| October 10, 2024 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | More than twenty years ago, in September of 2004, when I was at my first Swiss Futures & Options Association conference in Burgenstock, Switzerland, Cboe (then CBOE) announced they would launch VIX options, which would not start trading until February 24, 2006. I was there at the conference with my wife Cheryl and we were celebrating our 15th wedding anniversary as part of the trip. It was there I met future Cboe Chairman & CEO Ed Tilly for the second time. Fast forward twenty years later, VIX options are the most successful new product in exchange history. And now Cboe is adding to the product suite, planning to launch VIX futures options on Monday, October 14. This is a derivatives contract (VIX futures options) of a derivatives contract (VIX Futures), on a derivative (VIX) based on an index.
There is clearly demand for VIX options. Since 2022, volume is up about 60% and average daily volume in VIX options is now 851,000 contracts in 2024. This new option-on-future structure for VIX will allow "more market participants, including those restricted from accessing securities-based options, to trade a VIX options product," Cboe says.
The Singapore Exchange (SGX Group) yesterday reported significant growth in market statistics for September 2024, driven by easing monetary policies and China's stimulus package, which boosted optimism among investors. Securities trading activity surged, with total market turnover rising 75% year-on-year (y-o-y) to S$30.4 billion, and the daily average value increasing 67% to S$1.45 billion. The Straits Times Index (STI) advanced 4.1% month-on-month, reaching a 17-year peak and year-to-date gains of 10.6%.
Derivatives trading also accelerated, with volume climbing 34% y-o-y to 28.9 million contracts. Open interest in SGX FTSE A50 Index Futures hit a record 1.24 million contracts, reinforcing SGX's role in managing China exposures. Additionally, FX futures and OTC FX volumes grew significantly, with SGX USD/CNH FX futures reaching a notional high of US$17.4 billion. Commodity derivatives volume rose 29% y-o-y to a record 6.94 million contracts, buoyed by strong demand in rubber, petrochemicals, and iron ore contracts. ~JJL
| | | | | | Lead Stories | | | Cboe to Launch Options on VIX Futures on Monday, October 14; New CFTC-regulated options on futures will physically settle into front-month Cboe Volatility Index (VIX) Futures; Designed to offer market participants the ability to more granularly manage volatility; Further expansion of Cboe's volatility complex following launch of Cboe S&P 500 Variance (VA) futures
Cboe Global Markets, Inc.
Cboe Global Markets, Inc. (Cboe: CBOE), the world's leading derivatives and securities exchange network, today announced its new Options on Cboe Volatility Index (VIX) Futures (Ticker: UX) are planned to begin trading on Cboe Futures Exchange, LLC (CFE) on Monday, October 14. The new Options on VIX Futures will provide investors an additional tool to help manage U.S. equity market volatility, complementing Cboe's existing securities-based VIX Index options, which are designed to provide similar risk management and yield enhancement capabilities. Utilizing an option-on-future structure, the new product may allow more market participants, including those restricted from accessing securities-based options, to trade a VIX options product. Cboe's VIX Index options have seen record trading volumes during the last two years, with average daily volumes reaching over 851,000 contracts in 2024, up approximately 60% from 2022, as more investors have sought utility the options offer.
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Equity Options Are Trading as If the Market Is Exiting a Crisis; VIX rises to rare levels over realized S&P 500 volatility; Implied volatility rising on election, earnings, rate risks
Jan-Patrick Barnert and Christian Dass - Bloomberg
The gap between how much stocks are expected to swing and how much they're actually moving has widened to levels normally seen only at the tail end of crises, a sign that traders are looking for protection before a slew of events that could roil the market.
The Cboe Volatility Index, or VIX, which measures expected one-month volatility on the S&P 500 Index, reached about 14 points above the 10-day realized volatility. It's a level that's only been exceeded for extended periods in 2008 and 2020-2021 during times when the market was recovering from severe selloffs as a result of the Global Financial Crisis and Covid.
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Euro Traders Position for More Pain Ahead of ECB Decision; Demand for bearish options wagers rises to three-month high; Fed now seen cutting rates less than the ECB by year-end
Vassilis Karamanis - Bloomberg
Options markets are flagging the worst weekly retreat for the euro since July, as traders bet the European Central Bank will cut interest rates next week.
One-week risk reversals, a key options metric used to gauge market sentiment and positioning, were at the most bearish level for the euro in three months on Thursday. The contracts now cover the ECB's decision on Oct. 17.
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Wall Street Pros Avoid Election Bets With Race Too Close to Call; Hedge funds show no clear positioning ahead of vote: Goldman; Traders advise looking at individual stocks over broad indexes
Esha Dey and Natalia Kniazhevich - Bloomberg
In less than a month, Americans will vote in one of the most consequential elections in US history. But on Wall Street things are eerily quiet, as the so-called smart money is reluctant to wager on what's about to happen. "Never bet on the flip of a coin," said George Ball, head of the Houston-based investment firm Sanders Morris Harris. "The election is too close to permit thoughtful investment positioning."
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****** We need Yes, No or Maybe Not contracts now.~JJL
Almost Half of Traditional Hedge Funds Are Dabbling in Crypto; That's up from 29% last year, per new AIMA and PwC report; Many traditional hedge funds are active in crypto derivatives
Olga Kharif - Bloomberg
Nearly half of hedge funds focused on traditional asset classes now have exposure to cryptocurrencies as increased clarity around regulations and the launch of exchange-traded funds in the U.S. and Asia draw more investors into the asset class, according to a new survey. Among hedge funds trading in traditional markets, 47% had exposure to digital assets, up from 29% in 2023 and 37% in 2022, according to the Global Crypto Hedge Fund Report published Thursday by the Alternative Investment Management Association and PwC. Among those funds that are already invested, 67% plan to maintain the same level of capital in crypto while the rest plan to invest more by the end of 2024, the survey found.
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How the presidential election is playing havoc with stock-market volatility; The VIX is getting jolted as Election Day nears
Lawrence G. McMillan - MarketWatch
The S&P 500 Index has shrugged off the negativity of late September and hit a new all-time high. The breadth of the market is not necessarily following suit, but this is bullish confirmation for the chart of the index itself. There is still support in the 5,670 area, and a close below that would be a cause for concern. The "target" remains as the +4Ï "modified Bollinger Band" (mBB), which is now at about 5,840 and rising.
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Hedge Funds Sold Record Chinese Stocks on Tuesday, Goldman Says; Managers sold longs and added to shorts, according to note; Traders returned from weeklong holiday to volatile market
Jeanny Yu and Abhishek Vishnoi - Bloomberg
Hedge funds sold a record amount of Chinese shares on Tuesday after a key policy meeting disappointed traders with no major stimulus, according to a Goldman Sachs Group Inc. trader note.
"Hedge funds not only unwound their long positions but added shorts to their books as well, with long sells being double the amount of short sells," according to the note dated Thursday.
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| | | | | | Exchanges | | | Miami International Holdings Reports Trading Results for September 2024; Multiple Options and Equities Exchanges Report Record Volumes; MIAX Sapphire Market Share Surpasses 1.1% in September 2024
MIAX
MIAMI AND PRINCETON, N.J. - October 10, 2024 - Miami International Holdings, Inc. (MIH), a technology-driven leader in building and operating regulated financial markets across multiple asset classes, today reported September 2024 trading results for its U.S. exchange subsidiaries - MIAX, MIAX Pearl, MIAX Emerald and MIAX SapphireTM (collectively, the MIAX Exchange Group), and MIAX Futures.
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Euronext steps up Eurex competition with new stock options offering
Lucy Carter - Global Trading
Euronext continues to push against Eurex's market dominance, expanding its range of single stock options soon after bringing clearing in-house.
Euronext has expanded its European derivatives suite with the launch of 31 new single stock options: 21 German, four Portuguese and six Irish. This marks the exchange's first Irish stocks listing, and completes Euronext's coverage of all DAX 40 index constituents in Germany.
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Morgan Stanley, Goldman FCMs set new margin records; Investment banks see futures, options and swaps margin hit new highs in September
Joshua Walker - Risk.net
The US clearing units of Morgan Stanley and Goldman Sachs set records for margin on futures and options for the former and swaps for the latter in the first half of September. On September 16, Morgan Stanley reported $30 billion total client margin for futures and options, the highest point in data going back to 2021. This represents a 4.4% rise over the two weeks ending September 16, or 5.7% over four weeks.
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| | | | | | Regulation & Enforcement | | | The curious case of the revealing orders; Oxford academics have found evidence pointing to collusion on a European exchange, but market-makers aren't wholly convinced
Mauro Cesa and Luke Clancy - Risk.net
In the game of contract bridge, partners are permitted to pass signals to each other through coded card play. On financial exchanges, such behaviour could amount to market abuse, which is forbidden. Yet, an Oxford University mathematics professor believes he has found evidence of potential signalling by market-makers in exchange-traded funds (ETFs). Alvaro Cartea, who also leads the Oxford-Man Institute of Quantitative Finance, last week previewed the results of a study showing that the order sizes
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Hong Kong rationalises swaps reporting requirements; Some duplicate fields removed, but framework still more granular than other jurisdictions
Nancy Qu - Risk.net
Hong Kong regulators' decision to ease data requirements for its over-the-counter derivatives reporting regime should make firms' compliance workload more manageable between now and next September's implementation date, lawyers say. "The decision to optimise and trim the number of mandated data fields in Hong Kong reflects an effort to ease compliance burdens while maintaining effective market monitoring," says Andrew Fei, a partner at law firm King & Wood Mallesons in Hong Kong. "This objective
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| | | | | | Technology | | | The Derivatives Service Bureau Calls for Participation in Technology Advisory Committee (TAC)
DSB TAC to commence its fourth charter term
Derivatives Service Bureau
The Derivatives Service Bureau (DSB), the global golden source of reference data for OTC derivatives, today announced that the DSB's Technology Advisory Committee (TAC) Charter is welcoming new applicants ahead of a new two (2) year term, with an application deadline of 23rd October. Established in 2018, the TAC provides advisory support to the DSB in recognition of required enhancements and adaptations to its technology base and services. Working alongside the DSB Product and Governance Advisory Committees, the TAC is responsible for the technical stewardship ensuring the DSB technology strategy is aligned with the needs of the markets it serves, including making recommendations to the DSB Board on technology-related DSB industry consultation topics.
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