Observations & Insight
****SC: Cboe Europe Derivatives’s first-week volume tally (as of September 13) was 64 contracts, a Cboe spokesman confirmed. The most-traded futures contract during that period was 22 contracts on the Cboe NL25 Index (Cboe’s Netherlands index) with a September 17, 2021 expiry. The Amsterdam-based marketplace (CEDX) opened September 6 and offers futures and options based on Cboe Europe single-country and pan-European indices.
What Is OpEx? Third Week Options Expiration Is Shaking Up Markets
Yakob Petersei and Lu Wang – Bloomberg
Since January, U.S. stocks have lurched lower in the third week of most months. That happens to be in the run-up to the date on which most stock options expire, the third Friday of the month. While it’s not guaranteed to happen again, the turbulence around this event — known colloquially as OpEx, for options expiration — has become a source of fascination to many market observers, because it upends the traditional relationship between options and their underlying assets. What it suggests is that the stock market has effectively become a derivative of its own derivative — a tail wagging its dog.
Coinbase applies to offer trading in crypto derivatives and futures on the exchange
Camomile Shumba – Markets Insider
Coinbase, the largest publicly listed crypto exchange, said on Wednesday it plans to expand its product offering to include trading in futures and derivatives.
The company said in a tweet it had submitted an application with the National Futures Association (NFA), a US regulatory body that focuses on derivatives.
Hedge Funds Take Money and Run After Real’s World-Beating Rally
Vinicius Andrade – Bloomberg
Hedge funds are closing out winning bets on the Brazilian real after it surged more than any other major currency, bracing for headwinds as the nation faces slower economic growth and increasing political turmoil.
Kapitalo Investimentos, which oversees over 20 billion reais ($3.8 billion), said in a letter to clients that it unwound its long position in the currency, citing the conflict between President Jair Bolsonaro and the judiciary that’s adding to the country’s economic uncertainty. Data from Brazil’s exchange, B3, show that local funds’ derivative bets that the U.S. dollar will rise against the real have surged to $5.5 billion from nearly zero in early July.
Oil Slips With U.S. Offshore Supply Shut-Ins Ebbing, Dollar Rise
Alex Longley and Sheela Tobben – Bloomberg
Oil fell in New York alongside a broader commodity selloff that was party driven by a stronger dollar as investors weighed the impact mixed U.S. economic data will have on the Federal Reserve’s plan to taper stimulus.
West Texas Intermediate futures fell as much as 1.5%, after settling above $72 a barrel for the first time since July on Wednesday. Recovery in offshore U.S. production is progressing steadily and at this point some 30% of supply remains shut-in more than two weeks after Hurricane Ida. U.S. Retail sales unexpectedly increase in August, suggesting that demand for goods remains strong. A separate report showed weekly jobless claims increased.
Friday September 17 the end of an era, CME will delist its standard-size S&P 500 contracts
Eamonn Sheridan – ForexLive
Tomorrow will be the end of standard-size futures and options on futures contracts on the Standard and Poor’s 500 Stock Price Index. (“standard-size contracts”)
If I’m not wrong these began trading in 1982.
Once the September 2021 contracts expire on Friday September 17 the standard-size contracts will be delisted. The E-mini suite of futures and options on the S&P 500 Index will, of course, remain.
Interactive Brokers partners with Paxos to introduce crypto trading
Wesley Bray – The Trade
Interactive Brokers has become the latest firm to launch cryptocurrency trading through a partnership with blockchain infrastructure platform Paxos as institutional demand for the asset class increases.
Through the partnership with Paxos, clients will be able to trade and custody cryptocurrencies including Bitcoin, Ethereum, Litecoin and Bitcoin Cash alongside existing asset classes including stocks, options, futures, bonds, mutual funds and ETFs through a unified platform at the global brokerage firm.
Uncleared Margin Rules and equity derivatives – time to adjust strategies
Phases 5 and 6 of the Unclear Margin Rules (UMR) – to be implemented in September 2021 and September 2022, respectively – will be bring into scope many asset managers who, thus far, have not been subject to initial margin (IM) rules. What makes 2021 a big year is the scale of the impact – according to the ISDA roughly 1,000 Asset Managers will be in scope over the next 2 years! We spoke to Rachna Mathur, Head of Equity & Index Sales, Americas at Eurex about the inevitable impact that this will have on equity index derivatives.
CME Group SOFR Futures Open Interest Sets New Record, Surpasses One Million Contracts
CME Group, the world’s leading and most diverse derivatives marketplace, today announced that its SOFR futures contracts reached a new record, surpassing one million contracts of open interest on September 15.
SOFR futures open interest reached 1,004,882 contracts yesterday, marking its seventh-consecutive record open interest day:
Regulation & Enforcement
Federal Court Orders Florida Man to Pay $2.5 Million for Role in Fraudulent Binary Options Scheme
The Commodity Futures Trading Commission today announced that Judge Gregory A. Presnell of the U.S. District Court for the Middle District of Florida issued an order granting a permanent injunction against Ronald Montano, a resident of St. Cloud, Florida, and Montano Enterprises LLC (MEL), and requiring them to pay a combined $2.5 million in restitution and civil monetary penalty for solicitation fraud in connection with binary options trading…
UK crackdown on risky trading threatens meme-stock platforms ‘constantly tempting consumers’
Today UK News
The FCA is tightening its grip on high-risk investments in a move experts fear could hit trading platforms offering people on the street access to complex products.
The regulator put esoteric investments in its crosshairs in July. But on 15 September, it fleshed out its plan with a series of targets it wants to achieve that would indicate consumers are getting the right investments for them.
The most eye-catching pillar is the bold target to cut the number of consumers with high-risk investments who are vulnerable or have a low-risk tolerance in half by 2025.
Former Top Morgan Stanley FX Trader Leaves After Lengthy Probe
Donal Griffin and Felipe Marques – Bloomberg
A former senior Morgan Stanley trader, whose unit was embroiled in an internal probe into suspected mismarking and tens of millions of dollars of losses in 2019, has left after the investment bank disclosed allegations about his conduct.
Thiago Melzer, who oversaw trading in currency derivatives known as FX options, was “discharged” in June because of allegations concerning the valuing of certain trades and using communication methods not approved by the firm, according to a disclosure that Morgan Stanley made to the U.S. Financial Industry Regulatory Authority. The bank started an internal probe into suspected wrongdoing at the unit in late 2019, Bloomberg reported at the time.
The Stock Market Continues to Fall. How to Hedge Your Portfolio Now.
Steven M. Sears – Barron’s
The party is over. Or maybe not.
At any given moment, the world’s most sophisticated trading firms, including Citadel Securities and Susquehanna Investment Group, are paying good money for orders from brokerages that cater to individual investors.
As stock-market bulls keep pushing, watch for these technical levels
Lawrence G. McMillan – MarketWatch
The S&P 500 index has seen some selling this month after trading at a new all-time high on Sept. 2. The decline has been modest, and the bulls are trying to keep it that way. The major support at 4370 is still in place and hasn’t been tested since mid-August.
This week, the S&P SPX, -0.41% bottomed out near 4435, so that might be support, although it is really too soon to tell. If SPX drops below 4435, though, we would expect to see a retest of the 4370 support level.
How the ‘buy Yom Kippur sell Rosh Hashana’ trading theme is playing out in the stock market in 2021
Mark DeCambre – MarketWatch
It may be a quirk of seasonality or investing folklore. Either way, the investing strategy known unofficially as a “Sell Rosh Hashana, Buy Yom Kippur” often adheres to a common pattern, where markets slump in September, only to gain some traction higher in October, followed by a better seasonal trading period in November.
This year, Rosh Hashana, the Jewish New Year, began at sunset on Sept. 6 and ended at sunset on Sept. 8, while Yom Kippur, the day of atonement, begins at sunset Wednesday and concludes Thursday.
CME Group to Host 18th Annual University Trading Challenge
High-achieving college graduates are continuing to flock to Wall Street pursuing dream careers in finance. This year, investment banks and other financial firms received record numbers of applications for internships, leading prospective candidates to seek new ways to stand out.
Inspired by this strong interest, CME Group, the world’s leading and most diverse derivatives exchange, is offering an innovative opportunity for undergraduate and graduate students to shine: the 18th annual University Trading Challenge, which enables future professionals to try their hand at trading.
Joint trade association letter to EC on equivalence and recognition of UK CCPs
Nine industry associations (AFME, AIMA, EAPB, EBF, EFAMA, FIA, ICI, ISDA, SIFMA AMG) – representing the broadest group of market participants – have written to European Commissioner Mairead McGuinness, respectfully requesting that the European Commission (EC) extend the EC equivalence decision for UK CCPs.
BROS, BETZ and DNA: The Race to Claim a Good Ticker and Attract Investors
For newly public companies and funds, a cute or memorable ticker can be key to attracting buyers
Bailey Lipschultz and Claire Ballentine – Bloomberg Wealth
One of the most buzz-worthy tickers in biotech will make its return after a decade-long hiatus.
Ginkgo Bioworks Inc. is set to begin trading under the ticker DNA on Sept. 17 after completing a reverse merger with Soaring Eagle Acquisition Corp. That will mark the first time any company has traded under DNA since 2009, when Roche Holding AG bought Genentech Inc., one of the world’s first biotech firms and the original holder of the ticker.