| October 04, 2017 | | | |  | Spencer Doar
Associate Editor
John Lothian News | |
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| | | | Lead Stories | | | Options Imply Little Risk of Market Corrections Anytime Soon
Myron Scholes and Ash Alankar - Bloomberg
A watchful Federal Reserve has created a buoyant environment for equities. The S&P 500 Index is on course for its least volatile year since 1964. On top of that, anticipated volatility as measured by the Chicago Board Options Exchange Volatility Index, or VIX, is near historical lows.
jlne.ws/2xYLQax
****SD: "Options are signaling that this is not the time to take exaggerated risks because of a lack -- if any -- of upside potential, rather than out of concern about the possibility of a large pullback in markets." But is it better to buy far OTM options in lieu of a daily lottery binge? Has anybody done that study?
SEC Weighs How to Protect Vast Trading Database From Hackers
Dave Michaels - WSJ
U.S. regulators, already grappling with defending their systems against hackers, are taking a fresh look at how to protect a vast database of stock-market trades that promises to be an even bigger target of cyberthieves.
jlne.ws/2xYlNQL
****SD: The WSJ has Key Lawmaker Calls for SEC to Delay Trading Database and Bloomberg has After Hack, SEC Defends Plan to Amass Traders' Sensitive Data. If you need a refresher on the CAT, check out JLN's piece from earlier in the year Thesys vs. Goliath: That's One Big CAT.
ECB Closes in on Power Over Euro-Derivative Clearing Post-Brexit
Silla Brush - Bloomberg
European Commission backs ECB plan for oversight of industry; Brexit poses 'significant challenge' to oversight: commission
The European Central Bank moved closer to gaining power over the lucrative clearing industry, a crown jewel of London's financial hub and a key flash point in Brexit negotiations.
jlne.ws/2fR5wXF
****SD: Also see EC backs ECB bid for clearinghouse oversight
Canada's Pension Funds Are Piling on Leverage, Moody's Warns
Allison McNeely - Bloomberg
Average leverage has increased to 24% from 19% since 2009; Volatility exposure raises question: 'Why take on more risk?'
Canada's public pension funds, among the biggest in the world, are piling on risk with leveraged bets in a chase for higher returns, Moody's Investors Service warns.
jlne.ws/2xYHSPa
****SD: Canadian pension funds are historically big players in the options market (at least compared to their peers).
VIX Is Alarmingly ... Low: Cramer's 'Off The Charts'
Tom Bemis - TheStreet
As the U.S. stock market continues to grind higher, even in the face of the Las Vegas mass shootings, Jim Cramer told his Mad Money viewers Tuesday that it's important to ask whether investors have become too complacent.
To get a better handle on that, Cramer turned to Mark Sebastian, the founder of OptionPit and a contributor to RealMoney.com.
jlne.ws/2xZ5dQK
****SD: The WSJ has some perspective with The Lesson of This Placid Market. Meanwhile, CNBC has Cramer's charts of the fear index suggest the market can run higher. I would like to see a chart of CNBC's use of "VIX" or "VIX index" over time. At what point did it become more of a household name? (Not that Cramer's description, "When investors are scared, the VIX shoots higher; when they feel confident, the VIX goes lower," is at all helpful.)
Deutsche Bank May Suffer Most in MiFID Trading Hit, UBS Says
Stefania Spezzati and William Canny - Bloomberg
Deutsche Bank AG could take the biggest hit to trading revenues when Europe's MiFID II rules come into force because of its exposure to the continent, according to a UBS Group AG report.
jlne.ws/2fQED6c
Market Surge Is Getting Ridiculous
Helene Meisler - TheStreet
I have seen many folks complaining that they can't remember the last time we had a down day in the market. Let me remind you, it was just over a week ago, on Sept. 25, when all the major indexes closed in the red.
jlne.ws/2xZ7XOo
| | | | | | Exchanges and Clearing | | | CBOE Holdings Reports September 2017 Trading Volume
CBOE
CBOE Holdings, Inc. today reported September monthly trading volume and average revenue per contract (RPC)/net revenue capture data at www.cboe.com/monthlyvolrpc.
jlne.ws/2xYs52S
****SD: CBOE's volumes were down when compared with Sept 2016 (YoY) and August 2017 (MoM), but total volumes YTD are up by some 11 percent. In other CBOE news, the exchange will be listing Roku options starting Friday. One would think there would be some nice volume there as Reuters reports Short sellers 'clamoring' to borrow Roku shares: S3 Partners. And not like there have been a ton of hot ticket IPOs this year (SNAP traded some 75k options contracts yesterday)... When will we find out about Saudi Aramco's final destination?
Intercontinental Exchange Reports September Statistics: ICE ADV up 21% y/y Driven by Interest Rates ADV up 61% y/y and Energy ADV up 12% y/y; 3Q17 ADV up 15% y/y, Open Interest up 14% y/y
Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today reported September 2017 trading volume and related revenue statistics, which can be viewed on the company's investor relations website at http://ir.theice.com/ir-resources/supplemental-information in the Monthly Statistics Tracking spreadsheet.
jlne.ws/2xZ9x2N
MGEX Total Volume Reaches An All-Time High Calendar Year
Press Release
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), has recorded a total volume of 2,333,655 contracts traded as of October 2, 2017. This number exceeds the previous total volume record of 2,315,186 contracts, set in 2015, with nearly three months remaining in the 2017 calendar year.
jlne.ws/2fROc55
****SD: MGEX already set an options record for the year by a huge margin.
Euronext Announces Volumes For September 2017
Mondovisione
In September 2017, the overall average daily volume on derivatives reached 501,591 contracts, up +13.6% compared to September 2016 and down -0.4% compared to the previous month.
jlne.ws/2fRswGh
MOEX total trading volumes down 8% MoM in September
Valentina Kirilova - LeapRate
...Derivatives Market volumes amounted to RUB 7.3 trln (September 2016: RUB 9.7 trln). Of the total volume, options turnover was RUB 581.6 bln, up 21.8% YoY.
jlne.ws/2fQBGmq
| | | | | | Moves | | | OCC Appoints Three New Members to Board of Directors
OCC
OCC, the world's largest equity derivatives clearing organization, today announced that Kurt Eckert, Partner and Head of Market Structure at Wolverine Trading, Rachelle Keller, Chief Operating Officer for Prime, Futures and Securities Services at Citi, and Stephen Luparello, Managing Director and General Counsel for Citadel Securities, have joined the Board of Directors as Member Directors.
jlne.ws/2xZhaWP
Goldman Sachs loses European execution services head to BTIG
Hayley McDowell - The Trade
Christopher Rollins, managing director and co-head of European execution services at Goldman Sachs, has departed for a role with BTIG.
jlne.ws/2fRoJIX
Goldman Sachs has made a big hire in electronic trading
Frank Chaparro - Business Insider
Goldman Sachs is bringing on a technology veteran to help drive its electronic trading business. Mike Blum, the former chief technology officer at KCG Holdings, the high-frequency trading firm recently acquired by Virtu Financial, is joining Goldman as CTO for its electronic trading unit, according to an internal memo seen by Business Insider. Bloomberg News first reported the hire.
/goo.gl/WT8D3Y
| | | | | | Regulation & Enforcement | | | Experts predict lenient enforcement of MiFID II reporting rules
Hayley McDowell - The Trade
European authorities will likely provide some leniency to firms providing trade and transaction reporting as part of MiFID II requirements, according to a panel of experts.
jlne.ws/2fRukz3
U.S. financial regulations debate poses 'false choice': CFTC chairman
Michelle Price, Pete Schroeder - Reuters
Political debate over how to reform post-crisis rules has created a "false choice" that is obscuring other big emerging challenges to the financial markets such as digitization and cyber risk, the chair of the top U.S. derivatives regulator warned on Tuesday.
jlne.ws/2fR6Fif
Buy-side traders look to become algo experts ahead of MiFID II
Hayley McDowell - The Trade
Traders on the buy-side have been increasing their efforts to gain knowledge and understanding of the algorithms they use in order to satisfy best execution requirements under MiFID II.
jlne.ws/2fRjGYM
| | | | | | Technology | | | Vela Picks BSO to Enhance DMA Platform Connectivity
Aziz Abdel-Qader - Finance Magnates
BSO, the global Ethernet network, cloud and hosting ?provider, was selected by New York-based Vela Trading Technologies to provide clients of its Direct Market Access (DMA) platform, Object Trading, with low-latency connectivity and reliable access to the world's biggest exchanges..
jlne.ws/2hK5jpZ
| | | | | | Strategy | | | Hot Stocks: Locking In Your Gains
Steven Sears - Barron's
Investors should consider buying low in the options market and selling high in the stock market.
Buy low and sell high. It's one of the most basic principles of successful investing, yet one of the most difficult to follow. Most investors buy high and hope to sell higher, which usually works until it doesn'tÂand then it ends rather badly.
But there's a simple approachÂthe "stock replacement" strategyÂthat lets investors lock in profits on their hot shares without giving up the chance to make more money if the stock keeps rising.
jlne.ws/2fR8Emn
TED, HY Credit, VIX
ValueWalk
Going through the various charts on credit strategy and risk pricing I noticed a couple of interesting and related charts that I thought would be worth sharing with you. The first one is the "dreaded TED spread" - I wrote a piece on this back in July where I remarked on the fall in the TED spread; it stood in contrast to the steady rise earlier which had triggered some commentators to start getting (even more) bearish given the parallels to the 2008 period.
jlne.ws/2xZ6MhT
Reviewing Long Premium Win Rates
Sage Anderson - tastytrade blog
Like anything in life, portfolio management is all about constantly optimizing one's approach to match the current trading environment and our unique outlook on the financial markets.
As such, traders need to embrace an attitude of continuous learning - which brings us to today's blog topic - long premium win rates. A recent episode of Market Measures asked the very pertinent question "Is There a Good Time to Buy Premium?"
jlne.ws/2xYMR2z
How To Profit When The S&P 500 Inevitably Pulls Back (SH)
ETF Daily News
I know that I am hopelessly old-fashioned. But there is a limit to how much debt you  individuals, businesses or governments  can take on before it crushes you and takes you to the poorhouse.
This raises a host of urgent questions:
jlne.ws/2xYMRPT
Is it time for a stock market correction?
Jonathan Ratner - Financial Post
If you're keeping track of the ongoing rally for the S&P 500, you'll know that the index has gone 318 days without a correction of five per cent or more. That makes this the longest such run since 1960.
While that may make some investors nervous considering the S&P 500 continues to hit fresh all-time highs, there is at least one good reason why a sharp pullback or lengthy retreat doesn't appear to be on the horizon.
jlne.ws/2xYQG7K
****SD: Favors the TSX over the S&P.
| | | | | | Miscellaneous | | | What Will Cause the Next Financial Crisis? J.P. Morgan Says 'Liquidity'
Gunjan Banerji - WSJ
As the 10th anniversary of the financial crisis approaches, J.P. Morgan Chase & Co's Marko Kolanovic says the next one will be brought about by a liquidity crunch.
Following the 2008 financial crisis, central banks purchased $15 trillion of assets. Now, that accommodation is starting to reverse as central banks pull back from their actions over the past decade, like keeping interest rates near zero or making purchases in markets.
jlne.ws/2xZsrGL
Managed Futures Correlation
RCM Alternatives
We talked last week about AIMA's research on what a Managed Futures can do for your portfolio. But the paper is full of other interesting data and charts that we didn't get to cover our first time round, detailing unique aspects of Managed Futures as it relates to correlations.
jlne.ws/2fRTBsT
Inside Traders' War Games for Trump's Fed Chair Pick
Brian Chappatta - Bloomberg
Expect flatter yield curve, stronger dollar with hawkish Warsh; Powell gaining favor as 'GOP alternative to renaming Yellen'
jlne.ws/2xZjX20
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