Observations & Insight
Deep Dive With JLN: How Can The Financial Industry Draw In The Next Generation Of Talent?
John Lothian News’ CEO Jim Kharouf sat down with Brian Mehta, chief marketing officer at Trading Technologies, and Doug Monieson, partner at Hyde Park Angels, to talk about what will attract the next generation of traders and professionals into this space. From college outreach programs like TT CampusConnect to a variety of new education, training, competitions and platforms that open the world to new traders with new ideas, both see the financial markets as having much to offer.
“Getting companies involved is really important because it’s a great two-way street,” Mehta said. “It’s good for companies to see the potential talent out there. But it’s also important for the students to see the different possibilities. It’s not just going into a trading firm, or it’s not just going into a technology firm, but what about the exchanges? What about the other partners we work with that open the capital markets to students?”
FINRA Orders Wells Fargo Broker-Dealers to Pay $3.4 Million in Restitution and Reminds Firms of Sales Practice Obligations for Volatility-Linked Products
The Financial Industry Regulatory Authority (FINRA) announced today that it has ordered Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC to pay more than $3.4 million in restitution to affected customers for unsuitable recommendations of volatility-linked exchange-traded products (ETPs) and related supervisory failures. FINRA found that between July 1, 2010, and May 1, 2012, certain Wells Fargo registered representatives recommended volatility-linked ETPs without fully understanding their risks and features.
****SD: Basically, Wells Fargo reps didn’t realize that by virtue of the products being tied to VIX futures, there is an ensuing cost to carry and thus the products degrade over time. The irony here is that industry folks and financial educators ring the warning bell all the time about retail investors using these products when they don’t understand a futures curve or understand the “small print” of the vehicle, but here those retail investors are being told by the supposed “professionals” that they should use it as a long-term hedge rather than for short-term trading. Doesn’t do much to instill confidence… The WSJ’s take – Wells Fargo To Compensate Clients for Volatility ETPs After Charges by Regulator
The World’s Largest Oil Hedge Is Complete
Nacha Cattan – Bloomberg
Locks in export price of $46 per barrel for 2018: Rubio; Larger stabilization fund will help secure price for 2018
Mexico has completed its annual oil hedge for 2018, which will lock in an average export price of $46 per barrel of crude, Deputy Finance Minister Vanessa Rubio said in an interview. In addition to the put options bought on the market, a larger Oil Revenue Stabilization Fund, with the help of the central bank’s exchange-rate surplus, will help guarantee the price, Rubio told Bloomberg News.
Cboe says bye bye to Bats brand; New owners stamp corporate identity on Europe’s largest equities exchange
Samuel Agini – Financial News
The new owner of the largest equities exchange in Europe has ditched one of the best-known brands in trading. CBOE Holdings, the owner of the Chicago Board Options Exchange, said in a statement that Bats Europe will now be called Cboe Europe Equities.
****SD: From BATS, to Bats, to a part of CBOE, to Cboe.
Some Perspective on High VIX Non-Commercial Short Interest
Russell Rhoads – CBOE Options Hub Blog
This morning, as I perused my twitter feed that is dedicated to VIX I came across two tweets highlighting the chart below. Basically, these tweets were noting the high absolute level of Non-Commercial VIX futures short interest that appeared in the CFTC Commitment of Traders (COT) report from last week. The net position for Non-Commercial VIX futures traders was -174,665, an all-time low. This figure has some VIX commentators noting a rise in VIX and VIX futures may cause some panicked buying or a short squeeze. However, looking at this figure in context of the whole market tells a different story.
Hedge Funds Can’t Resist This Volatility Trade That’s Been Losing Money
Klaus Wille and Simone Foxman – Bloomberg
Global Sigma, BTG Pactual among firms adding volatility funds; Bets on higher market turbulence have backfired this year
Does the lack of worry in global financial markets worry you? A growing number of hedge fund managers are counting on it.
****SD: Being right (eventually) doesn’t equate to getting paid.
Small-Scale Traders Rush to Risky Cryptocurrency Options
Christine Masters – Cryptovest
Regulators warned against platforms offering derivative trading based on cryptocurrencies. With a wildly fluctuating market, this is an enticing, yet risky opportunity for naive investors.
S&P 500 nearing record period without 5% pullback in latest sign of Wall St calm
Adam Samson – FastFT
Not that investors needed another reminder, but US equities markets have been awfully tranquil for an awfully long time.
Exchanges and Clearing
CME Group Prepares Wednesday Weekly FX Options
John D’Antona – Markets Media
By popular demand, the Wednesday weekly is now at the CME. CME recently announced that it was launching, pending regulator approval, Wednesday Weekly FX options (Wednesday options) amid growth in existing Weekly FX options, which expire on Friday.
CBOE Holdings Becomes Cboe Global Markets, Unveils New Corporate Identity
CBOE Holdings, Inc. today unveiled its new name, Cboe Global Markets, Inc., identity and mission at the Futures Industry Association (FIA) Expo 2017 conference, currently taking place in Chicago. The changes were made to better reflect the evolving nature and spirit of the company and follows the acquisition of Bats Global Markets (Bats) earlier this year.
Strong Growth for Key Cboe Index Products in 2017
Matt Moran – VIX Views
Below is an update with ten charts that show growth in 2017 for some of the many index products offered by the marketplaces of Cboe Global Markets.
SGX Launches SGX America with Office Opening in Chicago
Singapore Exchange (SGX) today announced that it has expanded its international footprint with the opening of SGX America in Chicago. Building on its existing international connectivity, SGX’s presence in the U.S. will enable it to better serve a growing client base in this region and meet the rising international investor appetite to access and risk manage Asian exposure.
****SD: Hey Bears fans, who wants to trade some coking coal?
Nasdaq Clearing establishes direct clearing client model
New model introduces direct relationship between client and CCP for cost efficiency.
MCX launches commodity options trading with gold on Dhanteras
Finance minister Arun Jaitley on Tuesday launched an option’s contract in gold on the Multi Commodity Exchange (MCX) on the auspicious occasion of Dhanteras.
Regulation & Enforcement
Are Former Bank Executives Mnuchin And Cohn Encroaching On Regulator Turf?
Mark Melin – ValueWalk
Is Steven Mnuchin’s US Treasury Department encroaching on the regulatory turf of the Securities & Exchange Commission at the same time former Goldman Sachs executive Gary Cohn, now Director of the National Economic Council, is in conflict with regulatory domain expert Commodity Futures Trading Commission?
Traders have never been more confident that volatility is dead
David Scutt – Business Insider
Traders have never been so sure that volatility in US stocks is over, at least looking one month ahead.
How to Trade the VIX Flowchart
RCM Alternatives Blog
That’s actually a trick headline, as you can’t trade the VIX directly. It’s just an index of options prices. But you can invest/trade in products that track the VIX, like VIX futures, VIX ETFs, inverse ETFs, and more (here’s an in-depth research report).
Love Sick: U.S. Market Sentiment Index Flashes Sell, BNP Says
Eric Lam – Bloomberg
If you really love the U.S. market right now, you should let it go. That’s according to the BNP Paribas Love-Panic U.S. Index, a contrarian indicator tracking a broad series of data to gauge when investors have become blinded by their emotions.
Investors hit peak bullishness on oil: Kemp
John Kemp – Reuters
The wave of investor bullishness towards oil that started back in July and August may have peaked at the end of September, according to the latest position records published by regulators and exchanges.
It’s Time to Hedge China
Steven Sears – Barron’s
Investors should be cautious as the Communist leadership tests taking an active role in corporate decisions.
Long bets in the Canadian dollar hit 5-year high
Anneken Tappe – MarketWatch
The Canadian dollar is gaining in popularity while it is also gearing up for a big week in terms of data, which could set the tone for the rest of the year.
Options Strategy: Hedging Against The Next Crash
Tom Armistead – Seeking Alpha
Betting against the market confronts the fact that over any substantial period of time US equities have always increased in value. In addition, hedging becomes an exercise in market timing, not always an easy or successful route to riches.
Volatility As A Stock Replacement Strategy
Stuart Barton – Seeking Alpha
Stock replacement strategies can be used to manage risk.
The Options Industry Council: 25 Years of Trusted Options Investor Education
Mary Savoie – The Options Industry Council
I am very pleased to be part of a broad industry coalition that is celebrating The Options Industry Council’s 25th anniversary. I have spent my entire career in the exchange-listed options industry with the Options Clearing Corporation (OCC) including the last 20 years with the Options Industry Council (OIC) where I currently serve as the Executive Director. This is the role that I am most passionate about because we focus on providing investors with unbiased education that helps them to better understand the benefits and risks of using options as risk management solutions.
Investor bets gamers will spend big on virtual bling
Kevin Dugan – NY Post
Former hedgie Mike Novogratz is betting that gamers have way too much time — and money — on their hands. The former Fortress Investment Group bigwig has poured about $3.6 million into an online exchange that allows gamers to purchase virtual bling for their digital characters — a controversial $50 billion market that’s facilitated online gambling.
****SD: Believe it or not, this is a space – in-game skins/currency – that Steve Bannon has a bit of history with.
Wall Street pros recall ‘sheer panic’ of October 1987 stock-market crash
The October 1987 stock-market crash that holds the record for the deepest one-day percentage drop still evokes memories of its carnage 30 years later.
****SD: More reflections from those that were there.
Activist investor RBR launching campaign to break up Credit Suisse
Activist investor RBR Capital Advisors is launching a campaign for breaking up Swiss bank Credit Suisse Group AG (CSGN.S) into three parts, the Financial Times reported on Monday.