Havens Just Aren’t Safe Anymore, Goldman Says
Eric Lam – Bloomberg
No traditional havens had positive beta to VIX lately: Goldman; Derivative hedges will become more important, strategists say
Traditional safe havens haven’t been working out for investors in the latest ructions in financial markets, strategists at Goldman Sachs Inc. warned.
****JB: Business Insider here.
Hedge Funds Bet on Volatility
Gunjan Banerji – WSJ
Hedge funds are betting that the recent turbulence in U.S. stocks will persist—a reversal after wagering for more than two years that the equity market will remain calm.
Leveraged funds, a category that includes hedge funds, were net bullish on Cboe Volatility Index, or VIX, futures as of March 6, the latest Commodity Futures Trading Commission data show—marking the first time bullish wagers have outnumbered bearish ones on the contracts since February 2016.
****JB: Bloomberg here.
Lawsuit claims Wall Street’s ‘fear gauge’ was ‘manipulated’
Nathaniel Meyersohn – CNN
The CBOE Volatility Index (VIX), known as the VIX, has been hotly debated since the stock market plunged last month. The VIX is a real-time predictor of how much the S&P 500 will fluctuate over the 30 days that follow.
Betting on market calm had paid off for investors as stocks went on a tear in 2017, but it backfired last month when volatility seized Wall Street.
****SD: Reuters here.
Don’t Mistake Market Calm for Being Out of the Woods
Richard Barley – WSJ
Is the fuss all over? February’s sharp fall in stocks has faded, with the S&P 500 only 3% below its January peak and up 4% for the year. The rise in Treasury yields has paused and corporate-bond spreads are still tight.
Consolidated Audit Trail: Can Complex Compliance Create Future Value? David Campbell and Keith Jamaitis – Traders
Spurred by the Flash Crash, Consolidated Audit Trail (CAT) will change how SEC regulated banks and broker dealers manage information and reporting, creating monumental changes in technology, operations and processing flows. The data repository will link cross-firm trade events and track potential market manipulation, overseeing the most complex orders and trading strategies making oversight transparent.
All but one top US FCMs grew assets in January
Julie Aelbrecht – FOW (SUBSCRIPTION)
All but one of the top ten US futures commission merchants (FCMs) has reported a growth broker-held assets at the start of this year, according to the latest data from the US futures regulator.
Top dog Goldman Sachs increased its customer holdings by 5% to $21.2 billion, while runner up and rival JP Morgan saw its business grow 2% to a total of $18.6 billion at the end of January.
Exchanges and Clearing
Cboe Periodic Auctions Hits New One-Day Record of EUR582 Million Traded on March 12
Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE), one of the world’s largest exchange holding companies, today reported that Cboe Europe’s Periodic Auctions book set a new one-day record of EUR582.8 million traded on Monday, 12 March 2018. The previous one-day record was EUR488 million set on 6 February 2018.
CBOE Director For Product Development Talks Successes…
Darryn Pollock – Cointelegraph
In the lead up to Dec. 10 last year, there was a massive crypto rally that many feel was catalyzed by the announcement that Chicago Board Options Exchange (CBOE) would be launching Bitcoin futures.
They were heralded as a melding of the crypto investment space and the traditional spheres. Now, those in Wall Street would be able to enter the Bitcoin space with a familiar product.
A few months after the futures have launched, it is probably a good time to check in and see how this product has worked out at CBOE.
trueEX plans launch of cryptocurrency marketplace; trueEX has established new ‘trueDigital’ business to offer non-deliverable forwards for Bitcoin on new marketplace.
Hayley McDowell – The Trade
trueEX has confirmed plans to roll out a regulated derivatives marketplace for digital assets in a bid to win business from institutional investors looking to enter the cryptocurrency market.
Hong Kong Exchange, MSCI Are Said to Plan New Asian Futures
Kana Nishizawa and Benjamin Robertson – Bloomberg
Hong Kong Exchanges & Clearing Ltd. is working with index compiler MSCI Inc. to create futures contracts that would track hundreds of Asian companies, a broadening of the bourse’s offerings as it looks to build its derivatives business.
Regulation & Enforcement
U.S. Libor trader loses UK appeal over rigging conviction
Kirstin Ridley – Reuters
A former Barclays (BARC.L) trader lost an appeal against his conviction over Libor benchmark interest rate rigging at London’s Court of Appeal on Tuesday.
Alex Pabon, a 39-year-old American former derivatives trader, was jailed in 2016 alongside three other former Barclays traders for conspiracy to defraud in relation to the manipulation of Libor (London interbank offered rate).
The Evolving Middle Office: A Seal of Approval
Tom Lehrkinder – Tabb Forum
The middle-office technology supporting the futures industry finally is evolving after years of underdevelopment. Buy-side clients are demanding their FCMs provide new and improved tools to enable near-real-time processing and reconciliation of trades. TABB Group reached out to C-level operations and business executives to discuss the state of middle-office technology.
Bank of America lost two of its most senior equity derivatives traders
Sarah Butcher – Efinancialcareers
There have been more big exits from Bank of America’s equities business. Following the departures of Whitfield Hines (head of EMEA equity derivatives flow sales), Guillaume Arnaud (head of EMEA solutions sales and structuring) and Roy Martins (head of global equity swaps distribution), insiders say the bank has been struck by the resignations of Alexandre Fleury, global head of exotics trading, and Florent Sabot, head of exotic equity trading for EMEA and Asia.
XIV: The Scapegoat Of The Market’s Decline
As trading opened on Monday, February 5th, 2018, stocks had already been falling for a few days. Then, on that day, there was a major decline – the largest drop in point terms in history. The Dow was down 1,175 points. The S&P 500 Index (SPX) was down 113 points. All other major stock indices suffered similar fates. Those net changes were effective as of the 4 p.m. (Eastern Time) close of the NYSE.
Many Financial Firms Still Aren’t Prepared for Brexit, Irish Regulator Says
Peter Flanagan and Dara Doyle – Bloomberg
Many firms remain unprepared for U.K. exit from the EU; Regulator sees ‘significant step up’ in Brexit-based inquiries
Irish Central Bank Deputy Governor Ed Sibley warned that many financial firms remain unprepared for Britain’s exit from the European Union as the two sides remain at odds on their future relationship.
What has changed since the 2008 financial crisis?
V. Anantha Nageswaran – LiveMint
In October 2008, within weeks of the collapse of Lehman Brothers, Alan Greenspan testified before the US congress on whether his emphasis on deregulation had failed. He said yes, but then added caveats to his admission. In the end, he contradicted himself. He said: “Whatever regulatory changes are made, they will pale in comparison to the change already evident in today’s markets.” He added: “Those markets for an indefinite future will be far more restrained than would any currently contemplated new regulatory regime.”
Dealmaking Gets Harder Under Trump
Matt Levine – Bloomberg
One area where Donald Trump is more economically populist than I had expected is: He really does seem interested in blocking big mergers. In November, for instance, the Justice Department sued to block AT&T Inc.’s planned acquisition of Time Warner Inc., and then yesterday Trump himself issued an executive order blocking Broadcom Ltd.’s proposed hostile takeover of Qualcomm Inc. on national security grounds. The worry of the Committee on Foreign Investment in the U.S. was not that Broadcom — a Singapore-based company racing frantically to reincorporate itself in the U.S. — would do bad things with the technology it acquired from Qualcomm, but rather that it would underinvest in the research and development and allow China’s Huawei Technologies Co. to take the lead in building out 5G mobile technology.