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Volatility Is Back. Scarred ETF Investors Aren’t

Lead Stories

Volatility Is Back. Scarred ETF Investors Aren’t
Asjylyn Loder – WSJ
Exchange-traded products that enable investors to profit from wild price swings in stocks are enjoying big gains this year. But retail investors, who’ve been burned in the past by betting on volatility, are mostly steering clear of them.
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Last commodities hedge funds go off beaten track
Gregory Meyer – Financial Times
Being a commodities hedge fund manager is an increasingly lonely pursuit. Specialists in fuels, crops and metals have been exiting and few new arrivals are taking their place.
This class of traders once threw its weight around in futures markets. In the past 12 months, firms such as Jamison Capital Partners, Madava Asset Management and Astenbeck Capital Management have shut down funds, the latest in a prolonged retreat.
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The Big Question for Markets: Is There a Kudlow or Powell ‘Put’?
Neil Irwin – NY Times
These are unsettled times in financial markets.
Stock prices rose or fell by more than 1 percent in four of five days last week, and if anything those closing numbers masked even larger swings within each trading sessions. A common measure of expected stock market volatility is about to double its level from early January.
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European Interest Rates Have To Go Higher Eventually
Andrew Hecht – Nadex
The global financial crisis of 2008 caused central banks around the world to dig deep into their monetary policy toolboxes to come up with solutions to stimulate economies.
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Hedge funds rotate from WTI to Brent in search for roll yield: Kemp
John Kemp – Reuters
Hedge funds trimmed their bullish position in crude oil and fuels in the most recent week after increasing it significantly over the previous fortnight.
But the overall reduction conceals a sharp shift away from U.S. light crude (WTI) and toward the international marker Brent, according to an analysis of position data published by regulators and exchanges.
/jlne.ws/2IJc9UR

New Cboe Report Indicates More Bearish Bitcoin Price Pressure Is Coming – The Merkle
JP Buntinx – The Merkle
Ever since Bitcoin futures were made accessible to institutional investors, there has been little interest in this trading vehicle, it seems. The most recent report by Cboe shows that most speculators are opening short positions on the Bitcoin price. This will undoubtedly lead to a lot more price volatility, which is the last thing Bitcoin needs right now.
/jlne.ws/2v1WUVb

Exchanges and Clearing

OCC Continues To Clear the Path for the Exchange-Listed Options Industry
Scot Warren – OCC
One of OCC’s goals as the foundation for secure markets is to safeguard the integrity of cleared markets through safe and sound practices in our role as a Systemically Important Financial Market Utility (SIFMU). To help us achieve that goal, in March, OCC implemented a new cash clearing fund requirement, a measure that requires our clearing firms to collectively deposit and maintain $3 billion in cash our clearing fund.
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Asset managers back U.S. plan to limit stock exchange rebates
John McCrank – Reuters
Financial firms representing more than $1 trillion in assets under management have endorsed a U.S. regulator’s plan to test limiting the rebates and other incentives that stock exchanges can pay to brokers, a practice critics say creates conflicts of interest.
/jlne.ws/2v7Cydd

CBOE Holdings: Volmageddon Creates Opportunity
Brad Kenagy – Seeking Alpha
Since the beginning of the year, the market has seen a significant increase in volatility. One of the beneficiaries of an increase in volatility is CBOE Holdings (CBOE) as they are the provider of VIX futures & options. However, the market has not agreed, the share price is down 12% from the since the beginning of the year and 20% since the closing high at the end of January. Surprisingly, there have been no articles on CBOE this year and with the company reporting earnings in just under a month; I thought it would be a good idea to cover the company given the events that occurred during the first quarter.
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HKEX Marks Fifth Anniversary Of After-Hours Derivatives Trading
Press Release
The After-hours Trading Session (T+1 Session), an additional derivatives trading session introduced by Hong Kong Exchanges and Clearing Limited (HKEX) in April 2013, has proved to be effective and useful to market participants as it marks its fifth anniversary.
Over the past five years, HKEX observed that the T+1 Session’s importance to the market increased significantly, with trading volume up almost 12 times from the initial levels to more than 83,000 contracts. The market data also show that the session’s volume rose from about 4 per cent of the day trading volume in 20132 to about 20 per cent so far this year.
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ICE’s Chief Says Crypto Trading Is a ‘Trend We Can’t Ignore’
Viren Vaghela – Bloomberg
Intercontinental Exchange Inc., the owner of New York Stock Exchange, on Monday refused to rule out starting futures contracts on digital currencies, following in the footsteps of two of its rivals.
“There is a trend here we can’t ignore in my mind, so I don’t discount it,” Jeffrey Sprecher, ICE’s chief executive officer, said in an interview on Bloomberg TV. “People put more faith in a guy named Satoshi Nakamoto that no one has ever met than they do in the U.S. Fed,” he said, referring to the founder of bitcoin.
/jlne.ws/2HqZsOQ

Technology

Matrix Executions Expands Offering with Cboe Silexx Integration
MarketWatch
Matrix Executions, LLC. (“Matrix”) now offers Cboe’s Silexx OEMS users an additional option for routing. Matrix Executions, a newly formed agency only broker-dealer, serves the needs of exchanges as well as institutional and retail professionals.
Silexx, an innovative multi-asset order and execution management system (OEMS) caters to institutional customers throughout the U.S. With the Silexx OEMS, users can efficiently trade multiple equities based asset classes using Matrix routing and algorithmic strategies from one platform.
/jlne.ws/2IJRlfT

Strategy

SPY Options For Cautious Optimists
William Baldwin – Forbes
In a toppy market, investors suffer terrible mental torment awaiting the next crash. Ministering to them is Robert N. Gordon, portfolio doctor.
One patient: a forlorn taxpayer sitting on a highly appreciated $51 million collection of blue chips. Using a deft combination of put and call options, Gordon has all but locked in the gain while sidestepping tax rules designed to punish people who hedge away their risk.
/jlne.ws/2v1jxZA

Stock market ‘full bull detox’ coming, markets dangerously close – BAML
Joe Ciolli – Business Insider (SUBSCRIPTION)
Michael Hartnett realizes you’re worrying about a trade war, and he has some advice for you: Keep an eye on the bigger and potentially more catastrophic issue at hand — the Federal Reserve’s ongoing monetary tightening.\
It’s this removal of accommodation that Hartnett thinks will ultimately send the market into what he calls a “full bull detox,” or a reversal of the risk-seeking behavior that has characterized it for so long.
/jlne.ws/2IGrFR8

Miscellaneous

The loan market loves Libor…
Joe Rennison – Financial Times
… or rather, Libor has some features which work for the $4.1tn syndicated loan industry that are less crucial to the derivatives industry that has, so far, spearheaded a move to a new benchmark interest rate.
For those who haven’t been following, global markets are plotting a move away from the London Interbank Offering Rate (Libor), as it has become apparent that we shouldn’t use a survey to set a key global interest rate.
/jlne.ws/2IKluvJ

Exposed: Lehman Brothers internal FX training manual – Want to know what Tier 1 banks teach their FX desks? Look no further
Andrew Saks-McLeod – FinanceFeeds
Tier 1 liquidity is relied upon by our entire finely honed non-bank FX and electronic trading business globally.
Reliance on Tier 1 banks which adorn the shores of London’s docklands at the now extremely prosperous and world-dominating Canary Wharf is so concentrated that over 62% of all worldwide FX order flow is handled by just six banks whose plate glass offices, all of which are within close proximity of Canada Square, power the $5 trillion per day international FX markets.
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About Author

Bergstrom is chief information officer of John J. Lothian & Co. He edits MarketsWiki and JLN Options.