| February 14, 2019 | | | |  | Spencer Doar
Editor
John Lothian News | |
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| | | | Observations & Insight | | | 
Hits and Takes from STAC's Midwinter Meeting
JohnLothianNews.com
Often there is too much content from an interview to jam into one video. So in this video we've compiled a few notable comments from multiple people about a multitude of subjects. Imperative Execution CEO and Founder Roman Ginis talks about periodic auctions, USAM Group CEO Feargal O'Sullivan discusses blockchain hype, STA President and CEO Jim Toes covers going public in 2019, and Templum Markets CEO Vince Molinari predicts an increase in institutional involvement in the digital asset space.
Watch the video »
****SD: I truly appreciate the opportunity to talk with intelligent, insightful, experienced folks (with some real solid senses of humor, too, I will add) from across the industry about such a wide range of topics. On any given day, besides the hearty dose of options, I might get the chance to learn about dark fiber networks, or the legacy of failed futures contracts, or MiFID VI (or whatever the heck we're on at this point...), or margin methodologies, or some novel application of blockchain. Love it.
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Thursday's Miscellany
Spencer Doar - JLN
Saw this data point from FactSet: "[Health care device and equipment makers] account for 5% of the S&P 500, yet they represent 20% of all companies that gave downbeat forecasts  second only to tech." At least they have the resources to deal with pain...
Jeb Bush will be the Options Industry Conference's keynote speaker.
Apparently, Amazon's two HQ2s will actually just be one HQ2 - the Bezos giant will not build its planned New York campus, citing local political backlash. It will move forward with its plan for a campus in Virginia.
JPMorgan is rolling out its own cryptocurrency. So much for the libertarian dream.
The U.S. budget deficit grew by 42 percent in Q4 2018.
There's a story about pound traders in our "Miscellaneous" section - a live feed of Brexit news from the Guardian can be found HERE. The latest: "MPs reject [May's] motion by 303 votes to 258."
| | | | | | Lead Stories | | | SEC Rejects Capital Plan by Options Clearinghouse; The decision is the latest development in a yearslong dispute, creating fresh uncertainty for an organization vital to the options market
Gunjan Banerji - WSJ (SUBSCRIPTION)
U.S. regulators rejected on Wednesday Options Clearing Corp.'s plan to boost cash reserves, dealing a blow to what had been one of the clearing firm's key initiatives since the financial crisis.
/on.wsj.com/2SWqXZa
****SD: My understanding in a brief imagined dialogue:
SEC: "Hey, OCC, beef up your plans."
OCC: "Okay, sure thing, mighty powers that be."
*hands in plans*
SEC: "Thanks guys - looking good."
*Big traders sue and head to court re: plan*
SEC: "Ehhhh, hold up a moment..."
OCC: "Really? Well, chances are the regulators won't totally about-face."
SEC: *about-faces*
OCC: *walks back to drawing board - sighs*
Big traders/smaller exchanges, et al.: *golf clap*
Brief Price Gaps in Stocks Cost Investors $2 Billion a Year
Cezary Podkul - WSJ (SUBSCRIPTION)
Nearly a quarter of U.S. equity trades may not be executed at the best price available in the market, costing investors at least $2 billion a year, according to a new study funded by the U.S. government.
/on.wsj.com/2DzyLWI
****SD: This result is a byproduct of a study about potential market responses to a cyber attack. The study was backed by $1.25 million in funding from the Department of Defense and Homeland Security.
Mr. Volatility: What's the Next Catalyst?
Paul Rowady - Alphacution Research Conservatory
It was the one question we could be sure would be asked. Every. Time. And, it changed my perspective on the whole game...
Scene: It was a Spring day, 1990. 730 am. Pre-market open equity option traders meeting. O'Connor & Associates, 7th Floor, 141 W. Jackson Blvd., Chicago. Arguably, the world's leading proprietary derivatives trading firm of the era.
bit.ly/2SxabjC
Beware pools of liquidity: they could be a mirage; E-trading, shrunken market-makers and retreating central banks is a triple threat
Bilal Hafeez - FT (SUBSCRIPTION)
A cynic would say that investors know the price of everything and the value of nothing. But the reality could be much worse because they may not even know the price. For decades, investors, policymakers and academics have taken financial market prices as the critical gauge for the overall expectations on the economy and company performance.
/on.ft.com/2SLPUX7
****SD: Liquidity oasis - I like it.
Rand Volatility Tops Global Peers as South Africa Risks Mount
Colleen Goko - Bloomberg (SUBSCRIPTION)
South Africa's rand is back on its perch as the world's most volatile currency as investors price in the risk of a credit-rating downgrade while awaiting details of the government's rescue plan for the state-owned electricity company.
The currency fell for a second day against the dollar on Thursday to levels last seen in early January, and bond yields rose to their highest this year. The rand's three-month implied volatility climbed for a ninth day, overtaking the Turkish lira, as traders anticipate wider price swings.
/bloom.bg/2GJrjfa
Oil price risks shift to upside
John Kemp - Reuters
Oil traders no longer expect the market to be over-supplied this year, amid optimism a full-blown U.S.-China trade war will be averted, and oil production growth will slow thanks to OPEC cuts and sanctions on Venezuela.
Front-month Brent futures prices have jumped to almost $65 per barrel, up from just $50 in late December, and the highest for nearly three months (tmsnrt.rs/2V4bGD1).
/reut.rs/2GN4EyB
| | | | | | Exchanges and Clearing | | | 'Flash Boys'-Style Speed Bump Planned for Futures Markets
Nick Baker - Bloomberg (SUBSCRIPTION)
Intercontinental Exchange Inc.'s futures market wants to join the battle against the fastest traders. The Atlanta-based exchange plans a 3-millisecond trading delay, or speed bump, for its gold and silver futures contracts, according to a regulatory filing. The U.S. Commodity Futures Trading Commission on Wednesday asked for public comment on the proposal.
/goo.gl/rVUnWj
****SD: The amount of free press Michael Lewis gets whenever any of these subjects come up... The ICE plan for "passive order protection" is still a year away from implementation and applies to contracts without much volume. Obviously this will be applied just to futures for the time being, but it is notable as it's the first appearance of speed bumps in the derivatives world. When will it POP up in options? (Sorry - low hanging fruit.) While IEX says it has no plans for options, it did hire Boris Ilyevsky last year. I will note this item from ICE's filing: "The Exchange received feedback from the FIA Principal Traders Group ("FIA PTG"), who opposed 'speed bumps' in general and expressed concern that they could harm overall market quality, add complexity and provide a mechanism for potential trade practice abuse. If instituted, the FIA PTG asked the Exchange to assess the impact POP Functionality has on products and to discontinue use should data show its concerns were merited."
Cboe Global Markets Declares First-Quarter 2019 Dividend
Cboe
Cboe Global Markets, Inc., one of the world's largest exchange holding companies, today announced its Board of Directors has declared a quarterly cash dividend of $0.31 per share of common stock for the first quarter of 2019. The first-quarter 2019 dividend is payable on March 15, 2019, to stockholders of record as of March 1, 2019.
/goo.gl/bFyM3h
CME Is World's Most Valuable Exchange Brand For Sixth Year Running
Mondovisione
CME remains the most valuable brand among the world's leading exchanges, improving its brand value by 39% to US$1.9 billion, according to the latest report by Brand Finance, the world's leading independent brand valuation and strategy consultancy.
This substantial increase in brand value, following a 1% drop in 2018, is the result of CME's focus on new areas of opportunity, innovation and diversification including: the renewed popularity of futures contracts; new opportunities embraced in the market, most notably the trading of Bitcoin futures; and their acquisition of Britain's NEX Group (formerly ICAP) for US$5.5 billion.
bit.ly/2GGPef3
CME Group Inc. Reports Fourth-Quarter and Full-Year 2018 Financial Results
CME Group
CME Group Inc. (NASDAQ: CME) today reported financial results for the fourth quarter and full year of 2018. Consolidated results include NEX Group plc (NEX) activity for November and December 2018.
The company reported revenue of $1.2 billion and operating income of $650 million for the fourth quarter of 2018. Net income was $385.5 million and diluted earnings per share were $1.09. On an adjusted basis, net income was $625 million and diluted earnings per share were $1.77. Financial results presented on an adjusted basis for the fourth quarters of 2018 and 2017 exclude certain items, which are detailed in the reconciliation of non-GAAP results.
/goo.gl/RAonk9
| | | | | | Regulation & Enforcement | | | Zamansky LLC Commences a Securities Arbitration Proceeding Against UBS for Losses Sustained on its Yield Enhancement Strategy Share Article
PRWeb
Zamansky LLC, a New York City-based investment fraud law firm, recently filed a securities arbitration claim against UBS on behalf of investors who sustained substantial losses under UBS's Yield Enhancement Strategy (YES) program. The plaintiffs allege that UBS's YES program involves making several complex options investments that are not suitable for individual investors.
/goo.gl/XH7dxv
EU gives nod to global data swap by market regulators
Reuters
A global pact to allow regulators from across the world to collaborate on tackling market abuses meets European Union standards for protecting personal data, the bloc's data watchdog has said.
/goo.gl/bmu67V
| | | | | | Technology | | | Refinitiv's John Mason Talks to DMI About Transitioning to the Cloud
Data
Refinitiv, formerly Thomson Reuters Financial & Risk business, is off the runway and heading for the cloud with a view to transitioning its data and clients to the cloud, bringing processes to data rather than data to processes, and helping clients gain value from data and tackle the thorny issue of total cost of ownership (TCO). Regulation, inevitably, is also on the agenda.
/goo.gl/6zZSi6
Equinix Caps Off a Good Year With a Solid Quarter
The Motley Fool
Equinix (NASDAQ:EQIX) reported fourth-quarter and full-year 2018 results after the market close on Wednesday.
bit.ly/2DJJLAW
***SD: No surprise the data center business is booming.
New Google Cloud CEO Thomas Kurian explains the master plan
Rosalie Chan - Business Insider Prime (SUBSCRIPTION)
Rather than go after "digital-native" companies, Google Cloud is going to refocus itself on selling to vertical industries such as retail or finance.
/read.bi/2SAjeAj
****SD: More and more of the big tech guys are realizing their financial industry opportunities.
| | | | | | Strategy | | | Morgan Stanley Says Hedge Against Coming 'Pain Trade' in Tech
Gregor Stuart Hunter - Bloomberg (SUBSCRIPTION)
Market love for sector may prove misplaced in 2019, bank says; Hedging the historically volatile industry could be expensive
If the market's love affair with technology stocks turns ugly this year, investors may have to look hard for places to take cover, according to Morgan Stanley.
/bloom.bg/2IeNrjG
****SD: Generally, can a bank ever go wrong recommending a hedge? Seems like if it turns out to be unnecessary, you at least had insurance in place and peace of mind, and if you did need it, well, you limited some losses (or maybe made some moolah). And either way, the bank makes brokerage fees on the trade.
| | | | | | Miscellaneous | | | London keeps central role in euro clearing ahead of Brexit
Huw Jones - Reuters
London has kept its central role in clearing euro financial transactions ahead of Brexit, but European Union rivals have stepped up efforts to attract business, the CEO of the London Stock Exchange's clearing arm LCH said on Wednesday.
/goo.gl/9zBwcr
Order! Order! Pound traders brush up on parliament as Brexit stakes mount
Tom Finn, Saqib Iqbal Ahmed - Reuters
How would you get an 18-second jump on a big move in the pound? Bone up on your parliamentary protocol.
As if Britain's unwieldy departure from the Europe Union were not bewildering enough, Brexit has thrown up another conundrum for investors: parliament.
Centuries-old and often idiosyncratic, the institution is asserting more control over Brexit negotiations. The result is wild swings in sterling during volatile Brexit votes.
/reut.rs/2to1U2u
How a Nasdaq Loophole Fueled One Stock's Rise of 3,750%; The stock exchange is set to make changes after software company Phunware's shares soar
Dave Michaels and Alexander Osipovich - WSJ (SUBSCRIPTION)
A loophole in Nasdaq Inc.'s rules is under scrutiny after a roller-coaster ride in the stock of one small company highlighted how firms can go public without ample shares to trade.
/goo.gl/Wn3ipx
****SD: More like Phakeware.
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