Observations & Insight
Moon landing markets: A sea of tranquility
Spencer Doar – JLN
Who doesn’t like some context?
If you didn’t realize it, on this day 48 years ago, man first landed on the moon (if you believe that sort of thing). In July 1969, the S&P 500 was trading in the 90s. Like, nine zero. There was not an options exchange, let alone multiple ones. It was simply the backwoods put and call business involving newspaper ads.
Meanwhile, the S&P 500 and Nasdaq hit all time highs yesterday. If today’s flattish/kind of up action holds, the close will be another record, though only by a hair. We’re not that far from a 2,500 S&P print. All of this while the VIX is doing that weird “10 is the new 20” thing.
Crazy how time flies.
Volatility Plumbs Record Lows as Stock, Bond Rallies Accelerate
Garfield Clinton Reynolds – Bloomberg
MOVE gauge of Treasury volatility hits lowest since ’88 start; VIX closes below 10 for fifth day, S&P 500 at all-time high
Record highs for stocks are being met with record complacency across a range of assets.
****SD: While volatility is in there plumbing, give a good old roto-root too. Maybe there’s a sentiment clog somewhere.
U.S. stock options attractive as earnings reports roll in
Saqib Iqbal Ahmed – Reuters
The U.S. equity options market is pricing in uncharacteristically low stock market gyrations in the early days of second quarter corporate earnings reports, offering attractive opportunities for investors, market analysts said on Wednesday. On Wednesday, the CBOE Volatility Index, better known as the VIX and the most widely followed barometer of expected near-term stock market volatility, closed below 10 for the fifth straight day, the longest such streak since its inception.
****SD: More related to this theme in the ‘strategy” section.
Could Deep Learning Dethrone HFT?
Rob Daly – Markets Media
Deep learning just may be poised to shake investment strategies based on alpha capture to their knees, according to some experts. The machine learning sub-discipline is setting itself up to displace high-frequency trading which has dominated many of the electronically traded markets since approximately 2007.
****SD: Whatever the case, it’s sure better than superficial learning.
Volatility Owners are Having a No Good, Very Bad Year
Crystal Kim – Barron’s
Short-term VIX futures tracking exchange-traded funds flop again.
****SD: Well would you look at the shout out to Judith Viorst and her titular Alexander. (I never really liked his “horrible” day — thought he was a depressing petulant kid even when I was a depressing petulant kid.)
What Does the Buy-Side Need? Trading ‘Color’
Terry Flanagan – Traders
On the most fundamental level, buy-side asset managers rely on their sell-side brokers to preserve investment return via buying and selling securities as efficiently as possible.
The risk management revolution
New Zealand Herald
New Zealand has one of the world’s fastest growing global dairy-based derivatives markets, as Kathryn Jaggard explains.
Global dairy markets are undergoing a revolution, albeit one not heralded in the daily news or talked about over kitchen tables. This revolution is important – and yes, it involves futures and options.
****SD: This is fun one with a good deal of dairy finance history and context.
Draghi Says Officials ‘Aren’t There Yet’ as ECB Keeps Stimulus
Carolynn Look – Bloomberg
President says ‘we need to be persistent and patient’; ECB kept interest rates, forward guidance on QE unchanged
****SD: Where is the “there” they’re going to?
Exchanges and Clearing
Eurex Exchange’s Equity Index Highlights
Looking back over the past six months, two political events have shaped the narrative in Europe: the anticipated presidential election in France and the rather unexpected election in the UK. We witnessed a huge volume uplift in the VSTOXX Derivatives segment at the time of the French elections which saw the pro-euro and reformist candidate Macron prevail. This has created a positive tailwind in Europe due to the decrease in political uncertainty, which will add pressure on the ECB to reduce quantitative easing in the second half of 2017. We may experience market weakness as investors adapt to changes in the current accommodative central bank policy.
Wall Street Opens Its Wallet to Prep for Post-Volcker Era
Lisa Abramowicz – Bloomberg
Wall Street banks are beefing up their credit-trading and sales teams again after years of deep cuts ahead of what they hope will be a coming bonanza.
KCG electronic trading head Tusar exits firm as Virtu closes deal
John McCrank – Reuters
Greg Tusar, an electronic trading pioneer, confirmed that he left KCG Holdings Inc upon the closing of the firm’s $1.4 billion takeover by rival Virtu Financial Inc on Thursday. Tusar was head of electronic execution and platforms at KCG, responsible for sales, products and platforms globally. He joined KCG in 2013 after 13 years at Goldman Sachs, where he was partner and head of electronic equities trading.
Credit Agricole hires Soper as FX options head
Eva Szalay – FX Week
Andrew Soper takes up the post, following Steve Rendon’s exit in April
Regulation & Enforcement
Hester Peirce again gets nod for SEC post
Mark S. Nelson, J.D. – Jim Hamilton’s World of Securities Regulation
President Trump has nominated Hester Peirce to be an SEC commissioner. This will be the second time Peirce has received a presidential nod to join the Commission, the first having been under the Obama administration. Trump formally sent Peirce’s nomination to the Senate today, along with numerous others, including additional judicial nominees. Trump had previously announced his plans to nominate Peirce.
Big HFT warns against late change to EU trading rules
Samuel Agini – Financial News
One of the world’s best-known high-frequency trading firms has told European authorities it is too late to start making changes to Europe’s incoming securities rulebook — which has already been beset by delays.
FIA comments on EMIR Review part 1 REFIT proposals
On 18 July, FIA submitted a response to the European Market Infrastructure Regulation (EMIR) Part 1 (REFIT proposals). Many of the European Commission’s (Commission) proposed measures reflect FIA’s previous comments.
Sebi wants to know if individual investors are fit to trade derivatives
Mobis Philipose – Livemint
Sebi believes it needs to protect investors from burning their fingers trading in the derivatives markers, but should it be worried about retail participation?
Florida man settles SEC insider trading charges over Apple takeover
Jonathan Stempel – Reuters
A Florida man has agreed to pay $278,773 to settle U.S. Securities and Exchange Commission insider trading charges stemming from Apple Inc’s purchase of his employer, mobile security company AuthenTec Inc.
Beyond the Buzz: Seven Real Reasons an “As a Service” Solution Adds Value
Today’s financial technology space is teeming with buzz words: “fintech”, “regtech”, “big data”, “cloud”, “data zoo”, “Anything-a-a-S”, “real-time”, “low latency”, and the list goes on. As we launch our Hanweck blog, we want to unpack how our “real-time risk analytics as a service” offering (multiple buzz words in one phrase!) delivers tangible, lasting value that is deeper than just the catchy terminology it is wrapped in.
****SD: First from the newly launched Hanweck blog.
Hedge the Equity Market Without Timing It
Hamilton Reiner, JPMorgan Asset Management, via Barron’s
With equity valuations becoming stretched and uncertainty abound, a market correction may not be that far off. Hamilton Reiner, Head of U.S. Equity Derivatives and Portfolio Manager for JPMorgan Hedged Equity Fund, shares his insights on how hedged equity strategies can help investors position themselves for a correction.
Goldman Sachs: There’s still a killing to be made this earnings season
Joe Ciolli – Business Insider
Earnings season has the potential to be more lucrative than ever for stock traders, yet investors still haven’t caught on.
In recent quarters, reporting companies have seen their shares move four times the normal daily average, the most in the past 18 years, according to data compiled by Goldman Sachs.
Yet options are implying an earnings move of just 4.6% in either direction, near the lowest on record. So what traders should be doing, Goldman says, is placing strategic options bets designed to benefit from outsize fluctuations.
Select Sectors See Bump On Fed, Fiscal Policy and Amazon
Debbie Carlson – CME Group’s OpenMarkets
Equity index futures traders are increasingly relying on a new tool when news hits. Gone are the days of total reliance on a broad-based index like the S&P 500. Now, more of them look to S&P Select Sector Index Futures to make tactical decisions about their portfolios.
CBOE Morning Call – 7/20/2017
Russell Rhoads – CBOE Options Blog
Big Picture – 25 of the 500 stocks in the S&P 500 report earnings today, next week we get the brunt of earnings seasons with about 25% of the stocks that have Weeklys reporting earnings.
TD Ameritrade Has Already Surpassed Its Best Year Ever In Terms Of Client Assets
Spencer Israel – Benzinga
Shares of TD Ameritrade Holding Corp. are at their highest levels of the year after reporting a strong third quarter on Tuesday. At around $46 per share, the stock is trading at its highest level since February. The stock hasn’t been this high since April of 1999. The brokerage firm reported earnings of 44 cents per share and revenue of $931 million for the quarter, both of which exceeded Wall Street’s estimate. But the real story, according to CEO Tim Hockey, is new client assets.
****SD: Old sayings would have me thinking the opposite but: “TDA averaged 510,000 client trades per day in the quarter, up 10 percent year-over-year despite the fact that the VIX remains at all-time lows.”
Citi and Deutsche Bank Join Others in Shift out of London Following Brexit
Colin Firth – Finance Magnates
The uncertainty over Brexit on how it is going to be implemented has affected many top banks and financial institutions. The UK has been the nerve center of the European capital markets and the decision of the UK to leave EU has opened up the opportunity to decentralise the operations. Many big financial majors are trying to shift their operations to other cities including Frankfurt, Madrid, Dublin, Paris, and Amsterdam.
****SD: From Bloomberg – Frankfurt Is Already Running Out of Office Space for Banks
Breaking: Hacker Steals $32 Million in Ethereum from 3 Multisig Wallets
Nearly 153,000 units of cryptocurrency Ethereum, worth about $32 million, was stolen from three of the largest Ether multisig wallets in a hack seeming perpetrated today. The event is one of the biggest security breaches ever for the Bitcoin rival and it has the global cryptocurrency community rattled.
****SD: With security and stability always in question, legitimacy will be elusive.