| May 31, 2017 | | | |  | Spencer Doar
Associate Editor
John Lothian News | |
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| | | | Observations & Insight | | | Goodbye to the Convergex Briefing
Spencer Doar - JLN
The Convergex Morning Market Briefing, penned by Convergex Chief Strategist Nick Colas with the assistance of Research Associate Jessica Rabe, abruptly ended last night.
It covered a bit of everything (the Fed, car sales, volatility, passive vs active, housing, current events, the growing legal marijuana market  you name it) with a healthy dose of context and classic rock references. I will miss it. Best of luck to Colas and Rabe in future endeavors.
This has to do with Cowen Group's purchase of Convergex which was announced in early April. It makes me wonder how Convergex will fit into Cowen when all's said and done. What and who else will be shed? Keep in mind in a separate (but related) move earlier this year, LiquidPoint, Convergex's options/tech business, merged with Dash.
The Cowen/Convergex deal looks near completion (expectations are for Friday) given the announcement of Convergex CEO Eric Noll's eventual departure last week, but I hoped for the Briefing to continue.
I agree with Colas, who ended the last letter with a Stones quote: "You can't always get what you want/ But if you try sometimes, well you just might find/ You get what you need."
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Nasdaq's Kennedy Sees Plenty of Room for Options Industry Growth
Click here to watch
While the options industry has been incredibly resilient in the face of challenges, Kevin Kennedy, senior vice president, head of U.S. options with Nasdaq, sees the need for growth. In this video from the Options Industry Conference in Scottsdale, Ariz., Kennedy talks about opportunities to improve the functioning of options markets. Some things Kennedy believes should be addressed are auctions, the number of listed underlyings and spread width. He hopes Nasdaq can take a leadership role in revamping market structure and tailoring the regulatory environment to better suit end users.
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| | | | | | Lead Stories | | | How To Launch A Successful ETF
Cinthia Murphy - ETF.com
Cambria just launched its 11th ETF, an equity fund that relies on an options overlay to generate income and protect on the downside, the Cambria Core Equity ETF (CCOR). The firm, which also runs a digital advisory service, is known for its quant DNA and a focus on offering clients one-of-a-kindÂor best-in-classÂaccess for a competitive price. Cambria manages the only ETF in the market that comes with a zero management fee and only 0.25% in expense ratio: the Cambria Global Asset Allocation ETF (GAA).
/goo.gl/oFvcP4
****SD: ETF.com is part of the CBOE family now as the site was bought by Bats in April '16. Since the CBOE/Bats deal went final I've noticed some more options related stories on ETF.com. Coincidence?
Best Execution: Do You Get It?
Chris Sparrow - TABB Forum
Best execution is not an outcome - it is a process. We can certainly know if we got the best price available at the time of a trade. But that isn't best execution. Achieving best execution is not that simple. We need to first understand the context of the order.
/goo.gl/5D9muK
VIX ETPs: Retail investors poised for volatility - JPM
Reuters via Times of India
While U.S. stock market volatility remains subdued, positioning in VIX-linked Exchange Traded Products suggests significant bets on higher volatility, equity derivatives strategist at JP Morgan say
VIX ETP vega exposure remains significantly long and continues to be primarily retail investor driven, JPM equity derivatives strategist Bram Kaplan says in note
/goo.gl/NOCCr5
Sterling bounces as new polls lean PM May's way
Patrick Graham and Ritvik Carvalho - Reuters
Sterling recovered from its lowest level in more than a month on Wednesday after two surveys showed Prime Minister Theresa May's poll lead in double digits, countering signs she might be set to fall short of a majority in next week's election. The pound sank as low as $1.2770 in early trade in London after a projection by polling firm YouGov pointed for the first time to a hung parliament that might instead see a left-leaning coalition take power.
reut.rs/2sn3YFn
****SD: Early this morning (U.S.), the article was titled "Options market bets against sterling hit 2-1/2 month high." One hour later, the title was "Options market bets against sterling hit 3-1/2 month high" and now the title is what you see above. The power of election surveys...
Steve Cohen: New Hedge Fund May Be Bigger than SAC Capital
Lucinda Shen - Fortune
Hedge fund billionaire Steven Cohen was banned from managing outside money until 2018 after an insider trading scandal swept through his former firm SAC Capital. Now, Cohen not only appears poised to return to the hedge fund industry, but to resume his place at the top.
for.tn/2smKFMv
| | | | | | Exchanges and Clearing | | | India: Amid market boom, trading volumes at all-time highs
Business Standard News
With the benchmark indices registering new highs in May, share trading activity also seems to be gathering pace.
/goo.gl/UBvVTC
CME Clearing Named "Clearing House of the Year" by GlobalCapital
Press Release - CME Group
CME Group, the world's leading and most diverse derivatives marketplace, today announced that the company has been named 'Clearing House of the Year' by GlobalCapital in their Americas Derivatives Awards 2017.
bit.ly/2sn5tUh
| | | | | | Moves | | | People Moves
John Lothian - JLN
Yesterday's lead story mentioned Cameron Smith, Dan Coleman and Eric Noll all moving on to new ventures, some in the markets and some not. There have been some other moves recently too, all courtesy of people updating their LinkedIn profiles. Jennifer Wachtel, Tim Cave, Bruce Goldberg, Tom Thornton-Smith, Eric Hazard, and Brendan Bradley are on the list of updates.
/goo.gl/7VlBF2
| | | | | | Regulation & Enforcement | | | ISDA's Vision for a Smart Future
derivatiViews, ISDA Blog
ISDA has a long history of creating solutions for the derivatives industry. The Master Agreement and countless protocols and definitions have contributed to a safer, more efficient market for derivatives users.
/goo.gl/6VE1I9
Norms on commodity options in a fortnight
Economic Times
The Securities & Exchange Board of India (Sebi) is expected to issue a circular on the operational framework and modalities for launch of commodity options by exchanges like NCDEX and MCX in a fortnight, a person aware of the development told ET. The regulator has also taken up the tricky issue of options' taxation with the Central Board of Direct Taxes (CBDT), he added.
/goo.gl/bTxCFC
| | | | | | Technology | | | Morgan Stanley's 16,000 Human Brokers Get Algorithmic Makeover
Hugh Son - Bloomberg
Call them cyborgs. Morgan Stanley is about to augment its 16,000 financial advisers with machine-learning algorithms that suggest trades, take over routine tasks and send reminders when your birthday is near.
bit.ly/2smWJO2
Discretionary Managers Seek Alpha in Alternative Data
Ivy Schmerken, Flextrade - TABB Forum
Alternative data providers see huge potential in providing their data to discretionary asset managers who are losing assets to quantitative and systematic funds.
bit.ly/2snu9vP
| | | | | | Strategy | | | Explaining The Low Vol Anomaly
Larry Swedroe - ETF.com
A major problem for the first formal asset pricing model developed by financial economists, the CAPM, is that while it predicts a positive relation between risk and return, empirical studies have found the actual relation to be flat, or even negative. Over the last 50 years, the most "defensive" (low-volatility, low-risk) stocks have delivered both higher returns and higher risk-adjusted returns than the most "aggressive" (high-volatility, high-risk) stocks. In addition, defensive strategies, at least those based on volatility, have delivered significant Fama - French three-factor and four-factor alphas. The superior performance of low-volatility stocks was first documented in the literature in the 1970sÂby Fischer Black (in 1972), among othersÂeven before the size and value premiums were "discovered."
/goo.gl/E1ROHL
Hope Springs Eternal For VIX Hedgers
Peter Tchir - Forbes
As we head into June, we will find out if the old adage - Sell in May and Go Away works or not. The ProShares Ultra VIX Short Term Futures ETF (UVXY)has seen a rapid rise in terms of shares outstanding, once again.
/goo.gl/0VDtng
One The Highest Probability Trades Available Anywhere In Global Finance
Jan Dehn - Frontera News
Historically it has been very profitable to buy EM during major risk-off episodes in developed economies, i.e. events that push the VIX index up by 10 points of more. Brexit was such an event and EM's performance following Brexit was no different from the past with strong positive performance across the board.
bit.ly/2sne7C6
Investors Pull off the Impossible With Apple Shares
Wall Street Daily
It's getting tougher than ever to pay up for pricey stocks. As I write, the S&P 500 is trading at 19.7 forward earnings  just below a 10-year high. Of course, that's not to say that bargains can't be found in the market or that some stocks haven't earned a premium valuation. But as senior analyst Jonathan Rodriguez pointed out last week, the lack of volatility in the stock market presents investors a unique opportunity.
/goo.gl/Q2r1IS
****SD: An explanation of the benefits of long calls in place of stock ownership. TL;DR it's a delta thing.
Volatility Signal Flashing for 10th Time Ever
Rocky White - Schaeffer's Research
Schaeffer's Senior V.P. of Research Todd Salamone noted last week that historical volatility (HV) on the S&P 500 Index (SPX) has been in the single-digits for an extended period. The last time this occurred was in early 2007, which preceded a major bear market. We were curious whether this was a common occurrence just before bear markets. Below is what we found when looking at previous times stock volatility was so low for an extended period.
bit.ly/2snb7pb
A Quick Volatility Analysis
Daniel Goldman - Seeking Alpha
There was some interesting, if not frustrating, discussion on volatility in the comments section of "Is XIV Bulletproof Or Will It Crater When The Time Is Right?" While I have written a little bit about volatility in the past, it was mostly to look at how the broader market was functioning. However, given that there still seems to be a fair amount of misunderstanding regarding volatility and volatility ETPs, I have decided to write a full discussion on the topic. This discussion will be split into two articles, the second article will be published in a few weeks.
bit.ly/2snayfk
| | | | | | Miscellaneous | | | FCM Rankings & Concentration: Q1 2017
Tod Skarecky - Clarus Financial Technology
Clearing broker data is out for Q1 2017, so I wanted to run the numbers and see if anything has changed. Lets start with a view onto the number of registered FCMs. This shows 64 firms registered (down 1 from Q4 2016), and 55 firms with any Client Requirements (down 2). On the bright side, there is a new entrant listed, Apex Clearing. Not yet showing activity, but good to see a new name pop up!
/goo.gl/bv89Qt
Mortgage Bankers and Hedge-Fund Revivals
Matt Levine - Bloomberg
Also bribery, market structure, VIX, unicorns, lunching and learning and the Bowling Green menagerie.
/bloom.bg/2snalsi
****SD: Brief mention of how lack of worry causes worrying  aka VIX doublespeak. Most of today's Levine recap commentary is about other subjects.
The Pain Trade Is Alive and Well
Mark Grant - Bloomberg
Federal Reserve policy makers talk of interest-rate hikes. They blather about cutting back on their $4.5 trillion portfolio of bonds. Yet, instead of backing up, as predicted by almost everyone, yields decline, the curve flattens, and the "Pain Trade" continues.
/bloom.bg/2sn1ffh
****SD: Some market risk from other areas.
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