| May 29, 2018 | | | |  | Spencer Doar
Editor
John Lothian News | |
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| | | | Observations & Insight | | | 
The Spread - Week of 5/21 to 5/25
JohnLothianNews.com
Reviews of "The Spread" are in!
"You look better in blue." - Host's mom
"I guess I like it - I just don't understand what you're talking about." - Old college friend
"I prefer the book." - Random millennial
"It's better than most other stuff." - Biased observer
Watch the video and see the stories referenced here »
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Markets Convulse as Italy Is Seen on Course for New Elections
Anooja Debnath, Chiara Remondini and Stephen Spratt - Bloomberg
Sovereign bonds, stocks decline after erasing opening rallies; President asks economist Cottarelli to form a government
Chaos ruled Italian markets as the nation plunged deeper into political turmoil.
/goo.gl/XuoTcfe
****Reuters - Worsening Italian crisis batters stock markets, euro
WSJ - Political Uncertainty in Italy, Spain Roils Markets
Yanis Varoufakis editorial in The Guardian - With his choice of prime minister, Italy's president has gifted the far right
Bloomberg - Shorting Italian Debt Delivers 24% Return for ETP Investors
Heisenberg - VaR Shocks, Panic Selling, Outflows And (Maybe) More To Come
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Fintech Exchange: Changing The Market Landscape
JLN
The fourth annual Fintech Exchange event was held in Chicago on April 25 -26, with an eye toward up-and-coming companies and exchanges, as well as what's new in the fintech space from established players. Here is a recap of the best of the two-day conference, hosted by Barchart, with speakers from start-up exchanges to Richard Sandor and Julie Armstrong. It also features the 90-minute lightning round in 90 seconds.
bit.ly/2setgbs
| | | | | | Lead Stories | | | Vix-mageddon revisited: it's the buyers who disappeared
Ing-Haw Cheng - Financial Times (SUBSCRIPTION)
The VIX is the talk of the town again. After averaging a sleepy 11% in 2017, Wall Street's "fear gauge" leapt to 37% in early February. It's declined quite a bit since then, but it's still averaging 20 per cent. "This is the first time in years when volatility has jumped and remained high," says Macro Risk Advisors.
/on.ft.com/2GYZEmX
****From the story: "Not all facts fit together so conveniently, nor will they ever. But my research, ... suggests the key features of this most recent episode are not unique and fit historical patterns in VIX futures."
Currency derivative markets signal more weakness for the euro
Saikat Chatterjee - Reuters
Currency derivatives tied to the outlook for the euro fell to their lowest level in more than a year on Tuesday, pointing to further weakness for the single currency as a sharp selloff in Italian debt spilled into foreign exchange markets.
/goo.gl/MsB2x1
Red Flags Are Suddenly Soaring in Markets
Richard Barley - WSJ (SUBSCRIPTION)
Italy's bond market is in meltdown, its politics in crisis after President Sergio Mattarella blocked the formation of an antiestablishment government and its credit rating under threat.
/on.wsj.com/2LHm6V6
Machine Learning for Volatility Trading
Artur Sepp Research Blog
Recently I have been working on applying machine learning for volatility forecasting and trading. I presented some of my findings at QuantMinds Conference 2018 which I wanted to share in this post.
bit.ly/2LI2D6z
****From the post - "Academics and practitioners have developed many models for volatility measurement and forecast - I estimate that the total number of available models to be about 200-300 if we count all modifications of intraday estimators, GARCH-type and continuous-time models." From QuantNews - Fundamentals of Machine Learning
| | | | | | Exchanges and Clearing | | | Singapore Exchange postpones launch of Indian derivatives products
Reuters
The Singapore Exchange (SGX) (SGXL.SI) has postponed the launch of a set of India derivatives products after an Indian court on Tuesday referred a dispute around the proposed offerings to an arbitrator.
/reut.rs/2LFDh9I
****Press releases - National Stock Exchange Of India Statement - Petition Against SGX Launch of SGX India Futures, SGX Options On SGX India Futures and SGX India Bank Futures and then the SGX release Update on SGX India Derivatives
Ex-NYSE Chief Liked SPACs So Much He Joined One
Stephen Gandel - Bloomberg
Before leaving a powerful and prominent job, it helps to know you have another lucrative place to land. Tom Farley, who stepped down as the head of the New York Stock Exchange, was lucky enough to help lay the groundwork for his next opportunity.
/bloom.bg/2LH4UPJ
MIAX Options - Approval for FINRA Arbitration Rules 12600, 12800, 13600 and 13800
Mondovisione
bit.ly/2LDgVFE
| | | | | | Moves | | | Wall Street banks are firing traders despite strong performance
Hugh Son - CNBC
Investment banks generated $43.9 billion in first-quarter revenue, the highest since 2015, according to financial research firm Coalition.
That didn't stop banks from cutting 6,000 traders, salespeople and bankers as an industry contraction continues.
European firms bore the brunt of the losses, according to Coalition.
/cnb.cx/2LCPWtL
Deutsche Asset's global equity trading head Bellaro to retire
Hayley McDowell - The Trade
Deutsche Asset Management's global head of equity trading and buy-side industry veteran Mike Bellaro is retiring after 30 years with the firm, The TRADE can reveal.
bit.ly/2LFhyOQ
| | | | | | Technology | | | Galaxy Derivatives Company Deploys Itiviti's Solution for Options Market Making in China
PRNewswire
Itiviti and ULLINK, the recently merged market-leading global provider of multi-asset trading technology and financial infrastructure, today announced that Galaxy Derivatives Company (GDC) has implemented Itiviti's trading solution for options market making on Zhengzhou Commodity Exchange (ZCE) and Dalian Commodity Exchange (DCE).
/goo.gl/NTZsGX
Quantcha Announces US Equity Option Ratings Availability
PRWeb
Quantcha today announced the availability of three new proprietary metrics designed to help solve the most common challenges faced by option investors. These metrics are easy to understand, easy to use, and easy to track over time.
/goo.gl/9EA8dt
TORA Integrates Its OEMS with Trax for MiFID II Trade and Transaction Reporting
TORA
TORA, provider of the industry's most advanced cloud-based order and execution management system (OEMS), today announced that it has partnered with Trax, the post-trade services and European market data division of MarketAxess, to help their mutual clients meet MiFID II trade and transaction reporting requirements. This development is the latest in a range of solutions that TORA offers to help clients satisfy MiFID II demands covering best execution, regulatory reporting and commission management.
bit.ly/2LE7eGY
| | | | | | Regulation & Enforcement | | | ESMA Promotes Consistent (Anti-) Procyclicality Margin Measures For CCPs
Mondovisione
The European Securities and Markets Authority (ESMA) has issued today final guidelines on anti-procyclicality margin measures for central counterparties (CCPs) under the European Market Infrastructure Regulation (EMIR).
bit.ly/2LHPJWb
Sebi launches probe into MCX's technical glitches and NSE's NOW disruption;
Press Trust of India
Markets regulator Sebi has begun initial probe into technical problem with MCX's trading system and "disruption" in NSE's web-based tool NOW, senior officials said.
/jlne.ws/2GYzhxi
Uses of Notional Amount in Derivatives Regulation
ISDA
Notional amount outstanding is a widely used metric in the derivatives market, but it is more a measure of traded volume or transaction size and less a measure of risk. A recent research paper published by the US Commodity Futures Trading Commission (CFTC) highlights this point, and introduces an alternate metric for the interest rate derivatives market.
/goo.gl/oxRrHR
ESMA Provides Updates on 15 Minute Reporting Rules for Trading Venues
Finance Magnates
The European Securities and Markets Authorities (ESMA) updated its question and answers (Q&A) section today regarding transparency and market structures issues under the Market in Financial Instruments Directive (MiFID II) and Regulation (MiFIR). Of particular note was an update covering the requirement imposed on trading venues to make post-trade data available free of charge 15 minutes after publication.
bit.ly/2xobBDb
| | | | | | Strategy | | | As VIX Hysteria Rises, One Signal That's Worthy of Attention
Bernie Schaeffer - Schaeffer's Investment Research
In the aftermath of the February 2018 volatility "melt-up" -- which proved to be an extinction-level event for some of the exchange-traded products (ETPs) tied to the Cboe Volatility Index (VIX) -- the narrative that has emerged in the financial media regarding the volatility complex has been borderline funereal in its tone. Trading in VIX instruments is now "scary," per a late-April Wall Street Journal article, amid thinning volume in the volatility index's futures and options. Meanwhile, analysts at J.P. Morgan recently downgraded Cboe Global Markets (CBOE) stock to "underweight," with the firm warning of "continued risk of a further slowdown in VIX futures activity... and... the potential for VIX options trading activity to slow."
bit.ly/2xoEcYJ
Is Low Volatility Bad News For Stocks?
Clif Droke - Seeking Alpha
Is the stock market poised for a major decline? If you ask the bears that question the answer you'll get is, of course, "yes!" But what about the bulls? Normally their answer would be an emphatic "no!" and even now most of them would probably echo that sentiment. But are the bulls outright optimistic on the stock market's interim prospects? The evidence suggests, surprisingly, that they are not. In this report, we'll examine the latest investor sentiment percentages and how it supports the continuation of the bull market.
bit.ly/2xqI2Ri
Our Model Forecasts May Non-Farm Payroll, and June's Too
Erik Norland - CME Group
Forget for a moment about the May employment report due out on June 1. We have something much more interesting than the 195K consensus estimate for non-farm payrolls (NFP) in May. Using just three factors, our model forecasts not only May's result but also produces a preliminary estimate for the June payroll report out on July 6. This model explains approximately 70% of the future variance in the NFP, enabling for forecasts over one month in advance.
bit.ly/2xr3vtm
VIX Positioning Points to Post-Fed Headwinds for Stocks
Todd Salamone - Schaeffer's Investment Research
If you circled June 12 on your calendar, you can now erase it -- at least for now, as President Donald Trump canceled the summit with North Korean leader Kim Jong Un. As stocks slid initially in Thursday's trading in reaction to this news, I commented to my colleagues that equities have rallied for years without a North Korean summit on the calendar.
bit.ly/2GZmlag
Playing in Traffic
Ben Carlson - A Wealth of Common Sense
At nearly every conference speech on behavioral psychology I've seen over the past decade or so the speaker will invariably ask the audience, "By a show of hands  how many of you think you're an above average driver?"
bit.ly/2LF19dr
Bitcoin options at cheapest levels in months
Deribit via CryptoNinjas
Bitcoin has retreated over 25% from its recent highs in early May, and the implied volatility of options on Deribit's bitcoin options exchange has also decreased significantly over the same period.
bit.ly/2LIwSu2
****SD: This is a "sponsored" piece (Deribit has a product to sell) - keep that in mind when reading.
FX Options Market Update: May 29, 2018
Dan Larsen - TradingFloor.com
Saxo Bank head of FX trading Dan Juhl-Larsen's latest report on the FX Options space is now live, with analysis of the Turkish lira, the euro, Italy, and more.
bit.ly/2xnvIkO
| | | | | | Miscellaneous | | | Soros Sees New Global Financial Crisis Brewing, EU Under Threat
Nikos Chrysoloras and Helene Fouquet - Bloomberg
A surging dollar and a capital flight from emerging markets may lead to another "major" financial crisis, investor George Soros said, warning the European Union that it's facing an imminent existential threat.
/bloom.bg/2LHWdVg
Iron ore derivatives traders seek more hedging options
Hellenic Shipping News Worldwide
Iron ore derivatives traders on Singapore-based exchange SGX want more hedging tools, including a 65pc Fe contract, and welcome the internationalisation of Chinese futures, which will create more trading opportunities.
bit.ly/2LAsy09
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Editor
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