Observations & Insight
MarketsWiki Education World of Opportunity Top Videos
1. Donald Wilson, DRW Trading Group – Reminiscences (and Prognostications) of a Futures Operator
2. Blair Hull – Getting the Edge: Blackjack and the S&P 500
3. Haim Bodek, Decimus Capital Markets – A Flash Course on Market Structure
4. Peter Borish, The Quad Group – Trading Traps: Too Many to Count
5. Ray Cahnman, chairman, Transmarket Group – Me, Us & You: How Trading Works
***** According to the number of plays on Youtube, here are the top videos from the MarketsWiki Education series through the years. The top videos were all big name traders, interestingly enough. The Blair Hull video was shot at a STAC conference, not the series, but was meant to be part of the same genre. Don’t forget to sign up your interns or newer employees for the New York or Chicago events coming up the next two weeks. Sign up HERE
Now Fed Officials Are Starting to Wonder If the VIX Is Too Low
Oliver Renick – Bloomberg
Minutes to June 13-14 meeting showed concern on low volatlity; Yellen and others have said traditional valuation metrics high
Wondering why three Federal Reserve officials were moved last week to make public pronouncements about rising asset prices? Evidently, it’s the potential for “buildup of risk to financial stability.”
Don’t Be Afraid of the Market’s Fearlessness
John Kimelman – Barron’s
Contrarian investors are inclined to see the bad news in good news and vice versa.
So it’s only natural for many investors to see potential doom lurking behind the door in a market that has remained buoyant while showing little signs of volatility or fear.
Brent bulls and bears play options tug-of-war
Reuters via Times of India
The Brent crude oil options market is showing a definite split between the optimists and the pessimists this week, but it would seem the bulls are starting to gain the upper hand.
Investors smell risk of strong yen following Tokyo election
Kosuke Takami – Nikkei Asian Review
Currency traders are hedging against a potential rise in the yen via options contracts, seeing there is now a higher chance of the Bank of Japan changing monetary policy, with the reappointment of Gov. Haruhiko Kuroda becoming less certain after the Tokyo assembly election.
BoA Asks: Are We On The Edge Of Market Euphoria?
On the same day that Goldman Sachs reported that traders are increasing their protection against volatility, and the VIX call/put ratio has spiked to one of the highest levels since the great financial crisis, Bank of America Merrill Lynch’s regular Sell Side Indicator report proudly proclaimed that “the bulls are back” as its sell-side indicator — a measure of Wall Street’s bullishness on stocks – rose by 2.4 percentage points to 56.4 its highest level since 2011.
US Utilities Were More Volatile than Broader Markets
Utility stocks are often called “widow” and “orphan” stocks due to their smooth stock movements and stable dividends. Due to their relatively stable and predictable earnings, utilities become comparatively safe investment options. However, it should be noted that utility stocks have been more volatile so far this year compared to broader markets.
Exchanges and Clearing
Euronext announces volumes for June 2017
Euronext, the leading pan-European exchange in the Eurozone, today announced trading volumes for June 2017.
****SD: The key here – “These figures include a total of 5.6 million equity and index option contracts?, resulting from the planned non-recurring migration of open interest from TOM to Euronext, which took place at marginal rates due to the exceptional circumstances of the TOM closure.”
ICE’s June Volumes Set Multi-Year Highs, FX & Equities Surge
Jeff Patterson – Finance Magnates
Intercontinental Exchange (NYSE: ICE), a global network of exchanges and clearing houses, has disclosed its aggregated trading volumes for June 2017. Despite a slow trading month, ICE managed to set a three-year high in futures volumes – FX and equities also registered an outperformance during the month.
****SD: Total futures and options volumes up to 7 million contracts in June from 5.5 million in May. The growth was almost exclusively in short term interest rate contracts – 1.5 million contracts traded in May to 2.7 million in June.
CCP study raises concentration concerns
Helen Bartholomew – Reuters
Revised guidelines for the resilience, recovery and resolution of central counterparty clearinghouses were issued today by a group of regulatory committees as part of an effort to plug gaps in rules aimed at avoiding taxpayer bailouts of the systemically important firms.
****SD: Also from Reuters – Clearing houses get ultimatum to fix serious ‘shortcomings’
5 Questions with Massimo Giorgini of Borsa Italiana’s IDEM Market
Brian Mehta – Trading Technologies’ Blog
DEM, the Italian Derivatives Market of Borsa Italiana and part of London Stock Exchange Group, was one of the fastest growing equity derivatives markets last year in Europe, trading nearly 49 million lots. This performance was led by FTSE MIB futures and FTSE MIB options, with both experiencing double-digit growth in 2016.
****SD: JLN spoke with the LSE’s head of derivatives, Nicolas Bertrand, about Borsa Italiana at IDX this year. Check out that video here.
Midclear teams with GMEX for Lebanese CCP
Helen Bartholomew – Reuters
The first derivatives central counterparty clearinghouse in Lebanon is under development, paving the way for exchange-traded futures and options and over-the-counter swap products that could play a vital role in the country’s wider capital markets development.
Regulation & Enforcement
Markets break out in Mifid II sweat as new rules loom
Philip Stafford – Financial Times
“The interest in this outside the EU is phenomenal,” says James Roberts, director of European public policy at ISDA, the derivatives trade association. “Some people are just waking up to it.”
****SD: A cold sweat.
Billionaire Louis Bacon’s Charitable Foundation Sues PJT Partners Over The Andrew Caspersen Fraud
Nathan Vardi – Forbes
Hedge fund billionaire Louis Bacon’s charitable foundation has sued Paul J. Taubman’s investment bank for fraud, claiming PJT Partners “bears responsibility for the foundation’s enormous loss” stemming from the Ponzi-like scheme of Andrew Caspersen.
While he was the privileged member of a prominent Wall Street family who was successful at his job, Caspersen has portrayed himself as a gambling addict, which caused him to conjure fake Wall Street deals to obtain funds to feed his personal and ultimately disastrous options trading. Caspersen pleaded guilty last year to defrauding investors of $38 million and is currently serving a four-year jail sentence.
Commodity investors embrace algorithmic trading; Digitisation of sector levels the information playing field
Emiko Terazono – FT
As computer models and algorithmic programmes exert a greater influence on commodities prices, traders are trying to get to grips with the digital forces that are changing how raw materials are bought and sold.
Fast internet likely to keep trading in London after Brexit: ECB
Access to ultra-fast internet cables in London is likely to make financial firms reluctant to move out of London even after Britain leaves the European Union, a study by the European Central Bank has found.
****SD: Also see EU hopes to win London’s euro trading sunk by undersea cables
How to Avoid Market Data Mayhem
Jay Patani, ITRS – TABB Forum
On Monday evening, in a bizarre turn of events, Apple’s, Google’s and Microsoft’s stock all appeared to be trading at $123.47. The actual prices of the stocks, listed on the Nasdaq stock exchange, remained unaffected and no trades could be made at this price. But this kind of incident is a red flag moment, reminding us how connected different systems are in the financial world and signaling that market data processes are not being adequately monitored. Though not the sexiest part of trading, adequate monitoring and analytics on market data can optimize clients’ execution performance and prevent embarrassing mistakes.
How to Tame Volatility? Nix VIX and Buy CBOE
Steven M. Sears – Barron’s
You must make a friend of volatility. If you don’t, volatility is truly something to fear.
Stock Option Strategies for Earnings Season
Scott Connor – The Ticker Tape
Earnings season is one of those times when stocks can see larger than normal moves. You also might see that the implied volatility has risen to unusually high levels in the days or weeks heading up to the earnings release. That’s because the earnings report is seen as the company’s bill of health, and the information in the release can have a significant effect on share prices.
Summer Calm In June
Michael Loewengart – Seeking Alpha
Summertime? Time to sit back and unwind—that’s the philosophy the markets seemed to take in June. That said, below the surface there were some significant pockets of activity that investors are paying attention to as summer heats up.
Wall Street is boldly ignoring stock market history
Joe Ciolli – Business Insider
If Wall Street strategists are to be believed, the US stock market has already peaked for the year.
What Smart Beta Isn’t
Richard Redding – Financial Advisor
Still trying to define smart beta? Rest assured that you are in good company, as many investment managers may not realize they have run a smart beta fund for years—until they were informed by a marketing person! Perhaps that is why investors find the term “smart beta” to be confusing, misleading or even meaningless, which is compounded by the interchangeable use of the term “strategic beta” by many investment professionals.
A new survey shows a lot of young Wall Streeters want out
Frank Chaparro – Business Insider
This chart should concern Wall Street.
A survey of 300 finance professionals with six to 10 years of post-MBA experience by the Toigo Foundation and Russell Reynolds Associates, a New York-based executive-search firm, found 50% of finance employees want to leave their job in the next one to three years. And 20% are considering leaving finance all together.
****SD: I’m surprised this wasn’t titled “Millennials Set to Kill Future of Wall Street.”
Active stock pickers having best year of the bull market
Jeff Cox – CNBC
Active managers, after years of suffering through a low-volatility stock market that has made their lives miserable, are finally showing signs of life.
The first half of 2017 saw 54 percent of large-cap managers beat their benchmarks. That number may not sound remarkable on its face but is actually the first time a majority achieved the feat in the first half since 2009, when Bank of America Merrill Lynch first started tracking the performance. Sixty percent beat in the second quarter, the best since the first quarter of 2009.