Editor’s Note: In light of Martin Luther King Jr. Day, there will not be a JLN Options newsletter on Monday.
US Options Volumes Strong in 2017 Despite Record Low Volatility
Tabb Options Liquidity Matrix
US equity options volumes in 2017 increased 3.1% over 2016 totals, reaching 4.19 billion contracts, the third-highest annual total in the past 10 years. 2017’s volume was surpassed only by the record-setting 4.56 billion contracts in 2011 and 4.27 billion contracts in 2014. The volume growth in 2017 is indicative of clients’ increasing use of equity options to manage risk as well as the widening search for alpha during this period of historically low volatility.
FX Options Traders Get Wake-Up Call From Central-Bank Signals
Katherine Greifeld – Bloomberg
The currency world showed signs of emerging from its low-volatility stupor this week after the Bank of Japan and the European Central Bank surprised traders with messages on their bond-buying policy that fueled rallies in the euro and yen.
Cryptocurrencies Steal Volatility Away From Stocks; Earnings drive fluctuations in equities, but there are no such yardsticks for bitcoin — only the waxing and waning of enthusiasm for a potentially revolutionary asset class.
Dean Curnutt – Bloomberg
What drives volatility? In equities these days, it turns out, not much. With just 6.8 percent realized volatility in the S&P 500 Index, 2017 marked the least volatile year since 1964. Low correlation among stocks, muted inflation variability and market-friendly central bank policies all played a role. But that hasn’t stopped investors from asking, “Who ate the vol?”
Five Reasons Event Risk to take Center Stage in 2018
Bluford Putnam – CME Group
The year 2017 saw the juxtaposition of heightened policy uncertainty with relatively complacent markets and low volatility, especially in equities. Much of the policy uncertainty may find some answers in 2018. It is decision time for NAFTA and Brexit. Elections will be in the spotlight. Italy in March, Mexico in July, Brazil in October, and November 2018 will see a ferociously contested U.S. election for the entire House of Representatives and one-third of the Senate. At the Federal Reserve (Fed), the focus will be on inflation and the shape of the yield curve as it decides how aggressively to push rates higher or not. The weather will play a role, too, as we find out if La NiÒa deepens and brings droughts to Brazil and Argentina or fades away quietly.
Death of Bond Bull Market Exaggerated as Volatility Signals Calm
Charlotte Ryan – Bloomberg
U.S. government bonds have slid this week, yet fears of a market rout seem overblown.
The climb in Treasury yields has led Janus fund manager Bill Gross to declare the end of the bull market, but he doesn’t foresee dramatic losses. Volatility remains near record lows, according to three-month options on 10-year Treasury futures, suggesting investors aren’t worried about big price moves in either direction. That contrasts with the jump in volatility seen during the “taper tantrum” of 2013 when Treasury yields spiked as Ben Bernanke said the Federal Reserve was considering reducing its balance sheet.
The VIX Is Dangerously Close to a Tipping Point
Anthony Mirhaydari – InvestorPlace
Stocks soared on Thursday thanks to the largest gain by transportation stocks since 2001 and a rally in Treasury bonds as fears China could slow its bond purchases ó the reason for some market unpleasantness earlier in the week ó faded away after officials essentially labeled the report fake news.
****SD: Recap of yesterday’s activity.
Exchanges and Clearing
CCPs: it’s a marathon not a sprint
Securities Lending Times
All the pieces of the puzzle are now in place for the market to judge for itself whether central clearing is vindicated
CME copper volumes soar in December
CME Group copper futures surged at the end of last year, with monthly average daily volumes rising 72.3% year on year to 117,658 contracts, the US-based exchange said.
****SD: “Average daily copper volumes for the entire year stood at 107,775 contracts, up 26.2%, but pales in comparison to the 180.5% annual growth in copper options.”
Regulation & Enforcement
EU Parliament expected to soften euro clearing relocation powers
Francesco Guarascio – Reuters
The European Parliament is aiming to soften plans to give European Union regulators the power to force London’s main clearing house to relocate if it wants to continue doing business in the single market after Brexit, an EU lawmaker said.
Watchdog cracks down on binary options firms
The chief City regulator has taken the unusual step of naming 94 firms it thinks may be illegally taking bets from UK investors and has threatened to prosecute them where it can.
Transparency warning for data warehouses and rating agencies
Philip Stafford and Caroline Binham – Financial Times
The fees charged by rating agencies and data warehouses in Europe to customers are too opaque and could be preventing fair competition in the market, a key regulator warned on Thursday.
A study by the European Securities and Markets Authority found there were “significant areas for improvement” in the transparency of their fees.
Who Wants to Be Bitcoin’s Watchdog?
Robert Schmidt and Benjamin Bain – Bloomberg
At a meeting with staff of the U.S. Commodity Futures Trading Commission late last year, Chairman J. Christopher Giancarlo ticked off a list of the watchdog agency’s achievements. Among them: It emerged as the federal overseer of digital currencies like bitcoin. For better or worse, Giancarlo added.
Cost of proprietary market data to be big concern in 2018
Rick Baert – Pensions and Investments
The new year will see increased concern by money managers and asset owners about the cost of purchasing proprietary market data from exchanges, panelists at a Security Traders Association of Chicago conference said late Wednesday. “The buy side is going to be more alert to this than it has in the past,” said panelist John Ramsay, chief market policy officer at IEX Group Inc., an exchange that does not sell market data. He and other panelists said the cost of market data, previously a concern of the sell side exclusively, is being passed on to buy-side participants.
FIA Tech Goes Live With MiFID II Position Limits Databank And Spot Month Calendar
FIA Tech is pleased to announce the expansion of its Position Limits Databank service to encompass position limits for commodity derivatives as set by European regulators under MiFID II. The enhanced position limits service went live as planned ahead of the launch of MiFID II on January 3 2018.
****Also from FIA Tech – FIA Tech Launches Secure Lockbox For Indirect Clearing Data
Automated Trading Firm Plans Crypto Hires in Asia and Office in China
Andrea Tan – Bloomberg
Firm also plans to more than double employees in Singapore; Asia head Teeter says volatility will return to markets
DRW Holdings LLC, the automated trading firm founded by Don Wilson, plans to add staff at its cryptocurrency unit in Asia and is considering opening an office in mainland China, as it expands into new markets.
Top Women Advisors’ Best Stock Picks For 2018
The financial newsletter field has long dominated by men, so it might surprise some that many of the most successful advisors we cover are women; indeed, MoneyShow.com has been built over 3 decades by Kim Githler, herself a pioneer in financial education. What are the top women advisors recommending now? Here are their best ideas for 2018.
Barclays Announces Upcoming Delisting of 16 ETNs and Issuer Redemption of 18 Other ETNs
Barclays Bank PLC (“Barclays”) announced today that it plans to delist from the NYSE Arca exchange and suspend sales from inventory and further issuances of 16 series of exchange-traded notes, effective after the close of trading on April 12, 2018 (the “Delisting Date”). Barclays also announced that it plans to redeem in full 18 other series of exchange-traded notes on April 12, 2018 (the “Redemption Date”).