U.S. midterms a mere blip on equity options traders’ radar
Saqib Iqbal Ahmed – Reuters
Less than a month before the U.S. congressional elections, data suggests equity options traders do not view the election as a big catalyst for setting the direction of U.S. stock market in the immediate aftermath of the vote results.
****JB: For a different view on this from Yahoo Finance – Markets think the midterms could be as big as the presidential election
Federal Reserve minutes indicate interest rates will have to rise high enough to slow down the economy
Greg Robb – MarketWatch
A majority of top Federal Reserve officials believe that interest rates will have to continue to increase until the economy slows down from the rising cost of borrowing, according to minutes of the central bank’s September meeting released on Wednesday.
Just how long policy would have to be restrictive was an open question, the minutes showed. A “few” officials thought policy would have to remain “modestly restrictive for a time” while an additional “number” thought policy would need to be restrictive only “temporarily.”
Here’s proof that higher bond yields didn’t cause last week’s plunge in stocks
Simon Maierhofer – MarketWatch
Imagine going to the doctor with heartburn. Finding the actual cause of heartburn is important, because it could lead to anything from indigestion to heart attack.
Last week, stocks had a “heartburn week.” Knowing the cause will help understand whether this is indicative of “indigestion” (aka a correction) or a “heart attack” (aka a crash).
Wall Street’s Fear Gauge Flashes Green Again
Jon Sindreu – WSJ
Panic in the stock market is officially over—at least according to derivatives markets.
The Cboe Volatility Index remains elevated after hitting its highest level since February during last week’s market rout. The VIX is known as Wall Street’s “fear gauge” because it tracks the expected swings in the S&P 500 index using options contracts.
****JB: Things change. As of this writing the Dow is down -430 points, the S&P 500 index is down 40 points and the VIX is up to 21.05 from an open of 18.46. Day is not over yet.
Exchanges and Clearing
A New SEC Ruling Is a Win for Brokers and Traders
Daren Fonda – Barron’s
Brokers, banks, and trading firms may have won a small victory: Regulators appear to be cracking down on fees for proprietary market data feeds.
The Securities and Exchange Commission issued a ruling Tuesday against Nasdaq (ticker: NDAQ) and Intercontinental Exchange (ICE), owner of the New York Stock Exchange. The ruling concerned price increases for proprietary market data, such as the depth of book, order imbalances, and security status. The SEC ruled that the exchanges failed to justify price increases for the data. The fees weren’t necessarily too high, according to a statement from SEC chairman Jay Clayton. But the exchanges didn’t provide “sufficient factual and legal support” to warrant the price increases, he said, ordering the exchanges to provide stronger rationales for the price increases.
Exchange chiefs back Giancarlo in tussle over CCP oversight
Robert Mackenzie Smith and Dan DeFrancesco – Risk.net (SUBSCRIPTION)
The chief executives of CME and Eurex have rallied behind a US regulator’s call for European lawmakers to scrap a contentious plan to expand oversight of foreign clearing houses.
Nasdaq Commodities quits oil contracts, to list new products in France and Germany
The Nasdaq Commodities exchange will delist its remaining fuel oil contracts that are expiring in 2019 and launch a new natural gas monthly future contract in France and options for the German only electricity market in November, it said on Thursday.
The planned delisting is the last step in the complete closure of the current fuel oil product offering at Nasdaq Commodities, the exchange said.
FIA Statement on Basel Committee’s Consultation on Capital
FIA President and CEO Walt Lukken today made the following statement regarding the Basel Committee on Banking Supervision’s announcement of a consultation on the leverage ratio treatment of client cleared derivatives:
“As FIA has consistently emphasized and demonstrated in our dialogue with policymakers, the leverage ratio has a direct and significant negative impact on the ability of banks to provide clearing services to customers. FIA welcomes the Basel Committee’s decision to publish this consultation and looks forward to responding.”
Regulation & Enforcement
SEC Charges eBay’s (EBAY) Former Director of SEC Reporting with Insider Trading
On September 28, 2018, the Securities and Exchange Commission charged eBay Inc.’s (NASDAQ: EBAY) former Director of SEC Reporting with insider trading ahead of Xoom Corporation’s acquisition by PayPal Holdings, which at the time was owned by eBay.
****JB: And of course he used options for this scheme because presumably no one would notice.
The VIX To Rule Them All – And The 3 Value Stocks We Added In The Volatility
Matthew Utesch – Seeking Alpha
In the Lord of the Rings, we are reminded of the line “one ring to rule them all” as the plot focuses on a single ring that contains so much power that it is impossible for any individual (no matter how well-meaning) to possess. Although the Ring exists in an imaginary world, the same principles hold true in real life that some devices are more powerful than one would expect. This is where I make the case that the VIX index has been underestimated as a way of understanding many of the dramatic market movements that have occurred over the last year.
S&P 500 Pulled Off a Textbook Bull Market Move: Chart
Jonas Elmerraji – TheStreet
No doubt about it, last week’s price action was jarring for most investors.
Volatility flooded into all the major indices starting last Wednesday, resulting in a nearly 5% selloff in the S&P 500 by the start of this week – and a 56% two-day spike in the (VIX.X) Volatility Index.
And despite the rebound rally that the broad market pulled off Tuesday, many investors are understandably feeling gun-shy in the face of all the added volatility. The good news is that last week’s selling actually looks like a pretty textbook move for the S&P 500 – and, from a technical standpoint, it’s one that sets the stage for new highs in the months ahead.
To decipher what’s happening in the big picture, we’re turning to the charts for a technical look.
3 Strategies for Dealing with Volatility
Martin Tillier – Nasdaq
For traders and investors, volatility is unavoidable. It is not always present but comes regularly enough that we should all be familiar with it. Yet, every time it does come, it seems to take us by surprise and can often induce a feeling of panic. We lose sight of the facts, such as that Tuesday’s big rally means that so far stocks are positive on the week, and we focus instead on the big down days that provoke memories of crashes past.
Short positions on most Asian currencies drop; dollar momentum seen waning: Reuters poll
Ambar Warrick – Reuters
Short positions on most Asian currencies were seen unwinding over the past two weeks, a Reuters poll showed on Thursday, with traders turning skeptical of the dollar’s .DXY bull run after U.S. retail sales data came in below expectations.
What Is Risk Really All About?
Jerry Wagner – Seeking Alpha
I was reading my email this morning, and I came across this query: “What were you doing at this time last year?” I wondered, so I checked my calendar. I realized I had been writing the following article that I think remains relevant, especially after the downturn last week
Shattering the Glass Ceiling
Jeff Reeves – FIA
When it comes to gender diversity in the futures and derivatives industry, perception is reality.
That was the key takeaway at a special panel discussion at FIA’s Futures & Options Expo in Chicago on Wednesday, Oct. 17.
The six highly successful women who participated in FIA’s “Shattering the Glass Ceiling” panel all shared personal stories of professional growth and success, proving there are indeed paths to leadership in the industry right now. But they all conceded that each of their professional journeys were driven by self-confidence, risk-taking and mentorship that helped them reach their full potential — factors that helped them overcome the doubts that can hold some women back.