| March 14, 2018 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Boca Takeaways
Spencer Doar - JLN
The "Ten Years On: A Retrospective View of the Financial Crisis" panel led to the most fireworks of the conference thus far. We are 10 years on from the crisis, and it is extremely clear that no one views those events the same way.
Paul Atkins, CEO of Patomak Global Partners, at one point took issue with former Congressman Barney Frank's take on Fannie and Freddie, saying, "You should take an accounting class," to which Barney Frank shot back, "Don't be so condescending." The whole panel went that way. You have to feel for FIA President and CEO Walt Lukken - that was a tough one to moderate. Tension and humor is a memorable mix. Only OCC Executive Chairman and CEO Craig Donohue came out unscathed (despite sitting between Atkins and Frank) and was also the only one who could get the discussion mostly back on a financial track. Apparently, talking about the pitfalls of the Current Exposure Method is one way to quash partisan bickering. So remember that next time you're sitting around the table with nutty family at Thanksgiving. The other panelist, Thomas Russo, former former executive vice president and general counsel at AIG, took some lumps, too.
In 10 years, when there's a 20 year lookback, it's doubtful there will be any more clarity.
One other thing suggested by Donohue - OCC should have access to a "liquidity facility" from the Federal Reserve.
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Cboe's Press Briefing was held Wednesday morning. The following are some miscellaneous notes from that discussion:
-It was iterated by a different Cboe exec in a MarketWatch story in today's newsletter, but also by execs at the breakfast, that Cboe is looking to build a whole crypto derivatives ecosystem. The exchange group believes in the efficacy of crypto assets, but isn't picking winners. Bitcoin futures were a byproduct of customer demand - the next crypto futures product will also be a byproduct of client feedback.
-Much of the time was spent trying to clarify the nature of the VIX complex in the wake of the fallout from the activity in early February (namely the performance of ETPs seeking to inversely replicate VIX performance). Cboe execs said that at their Risk Management Conference last week on the other side of Florida, most of their clients (read: professionals and institutions) were rather confused about the reactions of the press to the return of volatility. Attention focused on losses from being short vol, but didn't frame it in the context of a broad portfolio. Vol products worked and served their purpose according to Cboe.
-As for accusations of VIX manipulation by systematically bidding on far OTM SPX options, Cboe remains skeptical about the efficacy of that as a strategy. For one, anyone putting those bids in would be opening themself to be nailed by any variety of market participants looking to take advantage of an "uneconomic" position in SPX options.
More to come - have a good one everybody.
| | | | | | Lead Stories | | | ETFs not to blame for market turbulence, says BNY Mellon
Emma Dunkley - Financial Times (SUBSCRIPTION)
The exchange traded fund industry is being defended from accusations that it helped to cause last month's global markets turbulence, despite a slump in investor interest and mounting scrutiny of the role played by passive investments.
Jeffrey McCarthy, chief executive of BNY Mellon's ETF asset servicing business, said the industry would recover from the turmoil, adding: "ETFs do not cause volatility  an ETF is diversified in its investment across a wide variety of securities?.?.?.?it's more the rise of program trading."
jlne.ws/2tNjHDj
A Month After Market Mayhem, Here's How Gauges of Stress Look
Adam Haigh - Bloomberg
The whirlwinds that swept through global markets like a powerful nor'easter from late January have dissipated. But what do the weather gauges now signal?
Measures of stress in stocks, bonds and currencies suggest that traders are settling in to newfound ranges. Equities are experiencing fewer price swings, and valuations are now closer to five-year averages. Emerging-market currency volatility is back to levels seen at the beginning of the year and Treasuries have calmed since 10-year yields stopped climbing.
jlne.ws/2tPwGEw
Why Large Losses (and Gains) Come Out of Low Vol Periods
RCM Alternatives Blog
How and why did Managed Futures take such a big hit in February as volatility spiked is the talk of the town, amid Bloomberg articles and managers sending out their Feb numbers? We covered whether this positive correlation to stocks is the new normal (part 1), but that all begs the question - why were the losses larger than normal?
/goo.gl/zXxR5q
SocGen in exclusive talks to buy Commerzbank's EMC unit: Handelsblatt??
Reuters Staff
French lender Societe Generale (SOGN.PA) has entered exclusive talks to buy the Equities, Markets and Commodities (EMC) division of Germany's Commerzbank (CBKG.DE) after beating rival bidder Goldman Sachs (GS.N), Handelsblatt reported on Tuesday.
/goo.gl/RsmKvo
Google bans cryptocurrency and binary option ads, cracks down on CFD and spread bet ads
Business Insider
Google plans to ban all cryptocurrencies and binary options adverts, and is cracking down on ads for other speculative financial instruments.
Scott Spencer, Google's Director of Sustainable Ads, said in a blog post on Wednesday that the company has "updated several policies to address ads in unregulated or speculative financial products like binary options, cryptocurrency, foreign exchange markets and contracts for difference (or CFDs)."
jlne.ws/2FUtvjR
| | | | | | Exchanges and Clearing | | | Cboe official says more cryptoassets on futures exchange a possibility; Bitcoin tries to halt skid
Barbara Kollmeyer and Aaron Hankin - MarketWatch
The price for a single bitcoin tried to claw back above $9,000 Tuesday, as the digital asset looked on track to halt a five-session string of settlements in negative territory on futures markets. The No. 1 digital currency's spot price BTCUSD, was little changed at around $9,100 on Tuesday, while futures, which have ended lower for five consecutive sessions, according to FactSet data, appeared ready to book modest gains. Lately, regulatory concerns have been undercutting demand for digital currencies as of late, specifically a warning last week from the Securities and Exchange Commission over crypto-trading platforms, market participants said.
/goo.gl/AD1z6d
SGX looking to enhance derivs clearing fund
Jack Ball - Global Investor Group (SUBSCRIPTION)
The proposals will better reflect the risk each clearing member poses to the exchange
/goo.gl/i9DqNX
CQG Expands Trading Destinations, Connects to Shanghai ?Energy Exchange
Aziz Abdel-Qader - Finance Magnates
CQG, a Denver-based provider of technology for integrating market data, technical analysis and trade routing, has expanded its list of direct trading connections to enable its clients to trade energy markets through connectivity to Shanghai International Energy Exchange (INE).
jlne.ws/2FOI3BF
Winklevoss Twins Eyeing Litecoin for Gemini Exchange
GlobalCoinReport
Litecoin is gaining traction as one of the major cryptocurrencies on the market. Where Bitcoin has dominated the digital currency landscape, Ethereum is the same for smart contracts. However, Litecoin's strong advantages compared with Bitcoin have made them a near parallel option. As exchanges expand and increase their offerings beyond the big two, Litecoin is almost always in the running for initial product offerings. Recent announcements by the Winklevoss Twins have suggested that the two are actively seeking to include Litecoin in their Gemini exchange. This is a major triumph for the cryptocurrency referred to as 'The Silver to Bitcoin's Gold.'
jlne.ws/2FVBugv
| | | | | | Regulation & Enforcement | | | Sebi moots 'surge charges' on members with high order-to-trade ratio
Business Standard
The Securities and Exchange Board of India (Sebi) is mooting to impose high transaction charges on brokers or trading members availing the co-location facility at stock exchanges. Access to co-location servers allows faster access to trade data. Typically, it is used for algorithm-based trading, also known as high frequency trading (HFT).
/goo.gl/cxvKGU
U.S. Libor trader loses UK appeal over rigging conviction
Kirstin Ridley - Reuters
A former Barclays (BARC.L) trader lost an appeal against his conviction over Libor benchmark interest rate rigging at London's Court of Appeal on Tuesday.
Alex Pabon, a 39-year-old American former derivatives trader, was jailed in 2016 alongside three other former Barclays traders for conspiracy to defraud in relation to the manipulation of Libor (London interbank offered rate).
/goo.gl/WjwQRT
Onward and upward: Winklevoss proposal for Virtual Currency Association lauded by Commissioner Quintenz
Brad Rosen, J.D. - Jim Hamilton's World of Securities Regulation
Cameron and Tyler Winklevoss announced the establishment of the Virtual Currency Association (VCA), the first self-regulatory organization (SRO) for the cryptocurrency industry, and drew prompt recognition and words of praise from CFTC Commissioner Brian Quintenz. The commissioner commended the Winklevoss twins for "their energetic leadership and thoughtful approach in outlining a virtual commodity self-regulatory organization (SRO) concept" in a statement.
/goo.gl/x3pjUX
| | | | | | Strategy | | | It's A Trader's Market Now
Seeking Alpha
February volatility has clearly signaled a regime change. We're no longer in a market that rewards 'hodlers' to think less and hold more. It's a traders' market now.
The S&P finally snapped that ridiculous no pullback streak we've all been watching on Fintwit.
jlne.ws/2HyADj0
The Unbearable Lightness of the Yen
Saumya Vaishampayan - WSJ
It's getting harder and harder to be a yen bear. The yen has surged 5.8% against the dollar this year, the most of any Asian currency and also outpacing the euro, British pound and Australian dollar. In recent action, one U.S. dollar bought ¥106.51.
/goo.gl/PFGUr9
****SD: From the article - "In aggregate, [hedge funds and leveraged investors] now hold the fewest net short futures and options contracts tied to the yen in more than eight months."
| | | | | | Education | | | Using "The Greeks" To Understand Options
Jim Graham - Investopedia
Trying to predict what will happen to the price of a single option or a position involving multiple options as the market changes can be a difficult undertaking. Because the option price does not always appear to move in conjunction with the price of the underlying asset, it is important to understand what factors contribute to the movement in the price of an option, and what effect they have.
jlne.ws/2FQ0ea1
| | | | | | Miscellaneous | | | The Future of Hedge Funds Is Non-Equity Strategies
Amy Whyte - Institutional Investor
Last year saw the lowest proportion of new stock-oriented hedge funds since at least 2011, according to Seward & Kissel. Only 56 percent of hedge funds started in 2017 by U.S.-based clients of asset-management law firm Seward & Kissel had equity or equity-related strategies, according to its annual hedge fund study released Tuesday. It was the first time since the study began in 2011 that there was near parity between newly created funds with stock strategies and those launched to make non-equity investments.
/goo.gl/4Hr277
Rising Commodity Prices Hide Longer-Term Challenges
A. Gary Shilling - Bloomberg
As major economies continue to expand moderately, it's not surprising that commodity use is increasing and many prices are rising. The Bloomberg Commodity Index is up 20 percent since early 2016. Crude oil prices have more than doubled since bottoming in February 2016. The MSCI World Metals & Mining Index of equities has risen about 90 percent since the start of 2016, topping the 30 percent gain for the MSCI All Country World Index.
/goo.gl/pwss5J
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