Observations & Insight
TGI (Tariff) Friday
SD – JLN
Round 1 of the official tariff tiff began last night. How are you feeling?
While foot traffic has diminished in downtown Chicago this week as vacations take their toll on active headcount and the usual “summer quiet” stories making the rounds, I don’t feel lulled (other than the dearth of options specific news).
The “lack of lull” feeling isn’t totally out of place. Daily notional turnover on U.S. NMS exchanges in June was $350.1 billion compared with a summer norm of <$300 billion. (July has been slower thus far.)
“China this, soybeans that” chatter is everywhere. Plus, JLN personnel are heading to New York for next week’s kickoff of this year’s MarketsWiki Education World of Opportunity series of presentations from industry vets. (I’ll have some availability Wednesday morning and Tuesday – feel free to hit me up at email@example.com.)
Then there’s all this oil sabre rattling and earnings expectations/prep going on, too. (That being said, the VIX has fallen from 15 to the 13 handle today.)
It could have been a weirder Friday – we got a jobs report but not a presidential hint at the numbers. (After they were released he did tweet “JOBS, JOBS, JOBS!” with a link – the top responses are rather amusing.)
Random: Tesla’s Jan 2019 50 puts and Jan 2019 20 puts are active – check out the OI. (TSLA is trading around ~$308 as of this writing.)
There is one definitely summery thing though: we have the first hurricane of the season. It’s named Beryl.
Trump Eyes Even Higher Tariffs as Trade War With China Escalates
Bloomberg News (SUBSCRIPTION)
U.S. government imposes levies on $34 billion of imports; China to levy stiff duties on U.S. cars, soybeans, other items
President Donald Trump threatened to impose tariffs on every single Chinese import into America as the world’s two largest economies exchanged the first blows in a trade war that isn’t set to end anytime soon. After months of rhetoric, a 25 percent levy on $34 billion of Chinese goods entering the U.S. took effect just after midnight Washington time on Friday with farming plows and airplane parts among the products targeted. China hit back immediately via duties on U.S. shipments including soybeans and automobiles.
****SD: It took China three minutes to respond – 12:04 a.m. Eastern Time. Honestly, I’m a bit surprised it wasn’t instantaneous. Two other Bloomberg stories – Trump’s Trade War Is Already Hurting U.S. Investment, Fed Says and Trump’s Trade War Has Officially Started; Hostilities need to cease immediately.
Investors Skeptical About Stock Rally as Trade-War Era Begins
Gregor Stuart Hunter – Bloomberg (SUBSCRIPTION)
Stocks may be up today, but analysts and investors are skeptical that the rally will last as the U.S.-China trade war begins.
No longer just ‘noise’: ongoing trade uncertainty saps investor confidence
Ryan Vlastelica – MarketWatch
There’s both good news and bad news for those who watch how U.S. stock-market investors are feeling about the current state of the equity market.
Exchanges and Clearing
Cboe Global Markets Reports June 2018 Trading Volume
Year – to – date ADV across options, futures, U.S. and European equities and global FX up over 2017
June ADV in global FX up 35% over June 2017 ADV
June ADV in futures up 11% over May 2018 ADV
TMX Group Consolidated Trading Statistics – June 2018
TMX Group Limited today announced June 2018 trading statistics for its marketplaces – Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange (Alpha) and Montréal Exchange (MX).
“It’s important to offer accessibility during the original Asian trading hours”
MarketVoice, FIA’s Magazine of the Global Futures, Options and Cleared Swaps Markets, has looked into our plans to extend Eurex’ trading hours. Our deputy CEO Michael Peters shared the reasoning behind the project with the association.
ASX Monthly Activity Report – June 2018
SGX reports market statistics for June 2018
…Total Derivatives volume was 17.82 million, up 7% month-on-month (m-o-m) and up 14% year-on-year (y-o-y).
NSE to conduct mock trading session in currency derivatives on July 14
Business Standard News
The National Stock Exchange will conduct a mock trading session for currency derivatives on July 14 ahead of implementing the self trade prevention check.
Two senior equities traders exit SocGen in New York
Beecher Tuttle – efinancialcareers
Two longtime Societe Generale traders have left the bank. Olivier Blaise, SocGen’s head of volatility trading stocks and ETFs, and Benjamin Messas, head of exotic equity trading in the Americas, each exited in May, according to FINRA records. SocGen didn’t comment on the nature of their departures.
****SD: The trader churn continues. This week Business Insider had a story about the epic degree to which derivatives traders are changing roles after the February vol spike. I guess it reminded bosses that “Oh yeah, market conditions actually can change. Forgot about that…”
Regulation & Enforcement
Study finds 40% of firms at risk of MiFID II fines up to EUR5 million; Firms at risk of not complying with MiFID II’s Article 16 record keeping requirements, research says.
Hayley McDowell – The Trade
A significant 40% of financial services firms are at risk of being fined up to EUR5 million for failing to comply with record keeping rules under MiFID II, according to research. The study, carried out by communications technology firm Teleware, found that only 60% of companies in financial services have sufficient technology and processes in place to record and capture real-time communications.
U.S. operator lifts sanctions against Hana Financial
The Chicago Mercantile Exchange (CME) lifted its suspension of trading through Hana Financial Investment Co. ahead of schedule as of Friday, the South Korean financial entity said.
FINRA To Strengthen Background Checks For Broker Hires
Celeste Skinner – Finance Magnates
From next Monday, the regulator will begin to perform public record reviews of potential financial advisors.
A once timeless skill in commodities investing is under threat; Examining data on futures positions may no longer yield trading gold
Gregory Meyer – Financial Times (SUBSCRIPTION)
One of commodities markets’ more time-honoured tasks involves scanning weekly data on fund managers’ futures positions. Analysts calculate the funds’ net bullish or bearishness and try to guess where prices might go next.
Equity Volatility Will Lead To Another Leg To The Upside
Andrew Hecht – Seeking Alpha
Volatility in the stock market trended lower throughout 2016 and 2017. After a six-week correction in the equities asset class that started in response to selling in the Chinese domestic market at the end of 2015, stock prices rallied in what was an almost one-way move. Brexit in June 2016 did little to stop then bullish price action in equities. Many market analysts had predicted that the election of Donald Trump as the forty-fifth president of the United States would create a downdraft in stocks. The kneejerk reaction to the downside on election night gave way to a huge rally that lasted until early February 2018. Stocks did not move lower in response to the new administration; they went the other way.
Betting on Banks Rebounding
Gunjan Banerji – Barron’s (SUBSCRIPTION)
The big banks kick off earnings season on Friday. Are they set to stage a comeback?
Financial stocks in the S&P 500 have slid 5.1% this year, lagging behind the broader index’s slim 2.4% gain and sending some options investors running for protection. Bank shares have gyrated lately as results of the Federal Reserve’s stress tests have been released, challenging Goldman Sachs Group (ticker: GS) and Morgan Stanley (MS).
Labor Officials Were Alarmed By Trump’s Jobs Report Tweet: “It’s All Over The News”
Jason Leopold – BuzzFeed
“Are you ‘whispering words of wisdom’?” one official wrote, according to emails newly obtained by BuzzFeed News.
Q2 Commodity Performance and the Notable Spread Between Brent and WTI Crude
Marya Alsati – S&P Dow Jones Indices
The S&P GSCI was up 8.0% for the Q2 2018, with agriculture being the worst-performing sector in the index, and energy the best (see Exhibit 1). Of the 24 commodities tracked by the index, 14 finished the quarter on a positive note. Soybeans was the worst-performing commodity in the index, and Brent crude was the best.