| July 23, 2018 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Options Exchange Stats in June - Some Highlights
Spencer Doar - JLN
OMX PHLX, Cboe and MIAX led all exchanges in percentage of time spent at best bid/offer AND greatest size, according to Tabb's Options Liquidity Matrix, coming in at 23.3 percent, 17.5 percent and 13.4 percent, respectively.
The top three ranking changes when you remove greatest size and just focus on percentage of time at best bid/offer. Then the top three are BATS BZX, NYSE Arca and Nasdaq, with 81.3 percent, 73.3 percent and 71.4 percent, respectively.
The lead exchanges in terms of average contract size per trade were NYSE AMEX, OMX PHLX, and Cboe, with 25.3 contracts, 22.0 contracts and 17.2 contracts, respectively. In dollars per trade terms, the top three shifts to Cboe, NYSE AMEX and then OMX PHLX.
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Credit Suisse AG Announces the Acceleration of Five ETNs
PRNewswire
Credit Suisse AG ("Credit Suisse") announced today that it will accelerate at its option all of its VelocityShares Daily 2x VIX Medium Term ETNs ("TVIZ"), VelocityShares VIX Medium Term ETNs (VIIZ"), Credit Suisse X-Links WTI Crude Oil Index ETNs ("OIIL"), AxelaTrader 3x Long Brent Crude Oil ETNs ("UBRT") and AxelaTrader 3x Inverse Brent Crude Oil ETNs ("DBRT").
/goo.gl/nMUT8z
****SD: The two volatility notes, TVIZ and VIIZ, only had $1.8m and $7m in assets respectively. I'm under the impression ~$50m is the threshold for the provider to actually start making some money. The three oil ETNs were doing slightly better in terms of assets - $43m, $66 and $6.7m - but still not great. The image below was originally from a 2016 post on Bill Luby's VIX and More blog. I've altered it to show what VIX-linked ETPs have closed in the last ~20 months. (Note: Ignore the percentages by the tickers as those are outdated indicators of performance.)
****JB: The Bloomberg story on this can be read here.
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Closures of VIX ETPs Since the End of 2016
****SD: VMIN doesn't have much in the way of assets either.
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CFTC Chairman J. Christopher Giancarlo Response to Bollettino
CFTC
The Congregation for the Doctrine of the Faith recently published the above-referenced Bollettino on economic and financial issues.[1] Building on the premise that "no area of human action" is outside ethical principles, the document lays out ethical foundations to govern economic and financial systems, including in the usage of derivatives (paragraph 26). We thank you for such a thought-provoking reflection.
bit.ly/2LIpbDV
****SD: You might recall the papal attack on derivatives a ways back. This is the CFTC's response/defense (needless to say, it is a delicately phrased piece).
| | | | | | Lead Stories | | | Asset owners, fearful of volatility, flock to risk mitigation strategies
Christine Williamson - Pensions and Investments
Rising volatility is motivating asset owners to take a close look at investment strategies that mitigate risk or seek to find alpha from the choppy, unsettled markets many see on the horizon. Volatility managers running long- and short-volatility strategies and tail-risk specialists report a sharp rise in inquiries and investment, particularly from institutions.
/goo.gl/gRkzwb
****SD: I did a Google Trend search for "stock market crash" in the last 12 months in the U.S. - pretty low, flat line (under 10) with a huuuuge spike the week of Feb 4 to Feb 10 (the reading hit 100).
Volatility's Coming for Your Summer Break as Headwinds Build
Dani Burger - Bloomberg (SUBSCRIPTION)
Liquidity risk takes center stage amid August's thin trading; Managers prepare to do work on vacation if shock materializes
A yuan slump, a correction in commodity markets, Trump broadsides against the Fed, a trade war, and fresh Italian risk. For Voya Asset Management in New York, they're headwinds threatening to disrupt the summer break.
/goo.gl/whee52
****SD: What's your cell signal like on the beach?
Financial markets are surprising investors more frequently this year
David Scutt - Business Insider
Market moves are surprising more frequently. Volatility has returned to financial markets this year, snapping the tranquility of 2017 that allowed asset classes further out the risk spectrum to flourish. The daily swings are getting larger, and more frequent, compared to what market participants expect. Here's proof.
/goo.gl/6VTcPk
Maker-taker irony as NYSE and Nasdaq challenge SEC
Norma Cohen - Financial Times (SUBSCRIPTION)
The New York Stock Exchange and Nasdaq, two of the world's largest stock exchanges, are pitched against some of their biggest customers in a row with national regulators over the assessment of trading fees.
The dispute centres on how technological innovation has changed the way capital is deployed.
It may appear arcane but there is an important consideration: transaction costs, a real if little-understood challenge for the fund management industry.
/on.ft.com/2JO4aWv
Full Blown Trade War With China Will Pound S&P 500 Profits: Goldman Sachs
Brian Sozzi - TheStreet
Don't let tech earnings season and Trump's battle with Iran make you forget the very real impact of the ongoing U.S. trade conflict with China.
Goldman Sachs is out Monday with a harsh reminder on how escalating trade tensions with China could influence S&P 500 companies. In short, the worst-case scenario would see corporate bottom lines decimated and likely, stock prices.
bit.ly/2JOtvQ6
****SD: CNBC here.
Raft cut loose: HF tower for HFT refused
Matt Hurd - Meanderful
Alexandre Laumonier, aka @SniperInMahwah, noted via tweet an HF and microwave tower for HFT application has been refused in the UK by a parish council.
bit.ly/2JNm6R6
| | | | | | Exchanges and Clearing | | | MCX Says Confident Of Maintaining Liquidity Despite Lull In Agri Contracts
Bloomberg Quint
MCX India Ltd., the country's largest commodity exchange, said it is confident of maintaining liquidity in existing contracts despite agri-commodities remaining subdued. The exchange recently launched non-agri commodities options for silver, copper, zinc and crude oil after launching gold contracts back in October.
/goo.gl/REkhPj
CBOE: Primed To Capture Profits During Volatile Markets
Dylan Quintilone - Seeking Alpha
Summary CBOE remains a good value in the stock exchange industry. The BATS merger modernized the trading flows across CBOE exchanges and trading avenues. The company's profitability improves during times of heavy trading volumes and during periods of stock market turmoil.
/goo.gl/WGocUU
****SD: This is a look at the exchange group from a stock perspective.
MIAX Options - Reminder of New Stock-Tied Complex Order Functionality beginning August 6, 2018
MIAX
As previously announced in the April 17, 2018, June 12, 2018 and July 6, 2018 Alerts, the MIAX Options Exchange is planning to introduce Stock-Tied complex order functionality beginning Monday, August 6, 2018, pending SEC Approval.
Support for Stock-Tied is currently available in the MIAX Firm Test Bed (FTB2) environment.
Firms that subscribe to the following interfaces/feeds are advised to assess their current interface implementations and make appropriate updates as needed:
bit.ly/2JO19Wb
| | | | | | Regulation & Enforcement | | | Brussels rejects UK's financial services Brexit plan
Jim Brunsden - Financial Times (SUBSCRIPTION)
Brussels has rejected the UK's proposals on how to govern the City of London's access to the European market after Brexit, saying Theresa May's latest financial services plan would rob the EU of its "decision making autonomy".
/on.ft.com/2JNlsTG
China should normalize stock index futures trading, regulator says
Reuters Staff
China should scramble to resume normal trade in stock index futures, a top Chinese securities regulator said on Monday, in an effort to satisfy the risk management needs of both domestic and foreign investors. The easing gesture, which came after a fall of about 14 percent in the stock market this year amid a nascent trade war with the United States, points to regulators' commitment to free up financial markets.
/goo.gl/4fzRAd
****SD: This is indicative of a policy which will spill over to the options space. Also, the vice chairman of the Chinese securities regulator is named Fang.
Federal Court Orders Commodity Pool Operator and Its Principal to Pay More Than $1.9 Million for Bitcoin and Binary Options Fraud Scheme
CFTC
On July 9, 2018, a New York federal court ordered Dillon Michael Dean (Dean) of Longmont, Colorado, and The Entrepreneurs Headquarters Limited (TEH), Dean's UK-registered company, to pay over $1.9 million in civil monetary penalties and restitution in connection with a lawsuit brought by the Commodity Futures Trading Commission (CFTC).
bit.ly/2JJIVoZ
****JB: Seems to be a recurring problem. Crypto and Binary Options investment scams lead to $26M losses in 1H-2018
| | | | | | Strategy | | | Catalysts for Growth in Use of Index Options
Matt Moran - Cboe
When I worked at investment conferences around the year 2000 and asked attendees about use of listed options, many attendees would say they did not use listed options for a variety of reasons, including perceptions that options were too risky, too complex, too labor-intensive, and/or not well understood. Since the 2002 launch of the Cboe BXM Index, there has been a tremendous increase in interest in and use of listed options by individual and institutional investors, and there now are more packaged options-based products with less volatility than related stock index products.
bit.ly/2LIvF5K
This Wall Street magic trick makes stocks appear cheaper than they are
Mark Hulbert - MarketWatch
Some Wall Street analysts are playing games with the S&P 500's price/earnings ratio.
These analysts are calculating the S&P 500's P/E ratio on the basis of what they think corporate earnings will amount to in the coming calendar year. Nowadays, that means their P/Es are based on 2019 earnings  a number that won't actually be known for another 20 months or so.
/on.mktw.net/2JNfXV8
Managing Small Cap Volatility
ETF Daily News
Small caps as an asset class tend to be more growth oriented, and thus investors may stand to gain more from allocating to small caps. However, higher volatility is inherent to U.S. small caps too.
In this blog post, I will examine the idiosyncratic nature of small caps by looking at their correlation profile and show how small-cap companies are less correlated to each other than they are to large caps. I will then highlight key risks of allocating to small caps in the current market cycle and, finally, how investors can potentially lower that risk.
bit.ly/2JLywsY
| | | | | | Miscellaneous | | | Trump and the U.S. dollar: Actions speak louder than words
Saqib Iqbal Ahmed, James Thorne - Reuters
U.S. President Donald Trump may not be happy about the strength of the U.S. dollar, but the greenback's recent rally may partly be a product of his own making.
/goo.gl/hhrtTy
Omega's Cooperman says he doesn't want to spend the rest of his life chasing the S&P 500
Mark DeCambre - MarketWatch
Omega Advisors Chief Executive Leon Cooperman said he plans on turning his hedge fund into a family office, according to a report.
In a recent letter to clients, the prominent investor said he didn't "want to spend the rest of" his life chasing the S&P 500, the Wall Street Journal reported.
/on.mktw.net/2JNBhKp
Steam pipe blasts show dangers lurking under New York streets
Diana Kruzman - Reuters
Under the crowded streets of New York City, a network of pipes, cables and tunnels contains hidden dangers that burst to the surface this week, spraying the Flatiron district with debris containing asbestos, a toxic chemical that can lead to respiratory illnesses, including cancer.
/goo.gl/LKBx2i
****SD: And I always thought gators were the thing to watch out for lurking under NY streets...
New York Daily News cuts half of its staff
Jason Abbruzzese and Claire Atkinson - NBC
The New York Daily News announced on Monday plans to eliminate half of its newsroom as part of a broader effort to refocus the newspaper.
/nbcnews.to/2JJLdV7
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| | | | John Lothian News (JLN) is the news division of John J. Lothian & Company, Inc. (JJLCO). The online media and financial services firm is staffed by derivatives industry, journalism and technology professionals. | | | | | | | John Lothian News Editorial Staff: | | | John Lothian
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