| October 31, 2018 | | | |  | Spencer Doar
Editor
John Lothian News | |
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| | | | Lead Stories | | | Standardized Approach for Calculating the Exposure Amount of Derivative Contracts
Federal Reserve
The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (together, the agencies) are inviting public comment on a proposal that would implement a new approach for calculating the exposure amount of derivative contracts under the agencies' regulatory capital rule. The proposed approach, called the standardized approach for counterparty credit risk (SA-CCR), would replace the current exposure methodology (CEM) as an additional methodology for calculating advanced approaches total risk-weighted assets under the capital rule.
/goo.gl/TSp9Kz
****SD: Let the index options market makers rejoice! (Or at least start chilling the champagne.) The gears of regulation remain slow though, so this is just another step on the right path for options capital calculations at bank clearers. Here is an abridged press release and here is Reuters on this proposed rulemaking.
Panic in Stocks? Options Signal No
Gunjan Banerji - WSJ (SUBSCRIPTION)
In options markets there hasn't been a stampede into benchmark protection
An unusual dynamic in options markets is signaling that investors aren't panicking despite October's stock-market drubbing: Expectations for volatility are greater in individual companies than the broader market.
/goo.gl/UWPkmW
****SD: The VIX futures curve is still in backwardation.
World's Biggest Derivatives Exchange Is Getting a Boost From Trade War
Isis Almeida - BloombergQuint
Trading in CME agriculture complex jumped most in three years; 'When there's risk, people hedge,' CME's Andriesen says
First it was a drought in Russia, the biggest wheat exporter. Then dry spells struck European and Australian crops. And to spice up the mix, Donald Trump started a trade war with top soybean and pork buyer China.
/goo.gl/9HEJUq
****SD: Yes, this is a boost to ags, but let's get something straight generally - the CME has been doing just fine. Continued focus on electronification, record after record across the volume and open interest board in a multitude of products, weathering the global NIRP/ZIRP phenomenon with robust interest rate derivatives activity, marketing its options on futures in a more holistic manner, more off-hour trading activity, keeping its name on people's minds when it comes to crypto - all of this adds up to success, trade war or no. Oh, and there's this little acquisition of a firm called NEX, too. (The UK competition authority just approved the deal.) One more thing, look at CME stock. Has it only been on the rise since trade tensions began? Heck no.
Seven Charts Showing Just How Crazy October Has Been for Stocks
Sarah Ponczek, Vildana Hajric and Lu Wang - Bloomberg (SUBSCRIPTION)
It's been a helter-skelter October in stocks.
Investors have been on edge, with volatility spiking and the S&P 500 Index on track for its worst month since 2010. The tech-heavy Nasdaq 100 is doing worse, falling more than 10 percent into a correction. Even the rallies are nuts. Like on Tuesday, when major averages all posted gains greater than 1.5 percent, but the S&P 500 rose and fell more than 1 percent five times.
/goo.gl/CzBq31
****SD: Business Insider has 'Red October' sees US stocks endure their worst month since the financial crisis and S&P has Stocks On Pace For The 6th Scariest October Ever
| | | | | | Exchanges and Clearing | | | Cboe Global Markets Declares Fourth-Quarter 2018 Dividend
Cboe
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world's largest exchange holding companies, today announced its Board of Directors has declared a quarterly cash dividend of $0.31 per share of common stock for the fourth quarter of 2018. The fourth-quarter 2018 https://on.mktw.net/2Qa8OCb
Intercontinental Exchange Reports Third Quarter 2018 ; Third quarter revenues of $1.2 billion, +5% y/y
ICE
Intercontinental Exchange (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of data and listing services, today reported financial results for the third quarter of 2018. For the quarter ended September 30, 2018, consolidated net income attributable to ICE was $458 million on $1.2 billion of consolidated revenues less transaction-based expenses. Third quarter GAAP diluted earnings per share (EPS) were $0.79. Adjusted net income was $491 million in the third quarter and adjusted diluted EPS were $0.85, up 16% year-over-year. Please refer to the reconciliation of non-GAAP financial measures included in this press release for more information on our adjusted operating expenses, adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted EPS, organic data revenue and free cash flow.
bit.ly/2Q6x8F6
September Equity Index Product Review
CME Group
bit.ly/2Q4flhH
| | | | | | Moves | | | Goldman, JPMorgan Hit Pause on Intern Recruiting 'Madness'; A push in recent years to move up application deadlines isn't bringing in the kinds of candidates the banks need
Liz Hoffman - WSJ (SUBSCRIPTION)
Two Wall Street investment banks are easing up in the race to hire their most junior employees.
/on.wsj.com/2Q9p0Uu
| | | | | | Regulation & Enforcement | | | U.S. Market-Manipulation Cases Reach Record; CFTC and Justice Department target spoofing and other illegal tactics, helped by data-sharing deal with key exchange
Gabriel T. Rubin - WSJ (SUBSCRIPTION)
Federal regulators have ramped up their pursuit of traders who use a bluffing tactic known as spoofing to manipulate market prices, enforcement officials said, leading to a record number of manipulation cases.
/on.wsj.com/2Q6yCza
| | | | | | Technology | | | CAT Reporting Technical Specifications For Industry Members Version 1.0
Mondovisione
CAT NMS, LLC published the final version of the CAT Reporting Technical Specifications for Industry Members ("Technical Specifications"). This version incorporates industry feedback submitted to the Participants since publication of the Version 0.6 draft published on September 5, 2018.
bit.ly/2Q8rgva
****SD: Here is the link to the full 175-page PDF. Luckily, the participants also released a 182-page document covering varying reporting scenarios based on the huge array of routing and execution choices available to those in the equity and options worlds.
| | | | | | Strategy | | | How The Market's Volatility Is Shaking Out In Leveraged ETFs
Spencer Israel - MarketWatch
The third quarter earnings season is in full swing, with the busiest week of earnings upon us.
But what makes this earnings season unique is it has been accompanied by a bought of volatility that, to be frank, is rather unusual in this market. Not only has the VIX reached levels not seen since the end of March, but the market has officially given back all its 2018 gains.
While it's likely causing headaches for investors, this general market/earnings volatility is a dream for traders, especially ones who use daily trading strategies.
/goo.gl/LZRxLJ
British Pound Hits Multi-Week Lows as Investors Rush to Buy Options Protecting Against 'No Deal' Brexit
Gary Howes - Pound Sterling Live
The British Pound is hovering near October lows against the Euro and two-month lows against the U.S. Dollar as the impasse in Brexit negotiations remains front-and-centre for investors with odds of a no-deal Brexit now being at around 50% according to betting markets, up from 35% seen in October.
bit.ly/2Qaw8jw
CoreCommodity's De Chiara says bull cycle in commodities starting
Reuters
Commodities from energy to metals and agriculture are in the early stages of a strong upward move, CoreCommodity LLC portfolio manager Adam De Chiara said on Tuesday, as interest rates start to rise and long-standing supply gluts start to dwindle.
/reut.rs/2DfjwVw
| | | | | | Miscellaneous | | | MSCI indexes will not ban stocks that deny shareholders a vote
Trevor Hunnicutt - Reuters
Index provider MSCI Inc said on Tuesday it would allow companies that give shareholders unequal voting rights to remain its current equity indexes, backing down from an earlier proposal that would have reduced exposure to such companies.
/reut.rs/2Debvjp
****SD: MSCI's press release here.
The Finance 202: Trump says Democrats will tank the stock market. History suggests otherwise.
Tory Newmyer - The Washington Post (SUBSCRIPTION)
President Trump broke his habit of only acknowledging stock market highs on Twitter to offer a theory about the recent sell-off:
/goo.gl/jUd3Fc
Stalwart Hedge Funds Test Their Clout With Clients
Juliet Chung - WSJ (SUBSCRIPTION)
Some of the rare hedge funds earning their keep are about to make it harder on investors.
Israel Englander's $35.9 billion Millennium Management and Kenneth Griffin's $31 billion Citadel LLC are rolling out changes that could result in investors facing a longer path to get their money out of a fund or having to pay higher fees.
Millennium has told investors that early next year they will get back any profits from this year. To reinvest that cash with Millennium, clients will need to sign up for a new share class whose terms mean it would take five years to get all their money backÂcompared with a year now.
/on.wsj.com/2DfvwpW
Junk Bonds Spooked by Worst October Since 2008 as Yields Spike
Gowri Gurumurthy - Bloomberg (SUBSCRIPTION)
It's the worst October for U.S. junk bonds since 2008.
This month is typically a good one for high yield, but October is on track for the biggest loss since December 2015 as equity volatility, earnings and trade worries weigh.
/bloom.bg/2Q8SFND
****SD: And thus junk bond ETF options (mostly HYG, but also JNK) have been regular entrants in the top 20 ETF options by average daily volume list.
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| | | | John Lothian News (JLN) is the news division of John J. Lothian & Company, Inc. (JJLCO). The online media and financial services firm is staffed by derivatives industry, journalism and technology professionals. | | | | | | | John Lothian News Editorial Staff: | | | John Lothian
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Editor
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