July 27, 2017 | | | | Spencer Doar Associate Editor John Lothian News | |
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| | Observations & Insight | | A MIAX Equities Exchange and the CFTC Connection: A Few More Words on LedgerX Spencer Doar - JLN In case you missed the big news Monday, the CFTC gave approval to LedgerX to be a derivatives clearing organization. Miami International Holdings, or MIH (parent company of MIAX), a partner and investor in the crypto exchange, put out its press release regarding the approval last night. The key takeaway from the release is a pretty big "Whoa!" stemming from this one-off line: "MIH secured similar rights for securities to be listed on its MIAX Equities Exchange, once launched." There is not much information out there regarding this proposed exchange. All the web yields is a trademark filing from 2016 for "MIAX Equities." (Note: MIH has not yet responded with a comment as of publishing time. This story will be updated with that information once received.) Other notable bits shed quite a bit of light on the MIAX family's future. For one, MIAX Technologies is exploring tech support and service for LedgerX. Even more important, one of the stipulations of Miami's investment in Ledger was it received exclusive 10-year rights "to license equity or fixed income products related to digital currencies that are developed by LedgerX and to develop its own proprietary equity or fixed income derivatives products based on such LedgerX products to be listed on MIAX Options or MIAX PEARL." (That part is when the MIAX Equities Exchange popped up.) And there is one angle I neglected to mention in my blog earlier this week: the CFTC connection. Paul Chou, president and CEO of Ledger Holdings, was appointed to the CFTC Technology Advisory Committee in January 2016; Mark Wetjen, former CFTC commissioner now with DTCC, sits on the board of Ledger Holdings; Ananda Radhakrishnan, formerly the CFTC's Director of the Division of Clearing and Risk, sits on the LedgerX board; and James E. Newsome, former CFTC chairman (among other notable roles), is also on the board. So, yeah, they must be pretty tuned-in to the regulatory landscape over there.
| | | Lead Stories | | Weekly Comic: VIX hits all-time low; is volatility dead? Investing.com The VIX, Wall Street's so-called 'fear gauge', crashed to the lowest level on record this week, as a raft of better-than-expected earnings reports boosted appetite for equities. The CBOE Volatility Index, fell to an all-time low of 8.84 on Wednesday. Its historical average is 20. /goo.gl/kp95MB ****JB: 8.84 was intraday but below the previous record low of 8.89. The VIX closed at 9.6 yesterday which is the tenth day in a row below 10. ***SD: More charts from ZeroHedge regarding the micro VIX crash yesterday as the FOMC statement came out  VIX Crashes To Record Lows As Fed/ECB Double-Whammy Smashes Dollar FCA: Libor to end in 2021 Martin Arnold, Emma Dunkley, Paul McClean - Financial Times The head of the Financial Conduct Authority has revealed that Libor, the inter-bank lending rate at the centre of a multi-year scandal, will be phased out in 2021, as regulators look to replace it with a more reliable alternative.Andrew Bailey said in a speech in London on Thursday morning that Libor was unable to fulfill its objective of capturing the cost of banks borrowing from each other because this activity has fallen so sharply since the 2008 financial crisis. on.ft.com/2tNkuDR ***SD: LIBOR is one of those funny things with tentacles everywhere and with a deceptively significant influence on derivatives pricing. There are the more obvious instruments affected by LIBOR, namely eurodollar contracts, but LIBOR is in some way, shape or form integrated into more than $350 trillion worth of (global) derivatives contracts, bonds and financial products, according to the ICE Benchmark Administration. For more, check out this 2013 blog, LIBOR and Derivatives - how close are they?, and a related 2016 post from FINCAD, Valuing Rates Derivatives Using OIS Discounting. And here is Andrew Bailey's speech about killing off LIBOR. His opening line: "I am going to talk this morning about LIBOR. That often causes an intake of breath!" Fed Reinforces Its Path Toward a 'Beautiful Normalization' Mohamed A. El-Erian - Bloomberg At the end of its two-day policy meeting, the Federal Reserve on Wednesday delivered a rather milquetoast statement -- purposely and understandably so. In the process, the central bank is achieving two goals: keeping its options open as it continue to navigate an unusually fluid economic, financial, institutional and political landscape; and reinforcing the markets' comfort with the notion that the Fed will be able to provide, to borrow a phrase from Ray Dalio, a "beautiful normalization" after a prolonged period of heavy reliance on unconventional monetary policy. /bloom.bg/2tMUtEJ ****SD: For more context from Bloomberg's "Daily Prophet," see Markets Detect Fed Doves in Hawks' Clothing How Oil Prices Are Held Hostage By Derivatives Kent Moors - OilPrice.com The price of oil might just be the single most important number in the modern economy. bit.ly/2w46Glg Bitcoin: Fake Asset Or Security? R. Christopher Whalen - The Institutional Risk Analyst We've all heard of fake news, but consider the growing possibility of fake or at least virtual assets. Investors face a deliberately orchestrated shortage of real investments c/o global central banks in markets such as stocks and real estate. Is there any wonder that the financial engineers of Wall Street have again begun to manufacture new derivatives leveraging the real world? /goo.gl/DpQmxR ****JB: As more money enters the bitcoin system, more people will have a vested interest in seeing it work and become stable. There are bound to be birthing pains along the way but bitcoin is probably here to stay and will mature over time (that or at least one of the other cryptocurrencies). One Of These 3 Black Swans Will Likely Trigger A Global Recession By End Of 2018 John Mauldin - Forbes Exactly ten years ago, we were months away from a world-shaking financial crisis. By late 2006, we had an inverted yield curve steep to be a high-probability indicator of recession. I estimated at that time that the losses would be $400 billion at a minimum. Yet, most of my readers and fellow analysts told me I was way too bearish. bit.ly/2tMSlwT ****SD: I don't care how many times I see his name, I always read it in my head as "Maudlin."
| | | Exchanges and Clearing | | Dalian Commodity Exchange Adjusts Positions Limits, Trading Limits And Trading Fee Rates For Relevant Futures Mondovisione On July 20, Dalian Commodity Exchange (DCE) issued the "Notice on Adjusting the Position Limits and Trading Limits for the Metallurgical Coke and Coking Coal Futures" and the "Notice on Adjusting the Trading Fee Rates for the Iron Ore and PP Futures", so as to adjust the position limits and trading limits for the metallurgical coke and coking coal futures and reduce the intraday trading fee rates for the January, May and September Contracts of the iron ore and PP futures. In response to the clients' requirement, this year, DCE has been assessing the position limits for the futures and the options and making adjustments to the position limits of the products based on the market situations, in order to better develop the futures market in Dalian City. bit.ly/2tNf6Aw SGX reports FY2017 net profit of S$340 million SGX Revenue: S$801 million, down 2% from a year earlier bit.ly/2tN4SA9 ****SD: "Derivatives revenue declined 7% to S$303.1 million (S$325.3 million), contributing to 38% (40%) of total revenue." Bursa Malaysia Derivatives Clearing Berhad Implements Settlement Via RENTAS Mondovisione Bursa Malaysia Berhad ("Bursa Malaysia" or "the Exchange") announced it has started using the Real-time Electronic Transfer of Funds and Securities System ("RENTAS") for settlements of payments on Bursa Malaysia Derivatives Clearing Berhad (BMDC). The change to RENTAS will ensure greater efficiency and resilience of the settlements payments mechanism. /goo.gl/u25hDv ****SD: Near as I can tell, the only options traded on Bursa Malaysia are FTSE Bursa Malaysia KLCI Options. Everything else is futures. OCC Supports Charitable Organizations for Families at Risk OCC As part of its efforts to support the communities where its colleagues live and work, OCC, the world's largest equity derivatives clearing organization, is pleased to provide financial support to its designated 2017 charitable organizations through OCC's offices in Chicago and Dallas. bit.ly/2tJXgOT ****SD: See my comments yesterday. TL;DR - giving is good. Do it.
| | | Regulation & Enforcement | | FINRA names new head of enforcement, expands to include market surveillance Elizabeth Dilts - Reuters The Financial Industry Regulatory Authority on Wednesday named Susan Schroeder the new head of its enforcement division and expanded the unit to include members of the market surveillance and examinations group. reut.rs/2tMXUet Sebi, exchanges meet to beef up systems post 3-hour technical glitch at NSE Business Standard News The Securities and Exchange Board of India (Sebi) has called for a meeting of stock exchanges on Friday to discuss beefing up of systems and process following the three-hour technical glitch at National Stock Exchange (NSE) earlier this month. bit.ly/2w3LLyP How can Sebi moderate India's derivatives cholesterol? LiveMint The Securities and Exchange Board of India (Sebi) has released a discussion paper on Growth And Development Of Equity Derivative Market in India. The discussion paper is replete with data on the structure of India's equity markets across stocks and derivatives. The paper concludes that the market is disproportionately skewed towards derivatives and invites suggestions for policy interventions to correct this abnormality. bit.ly/2tNcyTa
| | | Technology | | Thomson Reuters Readies Market Participants For New FX Derivatives Requirements Under MiFID II Mondovisione Thomson Reuters has completed enhancements to its FXall and FX Trading desktops to ensure clients trading on Thomson Reuters Multilateral Trading Facility (MTF) remain fully compliant with the new MiFID II execution requirements for FX derivatives that will take effect in January 2018. The enhancements enable Thomson Reuters to add MTF-support for FX forwards, swaps, NDFs and options trading on FXall as well as continue support for swaps trading on Thomson Reuters Matching. /goo.gl/Ga3XHk big xyt Launches Liquidity Cockpit To Provide Trading Firms With Enhanced Visibility Over Liquidity Across Asset Classes Press Release big xyt, the independent provider of high-volume, smart data and analytics capabilities, today announced the launch of its Liquidity Cockpit, designed to give global trading and investment firms enhanced visibility over dark and lit liquidity, and the ability to navigate and analyse European market share across a fragmented and dynamic market landscape. bit.ly/2tNf8Zn
| | | Moves | | LiquidityBook names Twitter alumnus Andy Carroll chief architect Finextra LiquidityBook today announced the appointment of industry veteran Andy Carroll as Chief Architect. bit.ly/2tMWe4X
| | | Strategy | | CBOE Morning Call 7/27/2017 Russell Rhoads - CBOE Options Blog The FOMC didn't offer up any surprises yesterday afternoon and the stock market reacted with a giant yawn. VIX finally put in a new all-time intraday low hitting 8.84 as the FOMC announcement was just about to hit the tape. Before the day was done VIX had worked its way up to 9.60. The odds of a rate hike in December still remains at about 50%, but I'm taking the no hike side of that bet. It will take very little in the form of negative news for the Fed to push out a hike or go on hold. /goo.gl/KkyXpB Twitter Earnings Trending $TWTR ATM Straddle CBOE Options Hub bit.ly/2w3Tdd3 ****SD: Just some of yesterday's notable activity.
| | | Education | | Options Strategy: Put Ratio Spreads The Ticker Tape Ready for a primer on put ratio spreads? Take a deep breath and let's dive in. For options traders, basic spreads are typically created on a ratio of 1:1. A vertical spread has one long option for every short option. A straddle or strangle consists of the purchase or sale of one call and one put of the same expiration date, and so on. But ratio spreads, as the name implies, don't. And although they come in all shapes and sizes, a good place to begin is with a simple 1:2 put ratio spread (or "one-by-two put spread" in trader-speak). bit.ly/2tMRBb5 Earnings Week of 7/24/2017 CBOE Options Blog The biggest week for 2Q earnings is upon us. As always the numbers below represent the last 12 quarters of one day stock price reaction to earnings. bit.ly/2w3IH5p
| | | Miscellaneous | | Is There A Future For Trading And Investing? Brett Steenbarger - Forbes In the past month, I've conducted multiple educational events and met with traders and portfolio managers at a wide range of firms in different countries. It's been a great overview of what is on the minds of market participants. So what are today's traders and investors focusing on? Possible shifts in global monetary policy? Continued geopolitical tensions? Gridlock in Washington? While those topics certainly enter conversations, there is a much more pressing topic dominating my meetings: the future of trading and investing in the face of ever-lower volatility and the increasing role of algorithmic market participation. bit.ly/2tMUrMZ Holes in the net: lawyers split over China netting opinions Frances Ivens - Risk.net It has been a banner 12 months in the Chinese derivatives market, with foreign investors now able to access onshore interest rate and foreign exchange derivatives for hedging purposes, while the credit default swap market is finally starting to take shape. bit.ly/2tNooN1
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