| June 22, 2018 | | | |  | Spencer Doar
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Miscellany for Friday
SD- JLN
Perusing the day's most active option chains on the OIC's website yesterday was a bit wonky. Only one of the 19 most active equity symbols had more put activity than calls, that being FOXA (21st Century Fox).
On the ETF side, there was a lot of lopsided action. TLT (20-yr Treasuries) saw 92 percent of its activity on the call side. The flip side of that coin - ETFs dominated by put activity - was populated by EEM (emerging markets), QQQ (Nasdaq), EWZ (Brazil) and SMH (semiconductors), with puts accounting for 80 percent, 70 percent, 83 percent and 78 percent of those ETFs' volumes, respectively.
From the MarketsMedia lead story today - "Since 2013, the Chicago Board Options Exchange's broker-dealer community in equity options has shrunk to 40 from about 70. One could say the same shrinkage applies to the other exchanges. According to options traders, there are now only roughly 15 market-makers active."
In honor of Russell reconstitution today we put out a video with FTSE Russell's Sean Smith.
Here are some fun numbers from the Collaborative Fund Blog: The Nasdaq 100 gained 32 percent last year. Five companies accounted for 51 percent of that return. The S&P 500 gained 108 percent the last five years and 22 companies account for half of those gains. For a more granular snippet, consider AMZN accounted for six percent of the S&P's 2017 returns and Apple nearly seven percent.
FIA is now taking applications for this year's Innovators Pavilion at Expo in October.
There will be an episode of "The Spread" after a hiatus due to travel and sickness.
| | | | | | Lead Stories | | | Flashback Friday: Are Options Specialists Endangered?
MarketsMedia
Oh options specialist, where have you gone?
Ah, 2009 was the Golden Age of options market making and the specialist compared to now. The participants were more plentiful and while actual volume amounts were lower markups were higher. A firm or specialist could make money in the business and a good living. It could be considered the best of times and the worst of times.
bit.ly/2Ii7GrA
Now Volatility Is Hitting Markets Where It Actually Matters
Dani Burger - Bloomberg (SUBSCRIPTION)
JPM FX vol index heads towards second consecutive monthly gain; Growth risks, trade anxiety yet to awaken stock volatility
As U.S. stocks enter a more tranquil era, currency markets are looking jittery.
The asset class that directly influences the terms of global trade is restive on the heels of protectionism, monetary tightening and fissures in the synchronized growth story.
/bloom.bg/2IibfOu
Derivatives need alternative if LIBOR fails: Fed's adviser
Richard Leong - Reuters
The interest rates derivatives market needs to develop contingency plans in its contracts in case the London interbank offered bank rate (LIBOR) ceases to exist, a special adviser at the Federal Reserve said on Thursday.
LIBOR is a rate benchmark for $200 trillion of dollar-denominated financial products, mostly in interest rate swaps. It is derived from a survey of banks on what they charge each other to borrow dollars.
/reut.rs/2IfZbxj
China could hold $100bn opportunity for brokers - UBS
Global Investor Group (SUBSCRIPTION)
China could be home to a $100 billion revenue pool for foreign institutional brokers by 2025, providing deregulation occurs.
Analysts at UBS predict a gradual relaxation of rules could unlock significant opportunities across trading (market making and derivatives), financing (prime brokerage) and asset management.
"Deregulation also opens up derivatives for various asset classes, expanding the revenue base for securities firms," UBS analysts Kelvin Chu and May Yan wrote in a note to clients in mid-June.
bit.ly/2K7KQVg
****SD: See our exchanges section for some options news out of China.
Why a major trade war could mean a 'full-blown recession'
Steve Goldstein - MarketWatch
So far, the trade war has been more bark than bite, as the U.S. tariffs on aluminum, steel and Chinese goods are dwarfed in magnitude by threatened levies.
A new research note says that's a relief, because an all-out trade war risks a recession.
/on.mktw.net/2IfWZpz
****JB: As we write this president Trump just threatened to impose a 20 percent tariff on European cars.
China Stocks Hover on Brink of Bear Market as Grim Mood Persists
Bloomberg (SUBSCRIPTION)
Chinese stocks ended higher Friday but remained on the edge of a bear market, as investors weighed concerns over a possible trade war with the U.S. against a domestic regulatory order aimed at preventing a downward spiral of selling.
/bloom.bg/2KazYpw
The Global Financial and Monetary System in 2030
World Economic Forum
The global financial and monetary system is at a crossroads. A decade after the onset of the global financial crisis, the world economy is showing signs of recovery. Growth in 2017 was broad-based, accelerating in about 75% of all countries. Boosted by a recovery in investment, global trade growth has rebounded from its low point in 2001. The improved economic outlook, in an era of low interest rates, has boosted equity valuations and growth prospects for 2018 and 2019 are also robust.
bit.ly/2IhqXJy
****SD: I've watched enough outdated sci-fi movies to realize it's dang hard to figure out what's going to happen in a decade. But, that does not mean I will stop enjoying Jean-Claude Van Damme's 1994 classic "Time Cop" (it takes place in 2004).
Big Banks Clear Fed's Stress Tests; Federal Reserve releases first round of results of annual exams assessing banks' health; second part is next Thursday
Lalita Clozel and Telis Demos - WSJ (SUBSCRIPTION)
The Federal Reserve determined the largest U.S. banks were healthy enough to withstand a severe economic downturn and would continue lending during a crisis, as the industry posts record profits and prepares for a wave of regulatory relief.
/jlne.ws/2KcglAY
| | | | | | Exchanges and Clearing | | | Dalian Commodity Exchange: Another Agricultural Product Option Debuts
Mondovisione
Dalian Commodity Exchange (DCE) released a notice on June 11 that the application for corn futures option (the corn option for short) has been approved by the China Securities Regulatory Commission (CSRC). It means that another agricultural product option of China is expected to debut after soybean meal and white sugar options, which will further enrich the agricultural product derivatives instruments of China and provide the upstream and downstream subjects of corn and relevant industries with more abundant and more flexible risk management methods and trading strategies.
bit.ly/2IiN3eF
The Nasdaq Stock Market, Nasdaq PHLX, Nasdaq BX, Nasdaq ISE, Nasdaq GEMX, and Nasdaq MRX Conducted the Annual Election for Member Representative Directors on Thursday, June 21, 2018
Nasdaq
The Nasdaq Stock Market LLC, Nasdaq PHLX LLC, Nasdaq BX, Inc., Nasdaq ISE, LLC, Nasdaq GEMX, LLC and Nasdaq MRX, LLC jointly conducted the 2018 Annual Election for Member Representative Directors on Thursday, June 21, 2018
Four seats on the Boards of Directors of the Nasdaq Exchanges ("Board") were filled for a one-year term of office.
bit.ly/2IgmCXj
| | | | | | Regulation & Enforcement | | | Remarks Of CFTC Commissioner Brian Quintenz At The Institute Of International Bankers Membership Luncheon
Mondovisione
The European Union (EU) and the United States share an interest in fostering a liquid, competitive, well-functioning global derivatives market. Although we frequently share the same goalsÂfor example preventing a buildup of systemic risk or prosecuting manipulation and fraudÂthis does not mean that we must each approach every regulatory solution identically. There are many different means by which to achieve a shared goal, and regulators should have the discretion to adopt the framework that works best for their markets. In my opinion, the expectation should not be that our rules are identical, but rather that they seek to establish comparable standards to prevent undesirable outcomes.
bit.ly/2K9bn4t
Deutsche Bank Defendant Defies Prosecutors in Paschi Trial
Sonia Sirletti and Vernon Silver - Bloomberg
An ex-Deutsche Bank AG banker told a Milan court that the controversial Santorini transaction signed with Banca Monte dei Paschi di Siena SpA was a risky deal for the German bank and was properly accounted for by the Italian lender, challenging the prosecution's case.
Marco Veroni, the first Deutsche Bank defendant questioned by prosecutors at the Milan trial, disputed the accusation that the deal had no real risk and was constructed to disguise an ongoing loss at the Siena bank with a temporary gain.
/bloom.bg/2IgtUKD
****SD: Who doesn't love a case over complex derivatives arrangements?
| | | | | | Technology | | | E*TRADE Adds Easy-to-Use Risk Management Firepower with Risk Slide Tool
Markets Insider
E*TRADE FINANCIAL Corporation today announced another significant addition to its suite of trading tools.
/read.bi/2IhM1Qd
| | | | | | Strategy | | | Funds That Boost Income With Covered Calls
Investopedia
While options can be used as a vehicle for high-risk speculation, they can also be used as part of more conservative strategies. A trio of income experts and MoneyShow.com contributors highlight ETFs and closed-end funds that specialize in covered call and buy-write strategies designed to hedge against volatility, protect against rising rates or enhance the income return of an equity portfolio.
bit.ly/2Ihhjqq
****SD: Super random and in the weeds a bit, but this is a look under the hood of some big funds using options.
Sector performance and economic cycles: When do sectors have the potential to shine?
Nick Kalivas - S&P Dow Jones Indices
There are many determinants of stock performance. Corporate earnings, fiscal policy and interest rates can all influence the equity markets. But equity returns are also dependent on where we stand in the economic cycle.
Some sectors, such as industrials and financials, tend to display strong performance early in the economic cycle when economic growth is accelerating. Other sectors, like utilities and consumer staples, tend to be strongest very late in the economic cycle when economic growth is weakest.
How do we know this?
bit.ly/2IixNyr
| | | | | | Miscellaneous | | | Saudi Arabia, Argentina to be part of MSCI emerging markets index
Reuters via CNBC
Index provider MSCI said it will reclassify Argentina as an emerging market and start including Saudi Arabia in that classification in a move that could be supportive of their local equities.
The inclusion comes amid anticipation over the listing of Aramco, the state-controlled Saudi energy giant, and hours after the IMF approved a $50 billion financing deal for Argentina.
/cnb.cx/2Kfg78E
Britain might not play fair with Brexit: Deutsche Boerse chief
Reuters
Britain may bend the rules to defend London's standing as a global investment hub after leaving the European Union, the head of the company that runs the Frankfurt Stock Exchange warned on Thursday, raising the stakes in a duel for post-Brexit financial supremacy.
/reut.rs/2Kc5nrV
****SD: Sounds like board game night with my dad...
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Editor
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