| June 19, 2017 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | For The Trader Among Us: Trading Chicago
If you haven't registered for the Trading Chicago event on June 29 at the Swissotel in the Windy City, now is the time to do it. We've got a great lineup of panels and speakers with a strong emphasis on the impact of regulation, technology and key markets on end-users such as CTAs, hedge funds, proprietary trading firms and asset managers.
For full conference information, click HERE.
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LME Working To Get Exchange Structure Right
JohnLothianNews.com
"I think we have to be honest that no market structure is going to be the optimal solution for all of its customers. No exchange is in a position where it doesn't have these open questions. But we probably have more open questions than most at the moment."
The London Metal Exchange and its newly minted CEO Matt Chamberlain spent the first part of 2017 implementing all sorts of admittedly stressful updates and revamps to its trading technology. Now, Chamberlain's task is to adapt the exchange's structure for the 21st century. The exchange released a discussion paper earlier in the year. Once all of the responses to that document have been considered, the exchange will make a decision about its structure and focus on getting the buy-in of its customers.
While all of this is going on, Chamberlain and the exchange are making the final preparations for the July 10 launch of LMEprecious, the LME's attempt to tap into London's thriving OTC precious market with daily and monthly gold and silver futures contracts.
Read the rest and watch the video »
****SD: In case you missed it, thus far we have released ICE's Hutcheson Talks Benchmarks and Assuming the Helm of ICE Clear Europe; Eurex CEO Sees Plenty of Structural Growth Potential; CME's Knottenbelt Discusses International Plans and CME Europe Closure and FIA Europe's Simon Puleston Jones Talks Brexit and MiFID II Readiness.
| | | | | | Lead Stories | | | Market Volatility Has Vanished Around the World
Steven Russolillo - WSJ
The calm that has descended on U.S. financial markets is stretching around the world.
Based on one commonly used measure, Asian equities are near their least volatile this centuryÂa byproduct of improving corporate earnings, stabilizing economic growth and the diminishing impact of geopolitical events on markets.
In the U.S., Wall Street's "fear gauge" is near all-time lows, and in Europe, volatility has also largely subsided.
on.wsj.com/2tF3UBx
How S&P 500 options may be used to manipulate VIX 'fear gauge'
Elliot Blair Smith - MarketWatch
Are traders manipulating options tied to the Standard and Poor's 500 to inflate the settlement value of a popular volatility index known as the VIXÂand skimming profits?
No, says the Chicago Board Options Exchange, which recently reported a fourth consecutive year of record index trading, posting new highs in SPX options and VIX futures.
on.mktw.net/2tFCqMo
MIZUHO: 'The market appears at risk for an unexpected event'
Joe Ciolli - Business Insider
Mizuho Securities has had just about enough of this pesky, ultra-resilient stock market. And it's not backing down from calling a correction.
The firm sees conditions that are ripe for a decline of 10% or more. Mizuho's biggest concern is that stocks are expensive, especially when compared to the rate of US economic growth and corporate profitability.
read.bi/2tFFKXz
****SD: For a Business Insider VIX/yield curve story, click here.
China to promote wealth management investment in commodities - regulator
Reuters
China's securities regulator said it will encourage wealth management firms to invest in commodity futures in a bid to promote its domestic derivatives industry and raise the amount of commodities in the nation's assets under management.
reut.rs/2tFvezN
****SD: Bang the derivatives drum as options on futures are rolled out in at Chinese exchanges? Makes sense to me.
Moral Hazard And The Illusion Of Efficient Markets
Seeking Alpha
In many ways, suppressed volatility is the defining feature of markets in 2017. It is the story. Indeed, volatility (or the lack thereof) has become such a hot topic that it's spawned a cottage industry for explanations and theories about why we're seeing what we're seeing (incidentally, I was the first to characterize the cacophony of opinions about low volatility as a cottage industry and much to my chagrin, another outlet later hijacked that characterization without even attempting to properly attribute it).
One analyst recently described the situation as a "VIX-ation."
/goo.gl/JLaKsd
Federal Reserve speeches, politics set to center stage on Wall Street
Alexandra Gibbs - CNBC
U.S. stock index futures pointed to a strong higher open on Monday, as investors awaited remarks from leading Federal Reserve officials, while keeping a close eye on news coming out of the political sphere.
cnb.cx/2sHlN5s
****SD: For a slightly different, more macro look, this from FT Adviser - Attention turns back to central banks as political risk fades
FTSE Russell Reconstitution Completed this Friday
Russell Rhoads - CBOE
This is a big week for the FTSE Russell suite of indexes. On Friday, a large number of indexes will undergo what is referred to as the annual reconstitution. Specifically, the final phase of this process will occur on the market close Friday as stocks move into or out of indexes. The index we care most about at CBOE is the Russell 2000 which is the standard benchmark index for small cap managers in the US. Also, RUT options are the 3rd most actively traded broad based index option market at CBOE.
bit.ly/2tFIkgi
| | | | | | Exchanges and Clearing | | | Nodal Exchange Announces Launch of Power Options Contracts
Press Release
Nodal Exchange, LLC introduced 12 new power options contracts today. These contracts are the first options contracts to be offered by Nodal Exchange. Nodal Exchange options are European style options and are exercised into the underlying futures contracts on the last trading day.
/goo.gl/fLH7ip
HKEX Announces Appointee For New Clearing Positions
Mondovisione
Hong Kong Exchanges and Clearing Limited (HKEX) has appointed Roland Chai as Managing Director, Chief Operating Officer (COO) of its Clearing Division and Head of Clearing Risk Solutions, effective today. He reports to Calvin Tai, HKEX's Joint Chief Operating Officer and Head of Clearing.
bit.ly/2tFq72m
****SD: HKEX launched USD/CNH currency options a couple of months ago  still waiting on some more traction in that product. March saw a decrease across the board in futures options but overall options volume was buoyed by a 22 percent increase in stock options.
| | | | | | Regulation & Enforcement | | | U.S. bank investors hope Fed stress test results lead to big payouts
Pete Schroeder and David Henry - Reuters
Investors are hoping the Federal Reserve will allow big U.S. banks to put an estimated $150 billion in idle capital toward stock buybacks, dividends and profit-boosting investments in the coming weeks after conducting a regular examination of financial strength.
reut.rs/2sHtsRt
Israel moves to ban binary options for overseas investors
Global Investor Group
The Israeli cabinet approved on Sunday a proposal to ban the sale of binary options to overseas investors in the latest international move to clamp-down on the instrument.
The bill, drafted by the Israel Securities Authority, is now set to go to the Israeli parliament for an initial reading and then be debated by the Knesset Finance Committee.
bit.ly/2tFahVM
****SD: Looks like The Times of Israel's cataloging of the binary industry's issues in the region have had the desired effect. How many national newspapers have a whole topics page devoted to binary options? Imagine if the USA Today or something did. (Not a great comparison, but you get my gist.)
Turkey Said to Plan Hedging Rule to Limit Corporate FX Risk
Asli Kandemir, Onur Ant and Constantine Courcoulas - Bloomberg
Turkey is planning new measures to tackle the potential risk from the $300 billion in foreign-currency debt held by private companies, according to two people familiar with the discussions.
/bloom.bg/2tFdZOY
****SD: I bet Borsa Istanbul is pleased peachy. The way I understand it, this reg essentially says, "Hey, use the exchange's currency derivatives." (Plenty of OTC opportunities too I'm sure, but still.) This requirement would apply to some 2,000 private companies.
| | | | | | Strategy | | | Despite uncertainty, half of investors aren't even checking on their portfolios
Ryan Vlastelica - MarketWatch
The global economy is in an unusually uncertain place right now, an environment marked by low global interest rates, uneven levels of growth in major markets, heightened geopolitical uncertainty and U.S. stock market valuations that seem stretched, by many metrics. However, half of investors haven't even thought about whether they should adjust their portfolios in response to current conditions  perhaps to their detriment.
According to a survey by Dreyfus, 49% of individual investors have yet to take any action to reevaluate their investment approaches in response to what the investment management firm said was "the possibility of a shifting investment landscape."
on.mktw.net/2tFxeYF
****SD: I really hope that people with long-dated options in their portfolios fall into the 51 percent of folks who do check their portfolios. (I'm assuming that if you don't check your portfolio you aren't, somehow, trading weeklys/weeklies.)
In calm markets, focus on maximizing returns, not minimizing volatility
Liz Moyer - CNBC
Stock markets are as calm as they've been in five decades, despite uncertainty over the direction of federal tax and health care reform and infrastructure spending. But that doesn't mean investors have to fear treading in even as major indexes  and high profile stocks  hit records.
cnb.cx/2tFEd3T
We Are All Insurers Now
Ben Lavine - ETF.com
Not too long after we published our May 2017 Market Commentary commenting on "The Death of Volatility," the Wall Street Journal wrote about the increased popularity of shorting the VIX, or implied volatility priced into S&P options.
With the VIX having dropped to record low levels (Figure 1), shorting the VIX has produced a handsome return so far this year (up 70% based on the ProShares Short VIX Short-Term Futures ETF (SVXY)).
/goo.gl/rMuqkg
| | | | | | Education | | | How to Play Pickle With the Market, Using the Greeks
Robert Lang - The Street
Remember as a kid playing pickle? This is the game where say on a baseball field you are in a rundown between two bases, and players on the other team are trying to tag you out. You run back and forth, dodge, duck and swerve to avoid a tag and make it safely to one of two bases. It's a thrilling, zero sum game, often filled with surprising moves.
There are market trading strategies that are similar to the game of pickle, in which we do our best to stay away from the tag that puts us out of the game.
bit.ly/2tFnfmn
| | | | | | Miscellaneous | | | Hedge Funds Exit Gold Before Fed Sparks Worst Rout in Month
Luzi-Ann Javier - Bloomberg
Prices fall as Fed raises rates, signals more to come; Investors exit SPDR Gold ETF at fastest pace this year
Hedge funds were smart enough to get ahead of Janet Yellen's bad news for the gold market.
/bloom.bg/2tFsu5k
****SD: From the story - "Money managers cut their gold net-long position, or the difference between bets on a price increase and wagers on a decline, by 11 percent to 155,037 futures and options contracts in the week ended June 13, according to U.S. Commodity Futures Trading Commission data released three days later."
How Robots Rule the Stock Market
Mark Kolakowski - Investopedia
Robots apparently rule the stock market. Quantitative funds managed via computerized systematic trading strategies, often referred to as investing robots or bots, are the fastest growing category of funds according to analysis by Credit Suisse Group AG reported by Bloomberg. As a result, quantitative and passive investment funds now control about 60% of all equity assets, double their share in just a decade, and only 10% of trading volume now comes from human discretionary investors, per data from JPMorgan Chase & Co. cited by Bloomberg.
bit.ly/2sHneRy
Reshaping the Market, One Trade at a Time
Eric Stockland (IEX Chief Strategy Officer) - Traders News
One year ago, the SEC approved IEX to become a national securities exchange. It was an exhilarating moment, opening the door for us to continue our mission to level the playing field for investors.
We're proud to stand behind the progress we've made since then, and realize that there is still a lot of work to do.
Some peers, observers and pundits dismiss us as a "non-event." But the changes that we've already brought to investors and the broader market tell another story.
bit.ly/2sHBXf5
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