2016 Another Year of Positive Momentum for OCC
Craig Donohue, OCC Executive Chairman and CEO
In 2016, OCC’s evolution from a clearing and settlement utility to becoming a systemically important market influencer was highlighted by our company being recognized with two Clearinghouse of the Year Awards; from Global Investor/ISF and Futures and Options World. These awards underscore the hard work and dedication of OCC’s entire team to ensuring confidence in the financial markets and the broader economy.
****SD: Personnel changes alone made it a huge year for OCC. They have a Dallas office coming soon too.
VIX ETPs Flash Some Green in 2016
Vix and More
Last year I shocked quite a few investors and media outlets with the publication of Every Single VIX ETP (Long and Short) Lost Money in 2015. My intent was not to tar and feather the VIX exchange-traded products landscape, but to highlight the fact that in an environment characterized by sharp VIX spikes and other volatility extremes, the power of volatility compounding price decay can overwhelm both long and inverse ETPs.
China’s Epic Short Squeeze Is Back as Yuan Rally Crushes Bears
Surge in yuan, offshore borrowing costs echoes January 2016; Bearish option bets sink as traders cut odds on 7 per dollar
For yuan bears, it’s the worst kind of deja vu. As China’s currency posts a record two-day rally offshore and skyrocketing interbank rates make short positions prohibitively expensive, memories of an epic squeeze last January are rushing back to bearish traders. The abrupt market reversal almost exactly a year ago marked the beginning of a nearly 5 percent rally that lasted two months.
MiFID II’s algo plans come under fire
Sarfraz Thind – The Trade
The regulatory focus on algorithmic trading has never been greater. It is likely to get much more intense with the advent of MiFID II in 2018, which brings with it a raft of obligations for trading firms—in particular for high frequency traders (HFT)—who use algorithms as part of their operations. It is a change not welcomed by the industry.
Tastytrade Team Plans to Disrupt Industry With New Tastyworks Offering
Jessica Titlebaum Darmoni – The Title Connection
As one of my New Year’s Resolutions for 2017 is to take a more hands on approach to investing, I wanted to learn more about tastyworks, an online brokerage platform from the team that brought us tastytrade and thinkorswim. After reading about the new venture, I had a phone call with co-CEO and President of tastytrade, Kristi Ross, to talk about what drove them to expand their offering, how the pool of active investors is growing and why their offering will disrupt the retail investment space.
****SD: I’m going to check out their layout today. At the risk of sounding like Donald Trump, stay tuned!
Office Of The Comptroller Of The Currency Reports Bank Trading Revenue Fell In The Third Quarter 2016
Trading revenue of U.S. commercial banks and savings associations fell to $6.4 billion in the third quarter of 2016 from $7 billion in the previous quarter, the Office of the Comptroller of the Currency (OCC) reported in its Quarterly Report on Bank Trading and Derivatives Activities.
****SD: Fun fact – “While four banks held nearly 90 percent of the notional amount of derivatives, 1,438 U.S. commercial banks and savings associations held derivatives in the third quarter of 2016.” And on a very related note, this story from The Trade – Investment banks will continue to curb trading amid falling profits.
Cramer decodes the mystery of why the market’s fear gauge suddenly spiked last week
Abigail Stevenson – CNBC
Cramer decodes the mystery of why the market’s fear gauge suddenly spiked last week 18 Hours Ago | 07:54 Given the incredible run that the stock market has had since the election, Jim Cramer thinks it is time to find out if there are any warning signs that the market should be taking more seriously.
****SD: Lol. By “Cramer decodes….” CNBC means “Mad Money” had Mark Sebastian on as a guest and he offered his thoughts.
Make Small Caps Great Again – Tick Size Pilot Update
Eric Noll, Convergex – TabbForum
Early results of the Tick Size Pilot, the most notable change to U.S. equity market structure in a decade, show that the basics of the program are working as anticipated. But the possibility that Test Group 3 stocks are more subject to information leakage generated by large institutional orders than the control group or Groups 1 and 2 may be driving up transaction costs.
****SD: Trickle down (up?) effects for options from the underlyings.
9 Rules for Writing Client Alerts That People Will Actually Read
General counsel read and appreciate timely client alerts. “I read virtually everything that somehow crosses my desk or any of my devices,” says Olga Mack, general counsel of ClearSlide. “After all, the written word to a lawyer is like free food to a college student – I just can’t get enough of it even when it is poor quality.” And there’s the problem: a poor-quality alert is more dangerous to a firm’s reputation than no alert at all.
****SD: This is written for lawyerly types, but the tips cross professional borders.
Bank of NY Mellon’s Pershing stretched by trading surge
Tony Boyd – Australian Financial Review
A Trump-driven surge in share trading on the Australian securities exchange is good news for brokers and online share trading platforms but it will exacerbate the systems problems being experienced by the country’s largest third-party clearing and settlement firm, Pershing Securities.
****SD: ADV for futures and options on ASX in Dec was up 24 percent compared to Dec 2015.
Clearpool Weighs In on NYSE Access Fees
Say it ain’t so, New York Stock Exchange. Joe Wald, chief executive officer at agency broker Clearpool, is saying no to proposed changes in access and connectivity fees that the NYSE Group family of exchanges is looking to charge. These fees, he argues in a comment letter to the U.S. Securities and Exchange Commission, are already costly and allowing for higher charges can only hurt brokers, and ultimately, investors.
CBOE Holdings Reports Trading Volume for December and Full Year 2016
Several trading records were set for the year. Total volume and average daily volume (ADV) in index options trading at CBOE reached new all-time highs for the fourth consecutive year in 2016 with 430.7 million and 1.7 million contracts, respectively, each up 6 percent from 2015. Total volume and ADV in S&P 500 Index (SPX) options trading at CBOE reached new all-time highs for the fourth consecutive year in 2016 with 258 million and 1 million contracts, respectively, each up 9 percent from 2015.
Intercontinental Exchange Reports Record Daily Volume in 2016; ICE ADV +8% Y/Y
20th Consecutive Year of Record Volume in ICE Brent Crude, ADV +15% y/y in 2016; ICE 4Q16 ADV +10% y/y, Driven by Commodities +11% y/y, Rates +9% y/y & Equity Index +7% y/y
Tokyo Commodity Exchange: Message From The President & CEO
Japan’s economy saw some positive turns in 2016. The Bank of Japan’s negative interest policy and increased public spending led to positive growth in real GDP. Towards the end of the year, stock prices rose and the yen weakened against dollar – the “Trump effect”- supported expectations for improved corporate sector performance. Commodity markets experienced quiet stretches in summer into autumn, but saw increased activity after the Brexit vote in June and the U.S. presidential election in November. TOCOM volume increased significantly compared to the prior year.
Regulation & Enforcement
Less than half of US buy-side expect direct impact from MiFID II
Hayley McDowell – The Trade
A survey of asset managers based in North America has found just 43% expect European regulation MiFID II to have a direct impact on them.
Giancarlo Said to Be Trump’s Leading Choice for CFTC Chair
Benjamin Bain, Jennifer Jacobs and Robert Schmidt – Bloomberg
J. Christopher Giancarlo, a member of the Commodity Futures Trading Commission with close ties to the derivatives industry, is President-elect Donald Trump’s top choice to head the U.S.’s main swaps regulator, a person familiar with the matter said.
Trump’s SEC pick Clayton points to capital formation, not enforcement
Sarah Lynch – Reuters
With his selection of deal-making attorney Walter “Jay” Clayton to head the U.S. Securities and Exchange Commission, President-elect Donald Trump is signaling that the agency will try to reduce regulations that critics see as burdensome or hindering corporate growth.
Window Open For UK Firms Seeking Derivatives Rules Exemption
U.K. banks and investment firms can now apply for intragroup exemptions under the European Union’s rulebook for the derivatives market, Britain’s financial watchdog confirmed Wednesday.
Ex-Barclays trader pleads guilty in U.S. in forex probe
Nate Raymond – Reuters
A former Barclays Plc (BARC.L) trader pleaded guilty on Wednesday to U.S. charges arising from a global investigation into the manipulation of foreign-exchange prices at major banks, the U.S. Department of Justice said.
Market Scramble: Hedging against black swans amid a bull run
Noriyuki Doi – Nikkei Asian Review
The stock market here kicked off the new year with a bang Wednesday, topping every trading session in 2016. But considerable risks lie ahead in 2017, one of the greatest being the fickle nature of international investors.
DIY Guide to Technical Analysis: Chart Basics
Ryan Campbell, Investools – The Ticker Tape
Investors use a variety of methods to identify and evaluate investing opportunities. Two of the most common are technical analysis and fundamental analysis. To better understand technical analysis, it’s a good idea to define both. This way you know what it is and what it’s not.