| March 06, 2023 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Citadel Securities Eyes OTC Options to Boost Market-Making Clout
Miles Weiss - Bloomberg Law
Citadel Securities, a pillar of billionaire Ken Griffin's market-making and hedge fund empire, is seeking a foothold in a corner of the options world traditionally dominated by global banks. A unit of the firm is applying to become an over-the-counter derivatives dealer under a 1998 Securities and Exchange Commission rule intended to help broker-dealers compete with banks and foreign firms, filings show.
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Is the Rise of 0DTE Options Fueling Market Volatility?
Ismael De La Cruz - Investing.com
The week was positive for European, US, and Asian equity markets. The S&P 500 rallied to end a three-week losing streak. The Nasdaq had its best day since early February.
The turning point came on Thursday when Raphael Bostic of the Atlanta Fed said the bank might pause on rate hikes sometime this summer.
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Stock Market's Fate Comes Down to the Next 13 Trading Sessions; Powell remarks, jobs and CPI updates and FOMC decision on tap; Forward implied volatility on payrolls data underpriced: Citi
Jess Menton and Elena Popina - Bloomberg
Four major events over the next 13 trading sessions will be the key catalysts in determining whether this year's stock-market revival gets derailed or starts rolling again after a February slump. It all begins Tuesday, when Federal Reserve Chair Jerome Powell delivers his two-day biannual monetary policy testimony on Capitol Hill. With the S&P 500 Index coming off its best week in a month, investors will be searching for any hint on the central bank's interest-rate hiking path.
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Column: Hedge funds put record wager on higher 2-year U.S. bond yield
Jamie McGeever - Reuters
Hedge funds entered February holding their biggest ever short position in two-year U.S. Treasuries futures.
That's what the most up-to-date Commodity Futures Trading Commission (CFTC) data shows, and it fits hand in glove with the rise in the two-year yield to a 16-year high last week and the most inverted 2-year/10-year yield curve in 40 years.
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Global commodity trading earnings reach record $115bn; Independent houses benefit most from soaring profits driven by Ukraine war
Leslie Hook - Financial Times
The commodity industry made record gross profits of more than $115bn from trading activities last year, as volatile energy prices resulting from the war in Ukraine drove big swings in the market. The biggest gainers were the independent trading houses - such as Trafigura, Vitol and Glencore - which had the balance sheets to stay in the market, according to a new study from Oliver Wyman. "This year was a bit of a perfect storm across all the commodities, from a trading opportunity perspective," said Ernst Frankl, partner at the consultancy and one of the authors of the report. "Volatility is the lifeblood of what traders need in order to trade."
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| | | | | | Exchanges | | | CME Group to Launch Offshore Renminbi Options on April 3
CME Group
CME Group, the world's leading derivatives marketplace, today announced that it will launch options on its existing U.S. Dollar / Offshore Chinese Renminbi (USD/CNH) futures on April 3, pending regulatory review.
"Offshore Renminbi has become a core part of global FX trading and we're delighted to offer these options contracts to help clients manage currency risk as China resets its economy during this period of reopening." said Paul Houston, Global Head of FX Products, CME Group. "Our options contracts will offer an attractive complement to the OTC market, with price discovery and anonymous trading on our all-to-all order book, as well as block trading for clients who might prefer the OTC-style of trading but stand to benefit from the efficiencies of a centrally cleared product."
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Cboe Global Markets Reports Trading Volume for February 2023
Cboe Global Markets
Cboe Global Markets, Inc. (Cboe: CBOE), a leading provider of global market infrastructure and tradable products, today reported February monthly trading volume statistics across its global business lines. The data sheet "Cboe Global Markets Monthly Volume & RPC/Net Revenue Capture Report" contains an overview of certain February trading statistics and market share by business segment, volume in select index products, and RPC/net capture, which is reported on a one-month lag, across business lines.
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February 2023 figures at Eurex
Eurex
OTC Clearing and Repo volumes continued their upward trend. Repo Market volumes nearly doubled to EUR 209.8 billion y-o-y. Notional outstanding in OTC clearing up 21 percent. Eurex, Europe's leading derivatives exchange, reports 146.1 million traded contracts in February in its listed business, 12 percent less compared to February 2022. Interest rate derivatives went down by 7 percent year-on-year in February from 65.6 million to 61.4 million. Index derivatives decreased by 14 percent, from 78.8 million to 67.9 million contracts traded. Trading in equity derivatives fell by 23 percent compared to February 2022, from 21.7 million to 16.7 million contracts.
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| | | | | | Regulation & Enforcement | | | Term SOFR trading ban remains as easing talks collapse; Fed working group resolute on interdealer trading restrictions despite looming capacity crunch
Bernard Goyer - Risk.net
Industry attempts to overturn an interdealer trading ban on derivatives linked to the forward-looking version of the secured overnight financing rate, or SOFR, appear to be dead in the water after discussions around a possible easing of trading restrictions reached an impasse, Risk.net understands.
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Texts From Crypto Giant Binance Reveal Plan to Elude U.S. Authorities
Caitlin Ostroff and Patricia Kowsmann - WSJ
Binance exploded onto the crypto scene in 2017 and grew into the world's biggest digital-currency exchange. It quickly ran into a problem.
It largely operated from hubs in China and then Japan, yet a fifth of its customers were in the U.S., where authorities signaled a coming crackdown on unregulated offshore crypto players. Any lawsuit from U.S. regulators would be like "nuclear fall out" for Binance's business and its officers, a Binance executive warned colleagues in a 2019 private chat.
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| | | | | | Technology | | | EBS Direct Announces Rulebook Changes to Help Drive Industry Adoption of FX Global Code
CME Group
EBS, a leading provider of electronic trading platforms and technology services in foreign exchange markets, today announced an update to its liquidity provider eligibility criteria for EBS Direct, its relationship-based quote-driven market, to help accelerate the industry shift towards full compliance with the FX Global Code.
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| | | | | | Strategy | | | Quirky Bond Trade Gives Companies a Way to Cut Borrowing Costs; Companies can lower borrowing costs with callable bonds, swaps; Embedded options values different in debt, derivatives markets
David Caleb Mutua and Nina Trentmann - Bloomberg
Companies are taking advantage of price discrepancies in debt and derivatives markets that give them a way to trim their borrowing costs. Investors eager to take advantage of rising interest rates are buying the debt even if they only earn the extra yield for a year. A raft of investment-grade companies have sold bonds this year in the US that allow issuers to buy back their securities if rates drop enough for refinancing to make sense, an uncommon feature for high-grade notes.
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Leveraged and Inverse ETFs Gain Popularity. What to Know Before Jumping in.
Karishma Vanjani - Barron's
If you are a young investor getting your daily dose of finance on social media apps like Tik Tok and Discord, plugs for inverse and leveraged exchange-traded funds or ETFs have bombarded your feed.
The inverse and leveraged ETFs deliver negative and positive multiples of their underlying index's performance, respectively. And market enthusiasts have been touting these products on social media as a tool to lock in gains amid Federal Reserve rate hikes that led to market declines in 2022.
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Huge June Call Spread
Cboe (Video)
Dan Deming @djd551 on some big $VIX #options trades and the state of implied & realized #volatility in today's #Vol411.
/jlne.ws/3Jep0AE
| | | | | | Miscellaneous | | | Understanding FX Hedging Costs and Why Japanese Investors Are Moving Money Home
Libby Cherry and Masaki Kondo - Bloomberg
Normally, when yield on debt rises it becomes more attractive. But after the Federal Reserve began raising interest rates in the US in March 2022, investors in Japan sold record amounts of Treasuries and other overseas debt. The reason? Cross-border bond purchases come with exchange-rate risks, and the Fed's actions have been sending the cost of hedging such risks up even faster than yields. There are also signs European investors may be looking again at their own domestic debt and shifting money home, following the European Central Bank's key rate turning positive for the first time in a decade last July.
/jlne.ws/3SQL07M
Tether Faked Documents and Opened an Account Later Used by Terrorists: Report
George Glover - Markets Insider
Crypto giant Tether used faked documents and shell companies to set up bank accounts in 2018 - and one of those was then accessed by terrorists, according to a report.
The Wall Street Journal said Friday that the stablecoin issuer and its partner exchange Bitfinex falsified documents and opened accounts under different names in a bid to gain access to the global banking system, citing documents, e-mails, and people familiar with the matter.
/jlne.ws/3ZrjpfF
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