Wall Street’s ‘fear gauge’ on pace for record closing nadir as stock market trades at all-time high
Mark DeCambre – MarketWatch
A popular measure of Wall Street volatility was headed to an all-time low, highlighting a protracted period of subdued moves on Wall Street, as assets considered risky climb to records. The CBOE Volatility Index VIX, -3.53% often referred to as the market’s fear gauge, was trading recently at 9.14, which would mark the lowest close for the indicator since Dec. 22, 1993 when it ended at 9.31.
****SD: XIV is trading above 100 today for the first time (I’m not counting prices before its 2011 10-1 split). (VIX around 9.50 as of this writing.)
CME Group To Launch Wednesday Weekly Options
Colin Firth – Finance Magnates
In response to a growth in demand and the need for traders to manage risk at a detailed level, the Chicago Mercantile Exchange (CME) has announced the launch of Wednesday Weekly FX Options.
This will be similar to the Friday Weekly FX Options that are available currently but instead of Friday, these options would expire on Wednesday.
****JB: See press release on this below under Exchanges.
Market Fears Reflected in VIX Buying
Steven M. Sears – Barron’s
Trading in CBOE Volatility Index options has become a mirror into the collective soul of investors. Even as stocks grind higher, and the Standard & Poor’s 500 index is the least volatile it has been since 1965, an increase in VIX options trading shows investors are having a hard time believing what they are seeing.
As a result, many investors have bought upside VIX calls to hedge stocks, and even high-yield bonds, that the volatility market’s trading pattern is at an extreme.
Volanthology World Tour: Foreign Exchange Volatility
Doug Ashburn – The Ticker Tape
Despite what you read in the papers and see on the business reports, there’s a lot more to volatility than VIX—the CBOE Volatility Index, aka “the fear index.”
Sure, because VIX is based on the implied volatilities of a basket of options on the S&P 500 Index (SPX)—a broad-based market barometer—VIX can be a handy, one-number snapshot of the state of stock market vol. Well, at least the consensus estimate of expected volatility over the next month or so, given the prices of options on SPX.
Wall Street rally on pause, but more gains seen in 2018: Reuters poll
Caroline Valetkevitch – Reuters
A more than eight-year bull market on Wall Street will simmer for the rest of 2017 before picking up again next year, said strategists in a Reuters poll who were optimistic about corporate profits but concerned about slow tax reform progress.
The benchmark S&P 500 .SPX is likely to finish this year at 2,525, about 13 percent above 2016’s end, but 0.4 percent down from Tuesday’s close of 2,534.58, based on the median forecast of 47 strategists polled by Reuters.
The CBOE VIX: A New Leading Inflation Indicator in the Making?
Michael Zuzolo – The Market Mogul
With the Baltic Freight Index reaching 3-year highs, U.S. ISM manufacturing data reaching 13-year highs, and U.S. equity markets reaching all-time highs, more people – including the FED – are starting to wonder where inflation is in all this strong economic data as the final quarter of 2017 approaches. This article explores how the commodity sector can potentially monitor more efficiently & more effectively when inflationary pressures are returning in the financial capital markets. More specifically, it focuses in on the VIX as a potential leading indicator in anticipating increasing inflation expectations in the financial and capital markets.
Exchanges and Clearing
Q&A with Mark Morrison, OCC’s Chief Security Officer
Mark Morrison joined OCC on May 1st as Senior Vice President and Chief Security Officer (CSO). As October is Cyber Security Awareness Month, he shares his insights on cyber security and the exchange-listed options industry, as well as his responsibilities at the world’s largest equity derivatives clearing organization.
CME Group Launches Wednesday Weekly FX Options
PR Newswire via Markets Insider
CME Group, the world’s leading and most diverse derivatives marketplace, today announced it is launching Wednesday Weekly FX options (Wednesday options) due to customer demand and significant growth in existing Weekly FX options, which expire on Friday. Wednesday options will be available in premium quoted and volatility quoted European style options with a 2 p.m. CDT fix on five major currency pairs: AUD/USD; GBP/USD; CAD/USD; EUR/USD; JPY/USD. Wednesday options will be available for trading and clearing on October 30, 2017, pending regulatory approval.
MIAX Options – Rollout Of Modifications To Existing Complex Order & Opening Functionality Beginning October 9, 2017
The MIAX Options Exchange will introduce modifications to the following functionality beginning Monday, October 9, 2017.
Regulation & Enforcement
Commissioner Quintenz supports tech innovation, but critical of prior administration’s regulatory initiatives
Brad Rosen – Jim Hamilton’s World of Securities Regulation
CFTC Commissioner Brian Quintenz, in delivering his first major address since being sworn in to the commission in August of this year, announced his strong support to advance and promote innovation in financial marketplaces, but also offered harsh criticism for certain regulatory initiatives set in motion under the prior administration.
****SD: The Financial Times on the same topic – US regulator declares ‘dead’ moves to seize HFT code
Key Lawmaker Calls for SEC to Delay Trading Database
One of Congress’s leading overseers of Wall Street urged regulators on Wednesday to delay the launch of a vast database of stock-market trades that is increasingly seen as a major target for hackers.
The comments by Rep. Jeb Hensarling (R., Texas), chairman of the House Financial Services Committee, add to pressure on SEC Chairman Jay Clayton to postpone the database’s launch or scale back its content after he disclosed last month that hackers accessed a key SEC system that stores market-moving information.
*****SD: Concerns about the SEC’s security aren’t stopping Thesys, the tech company with a subsidiary tasked with building the consolidated audit trail, from expanding — see the top story in our “Tech” section.
Thesys Technologies Announces Move to New Headquarters in Midtown Manhattan
Thesys Technologies, LLC, the leading big data and market structure technology provider subsidiary of Tradeworx, Inc, announced today it has moved its offices to a new corporate headquarters at 1740 Broadway, located in a 26-story Class-A office tower in Midtown Manhattan on the 14th floor.
Deutsche Bank opens up code for common trading platform
Steve Slater – Reuters
Deutsche Bank is making its computer code publicly available for the first time, in an attempt to create a common industry standard for trading technology.
6 things to know before applying for a job in trading technology
Sarah Butcher – efinancialcareers
If you’re applying for a technology job in an investment bank, you’ve probably thought of working with the systems that support banks’ sales and trading activities. After all, this is where the highest paid jobs with the greatest exposure to the “front office” are, even though some technologists say they’re best avoided.
Before stepping into an interview for a front office tech job, however, you might want to know exactly what the trading systems do. In this respect, a new report from Greenwich Associates is helpful. Titled, ‘The Technology to Succeed in Fixed Income Trading,” it spends most of its time describing how fixed income trading tech systems function. These are the salient points…
Rising Stars age 35 and under on Wall Street
Rachael Levy, Alex Morrell and Frank Chaparro – Business Insider
Introducing the Rising Stars on Wall Street age 35 and under.
We scoured our contacts for ideas about whom we should include, receiving recommendations from bosses, colleagues, recruiters, and others working in the finance industry. The editors made final decisions.
There’s Been No ‘Target Top’ in the Short Volatility Trade
Luke Kawa – Bloomberg
In late August, the New York Times chronicled the ascension of Seth M. Golden from logistics manager at a Target Corp. store in northern Florida to $100 million hedge fund manager by day trading in exchange-traded products that allow investors to take a stance on implied equity volatility as measured by VIX futures.
VIX Options Trader Braces for a December Volatility Spike
Karee Venema – Schaeffer’s Research
Even with the U.S. stock market carving out record highs in today’s trading, the CBOE Volatility Index (VIX) is up 1.8% at 9.68, on track for its second straight day of gains. While this upside should be taken with a grain of salt considering the market’s “fear gauge” is lingering in single-digit territory — and near historically low levels — call volume on the volatility is running at a slightly accelerated clip today.
Low stock volatility won’t last forever, but the quiet may not end quickly
Ryan Vlastelica – MarketWatch
It’s the trillion-dollar question: when will volatility return, and what will be the cause?
The unprecedented calm of the U.S. stock market has been one of the most notable trends of 2017. September featured a stretch of the quietest trading in history, while the S&P 500 SPX, has only closed with a 1% move eight times this year, on track for the fewest since 1995, per LPL Financial data. Perhaps most notably, the CBOE Volatility index VIX, has almost unceasingly traded below 10, representing half its long-term average, and it dropped to a record low earlier this year.
CME Analysis Warns of La Niña Risks
An analysis by CME Groups says the La Niña weather phenomenon may be coming back for real this time, after a head fake last year.
****SD: And “one potentially worrisome feature of agricultural markets today, Norland writes, is that corn, wheat and soy complex options implied volatilities are trading at or near record lows.”
Volatility Spike, Here We Come?
Rahul Salgia – Seeking Alpha
The VelocityShares Daily Inverse VIX Short-Term ETN (NASDAQ:XIV) is hovering near all-time highs as volatility continues to contract. Even though there is no fear in the market, the smart money is positioned to see a volatility spike.
The Daily Prophet: Come Join the Cool Kids in Emerging Markets
Robert Burgess – Bloomberg
By all accounts, investors should be fleeing emerging-market assets. The Federal Reserve is due to start shrinking its $4.7 trillion balance sheet this month. In Spain, Catalonia’s separatists said nothing would stop their drive toward an independent state, raising fresh existential questions about the euro. In Japan, polls show falling support for Prime Minister Shinzo Abe just weeks before a general election he called.
Should We Apply Technical Analysis to VIX and Volatility?
John Kicklighter – DailyFX
Technical analysis does not work particular well on measures of activity or features of a system like it does for market pricing
Bitcoin’s Rise Happened in Shadows of Finance. Now Banks Want In
Hugh Son – Bloomberg
At first, bitcoin was a way to make payments without banks. Now, with more than $100 billion stashed in digital currencies, banks are debating whether and how to get in on the action.
Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein tweeted Tuesday that his firm is examining the cryptocurrency. Other global investment banks are looking into facilitating trades of bitcoin and other cryptocurrencies, according to industry consultants. Bitcoin has surged more than 300 percent this year, drawing the attention of hedge funds and wealthy individuals.
Why Do Markets Keep Rising? Trillions of Reasons
Randall W. Forsyth – Barron’s
Another day, another set of new highs. Pick your index, the Dow Jones Industrial Average, the Standard & Poor’s 500, the Nasdaq Composite and also the Global Dow all ended Wednesday at record levels.
ECB debated QE extension trade-offs in September: minutes
European Central Bank policymakers last month debated the trade-off between various options for extending its asset buying, with some arguing that a reduction was warranted in any scenario, accounts of their meeting showed on Thursday.