U.S. investors brace for mounting political risks as they decode Trump
David Randall and Jennifer Ablan – Reuters
Barry James built up his $4 billion mutual fund largely by studying balance sheets, earnings and market share. In the last few weeks, however, he has realized that he must look at a new force in the market: U.S. President Donald Trump.
****SD: Out of everybody, I bet Nick Cage and Tom Hanks could figure out how to decipher the code of Trump.
Volatility Traders Shed VIX Positions as Markets Are Eerily Calm
Carolina Wilson – Bloomberg
Assets in largest volatility note VXX down 16% this year; ProShares VIX-tracking ETF lost 94% of its value in 2016
With the financial markets strangely quiet, investors in volatility are finally getting fed up with losses and abandoning their positions.
****SD: Well, VIX is up today. To 11.63 as of this writing. Ugh.
The Volatility Limbo: How Low Can VIX Go?
Peter Tchir – Forbes
Spot VIX has traded in a relatively narrow range since early December, but VIX related ETNs and ETFs like VXX, UVXY and TVIX have been decimated.
US high-frequency traders set to make call on London
Philip Stafford -Financial Times
US high-frequency trading companies are weighing whether to give up on London as a means to continue accessing exchanges in Europe when regulations come in that will require them to register in the EU. HFTs based in the US have been able to trade in Europe under an exemption that will come to an end with the introduction of Mifid II. To keep that access some companies decided to register in London, but that was before the referendum on EU membership in June threatened to rob London of its status as a trading gateway to the rest of Europe.
Wall Street hits record on Trump’s tax comments, strong data
Yashaswini Swamynathan – Reuters
Wall Street’s record-setting run entered its fifth day on Wednesday, as President Donald Trump repeated his promise of tax cuts and on upbeat economic data that increased the odds of a rate hike and lifted bank stocks.
The Challenges of Changing a Company’s Risk Culture
Ben DiPietro – WSJ
John Fennell, executive vice president and chief risk officer at the Options Clearing Corp., an equity derivatives clearing firm, discusses his efforts to renovate the company’s risk culture and install a culture based on the mantra of “identify, escalate, and then debate.” Why did OCC’s risk culture need to be changed?
Exchanges and Clearing
Euronext to pursue alternatives if LCH deal falls through
Noor Zainab Hussain and Huw Jones – Reuters
Pan-European exchange Euronext may still buy a clearing house for derivatives if its planned purchase of LCH SA, which it uses, from London Stock Exchange falls through.
Euronext publishes 2016 full-year results
Today Euronext announced its results for the full year 2016.
****SD: The Trade has more – Euronext reveals ambitious 2017 expansion plans as revenues slip in 2016
Korea Exchange to Accelerate Growth of Derivatives Market
Jung Suk-yee – BusinessKorea
The Derivatives Market Division of the Korea Exchange (KRX) announced its business plan for this year on February 14 at its press conference held in Seoul.
Intercontinental Exchange Announces Agreement To Acquire TMX Atrium From TMX Group
Intercontinental Exchange (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced it has entered an agreement to acquire TMX Atrium, a global extranet and wireless services business from TMX Group. Terms of the agreement were not disclosed, and the transaction is expected to close within 90 days, subject to regulatory approvals. The financial impact of the transaction will be immaterial and was included in ICE’s financial guidance for 2017.
CME Group Inc. Names Slate of Director Nominees
CME Group Inc. today announced its slate of candidates for its board of directors for election at the company’s annual meeting to be held Wednesday, May 24, 2017.
CBOE, C2 and CFE Trading Schedule for Presidents’ Day Holiday
CBOE Holdings, Inc. (NASDAQ: CBOE) announced the following trading schedule for Chicago Board Options Exchange (CBOE), C2 Options Exchange (C2) and CBOE Futures Exchange (CFE) in observance of the Presidents’ Day holiday, observed on February 20.
Regulation & Enforcement
Is the Maker-Taker Pilot DOA?
Ivy Schmerken, FlexTrade – TabbForum
Many buy-side traders see maker-taker rebates as fuel for high-frequency traders, and the SEC Equity Market Structure Advisory Committee has recommended moving forward with a pilot to understand how rebates and access fees influence order routing decisions. But under the Trump administration, the pilot could be dead before it starts.
CFTC Action Welcome, But More Needed
For some time now, we’ve been warning that many derivatives users wouldn’t meet a March 1 deadline to amend their credit support annex agreements (CSA) in order to comply with new variation margin requirements. Yesterday’s announcement of a six-month transition by the Commodity Futures Trading Commission (CFTC) is therefore very welcome. It leaves the March 1 start date intact, but allows firms to continue trading while they finish the substantial work needed to amend their documents.
64 year old binary options fraud victim details his experiences
Andrew Saks-McLeod – FinanceFeeds
The widespread damage that has been caused by the OTC binary options frauds that have punctuated the online e-commerce world over the past decade has attracted the attention of regulators, government officials and litigation specialists worldwide over the past year, resulting in national bans in several countries in a collaborative attempt to put a stop to its existence.
Bringing Sexy Back…to FIX
Drew Shields – Trading Technologies
By the time I entered capital markets more than a decade ago, FIX had already become mundane, boring. FIX is essential, but so are eating vegetables, drinking water and exercise. None of those are things I really want to do, and they certainly aren’t worth blogging about.
Fidessa to bolster post-trade in second quarter
Julie Aelbrecht – FOW
London-based tech vendor reported on Monday a 12% rise in revenue for the year
Tech firm Fidessa said it plans to extend in the coming months one of its fund management post-trade systems to cover listed derivatives instruments. London-based Fidessa said it is looking to launch a derivatives module for its post-trade affirmation management solution by the end of the second quarter of the year.
Options Traders Are Betting China’s Bank Rally Has More to Go
Moxy Ying and Livia Yap – Bloomberg
Chinese lenders have surged to their highest since 2015; Volume of ICBC call options hits highest since January 2011
Record financing data and earnings optimism are helping send shares of Chinese lenders soaring, with options traders paying up to position for further gains.
Sucker Bets: Volatility ETNs Keep Attracting Assets
Todd Shriber – Benzinga
Of life’s many fields of endeavor, financial markets are among the most fertile grounds for the flawed logic that the longer something behaves in a particular way, the more likely it is that the trend will reverse.
How Market Insiders Buy Stock at Discounts; Investors worried about being left behind by the market can get paid for waiting with this put-option strategy
Steven M. Sears – Barron’s
We are living in extraordinary times in the financial markets. Stock prices keep chugging higher, dancing around record territories. Yet many people feel the risks of a decline are rising due to political uncertainty here and abroad.
EQDerivatives: “VSTOXX French Election Risk Opens Risk Premia Trade”
Georgia Reynolds – Eurex
While uncertainty surrounding populist parties across Europe is creeping into equity markets, the Euro Stoxx 50 Volatility Index is only clearly reacting to French election risk, opening an opportunity for investors to extract risk premia around the event.
Citadel Appoints Virginie Saade to Newly Created Compliance Role
Jeff Patterson – Finance Magnates
Citadel, a US-based asset manager and market-making firm, has secured the services of Virginie Saade, who joins the group in a newly created role as its Director of Government and Regulatory Policy for Europe, Finance Magnates has learned.
VIX and Three Day Weekends
Russell Rhoads – CBOE Options Hub
Another three-day weekend is sneaking up on us. The result for those of us that have an unhealthy obsession with VIX is to talk about how a three-day weekend provides a headwind for VIX performance. It has been awhile since I looked at the impact of holiday weekends so I downloaded data and got to work.
Equity and bond volatility are different – A need for deeper thinking
Mark Rzepczynski – Harvest
A key issue with asset allocation and risk parity is the changes in volatility across asset classes. The foundation for risk parity is based on equal weighing of asset classes volatility as opposed to setting dollar weighting. Hence, knowing the relative differences in volatility and how they move through time is critical.
European Banking Exodus to Dublin Handicapped by Trader Shortage
Jeff Patterson – Finance Magnates
The growing talk of a banking exodus from the UK to Dublin is far from a foregone conclusion, as lenders face a very real likelihood of trader shortages in the Irish capital.
Why Data Nerds Struggle to Gain Power at Hedge Funds
Simone Foxman – Bloomberg
Scientists, fund managers have rocky marriage at hedge funds; BlueMountain quants have sought a bigger voice in investing
As hedge funds embrace the cool calculations of big data, they find themselves wrestling with something far more human — a struggle for power.