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Maybe Strangely Low Stock Volatility Isn’t So Strange After All; Trump era brings lowest stock market volatility since early 1960s

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Maybe Strangely Low Stock Volatility Isn’t So Strange After All
Sarah Ponczek – Bloomberg
Volatility is low. But does that mean it’s abnormal?
A group of researchers and economists at the Federal Reserve Bank of New York set out to answer that very question in a blog post Monday; the results weren’t so clear cut. “Are investors complacent? The evidence is mixed,” they wrote.

****JB: Another article on the same topic from the Financial Times

Trump era brings lowest stock market volatility since early 1960s
John Authers and Joanna S Kao – Financial Times
The year after Donald Trump’s surprise victory in the US presidential election have been the quietest months for the US stock market in more than half a century.
Since election day, the daily change in the S&P 500, the most widely followed index of US stocks, has been only 0.31 per cent as the blue-chip index has set new record highs. This is the lowest daily change in more than 50 years.

****SD: Would you have guessed that the only other 12 month period on par with the present started one week after the JFK assassination?

Why Interactive Brokers Founder Fears Bitcoin Futures
Steven M. Sears – Barron’s
Bitcoin futures, which Cboe Global Markets and CME Group hope to list later this year, may accomplish what the global financial crisis could not: decimating a slew of trading firms and threatening the stability of Wall Street’s clearing outfits.

****SD: Thomas Petterffy’s concerns surround getting margin rates right considering the extreme fluctuations in Bitcoin’s price. See the below story for yet another example. Not encouraging when Petterffy says, “For the first time, I am extremely scared.” Another good observation from Vincent Au, a portfolio manager at hedge fund Gondor Capital – “Investors are willing to commit millions, tens of millions, and hundreds of millions into Bitcoin, yet people are scared of options.”

Bitcoin Crashes and Then Surges in Wild Weekend Action
Justina Lee and Yuji Nakamura – Bloomberg
Bitcoin is proving that investing in digital currencies isn’t for the faint of heart.
After plunging as much as 29 percent from a record high following the cancellation of a technology upgrade on Nov. 8, the largest cryptocurrency came roaring back in early trading Monday before fluctuating between gains and losses.

****SD: Check this out from Reuters – Think bitcoin’s getting expensive? Try Zimbabwe. On the Zimbabwe bitcoin exchange, Golix, the coin almost hit $14k.

U.S. Exchanges Said to Be Seeking Last-Minute Delay of Trading Database Project; Request to delay launch of Consolidated Audit Trail could come as soon as Monday, sources say
Dave Michaels – WSJ
U.S. exchanges plan to seek a last-minute delay in the launch of a vast database project designed to detect manipulation in the stock and options markets and decipher the cause of wild trading sessions, according to people familiar with the matter.

****SD: In more news, the SEC extended the period for it to consider if industry member fees will fund the CAT.

Weekend Review of Volatility Indexes and ETPs – 11/6/2017
Russell Rhoads – CBOE
S&P 500 volatility rose across the four volatility indexes based on SPX option pricing this past week. The short side of the equation was up strong and the longer dated indexes (VIX3M and VXMT) had good weeks as well. It may just be some concern is finally returning to the equity markets.

Weekend Review of Russell 2000 Options and Volatility – 11/6/2017
Russell Rhoads – CBOE
Small caps fell farther behind last week as the Russell 2000 (RUT) was down 1.37% while the Russell 1000 (RUI) was down only 0.24%. For the year RUT is now up 8.71% while RUI has gained a very respectable 15.21%.

Weekend Review of VIX Futures and Options – 11/6/2017
Russell Rhoads – CBOE
VIX rose over 20% last week and the futures curve followed, but not nearly to the extent as the spot index. The November contract goes off the board on the open Wednesday finishing the week at only a 0.31 premium to the spot index.

Exchanges and Clearing

Deutsche Bank chief questions EU’s clearing quest
Olaf Storbeck and Laura Noonan – Financial Times
The chief executive of Deutsche Bank has questioned European efforts to grab a bigger share of the business of clearing interest rate derivatives, one of the biggest flashpoints for EU policymakers since the UK voted to leave the bloc.

LSE to Call Vote on Future of CEO Amid Pressure From Activist; Activist shareholder TCI wants the London Stock Exchange to stick with Chief Executive Xavier Rolet
Ian Walker – WSJ
London Stock Exchange Group LSE -0.91% PLC said Friday it would hold a shareholder vote on whether to end the board’s search for a new chief executive and keep Xavier Rolet in the role until 2021 as requested by activist investor TCI Fund Management Ltd.

SGX launches new derivatives on MSCI Emerging Markets indices
Singapore Exchange (SGX) has launched net total return and price return futures on the MSCI Emerging Markets (EM) and MSCI EM Asia indices, making it the first and only exchange in Asia to offer investors exposure to these fast-growing market segments.


Machines Will Do Shady Things in the Markets Too
Matt Levine – Bloomberg
A useful way to think about modern electronic market structure is that in the olden days humans traded stocks and options, making markets based on gut instinct, and then those humans were replaced by computers that used algorithms that largely replicated the humans’ gut instincts but more efficiently. But also, in the olden days, those humans did various shady things, and over time the computers have started to replicate the humans’ shady-thing-doing abilities, because, you know, the shady-thing-doing tradition runs deep.


World’s Top Tech Giants Amass $1.7 Trillion in Monster Year
Between the FAANG quintet and China’s rivaling BAT companies, gains in the world’s top technology shares are nearing a whopping $1.7 trillion in market value this year.

Ex-Google China president: A.I. to obliterate white collar jobs first
Matthew J. Belvedere – CNBC
“The white collar jobs are easier to take because they’re pure a quantitative analytical process. Reporters, traders, telemarketing, telesales, customer service, [and] analysts, there can all be replaced by a software,” he explained on “Squawk Box.” “To do blue collar, some of work requires hand-eye coordination, things that machines are not yet good enough to do.”

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Bergstrom is chief information officer of John J. Lothian & Co. He edits MarketsWiki and JLN Options.