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Category Archives: Commentary

Commentary from the John Lothian News staff and guests editors.

Call the Guinness Book – Trading Records at CME Continue Standard

In 2018, 40% of Eurodollar options trading, 84% of Treasury options trading on the screen  The hit parade continues over at CME Group. Its markets didn’t need a volatility spike to continue their volume and open interest trends, but CME got one anyway and benefitted, especially in the interest rate options complex. The exchange group already had record electronic daily activity in its interest rate options in January. On February 6, as market participants were still trying to wrap their heads around inflation concerns and a market selloff, CME Group saw 2.96 million interest rate options trade on Globex. The…

The VIX Can’t Cause Vol – Cboe’s View on Volatility ETPs Standard

As volatility began to surge in February, and then exploded on the fifth of the month, exchange traded products (ETPs) that shorted or provided inverse exposure to VIX futures came under fire. The two most popular, Credit Suisse’s VelocityShares Daily Inverse VIX Short-Term exchange traded note (ETN), ticker XIV, and ProShares’ VIX Short VIX Short-Term Futures exchange traded fund (ETF), ticker SVXY, were the main focus, as they suffered huge losses. Trading in them was halted and then Credit Suisse announced it would liquidate its note. Those two products, more than any other, put intense scrutiny on such volatility products…

Vol-cano Erupts – How’s Seth Golden Doing? Standard

Last year there were a few stories that came across the desk regarding the juniorization of firms and how removing experienced senior personnel could present risks of its own. After all, if you came into the markets in the 2010s, how would you have experience with crazy drawdowns? (Myself included.) Maybe some are ahead of the curve and have at least seen Trading Places. Well, a lot of staff just gained some experience. The options and volatility stories of the last few days are intertwined and generally fall into the following storyline in some way: 1) Markets finally welcomed volatility…

Slippery Slope: Let’s Let Markets Decide On New Contracts Standard

Do exchanges need further regulation on the contracts they launch? That is the question the Commodity Futures Trading Commission is addressing now with the so-called self-certification process for new contracts. Exchanges have not faced this type of scrutiny over the launch of a new product in recent history until Bitcoin. Several new contract ideas have been squashed by legislation or regulation, including movie futures and onion futures way back when. But for the most part, exchanges are allowed to introduce new contracts as they wish and ultimately let the markets decide on whether or not they offer enough value to…

Tax Law Change Means All Cash Grain Traders Are Not Equal, Better Bids or No Standard

Grain market players who are not part of farmer-owned cooperatives are alarmed over the potential impact on grain market origination of the recent changes to the U.S. tax code. In what appears to be an unintended consequence of bad tax bill writing, cooperatives have been favored over other market players in the form of a tax benefit to farmers for selling their grain to cooperatives rather than to private grain companies. This change in the way physical grain moves through the system could make it more expensive for consumers, as cooperatives exercise what appears to be newly granted monopoly powers…

Turn Yourself In, It’ll Be Easier: Bank Cooperation On Spoofing Charges Saves Millions Standard

Over the past several months, there has been a fair amount of talk about the Commodity Futures Trading Commission’s push on the so-called “self-reporting” initiative launched last September and aimed at taking it easier on firms that come forward with wrongdoing. Yesterday’s announced spoofing charges and fines include one of the first such self-reporting cases, with HSBC Securities settling for $1.6 million, Deutsche Bank for $30 million and UBS for $15 million. Each was noted for their self reporting by James McDonald, the CFTC’s director of enforcement, who said in a statement: “Today’s enforcement action demonstrates that the commission will…

You Can’t Rain On Our Parade: Cboe’s Big 2017 Includes Bitcoin Futures. Can It Overcome Regulatory, Margin and Volatility Headwinds? Standard

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To hear Cboe Global Markets Chairman and CEO Ed Tilly tell it, his exchange group is firing on all cylinders and adding new ones to the engine. The exchange boasts the top US equity options market and has a lock on volatility products with the VIX futures and options and related exchange traded products. Cboe now has the top pan-European equity market and the second ranked US stock market, as well as a burgeoning FX business. As the migration of its exchanges onto the Bats trading platform continues, with Cboe Futures Exchange due up next month, its technology is taking…

Don’t Get the Munchees! A Lesson from the SEC Standard

The Securities & Exchange Commission (“SEC” or the “Commission”) has made good on its promise to pursue companies that engage in what it views as unregulated offerings of securities by way of initial coin offerings or “ICOs.” Specifically, the Commission recently pursued a company called “Munchee” that created an iPhone application for people to review restaurant meals. To fund the creation of its app, Munchee began an ICO seeking to raise $15 million and, in return, issue its token known as a “MUN.”  The company issued a white paper in connection with its ICO. In that document, Munchee indicated that…

Blockbuster – CME looks to increase back month activity in ag futures Standard

Twenty years ago, block trading of agricultural commodity futures never would have seen the light of day. There was no way the locals in the pit would have let block trades in corn or wheat or any of the other ag products happen. They would have demanded a piece of the action. Markets sure don’t look like they did two decades ago, though, and on Monday, block trades – large, privately negotiated trades executed off the floor or electronic market but cleared by the exchange – were executed in hogs, Black Sea wheat and urea fertilizer. Tuesday saw some corn…