China’s VIX Goes Dark as Government Clamps Down on Options
State-run index compiler stopped updating the gauge Thursday; Move is designed to curb options trading, people say
China stopped updating its homegrown version of the VIX Index, taking another step to discourage speculation in equity-linked options after authorities tightened trading restrictions last week. State-run China Securities Index Co. didn’t publish a value for the SSE 50 ETF Volatility Index on its website Thursday. An employee who answered CSI’s inquiry line said the company stopped updating the measure to work on an upgrade. The move was designed to curb activity in the options market, said people familiar with the matter, who asked not to be identified discussing private information. It’s unclear when the index will resume.
Market Selloff Played Out in the Most Hidden Corners of Credit
Tracy Alloway – Bloomberg
It makes some sense that investors reached for derivatives during the worst of the selloff, according to analysts at JPMorgan Chase & Co. Such instruments are more liquid than underlying bonds at a time when investors have long complained about their ability to buy and sell cash debt. Meanwhile, many of the systematic investors said to be driving the recent market moves tend to favor synthetic contracts over cash debt.
But one factor that may be exacerbating the drama in derivatives is the amount of options written on them. So-called credit index options give traders the right to buy or sell CDS indexes and are said to have exploded in popularity in recent years as investors seek to juice their bets through leverage or to place broad bets on credit.
Second investor files lawsuit over U.S. LJM fund: court filing
A second investor on Wednesday filed a lawsuit against managers of a U.S. mutual fund that lost most of its value earlier this month during a bout of market turmoil.
What are Ag Options Traders ‘Smiling’ About?
Erik Norland – CME Group
Our recent article on options on agricultural products marveled at the relatively low prices of at-the-money (ATM) options, especially in the face of a gathering La NiÒa, albeit a relatively mild one so far. As interesting as ATM options are, out-of-the-money (OTM) puts and calls are also telling their own story, arguably an even more perplexing one.
Brexit anxieties grow over London’s market infrastructure
Philip Stafford – Financial Times
As Theresa May tries to navigate the political minefield of Brexit, the future of the key financial market infrastructure located in London is becoming increasingly urgent.
This week, Ireland stepped up contingency planning to ensure shares on the Irish stock exchange can still be traded if the UK leaves the EU abruptly in March 2019, while Deutsche Bank said on Wednesday that it will make Frankfurt ó not London ó its centre for booking trades unless there is a transition deal that smoothes Britain’s exit.
Stigler’s Law and Option Pricing
Highly Evolved Vol
Stigler’s law states that no discovery is named after its original discoverer.
How Asia’s structured products dodged equities sell-off
Narayanan Somasundaram – Risk.net
Traditionally, an unexpected stock index crash sets alarm bells ringing for structured products traders in Asia. The popularity of the products among investors in the region means dealer hedging activity can represent a significant proportion of trading in certain indexes. So when times get tough, dealers often hit the same hedges at once, moving prices against them and leading to losses.
Nearly half of hedge-fund investors think the stock market has peaked
Kate Rooney – CNBC
About half of investors in hedge funds think equities peaked as of the end of last year, according to a new survey out Thursday. As a result, they’re turning back to hedge funds to manage the coming volatility.
The largest share of investors in five years plans to increase exposure to hedge funds in 2018, according to the report by data firm Preqin. Almost half are planning to maintain these allocations over the next year, which Preqin said is due to damped sentiment towards stocks.
Exchanges and Clearing
Fixed Income Highlights – February 2018 edition
Philip Simons, Global Head of Fixed Income Sales & Business Development, gives an update on the newest developments at Eurex, especially the OTC interest rate derivatives initiative and the Fixed Income ETD market as well as recent product launches.
Indian exchanges assure global bourses over orderly transition
Indian stock exchanges today assured international bourses and index providers of orderly transition, saying steps would be taken to ensure that ending licensing pacts do not disrupt the markets.
Regulation & Enforcement
French Watchdog Says ‘Crypto Derivatives’ Must Be Regulated, Can’t Be Advertised Online
Molly Jane Zuckerman – Cointelegraph
French stock market regulator Autorite des Marches Financiers (AMF) released a statement Thursday, Feb. 22, that cryptocurrency derivatives must be regulated under the European Union’s new Jan. 2018 financial reforms.
As derivatives cannot be legally advertised electronically, the AMF also states that online advertisements for cryptocurrency derivatives are not permitted.
U.S. regulatory panel kicks off Prudential review, discusses volatility
A panel of U.S. regulators on Wednesday kicked off a review of whether insurer Prudential Financial Inc (PRU.N) should continue to be subject to stringent oversight, according to a public notice.
Cinnober Posts Yearly Operating Loss of $11.49m, Despite Improved Net Sales
The company attributes the operating loss to high expenses related to MiFID II preparations.
Analysts lukewarm on Fidessa-Temenos
Andrew Neil – Global Investor Group (SUBSCRIPTION)
Culturally these are very different companies and the integration will not be without risk, according to analysts at Barclays
Furious Investors Dump Shares of Angry Birds Game Maker
Kati Pohjanpalo – Bloomberg
The chickens are coming home to roost at the Finnish company behind the Angry Birds game.
Rovio Entertainment Oyj lost half its market value in Helsinki, the most since its initial public offering in September and leaving it worth just over $500 million. Investors dumped the stock after executives predicted 2018 sales and profit will come in far below previous estimates.
Top cryptocurrency traders asking for big shake-up to bitcoin futures
Frank Chaparro – Business Insider
Some of the biggest players in the cryptocurrency market are calling for a shake-up in bitcoin futures trading.
Bitcoin futures started trading on Cboe Global Markets and CME in December and have been steadily growing since, with volumes for both markets at just under 10,000 contracts traded Wednesday, according to data from Bloomberg. At least 30 firms trade on Cboe, according to briefing documents from the exchange.