| February 18, 2022 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | EDITOR'S NOTE:
JLN Options will not be published on Monday, February 21, in observance of the Presidents' Day holiday. We'll be back on Tuesday. Have a great weekend!
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Eurex is celebrating three years of ESG derivatives trading. Eurex has 28 ESG derivatives, including five ESG futures and six options. Eurex is home to six of the top ten ESG derivatives globally by volume and open interest. Notionally, they have traded EUR79.3 billion since the launch, with a 209% increase year on year from 2021 to 2022. The notional open interest is EUR5 billion, and increased 202% from 2021 to 2022. The ESG sector is Eurex's shining success.
| | | | | | Lead Stories | | | A $2.2 Trillion Crunch Time Looms for Traders Loaded With Stock Hedges
Friday's OpEx lands in market where investor caution growing; Investors are holding positions until 'the bitter end': Sears
Lu Wang - Bloomberg
Stock investors, on guard for turmoil with everything from geopolitics to Federal Reserve hawkishness strafing their nerves, are bracing for a chaotic end to the week with $2.2 trillion of option expirations set to hit the market Friday. The monthly event involves $545 billion of derivatives across single stocks scheduled to expire, Goldman Sachs Group Inc. estimates. About $985 billion of S&P 500-linked contracts and $165 billion in options tied to the world's largest exchange-traded fund, the SPDR S&P 500 ETF Trust (ticker SPY), will run out, according to the firm's strategist Rocky Fishman.
/jlne.ws/3I8nL2Y
Analysis: As stocks swing, investors bet choppy markets are here to stay
Saqib Iqbal Ahmed - Reuters
After a turbulent start to the year, investors are betting stock market volatility isn't going away anytime soon.
While tensions between Russia and Ukraine have been the most recent driver of stock market gyrations, many expect inflation, uncertainty over monetary policy and stretched valuations to keep stirring asset prices this year, even if geopolitical fears subside.
/jlne.ws/3H0GxaU
U.K. Bond Traders Pay Most in Over Decade to Hedge Price Swings
Libby Cherry and James Hirai - Bloomberg
Implied volatility on short rates climbs to highest since 2010; Traders brace for Fed, BOE and ECB decisions next month
Traders seeking refuge from whiplash that has plagued U.K. bond markets this year have pushed the cost of hedging price swings to the highest in over a decade. The implied volatility for short-dated rates -- among the most sensitive to changes in borrowing costs -- soared to the highest level recorded in data stretching back to 2010 this week. It comes as investors jostle to adjust positions before the European Central Bank, Bank of England and Federal Reserve set policy next month.
/jlne.ws/3LLEnQf
Race for Leveraged ETFs Betting on Single Stocks Like Tesla (TSLA) Breaks Out
Elaine Chen - Bloomberg
Direxion has set off a race to deliver the first U.S. exchanged-traded funds that would allow investors to make leveraged bets on single stocks.
The asset manager, one of the biggest providers of leveraged ETFs, is planning 24 new funds that would offer the inverse, double the inverse or double the gain on single companies including Tesla Inc. and Meta Platforms Inc., according to Thursday filings with the Securities and Exchange Commission.
/jlne.ws/3sQO9aZ
US stocks could tumble almost 20% on Russia-Ukraine tensions â and investors are being too complacent, RBC says
Harry Robertson - Business Insider
A Russian invasion of Ukraine could hammer stocks in similar fashion to the two Iraq wars or the US-China trade war of 2018, analysts at RBC Capital Markets said, warning that investors are underestimating the threat.
In the build-up to the first Gulf War in 1991, the SP 500 stock index tumbled 19.9%, and ahead of the Iraq War in 2003, it dropped 33.6%, RBC's analysts said in a note to clients Thursday. During the US-China trade war, stocks fell by 19.8%.
/jlne.ws/3BvcXZW
The S&P 500 will surge 20% by year-end and recession fears are overblown, BMO strategy chief says
Harry Robertson - Business Insider
Fears about a recession are overblown, and US stocks should rally 20% from current levels by the end of the year, according to Brian Belski of BMO Capital Markets.
A flattening of the US government bond yield curve has unnerved some investors. They believe it's a signal the economy will become weak or even fall into a recession as a result of the Federal Reserve raising interest rates.
/jlne.ws/3I1j3nf
****JB: This and the story above it are difficult to reconcile with each other. And both by the same reporter.
| | | | | | Exchanges | | | Tadawul: Saudi Bourse Starts Options Trading on Single Stocks, Sources Say
Reema Al Othman - Bloomberg
Saudi Arabia will soon introduce options trading on single stocks to further boost liquidity in the Middle East's biggest stock market, people familiar with the matter said.
The Tadawul stock exchange plans to allow options trading in five to 10 companies initially over the next few weeks, the people said, asking not to be identified as the information is private. The bourse will start registering more stocks when they meet certain criteria, they said.
/jlne.ws/3LKqvpd
Exchange of the year: Intercontinental Exchange; Risk Awards 2022: Amid Brexit and benchmark transition, Ice fulfils Abu Dhabi exchange ambition
Risk.net staff
Preparing for Libor's end has been an uphill struggle for market participants of all stripes. For exchanges with flagship contracts pegged to the outgoing benchmarks, adaptation has been a matter of survival. For Intercontinental Exchange (Ice), which owns the rate via its Ice Benchmark Administration (IBA) arm and is also home to sterling Libor-linked futures and options, a smooth transition was imperative.
/jlne.ws/3gTWVj1
Derivatives client clearer of the year: BNP Paribas; Risk Awards 2022: Europe's clearing powerhouse hoovers up mandates at home and forges a US beachhead
Kieron Smith - Risk.net
Clearing Better late than never. After a decade of dominance in derivatives clearing by US banks, an EU bank is emerging as a serious competitor to its rivals across the pond. The big five US banks have maintained an iron grip on the market for the past decade, while Europe's wounded banks struggled to recover from the self-inflicted harm of the eurozone crisis. But despite jumping into the arena later than its US competitors, BNP Paribas is catching up fast.
/jlne.ws/3H7p29a
Optimizing Markets for Today and Tomorrow; A Framework for U.S. Equities Market Reform
Nasdaq
The U.S. Equities markets are amongst the most efficient and well-functioning in the world. The pandemic reinforced the notion that our markets can manage extreme volatility and elevated volumes, evidenced through market performance over the past several years. As we look ahead, we believe there is an opportunity to further enhance and modernize the rules that govern our markets to ensure they remain the most trusted, liquid and efficient in the world.
/jlne.ws/3JGzGFz
***** Nasdaq is very timely in its whitepaper.~JJL
| | | | | | Regulation & Enforcement | | | SEC Charges Infinity Q Founder with Orchestrating Massive Valuation Fraud
SEC
The Securities and Exchange Commission today charged James Velissaris, the former Chief Investment Officer and founder of Infinity Q Capital Management, with overvaluing assets by more than $1 billion while pocketing tens of millions of dollars in fees. The SEC's complaint alleges that, from at least 2017 through February 2021, Velissaris engaged in a fraudulent scheme to overvalue assets held by the Infinity Q Diversified Alpha mutual fund and the Infinity Q Volatility Alpha private fund. According to the complaint, Velissaris executed the overvaluation scheme by altering inputs and manipulating the code of a third-party pricing service used to value the funds' assets. Velissaris allegedly collected more than $26 million in profit distributions through his fraudulent conduct and without disclosing his activities to investors.
/jlne.ws/3s1UOA6
| | | | | | Miscellaneous | | | Short-selling does not count as a carbon offset; Hedge funds need to assess the real impact of climate change on portfolios
Jason Mitchell - FT
Could short-selling by hedge funds of carbon-polluters help save the planet? Despite being likened by critics every now and then to greedy nihilists responsible for multiple episodes of market volatility, short-sellers who bet on falling prices can play a role in moving the world towards net zero carbon emissions.
/jlne.ws/36qc6yr
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Editor
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