| June 28, 2017 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | 
Using A.I. to Address the Compliance Challenge
JohnLothianNews.com
"Historically for a lot of these artificial intelligence tools, they were very bespoke builds  and a lot of them still are. What we're really working on is taking the concepts and building more generic tool sets that you can provide to lots of different people."
As regulatory scrutiny spreads to more asset classes, so too do the challenges for compliance teams. Tony Sio, head of exchange and regulator surveillance with Nasdaq, believes artificial intelligence is the way forward.
Artificial intelligence has been around in varying forms for years, but it was not accessible to firms due to the associated costs to build and maintain. It is only of late the technology is being democratized for broader use. This bodes well for those reeling from compliance costs as A.I. represents a chance to leverage existing manpower in the search for manipulative trading practices.
Watch the video »
| | | | | | Lead Stories | | | CME Obtains Regulatory Clearance to Launch OTC FX Options Clearing
CME Group
CME Group, the world's leading and most diverse derivatives marketplace, announced today it has received regulatory clearance from the Commodity Futures Trading Commission (CFTC) to provide clearing services for over-the-counter FX options.
/goo.gl/4wSAis
Deutsche Bank Faces Possible $60 Million Derivative Loss
Matt Scully, Donal Griffin, and Steven Arons - Bloomberg
Deutsche Bank AG, the German lender seeking to overhaul how it manages risks, made a bet on U.S. inflation that puts the firm on course to lose as much as $60 million, people familiar with the matter said.
The trade used derivative products tied to U.S. inflation, said the people, who requested anonymity because the details aren't public. The Frankfurt-based lender has been examining whether Deutsche Bank traders breached risk limits on the deal, some of the people said. The case has been escalated to the bank's supervisory board, one person said.
/bloom.bg/2thEdKA
****JB: Deutsche Bank can't seem to catch a break lately.
Low volatility belies fragile U.S. stocks: reports
Saqib Iqbal Ahmed - Reuters
While U.S. stock market gyrations remain uncharacteristically subdued, derivatives analysts at some top Wall Street banks have started warning clients about the growing risk of increased market volatility.
Stocks remain near record highs and daily price fluctuations, by one measure, are close to being the most minimal in nearly half a century.
However, calm markets and buoyant stocks may be hiding the fact that the next volatility shock could be just around the corner, according to some analysts.
reut.rs/2ujpbBo
Draghi Tried to Be Cautious But Spooked the Market Anyway
Alessandro Speciale - Bloomberg
Mario Draghi just got evidence that his call for "prudence" in withdrawing European Central Bank stimulus applies to his words too.
The euro and bond yields surged on Tuesday after the ECB president said the reflation of the euro-area economy creates room to pull back unconventional measures without tightening the stance. Policy makers noted the jolt that showed how hypersensitive investors are to statements that can be read as even mildly hawkish, according to three Eurosystem officials familiar with their thinking.
/bloom.bg/2t0DMlB
****JB: Poor Mario. Damned if you do, damned if you don't.
'Untested' ETF Market Worries Top Speed Trader in U.S. Equities
Annie Massa and Elizabeth Dexheimer - Bloomberg
The growing market for exchange-traded funds hasn't been fully put to the test, according to one of the top U.S. speed trading firms.
Ari Rubenstein, chief executive officer and co-founder of Global Trading Systems LLC, told lawmakers Tuesday that while investment dollars have flooded the U.S. ETF market, the new order has not endured an extreme period of stress. Volatility, a measure of market uncertainty, has remained low.
/bloom.bg/2uiPUxX
****JB: Damn the torpedoes! Full speed ahead!
S&P 500: Is This Weakness The First Hint Of A Larger Selloff?
Jani Ziedins - Investing.com
The S&P 500 collapsed Tuesday in one of the worst selloffs in over a month. Of course "collapse" is a relative terms since Tuesday's weakness didn't even knock a full percentage point off of the S&P 500. But given how benign the stock market has been recently, 0.8% is shocking enough to grab everyone's attention. The tech heavy NASDAQ took a bigger hit, shedding 1.6%, but to put things in perspective, both indexes are still within a few points of all times highs.
bit.ly/2uiDrKD
Energy stocks are about to post a historic losing streak
Rebecca Ungarino - CNBC
The energy sector is on pace for its sixth month of losses, which would mark its longest monthly losing streak going back to the creation of the modern sector system in 1999. And some strategists are forecasting further downside ahead for the sector that's tethered closely to oil prices.
cnb.cx/2uiYRHw
European Stocks Fall in June, Part of Seasonal Decline
Namitha Jagadeesh - Bloomberg
History seems to repeat itself each June. European stocks are poised to slide this month, ending their longest winning streak since 2013. The benchmark Stoxx 600 index has fallen during June in nine of the past 10 years, losing on average 2.7 percent.
/bloom.bg/2uivRiX
Advantage Futures names industry veteran Carlos Rodriguez its new CFO
Finance Feeds
US futures broker Advantage Futures has announced the appointment of Carlos Rodriguez as its Chief Financial Officer. Mr Rodriguez is an industry veteran, bringing with him more than two decades of experience in the sector.
bit.ly/2uiObsb
Thank you from OptionsCity
Hazem Dawani - CEO, OptionsCity Software
Last week we announced that OptionsCity will be acquired by Vela Trading Technologies. Vela is uniquely positioned to complement our OptionsCity product offering and allow us to scale to meet the needs of our customers. We view this as a strategic acquisition that allows OptionsCity to accelerate the growth of its business. It brings together two highly complementary businesses, and with the corresponding increase in talent, technology, and financial assets, we will have the capability to deliver an increased range of trading technology, products, and services.
Excerpt from email
| | | | | | Exchanges and Clearing | | | Amy McCormick Appointed First Vice President of Financial Risk Management
OCC
OCC, the world's largest equity derivatives clearing organization, today announced the appointment of Amy McCormick, formerly with the National Futures Association, as First Vice President, Financial Risk Management, a new position for the organization. McCormick starts in her new role today, and will report to Dale Michaels, Executive Vice President, Financial Risk Management.
bit.ly/2ujecYC
HKEX Invites Views On Proposed After-Hours Trading Enhancements
Press Release
Proposals include: - extending close of after-hours trading for HSI, HHI and corresponding mini futures to 3:00 am from 11:45 pm in two phases; and
- adding HSI, HHI and corresponding mini options to after-hours trading
Consultation period is from 28 June 2017 to 4 August 2017
bit.ly/2uiRb88
CBOE Holdings' Exchanges Trading Schedule for Independence Day Holiday
CBOE
CBOE Holdings, Inc. (BATS: CBOE | NASDAQ: CBOE) today announced the following trading schedules for Chicago Board Options Exchange (CBOE), C2 Options Exchange (C2), CBOE Futures Exchange (CFE) and Bats U.S. equities and options exchanges in observance of the Independence Day holiday on Tuesday, July 4.
bit.ly/2uiKNgU
| | | | | | Regulation & Enforcement | | | Sebi allows NRIs to hedge currency risk
The Economic Times
Markets regulator Sebi on Wednesday allowed NRIs to access the exchange traded currency derivatives (ETCD) market to hedge currency risk arising out of their investments in India, a move aimed at providing them additional hedging option.
At present, NRIs (non-resident Indians) are permitted to hedge their rupee currency risk through over-the-counter (OTC) transactions with banks.
bit.ly/2uiVbFD
SEBI reviewing equity derivatives rules; wants to deter retail investors in F&O
MoneyControl
Capital and commodities market regulator SEBI (Securities and Exchange Board of India) is set to come out with a discussion paper on revising regulations for the equity derivatives (futures and options) segment. Among other proposals, the regulator may propose doubling the lot size for a contract to Rs 10 lakh from Rs 5 lakh currently. The idea behind this is to make futures and options unattractive to retail investors, who do not fully understand the risks associated with them.
The broader objective is to encourage retail investors to invest in shares rather than make speculative bets.
bit.ly/2uiPU0z
FCA Alerts Traders to AIG Options, CMC Options
Naomi Barzel - Finance Magnates
The Financial Conduct Authority (FCA) of the UK has issued a warning against binary options providers AIG Options and CMC Options for running their operations in the country without being authorized by the regulator. Based on the statement, it is possible that the two brands are run by the same company.
bit.ly/2uj6DRs
| | | | | | Strategy | | | The Best and Worst Ways to Trade SPY Options Each Week
Bernie Schaeffer - Schaeffer's Investment Research
Even prior to reading the excerpt above, it's quite likely you were aware of the dominance of SPDR S&P 500 ETF (SPY) calls and puts. The fund, which tracks the benchmark S&P 500 Index (SPX), regularly appears at the top of daily "most active options" lists, and SPY puts are frequently recommended to those looking to hedge long equity exposure in one fell swoop.
bit.ly/2uiR1gU
Short Volatility Strategies
Mark Melin - ValueWalk
Short volatility strategies have often been thrashed by more "traditional" quantitative asset managers as a "fat tail" strategy that contained significant hidden risk. But over the past year, that fat tail has occurred primarily in the positive returns department. A recent Goldman Sachs Options Research piece notes that one "short vol" strategy, as the concept is epistemic ally known, netted 197% over the past year. This raises the question: Is selling volatility a viable strategy? Or, as Goldman questions in the title of its June 28 piece: "Are Volatility Selling Strategies Crowded?"
bit.ly/2ujqeRJ
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