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US Options Volume Defies Moribund Volatility; Market fear indicator shows historic difference between Nasdaq 100 and S&P 500; U.S. shale firms more exposed to falling oil prices as hedges expire

Observations & Insight

Line-up for MarketsWiki Education Series in NY and Chicago
By John J. Lothian

We have set the line-ups of speakers for the MarketsWiki Education series in New York and Chicago. Here is the list of the speakers and the days they will be presenting.

On July 11 at Nasdaq’s Marketsite location we will have Gary Barnett (SEC), Larry Tabb (Tabb Group), Jennifer Nayar (Vela Trading Technologies), Thomas Ascher (formerly ISE), and Morgan Slade (Cloud Quant).

On July 11 at the second session at Nasdaq, we have Gregg Doud (Commodity Markets Council), Henry Schwartz (Trade Alert), Joe Gits (Social Media Analytics), Gerald Hanweck (Hanweck) and another speaker to be announced.

On July 12 at Reuters in Times Square we have Duncan Niederauer (formerly NYSE), Elaine Wah (IEX), Dennis Dutterer (retired), Trabue Bland (ICE) and a speaker from Reuters to be announced.

In Chicago on July 17 at the Stuart School of Business in Illinois Tech we have Tom Sexton (NFA), Tom Sosnoff (Tastytrade), Paul Georgy (Allendale), Dan Gramza (market educator), Rich Mackey (Rosenthal Global Securities) and a speaker from Illinois Tech.

On July 19, also at Illinois Tech, we have Richard Sandor (Envifi), Joe Guinan (Advantage), Amy Shelly (OCC), Bryan Durkin (CME Group), Terry Savage (Terry Savage Productions) and Jennifer Wilson (DRW).

At the second session on July 19, we have Mehmet Yanilmaz (Myra Trading, LLC), Julie Armstrong Menacho (CME Group), Keith Petersen (Barchart), and two speakers to be named.

Finally, on July 21 at Trading Technologies offices in Chicago we have John Damgard (FIA), Julie Lerner (Pan Exchange), Travis Schwab (Eventus), Leslie Sutphen (Financial Markets Consulting), Michael Patak (Topstep Trader) and a speaker to be named from Trading Technologies

Registration is open for all events, go to MarketsWikiEducation.com to register and see videos from prior events. You can register for the whole series in Chicago or New York or pick and choose individual sessions.

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FIA Europe’s Simon Puleston Jones Talks Brexit and MiFID II Readiness
JohnLothianNews.com

“Will [market participants] be ready for absolutely every part of MiFID II? I suspect, unfortunately, they just won’t be because of the sheer volume of regulations that have to be implemented.”

January 3, the implementation day for MiFID II, is 204 days away. Clouding the already messy process of preparing for such a gargantuan set of regulations is Brexit. Tossing more uncertainty on top of that: the surprising results of last week’s U.K. election which eroded Prime Minister Theresa May’s power base.

For market participants, this means an unknown future for London’s euro clearing business, though more information is expected today from the European Commission. In this video filmed at FIA’s IDX conference in London, Simon Puleston Jones, head of FIA Europe, talks about the possibilities for euro clearing, indirect clearing, direct electronic access and how MiFID II will impact U.S. firms.

Read the rest and watch the video »

Lead Stories

US Options Volume Defies Moribund Volatility
TABB Forum
Listed options volume totaled 366.5 million contracts in May 2017, an increase of 17.8% from May 2016’s total and an increase of 57 million contracts from April 2017. The significant increase in volume – not only compared to last month but also compared to the previous two months of May – was achieved despite prolonged moribund volatility.
jlne.ws/2skoZnH

****SD: Increase YoY and MoM? I guess we need an update on the phrase “volatility begets volume.”

Market fear indicator shows historic difference between Nasdaq 100 and S&P 500
Alex Rosenberg – CNBC
While it wouldn’t be surprising if the S&P 500 remained relatively calm through coming weeks, the Nasdaq 100 could see some more big moves.
The CBOE volatility index, which uses the prices of options on the S&P 500 to measure expected moves over the next 30 days, bounced off the 23-year low it hit on Friday, but is still at moderate levels. On the other hand, the CBOE Nasdaq 100 volatility index, which looks at the large-tech-centric index the same way that the VIX looks at the S&P, touched the highest level since November on Monday.
jlne.ws/2sjYNcJ

****SD: Funny how Bloomberg had a story last week (before the selloff) One Place Volatility Hasn’t Gone Home to Die Is the Nasdaq 100. Also see the Bloomberg story yesterday about the tech downturn potentially being caused by momentum and computer driven strategies Here’s What’s Probably Behind Friday’s Tech Slide.

U.S. shale firms more exposed to falling oil prices as hedges expire
Catherine Ngai and Swetha Gopinath – Reuters
Cash-strapped U.S. shale firms scaled back their hedging programs in the first quarter, leaving them more vulnerable to tumbling spot market prices just after OPEC reached a landmark deal to curb global supply.
The pullback in hedging was driven by rising service costs and expectations that prices would continue to rally after the Organization of the Petroleum Exporting Countries extended those cuts in May, analysts said.
jlne.ws/2skhlcE

Hedge funds remain cautious on oil
John Kemp – Reuters
Hedge funds remain cautious on the outlook for oil prices despite confident statements from Saudi Arabia that global oil inventories will decline substantially in the next few months.
Asset managers cut their combined net long position in the three main futures and options contracts linked to Brent and WTI by 39 million barrels in the week ending June 6 (tmsnrt.rs/2ske0ve).
jlne.ws/2sk54Ff

Bill Gross Warns All Financial Markets ‘Increasingly at Risk’
John Gittelsohn – Bloomberg
Investors should be wary as low interest rates, aging populations and global warming inhibit real economic growth and intensify headwinds facing financial markets, according to Bill Gross.
“Don’t be mesmerized by the blue skies,” Gross, manager of the Janus Henderson Global Unconstrained Bond Fund, wrote in an investment outlook released Tuesday. “All markets are increasingly at risk.”
jlne.ws/2sk2cbx

****SD: There’s plenty of these sorts of stories floating around (daily), for example: The S&P Could Fall Over 30% to 1600, Stockman Says. Definitely check out Ben Carlson’s blog about “gurus” and their (mostly useless) predictions, Bulls, Bears & Charlatans.

Exchanges and Clearing

CME’s Duffy Returns to Work After Collapsed Lung
Brian Louis – Bloomberg
CME Group Inc. Chief Executive Officer and Chairman Terry Duffy is back at work after recovering from a collapsed lung, according to the company, operator of the world’s largest futures exchange.
jlne.ws/2skLUis

Banks Contradict LSE CEO’s Brexit Warnings Over London Clearing
Will Hadfield – Bloomberg
CEO claims a 92% gain in costs, industry group says it’s 20%; Brexit has put LSE’s dominance of euro clearing into play
The chief of London Stock Exchange Group Plc has been making increasingly doom-laden warnings should Europe succeed in stripping London of its lucrative clearing industry. His own customers disagree.
jlne.ws/2skuWRk

Regulation & Enforcement

Wall Street’s self-regulator allows safe havens for tainted brokers
Benjamin Lesser and Elizabeth Dilts – Reuters
In three years of managing investments for North Dakota farmer Richard Haus, Long Island stock broker Mike McMahon and his colleagues charged their client $267,567 in fees and interest – while losing him $261,441 on the trades, Haus said.
McMahon and others at National Securities Corporation, for instance, bought or sold between 200 and 900 shares of Apple stock for Haus nine times in about a year – racking up $27,000 in fees, according to a 2015 complaint Haus filed with the Financial Industry Regulatory Authority (FINRA).
jlne.ws/2skc9FH

MiFID II: How Did We Get Here and What Does It Mean?
Andrew Gibbins – Trade Talk, Trading Technologies
MiFID II is a consequential and reactionary financial regulation born from MiFID I and the same G20 Pittsburgh meeting in 2009 that instigated the blueprints of its older siblings, Dodd-Frank, EMIR, REITS and, recently, the seemingly stalled Regulation Automated Trading (Reg AT), post the 2008 financial crash.
jlne.ws/2ti1hWq

Trump Administration Says Financial Watchdog Agency Should Be Defanged
Lan Rappeport and Matthew Goldstein – NY Times
The Trump administration called for the neutering of many of the central provisions of the Dodd-Frank Act as it offered its most detailed plans to date for the unraveling of the financial regulations put in place after the 2008 financial crisis.
jlne.ws/2skgpFa

****SD: Also see Reuters’ U.S. Treasury unveils financial reforms, critics attack

Technology

Thomson Reuters combines Eikon desktop with Symphony
Hayley McDowell – The Trade
Thomson Reuters has teamed up with investment bank-backed communications firm Symphony and integrated their respective messaging platforms.
jlne.ws/2skCsvN

Moves

Dash Financial Technologies On-Boards Industry Veteran, Robert Boylan
Jeff Patterson – Finance Magnates
Multi-asset trading technology provider, Dash Financial Technologies, has announced its latest hire, this time bringing in hedge fund veteran Robert Boylan, who will join the group as its newest Managing Director, Business Development.
jlne.ws/2skhgWq

****SD: Dash CEO Peter Maragos will be speaking at Trading Chicago, the FOW/JLN event coming up on June 28. You can register here.

People: OCC names new chief information officer
Risk.net
The Options Clearing Corporation (OCC) has hired David Hoag as chief information officer. He succeeds Luke Moranda, who moved into a new role of senior information technology adviser to John Davidson, OCC’s president and chief operating officer.

Hotspot, a foreign exchange-trading subsidiary of the Chicago Board Options Exchange (CBOE), has appointed Jon Weinberg as head of foreign exchange liquidity analysis.
jlne.ws/2sk9BYq

****SD: A recap of recent hires from around the industry in case you missed any of the action from past weeks/months.

Strategy

How to Play Alibaba’s Rising Stock Price; Its option-trading patterns suggest the Chinese web giant might be the Street’s newest momentum trade.
Steven M. Sears – Barron’s
Last June, Alibaba Group Holding’s founder, Jack Ma, complained to a Chinese-language newspaper that American investors did not understand his company. It turned out to be a great opportunity to buy the stock. At the time, it was trading around $76, and investors were struggling to understand the company’s operations. A lot has happened in the past year.
jlne.ws/2skmHol

****SD: BABA has had options traction for a while and it got a huge boost in interest after better-than-expected guidance last week. Check out this TradingFloor.com article – As Alibaba shares propel higher, options premium up too. Last Thursday, “According to Trade Alert LLC, 834,146 contracts traded … making it 571% above the average volume.”

Tech: Options traders still wary as sector recovers
Reuters via the Times of India
Options traders dial down fear, but still wary of more weakness in tech stocks as the sector recovers ground after its worst 2-day selloff in nearly a year
jlne.ws/2thP5F2

Miscellaneous

‘Vampire’ ETFs Are Causing Bank Stocks to Move in Lockstep
Dani Burger – Bloomberg
ETFs accounting for biggest proportion of financials trading; Underlyings more pricey to trade as single-stock volume falls
While the rest of the U.S. stock market celebrates its independence, liberated of lockstep moves and free to chart its own course, bank shares remain a bastion of groupthink.
jlne.ws/2sknPsd

****SD: So which is worse for markets, vampire ETFs or zombie ETFs?

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Graduate of University of Minnesota School of Journalism and Mass Communication