We all need to reassess what we understand by the word ‘risk’; The Fed Hints Yield-Curve Control Already Is in Place

Jul 30, 2020

Lead Stories

We all need to reassess what we understand by the word ‘risk’
Fiona Frick – Financial Times
The global financial crisis of 2008, followed by the Covid-19 pandemic, has made fundamental changes to the way financial markets work. Interventions by central banks, designed to save economies from major dislocations, have shaken some of the basic concepts investors have been applying for decades. As a result, we need to revisit these ideas with fresh eyes and update them for a new era.

The Fed Hints Yield-Curve Control Already Is in Place
Randall W. Forsyth – Barron’s
We have seen the future of Federal Reserve policy, and this is how it works.
The central bank’s long-awaited review of its monetary policy methods and goals—which is expected to be unveiled at the September meeting of the Federal Open Market Committee—will essentially put into writing what it already is doing, Jerome Powell, the Fed’s chair, said Wednesday.
“To a very large extent, the changes we’ll make to the longer-run goals to monetary policy strategy are really codifying the way we’re already acting with our policies,” Powell said at the end of his hourlong press conference after the two-day FOMC meeting wrapped up.

Dollar dips as Trump floats idea of election delay
Karen Brettell – Reuters
The U.S. dollar dipped on Thursday after U.S. President Donald Trump raised the possibility of delaying the nation’s November presidential election, and it is on track for its worst monthly performance in a decade as the spread of the coronavirus continues to weigh on the U.S. economy.
Trump repeated claims of mail-in voter fraud, writing on Twitter “delay the election until people can properly, securely and safely vote???”
The comments reversed an earlier dollar bounce.

****JB: The funny thing is, if president Trump got his way and delayed the election (which has never happened, not even during the Civil War), he would lose the presidency and a democrat most likely would become the next president. The 20th amendment says a president’s term ends at noon on January 20 after his/her four-year term is over. If no new president has been chosen (for whatever reason) then the 25th amendment, which spells out presidential succession, says the Speaker of the House would assume the presidency (with no president there is also no vice president to assume the office). Since democrats hold the House (and are likely to continue to do so) the chances are a democrat would assume office. Maybe it would be Nancy Pelosi, which would make her the first female president of the United States.

Turkey Runs Low on Ammunition to Combat Lira’s Slide
Caitlin Ostroff and Anna Isaac – WSJ
Investors are worried Turkey is running low on options to curb volatility in its currency after the lira hit its weakest level against the dollar in two months. After months of staying relatively stable because of the central bank’s intervention, the lira has fallen sharply this week. Since Monday, the currency has fallen by about 2% to trade at about 6.99 lira to the dollar, its weakest level since May 12 and approaching its record low, despite the dollar weakening against other major currencies. The lira has dropped 3% against the euro so far this week, its biggest weekly decline in over three months.

Exchanges and Clearing

Cboe to launch periodic auction in US after European success; After emerging as an alternative trading venue under MiFID II in Europe, Cboe will now bring its periodic auction to the US equity market.
Hayley McDowell – The Trade
Exchange operator Cboe Global Markets has confirmed it will launch a periodic auction system in the US, after being the first to launch the alternative trading venue in Europe.

*****MR: Check out Cboe’s press release here.

SGX cautions on market activity after jump in fourth-quarter profit
Anshuman Daga – Reuters
Singapore Exchange Ltd (SGX) (SGXL.SI) reported a rise of nearly 17% in net profit for the quarter ending in June, but cautioned that a recent surge in market activity amid the coronavirus pandemic could start easing.
SGX and other exchanges benefited from extreme market volatility that boosted the volumes of equities and derivatives trading this year, but which have since stabilised.

NYSE-owner ICE reports higher second-quarter earnings
John McCrank – Reuters
Intercontinental Exchange Inc (ICE.N), owner of the New York Stock Exchange, on Thursday reported a rise in second-quarter profits, helped by a jump in equities and options volumes as volatility remained high due to the coronavirus pandemic.
Net income attributable to the company rose to $523 million, or 95 cents per diluted share, in the quarter ended June 30, from $472 million, or 84 cents per diluted share, a year earlier.

CME Group Inc. Reports Second-Quarter 2020 Financial Results
CME Group (press release)
CME Group Inc. (NASDAQ: CME) today reported financial results for the second quarter of 2020. The company reported revenue of $1.2 billion and operating income of $638 million for the second quarter of 2020. Net income was $503 million and diluted earnings per share were $1.40. On an adjusted basis, net income was $583 million and diluted earnings per share were $1.63. Financial results presented on an adjusted basis for the second quarter of 2020 and 2019 exclude certain items, which are detailed in the reconciliation of non-GAAP results.1

MIAX Exchange Group – Options Markets – Series in GLD Made Non-Tradeable
MIAX Exchange Group
The following series in SPDR Gold Shares (GLD) have been made non-tradeable on the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchanges effective for today, Wednesday, July 29, 2020:

MIAX Exchange Group – Options Markets – Intra-day Series Adds in KODK
MIAX Exchange Group
The attached series in Eastman Kodak Company (KODK) were added to the MIAX Options Exchange, MIAX PEARL Options Exchange and MIAX Emerald Options Exchange effective today, Wednesday, July 29, 2020.


Openmarkets Weekly: Know Your Options Language
Jack Bouroudjian – OpenMarkets
Options trading was once the domain of the institutions, but with the introduction of the Micro E-mini contracts set to launch in August, active traders can finally incorporate all the benefits of the options marketplace into any trading strategy. Over the next couple of weeks, we’re going to take a closer look at this market. Today, we’ll focus on the language and terminology of options.

(Podcast) OBC 97: Your Q’s About Assignment Risk, First Options Trades and More
Options Boot Camp – Options Insider Network


Q2 2020 trends in futures and options trading
5 August 2020 • 10:00 AM – 11:00 AM ET • Webinar
Global futures and options trading grew by 32% to record-setting 21.9 billion contracts in the first half of 2020 compared to 2019, according to figures released by FIA. In the second quarter, the total number of traded contracts was 10.46 billion, down 8.4% from the record-breaking 11.41 billion contracts traded in Q1 2020, but up 21.8% from the second quarter of 2019. In fact, the second quarter volume was higher than any other quarter in the history of the industry aside from the first quarter of 2020.

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