| August 30, 2018 | | | | | Spencer Doar
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Citing Salt-N-Pepa, BNP Traders Tried to Rig Benchmark Rate
Matt Robinson - Bloomberg
BNP Paribas SA traders referenced song lyrics when trying to rig a benchmark for interest-rate derivatives, with a favorite tune being a 1987 rap hit by Salt-N-Pepa, according to U.S. regulators.
/bloom.bg/2MYK69N
****SD: Swaptions spotted in the wild! I love cases that lead to public scrutiny of trader chats. Here's |a link to the Salt-N-Pepa song in question and here's a link to the Montell Jordan song referenced. (Do you think the traders worked up a sweat trying to push it? Did they get their groove on before they got paid?) For more detail on the attempts at fixing ISDAfix, go here. ISDAfix is the MarketsWiki Page of the Day as well.
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MWE World of Opportunity - Cognitive Flexibility in Finance
JohnLothianNews.com
"Don't over-engineer it. There's a huge tendency, especially for technical people, to make up complexity."
The problems Kevin Darby, managing partner at Blue Trading Systems, encounters as a fintech vendor are very different from those he faced as an index options market maker. In this video from MarketsWiki Education's Chicago event, Darby talks about tackling an ever-changing problem set as your career evolves, as well as what Pac-Man and futures trading have in common.
Watch the video here »
| | | | | | Lead Stories | | | Barclays inexplicably parted company with its U.S. head of equity trading
Sarah Butcher - eFinancialCareers
In a surprising move, the head of U.S. equities trading has left Barclays after over a decade with the bank in New York.
Barclays insiders say Amit Mehrotra, the UK bank's head of U.S equity trading left the bank last week. Mehrotra spent the last seven years as head of U.S. equity trading at Barclays and also spent the last two years running all flow derivatives sales and trading. He began his career as an equity derivatives trader at Lehman Brothers in 1996.
/goo.gl/6LsJw8
Fear of a January Repeat Arise After Breakdown of Stocks-VIX Correlation
Luke Kawa - Bloomberg
U.S. stocks have been on a tear over the past week. So why has the market's "fear gauge" barely budged?
The stickiness of the Cboe Volatility Index, which tracks the 30-day implied volatility of the S&P 500 Index based on out-of-the-money options, eerily echoes conditions that prevailed in early 2018.
/bloom.bg/2LH2gYI
****SD: This quotes Pravit Chintawongvanich - he's now with Wells Fargo after five years with Macro Risk Advisors.
Bank of America grows derivatives, bucking G-Sib trend
Alessandro Aimone - Risk.net (SUBSCRIPTION)
Bank of America increased its derivatives exposures in the three months to end-June for the second consecutive quarter, registering the highest increase among the eight US global systemically important banks (G-Sibs).
bit.ly/2MAfprU
Traders are getting ready for another round of volatility soon
Jeff Cox - CNBC
Traders are anticipating that the relative calm that has pervaded the market throughout the summer is about to come to an abrupt end.
One indicator is coming in the VIX futures market  the place where market participants place bets about the path of the CBOE Volatility Index, a popular fear gauge. The index usually moves inverse to the direction of the S&P 500.
/cnb.cx/2LFtNKl
****SD: I like having two stories in a row that represent different views. The below story cites a Goldman strategist who says, "Based on our vol regime framework, a high vol regime remains unlikely as macro data remain too strong, but the probability of a low vol regime has also declined further. We think neither a high nor a low vol regime is very likely in the near term."
No winners in $2 trillion volatility market, everyone's losing money
Joe Ciolli - Business Insider (SUBSCRIPTION)
Conventional wisdom would suggest that if one side of a trade is getting crushed, the other side should be making money hand over fist.
But that hasn't proven to be true this year in the $2 trillion volatility market, as investors find themselves in a situation where the best trade has been to not be involved at all.
/read.bi/2LDDnNz
****SD: This is a play off of the theme of the Bloomberg story yesterday about vol bets.
US Futures Markets Remain on Track for a Strong 2018
Russell Rhoads - TABB Forum
Market volatility was lower in the second quarter versus the first, but US futures volumes remained strong, and TABB Group expects both the US futures and options-on-futures markets to set volume records in 2018. In addition, the number of FCMs remained steady at 62, bucking what has been a long-term downtrend in the number of firms. TABB Group's head of derivatives research Russell Rhoads examines trends in the futures and options-on-futures markets in the US.
/goo.gl/1TncEn
****SD: Options on futures volume is set to top 1 billion contracts for the first time. Also, the top 10 FCMs "continue to hold about 73 percent of market share, with the top 5 retaining more than 35 percent of customer assets."
Fresh Stress Grips Weakest Emerging-Market Currencies
Mike Bird and Saumya Vaishampayan - WSJ
The Argentine peso hit a record low and the Turkish lira resumed its slide, dramatizing the strains faced by emerging markets most vulnerable to a rising dollar.
While Argentina and Turkey are in particular trouble because of domestic issues, developing economies around the world are being squeezed as the Federal Reserve raises interest rates, boosting the U.S. currency. That has pushed up the cost of some developing nations' large dollar-denominated debts, prompting central bankers to voice concern about the Fed's direction.
/on.wsj.com/2MEwZv7
****SD: Bloomberg has a story about rand volatility here. For more FX news, see the WSJ's story on the Swedish krona. "Prices in the options market suggest the krona is expected to grow more volatile either side of the election."
| | | | | | Exchanges and Clearing | | | OCC clears the path to greater capital efficiencies for clearing firms in US exchange-listed options markets
Craig Donohue, OCC - WFE
At OCC, we constantly are searching for ways to promote stability and market integrity through effective and efficient clearance, settlement and risk management services, while providing thought leadership and education to market participants and the public about the prudent use of the products we clear.
/goo.gl/yqwyAo
BOX Exchange: Amendment To The Options Listing Procedures Plan
Mondovisione
On August 15, 2018, BOX Exchange LLC ("BOX") filed to amend its rules to conform to the recently approved changes to the Options Listed Procedures Plan ("OLPP"). A
/goo.gl/Kh2jf3
****SD: Full doc PDF here.
Nasdaq reports seven-year error in closing auction
Dan Barnes - The DESK
Exchange operator Nasdaq has admitted that it has not been including minimum quantity orders in the calculation of the cross price for its daily auction, since 2011.
bit.ly/2N4Dmaj
****SD: Yowza.
AITE group report (part III): looking forward
Eurex Exchange
For us at Eurex, MSCI is a major strategic focus point. That is why we constantly explore market developments and continuously expand our MSCI offering. To research MSCI exchange-traded derivatives (ETDs) in today's market structure, we teamed up with AITE Group. In the third part of the three-piece study, the importance of margin cost in choosing an exchange is outlined.
bit.ly/2N5luMq
****SD: "MSCI reports $3.774 trillion of MSCI index-based futures and options were transacted during 2017, marking a 45% increase compared to 2016."
| | | | | | Strategy | | | Cheap Ways to Play a Bull Market
Gunjan Banerji - Barron's
Major stock indexes set fresh records this week. Derivatives traders appear optimistic on a continued run through year end.
bit.ly/2MGzTzh
Strong Risk-adjusted Returns for Cboe's CMBO Index That Sells SPX Calls and Puts
Matt Moran - Cboe Blog
In recent years I have heard interest from pension fund sponsors in exploring the concept of selling both covered calls and cash-secured puts. In 2015 Cboe introduced the Cboe S&P 500 Covered Combo Index (CMBO), a benchmark index that sells S&P 500 (SPX) put options and call options, and that has more than 32 years of price history.
bit.ly/2MI6iFW
| | | | | | Miscellaneous | | | Morgan Stanley Says Rolling Bear Market Looms for Growth Shares
Dani Burger - Bloomberg
Some of the biggest winners of America's epic bull market in equities could be headed for trouble, if analysts are correct.
Companies that consistently post high earnings, so-called growth stocks, have been powering ahead of value stocks as their more cheaply priced brethren lag behind in the rally. In fact, the price of the S&P 500 Value Index is nearing the lowest since 2000 relative to its growth counterpart.
/bloom.bg/2LFnbLG
The midterm equity boost
Colby Smith - Financial Times
With less than 100 days until the US midterm elections, there's a lot of uncertainty about how the political situation will shake out. Statistical hub FiveThirtyEight gives Democrats a roughly 75 per cent chance of winning the House, but given how badly forecasters fared last time around, we should probably take any projections with a grain of salt.
What's more certain, however, is how US stocks will fare. Around the midterms, equity returns have far outpaced those of non-election years.
/on.ft.com/2LHoKsy
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