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Citadel ups its game; BOX and tZERO plan token exchange

Observations & Insight

The Options Industry Leader Series 2018 – Cboe’s Andy Lowenthal
Brought to you by the OCC

In this video from the 36th annual Options Industry Conference (OIC) in Amelia Island, Fla., Andy Lowenthal, Cboe executive vice president and co-head of markets, talks about transitioning Cboe’s exchanges to Bats technology, the plan for more crypto offerings, and bringing the industry together to focus on market structure issues.

Watch the video here »

Lead Stories

Exclusive: Citadel Securities ups ETF game as part of growth push
John McCrank – Reuters
Citadel Securities LLC has entered the lead market making business with a small list of exchange-traded funds, and is doubling down on hiring and analytics in 2018 to keep an edge over rival electronic trading firms, according to sources and an internal memo.

****SD: ETFs get the headline treatment as it was not a business Citadel was in at Nasdaq previously, but ETFs are just one part of an overall push – “Citadel plans to focus on adding expertise in existing and new businesses including ETFs, arbitrage, options, fixed income, currencies and commodities and low-latency trading.” unit, BOX to launch security token exchange
Gertrude Chavez-Dreyfuss – Reuters unit (tZERO)and BOX Digital Markets said on Tuesday they plan to launch a regulated exchange for security tokens.
Security tokens are digital representations of financial assets such as stocks, real estate or debt. Analysts said there are several projects in the works that would tokenize these financial assets.

****SD: You’d think by now I’d start to see the crypto announcements coming from a mile away…

Here’s the hidden stock-market risk investors need to watch out for
Ryan Vlastelica – MarketWatch
U.S. stock-market investors have plenty of potential headwinds to monitor, a list that includes trade policy, central-bank policy, and rises in commodity prices, inflation, bond yields, and the U.S. dollar, but one of the biggest risk factors may be essentially invisible.
Correlations, or the degree to which two different securities move in tandem, could be prone to spikes, which would create a trading environment where stocks broadly move in the same direction, regardless of their individual or underlying fundamentals.

The market’s ‘fear gauge’ may be signaling investors aren’t buying the rally
Rebecca Ungarino – CNBC
A concerning disconnect may be emerging between equities and the market’s measure of volatility, according to one portfolio manager.
Dennis Davitt of Harvest Volatility Management told CNBC’s “Trading Nation” he’s carefully watching the Cboe Volatility Index, widely considered the market’s “fear gauge” as it measures equities’ expected volatility over 30 days. Here are his reasons why.

Exchanges and Clearing

New York Stock Exchange to Have First Female Leader in 226-Year History
Bradley Hope and Alexander Osipovich – WSJ
The New York Stock Exchange is set to get its first female leader in its 226-year history. Stacey Cunningham, the NYSE’s chief operating officer, will become the Big Board’s 67th president, the exchange’s parent Intercontinental Exchange Inc. told The Wall Street Journal. She will start her new role Friday, succeeding Thomas Farley, an ICE veteran who is leaving the Atlanta-based company.

*****Other sources: the FT; Business Insider; The Trade; and Reuters. ICE press release here.

India exchange takes SGX to court over derivatives dispute
Emma Dunkley – Financial Times
India’s main stock exchange is taking the Singapore bourse to court to try to block SGX’s imminent launch of Indian derivatives contracts, in a sign of mounting tension between the two trading venues.
The Singapore Exchange said on Tuesday that the National Stock Exchange of India was seeking an injunction from the Bombay High Court on Singapore’s new Indian equity futures, set to launch next month.

****SD: Bloomberg here and Reuters here. SGX said in its release “We have full confidence in our legal position and will vigorously defend this action. Our clients can continue to trade per normal.”

CME amends feeder cattle futures, options contract rules
The Chicago Mercantile Exchange will amend the feeder cattle futures contract rule to include cattle identified in the U.S. Department of Agriculture reports as fancy, thin, fleshy, gaunt or full in the calculation of CME’s feeder cattle index price, the exchange said in a release on Tuesday.

Cboe Global Markets’ Exchanges Trading Schedule for Memorial Day Holiday
Cboe Global Markets, Inc., one of the world’s largest exchange holding companies, today announced the following trading schedule for the company’s options, futures, equities and FX trading venues in observance of the Memorial Day holiday.

Regulation & Enforcement

Equity Alert: Brownstein Law Group Announces Investigation of Securities Claims against the VIX Exchange CBOE
Business Wire
Brownstein Law Group, PC, a San Francisco law firm focused on complex litigation, announces that it is investigating potential securities claims on behalf of purchasers who held or traded S&P 500 (“SPX”) option contracts (“SPX Options”), CBOE Volatility Index (“VIX”) option contracts (“VIX Options”), futures based on the VIX (“VIX Futures”), or VIX Exchange Traded Products (“VIX ETPs”) on exchanges run by Cboe Global Markets, Inc. (formerly known as CBOE Holdings, Inc.) and its affiliates (“CBOE”).

****SD: And another one…

How to Launch Cryptocurrency Derivatives: CFTC Issues New Guidance
Gabriel T. Rubin – WSJ
The top U.S. derivatives regulator on Monday provided guidance to exchanges and clearinghouses that want to list cryptocurrency products, responding to industry concerns about the vetting process for new derivatives contracts like bitcoin futures.


Boom in Tick Data-as-a-Service
Robin Mess, big xyt – TABB Forum
The rise of quantitative analysis is mirrored by a rise in demand for its fuel: data. With one feeding the other, investment firms and banks are increasingly reliant upon products and services that can be tested and proven in a way that, for many markets, was impossible 10 years ago. As a result, the use of outsourced tick data provision is becoming prevalent in order to support that rapid growth.

First Derivatives Sees Substantial YoY Growth in Revenues
David Kimberley – Finance Magnates
First Derivatives (FD), a consulting firm and software provider to trading companies, released its annual results for the year ending in 2018 today. The company saw a substantial increase in year on year revenue that was accompanied by comparable growth in net profit.

****SD: Giving Newry new life!

Exclusive Interview: The Python Quant
Dr. Yves J. Hilpisch is founder and managing partner of The Python Quants (, a group focusing on the use of open source technologies for financial data science, artificial intelligence, algorithmic trading and computational finance. He is the author of the books: Python for Finance (O’Reilly, 2014), Derivatives Analytics with Python (Wiley, 2015) and Listed Volatility and Variance Derivatives (Wiley, 2017)


TD Ameritrade: VIX Performance Heading into Memorial Day Could Predict Summer Trading
Donna Fuscaldo – Investopedia
Wondering if the summer months will be a volatile time for stocks? TD Ameritrade’s chief market strategist J.J. Kinahan said that investors can look at how the VIX options trade this week to get an indication. According to the TD Ameritrade Holding Corporation (AMTD) strategist, this is the time of year when large firms will make a decision on how they will hedge for volatility during the summer. As a result, the VIX options market heading into the long Memorial Day weekend could provide some insight.


Lira Plunges to New Record
Tugce Ozsoy – Bloomberg
Turkey’s lira fell to a new record, reversing earlier gains, after Fitch Ratings said it was concerned about the erosion of the central bank’s independence to fight double-digit inflation.

Nex welcomes market volatility but deepens cost cuts
Philip Stafford – Financial Times
Nex Group, the trading and technology company run by Michael Spencer, has further deepened its cost-cutting to meet long-term profit targets even as it received a boost from renewed volatility in its markets.

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Graduate of University of Minnesota School of Journalism and Mass Communication