Observations & Insight
#TradeTalks: How OCC Strengthened its Resiliency to Prepare for #COVID19
Options Clearing Corp clearing record volumes with over 98% of its employees working remotely. Chief Operating Officer Scot Warren joins Jill Malandrino on Nasdaq #TradeTalks to discuss how OCC strengthened its resiliency to prepare for #COVID19.
Will quadruple witching mark the start of a rocky stretch for U.S. stocks? It may already have
Mark DeCambre – MarketWatch
Quadruple witching, a pandemic, a recession, and a stock market that is looking for reasons to add to an epic recovery from the impact of the coronavirus. Could those factors make for a volatile cocktail for the stock market in coming days and weeks?
Quadruple witching, occurs on the third Friday of the month of every quarter, in March, June, September, and December, and refers to the simultaneous expiration of single-stock options, single-stock futures, and stock-index options and stock-futures.
Wall Street Rewrites Market Playbooks for Pandemic’s Second Wave
Ruth Carson and Abhishek Vishnoi – Bloomberg
As the world braces for a second wave of infections from the coronavirus, stocks are priced for a booming global economy, bonds point to a protracted downturn and currency volatility is rising.
Investors are increasingly uneasy with these conflicting signals among asset classes, but they are also resigned to them, and have adjusted their playbooks accordingly.
The fall of currencies under the spell of stocks worries strategists
Eva Szalay – Financial Times
Currency analysts are lamenting an avalanche of cheap money from the US Federal Reserve, which they say has created bizarre conditions in which exchange rates track stocks rather than economic fundamentals.
For decades, strategists have analysed exchange rates on the basis of the outlook for growth and interest rates in the countries concerned. Generally, the better the prospects, the better the currency can be expected to perform.
Exchanges and Clearing
Product Modification Summary: Amendments to the Options on the South African Rand/US Dollar (ZAR/USD) Futures and the Options on the Russian Ruble/US Dollar (RUB/USD) Futures Contracts – Effective July 13, 2020
Amendments to the Options on the South African Rand/US Dollar (ZAR/USD) Futures and the Options on the Russian Ruble/US Dollar (RUB/USD) Futures Contracts.
Position Limits and Large Trader Reporting Requirements in Connection with the Initial Listing of KC HRW Wheat-Wheat Intercommodity Spread Options Contract
In connection with the listing of the Board of Trade of the City of Chicago, Inc.’s (“CBOT” or “Exchange”) KC HRW Wheat-Wheat Intercommodity Spread Options contract (the “Contract”) on trade date Monday, June 22, 2020 (see SER-8605 dated June 2, 2020), please note below and in Exhibit B of CBOT Submission No. 20-213 the corresponding aggregation allocations (Rule 559.D.), single month and all month position limits (Rule 559), and reportable level (Rule 561) for the new contract.
Singapore exchange suffers run of delistings
Hudson Lockett and Mercedes Ruehl – Financial Times
Singapore’s stock exchange is on course for another dismal year of delistings as scarce liquidity and governance scandals undermine its efforts to compete with regional rival Hong Kong.
Nine companies have dropped off the Singapore Exchange this year, or are in the process of doing so, according to Dealogic data, while just five companies have listed, putting this on track to be the second year in a row when more businesses have left the market than joined.
CME’s McCourt Says Size Makes New Micro-E-Mini Options Attractive
John D’Antona Jr. – Traders Magazine
In this case, bigger is not necessarily better. The Chicago Mercantile Exchange is now offering hedge funds, buysiders and active traders a new option, no pun intended, to trade with. The exchange will officially begin offering new options on Micro E-mini S&P 500 and Micro E-mini Nasdaq-100 Futures contracts, according to Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products, discussing the contract in a conversation with Traders Magazine’s Editor John D’Antona Jr.
Regulation & Enforcement
Federal Court Orders Alabama Man to Pay $755,000 for Binary Options Fraud
The Commodity Futures Trading Commission today announced that the U.S. District Court for the Northern District of Alabama issued an order granting a permanent injunction against Aaron B. Butler, a former resident of Muscle Shoals, Alabama, and requiring him to pay a combined $755,000 in restitution and civil monetary penalty for violations of the Commodity Exchange Act and CFTC regulations. The order also imposes permanent trading and registration bans on Butler, among other injunctive relief.
Federal Court imposes $1.8m penalty on One Tech Media Ltd and permanently bans Eustace Senese from managing corporations and carrying on financial services businesses
On 17 June 2020, Justice Davies of the Federal Court of Australia delivered judgment regarding pecuniary penalties, disqualification orders and injunctions in a binary options case ASIC brought against One Tech Media Ltd (OTML), Allianz Metro Pty Ltd (Allianz Metro), Eustace Senese and Yoav Ida.
Flash Boys’ New U.S. Rules Will Let Them Keep Trading Secrets
Benjamin Bain – Bloomberg
U.S. derivatives regulators are preparing to issue a new plan to regulate high-frequency trading after much-tougher Obama-era proposals were killed amid widespread industry opposition.
Rules to be proposed by the Commodity Futures Trading Commission will lay out a set of principles that exchanges must adopt in overseeing markets where computer-driven trading occurs at lightning-fast speeds, according to four people with direct knowledge of the matter. In a major change from earlier plans, the CFTC is dropping a controversial provision that would’ve made it easier for the agency to obtain traders’ computer code.
A proposal to delay the protocol “Ouch to Trade Options” or “OTTO” on The Nasdaq Options Market LLC.
Proposal to Amend SPY Position Limits
NYSE ARCA, INC. LETTER OF ACCEPTANCE, WAIVER, AND CONSENT NO. 2019-08-00125
On July 18, 2018, Goldman Sachs & Co. LLC (“GSCO” or the “Firm”) violated NYSE Arca Rule 6.49-O(b) by effecting equity transactions after gaining knowledge of undisclosed terms and conditions of a customer order in the same options series (“Anticipatory Hedging”). Consent to a censure and a $30,000 fine.
NYSE ARCA, INC. LETTER OF ACCEPTANCE, WAIVER, AND CONSENT Nos. 2018-07-00036; 2018-11-00038; 2019-09-00122
During the period between April 1, 2018 and July 1, 2019 (the “Relevant Period”), X-Change Financial Access, LLC violated: (i) NYSE Arca Rules 6.75-0 and 6.94-0 by improperly effecting six transactions in option series at prices that were inferior to the National Best Bid and Offer (“NBBO”) and (ii) NYSE Arca Rule 6.46-0 by failing to use due diligence to execute two options orders at the best prices available. Consent to a censure and a $12,500 fine.
Options Trading: Understanding Put-Call Parity
Steve Smith – Stock News
If I had a nickel for every time someone told me they love covered calls for their conservative income generation but would never sell a naked put because that’s too risky, I could retire from trading. The fact is a covered call is exactly the same, in terms of both risk and reward, of selling a naked put. They are what is called equivalent positions. There is a relationship between calls, puts, and the underlying stock. Because of that relationship, there is more than one way to build any option position, and that translates into positions with identical profit/loss profiles, even though the positions look very different.
Pandemic Could Erase More Global Wealth Than Financial Crisis
Marion Halftermeyer – Bloomberg
The rich are still getting richer, but the coronavirus crisis may slow the breakneck pace of wealth accumulation for years to come.
Volatile markets and the economic fallout from the virus could wipe out as much as $16 trillion of global wealth this year and hinder growth for the next five years, according to a study by Boston Consulting Group. By comparison, the 2008 financial crisis erased $10 trillion.
‘Cooped-up’ millennial traders have sparked a new pandemic — it won’t end well, warns Princeton economist
Shawn Langlois – MarketWatch
That’s Burton G. Malkiel, Princeton economist and Wealthfront’s Chief Investment Officer, sharing his thoughts Wednesday on what he describes as “the day-trading pandemic.”
Malkiel, who wrote the widely read investment book, “A Random Walk Down Wall Street,” blamed a sudden surge of inexperienced traders on the new reality facing the younger generation.
Here are the best and worst stocks during the first 100 days of the coronavirus pandemic
Philip van Doorn – MarketWatch
Since the World Health Organization declared COVID-19 a pandemic March 11, the U.S. has suffered more than 100,000 deaths from the deadly virus, the economy was shuttered and then slowly reopened, and the investing markets produced record volatility.
U.S. stocks hit their peak the previous month, with the Dow Jones Industrial Average registering an all-time closing high Feb. 12, and the S&P 500 Index and Nasdaq Composite Index following suit Feb. 19.