Observations & Insight
Exchanges and Clearing
CME Group Reached Record Average Daily Volume Of 16.3 Million Contracts In 2017, Up 4 Percent From 2016
2017 Interest Rate average daily volume was a record 8.2 million contracts, up 9 percent compared with 2016
Annual average daily volume records also were reached in Energy, Agricultural Commodities, Metals, total options and electronic options
OCC AA+/Stable Rating Reaffirmed By S&P
CHICAGO (January 2, 2018) – OCC, the world’s largest equity derivatives clearing organization, today commented on the reaffirmation of its AA+/Stable rating by Standard & Poor’s (S&P). S&P published their rating on December 28, 2017.
Cboe Launches New Volatility Product Microsite for ETP Investors
Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE), one of the world’s largest exchange holding companies, has launched a new microsite designed to educate and inform investors about exchange-traded volatility products (ETPs). The site is available at cboe.com/voletps.
MGEX: 2017 Topples Over Previous Calendar Year Record
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), has recorded the highest calendar year volume at 2,803,549 contracts. This oversees the previous record of the 2015 calendar year by 488,363 contracts and totals out to 28% higher than the total volume of 2016.
Along with this achievement, MGEX options volume for the 2017 calendar year nearly doubled the preceding record set in 2002 which was 61,226 contracts.
Eurex Exchange Outlines 2018 Road Map
In 2018, Europe’s largest derivatives exchange Eurex, part of Deutsche Börse Group, will continue to focus on helping its clients to navigate the regulatory changes ahead. “The introduction of MiFID II, rising capital requirements and Brexit pose challenges to the whole market,” said CEO Thomas Book. “In this environment, we gather our innovative power and develop solutions that support the industry.”
Nadex Widens Acceptable Bid/Ask Spread Used In Currency Expiration Value Calculation
In January 2, 2018 Nadex submitted to the Commission an emergency notice pursuant to Commission Rule 40.6(a), that on trade date Tuesday, January 2, 2018, the underlying GBP/USD cash market experienced a period of decreased activity at the open of the Nadex derivative contracts.
Regulation & Enforcement
FCA, BoE, BaFIN provide transitional periods to comply with open access requirements under MiFIR
The UK’s Financial Conduct Authority, Bank of England and Gemany’s BaFIN have issued statements provididing transitional periods for ICE Futures Europe, London Metal Exchange, LME Clear and Eurex Clearing in relation to open access requiements under MiFIR, which came into effect today.
****SD: From The Trade – Major European futures exchanges gain relief from MiFID II open access
MiFID Shake-Up Goes Smoothly Even as Trading Volumes Dry Up
William Canny, Will Hadfield and John Glover – Bloomberg
The biggest regulatory change in Europe in 10 years got off to a comparatively smooth start as the chairman of the European Securities and Markets Authority said he’s seen no teething problems.
What is MiFID II, Europe’s sweeping financial regulations, which begin today?
John Detrixhe – Quartz
Starting today (Jan. 3), Europe’s traders will have to contend with thousands of pages of new rules that will radically change transactions in everything from bonds to stocks to commodities. The sweeping overhaul won’t be obvious for millions of people who don’t work in the industry, at first. But under the surface it will affect everyone.
****SD: In case you’re late to the party.
Europex – The Entry Into Application of MiFID II/MiFIR: The Start Of A New Era Of European Energy Commodity Derivatives Trading
Today’s entry into application of the revised Markets in Financial Instruments Directive (MiFID II) and its accompanying Regulation (MiFIR) marks a major milestone in European energy commodity trading. The great majority of gas and electricity derivative contracts as well as all EU ETS emission allowances are now classified as financial instruments – along with all other commodity derivatives. New rules for market venues, like energy exchanges, where these financial instruments are traded, apply along with numerous other changes affecting market participants and market infrastructure providers.
Kenneth Griffin On Artificial Intelligence At Citadel; Calls Flash Boys “a great piece of fiction”
Ken Griffin of Citadel spoke at Georgetown University on September 12th 2017 about a wide range of topics including the future of the hedge fund industry – we have the transcript and video of the talk below – please note that this transcript may contain mistakes and is for information purposes only
****SD: Transcription isn’t perfect, but you can get the idea.
How to Protect Your Bull-Market Gains
Steven Sears – Barron’s
Remember that as the Standard & Poor’s 500 index keeps grinding higher and brokerage-account balances keep ballooning with unrealized gains.
In fact, unrealized gains—investment profits that have not been realized by selling the position—might be as historically high as the stock market. Many investors are sitting on loads of paper profits that could go the way of the dodo bird should something disrupt the market’s bullish bent and send stocks sharply lower.
Jefferies says traders should buy commodities to hedge stock positions
Joe Ciolli – Business Insider
The equity strategy team at Jefferies has a novel idea for how to protect against a big stock market downturn.
Rather than simply buying exposure to the CBOE Volatility Index, or VIX, which trades inversely to the benchmark S&P 500 roughly 80% of the time, the firm says the best hedge may be to own a basket of “out of favor” commodity stocks.
Tail protection for long investors: trend convexity at work
The performance of trend-following strategies can be ascribed to the difference between long- and short-term realized variance. We revisit this general result and show that it holds for various definitions of trend strategies. This explains the positive convexity of the aggregate performance of commodity trading advisors, which, when adequately measured, turns out to be much stronger than anticipated. We also highlight interesting connections with so-called risk parity portfolios. Finally, we propose a new portfolio of strangle options that provides a pure exposure to the long-term variance of the underlying, offering yet another viewpoint on the link between trend and volatility.
****SD: The link to the full PDF of the piece is here – as with many of these journal pieces, it isn’t “new.”
Happy Birthday Bitcoin
Russell Rhoads – Cboe
Most people are aware of bitcoin and the Bitcoin network as being proposed by Satoshi Nakamoto in a white paper (www.bitcoin.org/bitcoin.pdf) that was published in October 2008. However, the real birthday (at least in my mind) for bitcoin is January 3, 2009. On that day the first block of 50 bitcoin was mined which is now worth $740,000 based on yesterday’s 4:00 pm Gemini settlement price of $14,880. By the way it is estimated that Satoshi (he, she, or they) has about 980,000 bitcoin which is worth about $14.5 billion based on yesterday’s Gemini New York settlement.
Ukrainian holding trades first option on Black Sea Corn swap
The first ever option contract on the Black Sea Corn traded between two Ukrainian companies Thursday, according to the company that brokered the deal, SCB & Associates.
The call option (premium) was priced at $1.80/mt with a strike price of $170/mt, maturing in March on S&P Global Platts Black Sea Corn index.
****SD: The one party to the trade, Spike Trade, should not be confused with the trader forum/community/service Spike Trade.