Breaking News

CME fee rises vex trading industry; Decline of OTC derivatives trading; VIX research

Observations & Insight

Cboe chief on Jamie Dimon: He’s welcome to try shorting bitcoin
Jeff Cox – CNBC
If JPMorgan Chase CEO Jamie Dimon wants to bet against bitcoin, the head of Cboe Global Markets is only too happy to give him the venue to place his wager.
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****SD: Jamie Dimon probably regrets expressing an opinion on BTC. He thought he’d throw a punch, not realizing he’d become the bag.

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Cboe Throws Launch Date Punch at Crosstown Rival CME
Spencer Doar – JLN
Aren’t people supposed be getting into holiday mode? Isn’t December supposed to be slow, with nothing but junior staff running around trying not to mess things up? In the cryptocurrency space, that’s clearly not the case.
The CFTC on Friday said CME Group and Cboe Global Markets were okay to launch their respective bitcoin futures products through the self-certification process. CME quickly announced it would launch bitcoin futures on December 18, and then on Monday morning, Cboe announced a December 10 launch date and free trading for the first month to help the contract gain traction. Cboe’s contract will trade on the CFE, its futures exchange.
https://goo.gl/5jcgqk
****SD: In case you missed it yesterday. 

Lead Stories

CME fee rises vex struggling high-speed trading industry
Gregory Meyer – Financial Times (SUBSCRIPTION)
A rise in transaction fees for futures contracts at CME Group is angering the exchange operator’s most active customers at a time when their business models are being challenged by subdued market volatility.
jlne.ws/2BOPJP8

****SD: If the big firms keep trading at the same levels but operate with an angry and resigned mentality, that’s not good for the trading community.

MiFID Spells Decline of Off-Exchange Bond, Derivatives Trading
Silla Brush – Bloomberg
The European Union’s MiFID II law is expected to drive a significant, rapid shift in trading of bonds and derivatives to electronic and other trading venues.
jlne.ws/2BNrIbt

****SD: The acronym OTC should mean onto-the-cemetery after MiFID implementation.

What is VIX Predicting about Future Volatility?
Hamish Preston – S&P Dow Jones Indices
VIX closed last night at 11.33. What, if anything, does that mean?
We recently published a research paper, together with a more digestible practitioner’s guide, that provides a method for converting a given VIX level into an expectation for S&P 500 volatility over the next 30 days. Exhibit 1 shows that these estimates have provided a reasonable, but imperfect, guide for what was observed.
jlne.ws/2BKwNBb

****SD: Full study from S&P here (PDF).

Stockpickers, Rejoice! Correlations Are Falling Again
Chelsey Dulaney – WSJ (SUBSCRIPTION)
U.S. stock-sector movements haven’t been this disjointed in nearly two decades.
The three-month correlation between S&P 500 sectors last week fell below 20%, near its lowest level ever, according to a report from Credit Suisse. The bank’s equity derivatives team said the “extreme sector dispersion” is being driven by investor rotation in and out of sectors this year.
jlne.ws/2AYuOM2

Quantitative Brokers Appoints Ralf Roth as CEO
BusinessWire
Quantitative Brokers, an independent global provider of advanced agency algorithms and data-driven analytics to clients in the Futures and US Cash Treasury markets, has appointed Ralf Roth as Chief Executive Officer and named Thomas Ascher as Executive Chairman.
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Exchanges and Clearing

NYSE Owner Says ‘We May Be Stupid’ for Waiting on Bitcoin Futures
Matthew Leising – Bloomberg
The owner of the New York Stock Exchange and some of the largest futures markets in the world said he may regret not creating a futures contract based on bitcoin as competitors CME Group Inc., Cboe Global Markets Inc. and Nasdaq Inc. have done.
jlne.ws/2BLLa8x

****SD: Was that the royal “we” or the regular “we,” Mr. Sprecher?

CME’s November Volume Declines Not A Cause For Concern
Forbes
After a solid year-on-year performance across most of its major asset classes through October, CME Group’s trading volumes saw a dip in November, with its daily volumes coming in 14% below the year ago levels. However, the volumes did see 21% growth from the previous month. The possibility of a rate hike in the November 2016 led to a phenomenal rise in interest rate derivative volumes, and the tough year-on-year comp led to a 21% decline in November 2017.
jlne.ws/2BO2SrV

SGX reports market statistics for November 2017
SGX
Total Derivatives volume was 18.0 million, up 21% month-on-month (m-o-m) and up 9% year-on-year (y-o-y).
jlne.ws/2BOS7FK

Regulation & Enforcement

MiFID Spells Decline of Off-Exchange Bond, Derivatives Trading
Silla Brush – Bloomberg
The European Union’s MiFID II law is expected to drive a significant, rapid shift in trading of bonds and derivatives to electronic and other trading venues.
jlne.ws/2BNrIbt

Technology

Hanweck to Add Real-Time Analytics on Bitcoin Futures as of December 10, 2017
Hanweck
Hanweck, a leading provider of real-time risk analytics on global derivatives markets, today announced that it will expand its real-time futures analytics offering to cover bitcoin futures scheduled to launch on the Cboe Futures Exchange (CFE) on Sunday, December 10, 2017. Hanweck will also offer analytics on the CME’s bitcoin futures contract when it debuts on December 17, 2017, for trade date of December 18. Hanweck will calculate risk vectors for the bitcoin futures as part of Hanweck Scenario Analytics.
/goo.gl/VmAEBf

Strategy

Don’t Trip Over the Dip
Meredith Kelley Zidek – Cboe
Not sure what everyone else was thinking/doing/cursing about during Friday, December first’s Big Dipper, but it just so happened that I had set up something I expected to be far less exciting than it turned out to be. On what I thought was just another regular, normal, tired-bull-run morning where every day is approximately exactly like the one before, I had paid for expensive insurance so that I could play a little game and take my chances on picking up some goods. I paid admission so I could spin the wheel, in other words. Sure, I could have done it without paying, but I wanted a guaranteed exit, should the game go south. I hoped I would not have to use my exit ticket, and that I could sell it to someone else. Actually, my real hope was that the ticket would burn to wispy ashes and float away in the wind, with my shares rolling so far downhill that no one remembered why they liked that security, ever, in the first place.
jlne.ws/2BQSobk

Buy sterling on a “Brexit breakthrough”? Not yet, say investors
Saikat Chatterjee – news.trust.org
Sterling investors remain hesitant about chasing the rallying pound higher even as the British government said it was close to an agreement with the European Union on how to move Brexit talks onto trade next year.
jlne.ws/2BOtaKK

Goldman Sachs: Don’t sell yet, but time is running out on ‘Goldilocks’
Thomas Franck – CNBC
Goldman Sachs remains pro-risk in equities, but the investment bank’s top strategists say “time is running out for Goldilocks.”
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This VIX Signal Has Happened Just One Other Time
Rocky White – Schaeffer’s Investment Research
Something strange happened last week as the S&P 500 Index (SPX) gained over 1.5%. The CBOE Volatility Index (VIX) spiked 18%. It’s strange because those two indexes typically move in opposite directions.
jlne.ws/2BNM1W4

Jeffrey Gundlach says it’s a good time to buy commodities
CNBC
DoubleLine CEO Jeffrey Gundlach said Tuesday that historical and economic indicators point to a likely buying opportunity for commodities such as oil and gold.
jlne.ws/2BNOikl

Miscellaneous

Bitcoin Banter Heats Up as Cboe, CME Compete For Futures Traders
Bradley Keoun – TheStreet
Executives at Chicago-based exchange operator Cboe Global Markets Inc. (CBOE) , which plans to allow trading bitcoin futures starting Dec. 10, said Wednesday that their new market is designed to attract a “broader base” of customers than a rival venue planned by crosstown rival CME Group Inc. (CME) According to the Cboe executives, their new bitcoin futures contract also comes with a simpler end-of-day pricing mechanism.
jlne.ws/2BOOPCe

Record Low Volatility Drives New Equity Trading Patterns
Valerie Bogard – TABB Forum
As the average close for the Cboe Volatility Index sank to its third all-time low of the year in October 2017, off-exchange, block and auction volume all increased, providing good indicators of what to expect from the market environment in 2018, reports TABB’s Valerie Bogard.
jlne.ws/2BMaVFE

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Graduate of University of Minnesota School of Journalism and Mass Communication