| July 06, 2023 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | IOSCO published a Statement on Alternatives to USD Libor on July 3 that undermines the case for credit sensitive rates such as Ameribor and Bloomberg's offering. IOSCO said, "Most significantly, the review confirmed regulatory authorities' concerns that certain CSRs currently in use exhibit some of the same inherent 'inverted pyramid' weaknesses as LIBOR." Some of the issues included "liquidity risks in the bank-issued commercial paper (CP) and certificates of deposit (CD) market data, they are not sufficiently deep, robust and reliable to underpin alternatives to USD LIBOR." Also, IOSCO said, "Further, gaps in data and volatility related to reliance on a very small number of transactions mean that USD LIBOR alternatives based on these markets are unlikely to sufficiently implement the IOSCO's Principles relating to benchmark design." ~JJL
| | | | | | Lead Stories | | | Is a Big Stock-Market Crash Coming? Options Traders Say No.
Gunjan Banerji - WSJ
Options traders are positioning for the market's winning streak to continue.
The prices of options that would pay out if the S&P 500 plunged in coming months have dropped significantly since the start of the year, a sign many traders expect the recent calm to continue.
/jlne.ws/3reA8qu
Options Industry Midyear Review: Index Products Lead Growth
Cboe
As we enter the second-half of 2023, let's review how the options industry fared in the first six months of the year and what year-to-date performance indicates for the next six months.
Nearly 2.6 billion option contracts traded market-wide in the second quarter of 2023 as large cap equities rebounded from first quarter lows and the general level of concern among investors decreased, leading to lower volatility and a quarter-end Cboe VIX Index close of 13.59 - more than 5 points below March 31 levels. Across all products, daily volume averaged near 42 million contracts, a decline of 7% from the record levels set in the first quarter.
/jlne.ws/3O3sAjq
Dealers commence tackling US Libor swaptions transition
Lukas Becker - Risk.net (Subscription)
Dealers have ramped up efforts to switch their stock of US Libor-referencing swaptions to the secured overnight financing rate, or SOFR, amid rising fears about the complexity of physical delivery and deadlines set by clearing houses for acceptance of legacy Libor positions.
Nine dealers transitioned a chunk of swaptions on June 29, using a new service from Capitalab that replaces their Libor contracts with like-for-like SOFR positions. David Briggs, a salesperson at Capitalab, says the firm
/jlne.ws/44pjVx0
Federal Reserve signals determination to raise interest rates after June pause
James Politi and Colby Smith - Financial Times
Federal Reserve officials signalled they intend to resume interest rate increases amid a growing consensus that more tightening is needed to stamp out high inflation in the world's largest economy.
According to minutes from June's meeting of the Federal Open Market Committee, "almost all" officials who participated said "additional increases" in the Fed's benchmark interest rate would be "appropriate".
/jlne.ws/43cRUrp
New York Fed data shows underlying inflation may be slower than thought
Howard Schneider - Reuters
New data from the New York Federal Reserve shows underlying inflation may have slowed faster than the headline measures that have kept U.S. central bank officials poised for further interest rate increases. In a research series that is now due for monthly release, the New York Fed's so-called "multivariate core trend" measure of inflation stood at 3.5% in May, far lower than the 4.6% rate of increase for the personal consumption expenditures price index stripped of its volatile food and energy components.
/jlne.ws/46EH5kY
Buffett's derivatives bonanza doesn't prove that Taleb is wrong; An autopsy of Berkshire's big derivatives portfolio trade
Pablo Triana - Financial Times
Between 2004 and 2008, Warren Buffett sold an absolute boatload of derivatives contracts. Back in 2013 I tried to dissect the trade - an analysis Alphaville covered here and here - but now that the positions have all been closed out it makes sense to do a final autopsy. Remember, the size of the positions was humongous. At the peak the nominal size of Berkshire Hathaway's positions was about $40bn of equity index puts and $30bn of credit-default swaps, many of which were long-term, volatile exposures.
/jlne.ws/3XH6beN
Tesla Stock Is Wild. Wall Street Can't Keep Up.
Al Root - Barron's
Pity the Wall Street analyst assigned to cover Tesla stock. It isn't an easy job.
Just take a look at recent ratings, price targets, and stock trading. Thursday, BofA Securities analyst John Murphy took his price target on Tesla (ticker: TSLA) shares to $300 from $225 apiece.
/jlne.ws/46uLXca
Crypto Is 'Digitizing Gold' and Bitcoin Can Revolutionize Finance: Fink
Zahra Tayeb - Markets Insider
Crypto is akin to "digitizing gold" and bitcoin has the power to "revolutionize" finance, according to BlackRock CEO Larry Fink.
Fink's optimism toward crypto comes as the world's largest asset-management company sets its sights on a spot bitcoin ETF, and is currently seeking approval from US regulators.
/jlne.ws/44q6FZa
| | | | | | Exchanges | | | 'Top dog in Asia': Nikkei's stellar rise starts drawing big money
Kevin Buckland and Ankur Banerjee - Reuters
A tailwind behind Japanese stocks is strengthening as large foreign funds who have been avoiding the market for decades start to reach into pockets deep enough to take the Nikkei back to its 1989 peak. Their money was on the sidelines while the Nikkei 225 (.N225) surged 27% in the first half of the year, as managers kept habitual below-benchmark weightings on Japan - settings that didn't budge for years while the share index disappointed. The best first-half gains in a decade, corporate reforms and continuing ultra-easy monetary policy supporting the economic recovery have led to a change in mindset.
/jlne.ws/44x4tij
| | | | | | Regulation & Enforcement | | | Iosco deals hammer blow to BSBY, Ameribor; Non-compliance ruling does not equate to a ban, but may strangle use by regulated firms
Helen Bartholomew - Risk.net (Subscription)
The role of credit-sensitive rates in the post-Libor landscape has been thrown into doubt after the International Organization of Securities Commissions ruled that they do not comply with international benchmark standards.
/jlne.ws/43cJ8tw
Tom Hayes wins right to appeal Libor conviction for a second time
Alistair Gray - Financial Times
Tom Hayes, the former trader jailed for conspiring to rig the benchmark Libor interest rate, is to be given another chance to appeal against his conviction after a review by the body that investigates potential miscarriages of justice.
Hayes, who worked for UBS and Citigroup, was found guilty in 2015 of multiple charges of conspiracy to defraud and served five and a half years in prison. But the Criminal Cases Review Commission said on Thursday that there was a "real possibility" the Court of Appeal could overturn his conviction.
/jlne.ws/3XEZQR2
| | | | | | Moves | | | Pat Luongo is starting a new position as senior vice president at Jefferies. Luongo was previously director of AES options at Credit Suisse.
| | | | | | Strategy | | | 8 Warning Signs to Watch for a Potential Stock Market Correction
Matthew Fox - Markets Insider
Despite the stock market's near-30% rally since its mid-October low, not all investors are convinced that a new bull market has started.
For those investors, Fundstrat technical analyst Mark Newton highlighted the top warning signs to monitor to gauge whether a stock market correction is imminent.
/jlne.ws/46F9IOI
Bitcoin Stocks Rising
Cboe (Video)
In #Vol411, Scott Bauer @cboesib covers recent bullish #optionstrading activity in #bitcoin & #blockchain-related #stocks, a large #VIX options trade and other notable volume in single names.
/jlne.ws/3PHDUmj
| | | | | | Education | | | OIC 2023 Educational Series: Complex Spreads and Volatility Strategies
OIC
Throughout the third quarter of 2023, The Options Industry CouncilSM is launching new webinars to help investors learn about the potential benefits and risks of strategies with exchange-listed options. Each month of the quarter will feature two brand new instructor-led live webinars, at no cost to registrants, covering a variety of options investing topics.
In July, OIC will offer a pair of sessions around the theme of condor and butterfly strategies, including a review of the components and how these positions are established. During August, spread strategies will be in focus, with an overview of calendar spreads in the first webinar of the month, followed by a discussion of diagonal spreads. The quarter will conclude in September with two presentations on the theme of volatility strategies, reviewing both long and short straddles and strangles.
/jlne.ws/43eIP1d
| | | | | | Miscellaneous | | | How a Morgan Stanley Derivatives Salesperson Became a Celebrity Chef; Five minutes with Judy Joo on food inflation, how a finance background helps with running a restaurant and which perks work best with staff.
Irina Anghel - Bloomberg
Judy Joo says she used to read mostly about financial markets as she shows me around her quick-service Korean-American restaurant, Seoul Bird, in London's Canary Wharf. These days it's more cookbooks, food magazines and menus for the former derivatives salesperson who ditched Morgan Stanley's trading floor in 2004 after five years and went on to work in Michelin-starred restaurants and host her own cooking show.
/jlne.ws/3rew5dU
The Air Jordan Drop So Hot It Blew Up an Alleged $85 Million Ponzi Scheme; Michael Malekzadeh's Zadeh Kicks made millions of dollars taking big presale orders for coveted sneakers at low prices and scrambling to fill them. Then came the Air Jordan 11 Cool Grey.
Misyrlena Egkolfopoulou and Kim Bhasin - Bloomberg
A private jet landed in May 2022 at a small airport near Eugene, Oregon, and dropped off two men. They hopped in a car and drove past vegetable farms and cannabis storerooms to a quiet business park at the western edge of town. Their destination was a dusty warehouse that held hundreds of rows of neatly stacked sneaker boxes, almost 60,000 in all. The shoes were the stockpile of Michael Malekzadeh, the owner of Zadeh Kicks, one of the largest US sneaker resale operations. Many of the sneakers were among the most valuable on the secondary market, selling for thousands of dollars a pair. The men had come for their cut-the value of what they'd ordered and not received from Malekzadeh.
/jlne.ws/3D1oOk5
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