFMA, responded to ESMA’s call for evidence in May on position limits under MiFID II. ESMA sought stakeholders’ input as it launched this call for evidence in the context of the reviews it must perform under MiFID II together with the European Commission (EC). The response highlights challenges in the following three areas:
UK Financial Regulator Proposes to Ban Crypto-Derivative Sales to Retail Clients; US Congressional Committee Recommends Facebook Libra Moratorium
Gary DeWaal – Lexology
The United Kingdom’s Financial Conduct Authority proposed to ban the sale, marketing and distribution in or from the UK to retail persons of all derivatives and exchange-traded notes referencing unregulated cryptoassets that can be widely exchanged on cryptoasset platforms or other forums.
Deutsche Bank derivative dumbness
Jamie Powell – Financial Times (SUBSCRIPTION)
In financial markets, there’s always a new reason to worry.
Over the weekend, Deutsche Bank announced a new “strategic transformation” after a decade of woeful underperformance. The headline-grabbing figure was 18,000 — the number of jobs it expects to cut as part of the restructuring.