Breaking News

Talk of CAT Delay; Bond vol shows signs of life; Investors fearless

Lead Stories

Exchanges in talks with U.S. SEC to delay new audit system: sources
John McCrank – Reuters
Stock exchanges are in talks with the U.S. Securities and Exchange Commission to possibly delay the rollout of a new system aimed at helping the regulator better police the markets, sources familiar with matter the told Reuters.

****SD: They’re going to have to make a decision shortly. SROs are scheduled to start reporting data to the central repository on November 15.

Bond Volatility Shows Signs of Life as Rates Divergence Widens
Cormac Mullen – Bloomberg
As U.S. Treasury yields climb to the highest in seven months, volatility in the bond market is also trending up.
Bank of America Merrill Lynch’s MOVE Index, a gauge of price swings in the U.S. Treasury market, is close to the highest since May and its monthly average is on track to record a third consecutive rise.

Volatility fails to scare investors in U.S. stock, bond funds: Lipper
Trevor Hunnicutt – Reuters
Investors endured jolts to both stocks and bonds, pouring even more cash into funds tracking both markets during the latest week, according to Lipper data released on Thursday.
U.S.-based stock funds pulled in $4.7 billion and taxable-bond funds attracted $3.7 billion during the week ended Oct. 25, according to the research service.

Why Cheese Options and Butter Futures Are More Popular Than Ever
Shruti Singh and Lydia Mulvany – Bloomberg
More traders than ever are trying to get their hands on cheese and butter contracts traded in Chicago.

****SD: Dairy popular in the Midwest? Unbelieveable.

Why volatility could suddenly return to the markets in November
Patti Domm – CNBC
The beginning of November could bring a surge in market volatility, as President Donald Trump is finally expected to name a new Fed chair, and Congress is set to unveil the much-anticipated tax reform legislation.

ECB, Fed Are Growing Apart, Moving Markets; ECB’s asset purchases will continue, while the U.S. central bank moves away from easy money
Riva Gold and Mike Bird – WSJ
This summer, investors bet that developed-world central banks would move in tandem when exiting crisis-era stimulus. On Thursday, the European Central Bank gave notice that its stimulus will loiter longer, widening a gap between monetary policy expectations in the eurozone and U.S. that is set to further influence their financial markets.

Exchanges and Clearing

Intercontinental Exchange Announces Sale of Trayport to TMX Group in Exchange for GBP350MM Cash and NGX and Shorcan Energy
Press Release
Intercontinental Exchange (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, announced it has agreed to sell Trayport to TMX Group Limited (TMX Group) in exchange for certain TMX Group assets and cash of GBP350 million. In addition to cash, ICE will receive NGX and Shorcan Energy Brokers Inc. upon the completion of the transaction. In connection with the execution of the Agreements, ICE and TMX Group have also entered into a non-binding memorandum of understanding agreeing to explore in the future further avenues for possible collaboration.

HKEx closes iconic trading floor as it goes all-electric
The iconic Trading Hall in the Hong Kong Exchange, which has stood through the 1997 Asia financial crash, SARS and countless boom and busts, has closed for the final time today as it became the latest stock exchange to adopt electronic trading throughout.

****SD: At the same time here we are, with BOX opening the first options floor in decades. I’m now wondering what will come next – another exchange or another floor?

Rolet cashes in as he bids farewell to the LSE
Hannah Murphy – Financial Times
Xavier Rolet is making sure to cash in as he bids au revoir to the London Stock Exchange. Last week, the outgoing chief exec sold more than 117,000 of his company’s shares at GBP38.70 each, mopping up some GBP4.5m.

20 years ago Friday, this unprecedented trading curb kicked in
Bob Pisani – CNBC
A crisis that climaxed 20 years ago Friday rattled the NYSE floor and changed global investing. For the first ó and only ó time, systemwide circuit breakers shut the market before the official 4 p.m. close.

Crypto derivatives exchange WandX to launch token sale
Institutional Asset Manager
Indian tech firm WandX, led by CEO Abhinav Ramesh (pictured), is to launch a token sale on Friday 27 October to fund the building of its new platform, which will allow investors to create and trade in derivative products based on crypto-assets.


How Satellite Data Is Changing The Definition Of Crop Reports
Evan Peterson – CME Group OpenMarkets
The problem with data has changed. No longer must institutions consider only how to process large amounts of it. They must think about which data is possible to collect in the first place. Alternative data sources are providing more options than ever. One key resource for financial and commodity markets is the advancement of satellite imagery. When combined with machine learning, it becomes a highly valuable source of intelligence for industries that operate outdoors.


5 Ways to Trade the Spike in Volatility
Mark Sebastian – TheStreet
On Wednesday, the VIX hit 13 for the first time since Sept. 5. Like in September, the VIX failed to settle near highs. The last time the VIX settled near its highs was Aug. 17, at 15.55. Even so, it was the first time in more than a month that the VIX showed any signs of life.
Until Monday, the VIX had not been over 11 in about six weeks. That is an incredible period of historically low implied volatility. So, with a spike like this, how can one play a return to volatility? Whether you trade or fade the vol spike, there are five ways trades can try to profit from a pop in the VIX index.

If Volatility Returns, Markets Risk Slipping on Oil
Carley Garner – TheStreet
Going into the latter part of October, the equity markets are on pace for the least volatile month in history. Monday tied the record for the longest streak since 1928 without a drawdown of at least 3% at 241 days. The S&P is also in the middle of the second-longest streak of trading days without a 1% intraday move. The longest took place within the same rally; from Dec. 15 2016 through March 20, 2017.

Hedging Currency Risk Comes With Costs
Daniel Sotiroff – MorningStar
One of the drawbacks that comes with investing in foreign stocks is their higher volatility relative to domestic stocks. From January 2000 through June 2017, a U.S.-based investor holding a fund that simply tracked the MSCI United Kingdom Index weathered a standard deviation of 16.8%. That investor’s counterpart in London, who owned shares in a similar fund, tracking the same index, experienced a standard deviation of only 13.8% during the same period. Same index, but different volatility? There’s some nuance here. The U.S. and U.K. indexes are not exactly the same. The former is denominated in dollars, the latter in pounds. And the source of the extra volatility borne by the U.S. investor was a direct result of fluctuating foreign exchange rates.


Norway’s wealth fund posts strong Q3, reiterates warning of market volatility
Norway’s $1 trillion sovereign wealth fund, the world’s largest, reported returns of 3.2 percent in the third quarter, beating its benchmark by 0.1 percentage points as equity markets soared, it said on Friday.

Tech Stocks Soar to New Highs After Glowing Earnings Reports
Alistair Barr – Bloomberg
The web is pulling in more shoppers, advertisers, businesses; Mobile ads fuel gains at Google; Intel outpaces PC market
Shares in Inc., Microsoft Corp. and Alphabet Inc., hit records Friday after the technology giants reported earnings that showed strong revenue and profit growth for another quarter as the internet pulls in more shoppers, advertisers and businesses.

****SD: I remember scanning the business section’s recap of the stock markets as a kid and the only nutty elevated price that would make me pause was Berkshire.

Nasdaq 100 Companies Add $200 Billion in Market Cap in One Day
Lu Wang, Sarah Ponczek and Elena Popina
A strong dose of computer and internet earnings woke tech stocks from a moribund week, sending the Nasdaq 100 Index to its best performance in eight years relative to the broader market and putting fears of a FANG rout to bed, at least for a day.

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Graduate of University of Minnesota School of Journalism and Mass Communication