| April 05, 2017 | | | |  | Spencer Doar
Associate Editor
John Lothian News | |
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| | | | Observations & Insight | | | When it comes to web searches, more options than expected
Spencer Doar - JLN
When compiling the options newsletter, we check a variety of search terms, feeds and websites to get a picture of the day's activity. Given the ambiguity of "options" as a search term (even with added modifiers), searches invariably pull in results that have no relation to options in a derivatives sense. And that isn't the the only instance of disparate search yields.
You might be familiar with the Office of the Comptroller of the Currency, or OCC, which can be slightly confusing in headlines due to its overlap with the options industry's clearinghouse. But OCC is also the acronym for Orange County Choppers, the custom motorcycle manufacturer that gained some notoriety for its reality TV series, "American Chopper." This OCC's head honcho, Paul Teutul Sr., might seem a little out of place at a FIA conference.
Here's another big one - ViX. No, not the VIX, ViX. One would normally think of the CBOE's volatility index, but ViX is a line of women's designer swimwear. From its website: "ViX combines the bold sexiness of Brasil with the coastal allure of California." (Whatever that means.)
Checking for options analytics firm Trade Alert in the news yields a surfeit of varying results. It's a chance to follow all the hottest news about illegal wildlife trafficking and poaching, given that those are trade issues that inevitably involve authorities being "alerted." Here's one such example from National Geographic: New Maps May Help Chase Down Poachers Before They Strike. That's a slightly positive story, but more often they involve an array of customs agents seizing hauls of python skins, endangered turtles, shark fins, rhino horns and the like.
The Trade Alert search net captures stories about all sorts of potential personnel shifts in sports, too. Adding options into the equation makes it worse due to the nomenclature surrounding athlete contract construction  some have a "player option."
Then there's user error. It is not hard to type "potions insider" when the aim is Options Insider. While it doesn't seem that anyone has taken that domain name, search results are heavy on Harry Potter and RPG video games of the questing variety  obligatory link to a Potter potions fact sheet that popped up on Pinterest.
Here's to all the pro ball players who are rumored to switch teams  see you in the news tomorrow.
| | | | | | Lead Stories | | | Staff for Florida regulators recommend continued gas hedging despite nearly $7 billion in losses
William R. Levesque - Tampa Bay Times
Some argue that Florida's big investor-owned electric utilities are just lousy at hedging, or betting, on the price of natural gas. Are their $6.7 billion in hedging losses since 2002  losses customers pay for through higher electricity costs  evidence enough of that? "I don't think that they're that good at it," said attorney Jon Moyle, representing a consortium of large industrial energy users. "It's not their core business... When you look at the results, they're not something that you would shine up and hold up and say, 'This is really good.'"
/goo.gl/YhZvC9
****SD: Not everybody can rake it in like Mexico when it comes to energy hedging. In case you missed yesterday's Bloomberg story, Uncovering the Secret History of Wall Street's Largest Oil Trade, do yourself a favor and check it out. It was the most read from yesterday's newsletter.
Reinventing the (Algo) Wheel: Performance-Driven Trading as a Solution to MiFID II Testing Requirements
Scott Kurland and Daniel Shaw, ITG - Tabb Forum
With MiFID II looming, buy-side firms are under heightened pressure to demonstrate that they have a best-execution practice that they can explain and defend. With more than 1,600 discrete algorithms available worldwide, however, investment managers face a near-impossible task of demonstrating a coherent best-execution policy. While 'intelligent switching' and routing engines that leverage machine learning to automatically select the optimal broker, algo, and strategy for any given order at any given time may sound alluring, this approach further compounds the challenges.
/goo.gl/t5CqxG
These Winning Positions Could Turn Into Market Migraines
Luke Kawa - Bloomberg
Record shorts in eurodollars, VXX, while peso shorts fold; Positioning in crude oil and the ruble growing more cautious
A new quarter raises new questions. At the top of the list, where might placid markets run into a spot of bother? One way to approach the dilemma is to look for pain points by identifying positions that have become crowded across asset classes, the popular trades in foreign exchange, debt, equity, and commodity markets whose unwinding might trigger sharp moves in financial markets.
/goo.gl/DBrZVn
****SD: There has to be a Gary Larson cartoon about cows that fits the trading herd phenomenon.
Why moving clearing from London to Europe is no piece of cake!
Fraser Bell, chief revenue officer, at BSO - FTSE Global Markets
Nowhere is a good dose of reality needed more than the current debate surrounding whether London should remain the central hub for Eurozone clearing. While, any shift in operations would clearly be a blow to the City, is it really feasible for Europe to seamlessly become the new kings of clearing given the huge costs and complexity involved?
/goo.gl/XFVGGg
****SD: Fraser Bell spoke at our MarketsWiki Education London event last year  keep an eye on BSO.
Monthly swap data review: Libor dominance challenged
Amir Khwaja - Risk.net
There are more sources of over-the-counter derivatives data available today than at any point in the market's history
The advent of new margining rules for non-cleared over-the-counter derivatives appears to have pushed volumes towards clearing houses for non-deliverable forwards (NDFs) and inflation swaps - with LCH being the main beneficiary. In contrast, swaptions continue to be traded bilaterally.
/goo.gl/sqd3nU
****SD: The subject of swaptions doesn't pop up much here.
| | | | | | Exchanges and Clearing | | | Clearing houses see record volume as new rules boost activity
Philip Stafford and Hannah Murphy - Financial Times
Clearing houses are experiencing record activity as banks and investors comply with new derivative rules and push their over-the-counter fixed income and foreign exchange swaps towards centralised venues that bolster risk management for the industry.
/goo.gl/Lpqy0k
Exchanges report strong trading volume for March
Merle Crichton - FOW
Exchanges CME Group, Eurex, ASX, Euronext and the OCC have all reported strong derivatives trading volumes for March, while the Japan Exchange Group stands in contrast with a 6% slump in volumes. The Chicago Mercantile Exchange (CME) reported a daily average volume of 16.9 million contracts for the month, up 18% from March 2016, which saw 14.3 million contracts. Open interest at the end of March was 114 million contracts, an 8% increase from 106 million in the equivalent period last year.
/goo.gl/LJCU4Y
****SD: I'm not the only one who thinks this is going to be a good year for exchanges.
CBOE Holdings Announces Date of First-Quarter 2017 Earnings Release and Conference Call; Provides New Financial Reporting Template
CBOE
CBOE Holdings, Inc. today said it will announce its financial results for the first quarter of 2017 before the market opens on Tuesday, May 9, 2017. A conference call with remarks by the company's senior management will begin at 7:30 a.m. Central Time (CT), 8:30 a.m. Eastern Standard Time (EST). The company also plans to update its 2017 financial guidance on May 9, 2017, in conjunction with the release of its first-quarter 2017 financial results.
/goo.gl/LOfD9S
****SD: Ahhh May 9 Â the day Thomas Blood and conspirators tried to steal the Crown Jewels in 1671. Talk about a crazy life...
Euronext and ICE Clear partner up
Drew Nicol - Securities Lending Times
Euronext is set to partner with ICE Clear Netherlands for access to clearing services for its financial derivatives and commodities markets. Clearing operations will be run from Amsterdam, while a new asset financing solution for inventory management and physical delivery for commodities will be built by Euronext and operated from Paris. Euronext will contribute a EUR10 million upfront investment in ICE Clear Netherlands.
/goo.gl/1wR9nX
Intercontinental Exchange Reports March Statistics; ICE ADV up 30% Y/Y Driven by Financials up 53% Y/Y and Commodities up 11% Y/Y; ICE 1Q2017 ADV up 4% Y/Y
Business Wire
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today reported March and first quarter 2017 trading volume and related revenue statistics
/goo.gl/uM0cXh
Euronext announces volumes for March 2017
Euronext
Euronext, the leading pan-European exchange in the Eurozone, today announced trading volumes for March 2017.
/goo.gl/NACYkm
Frankfurt-London Truce Died Along With Deutsche Boerse Deal
John Detrixhe - Bloomberg
Eurex adds KfW development bank for interest-rate swaps; Frankfurt beat London in the Battle of the Bund in the 1990s
The truce between Frankfurt and London has ended. Deutsche Boerse AG's takeover of London Stock Exchange Group Plc officially died last week, and with it an alliance at the heart of Europe's biggest financial centers. As the German company plans for life without LSE, it's back in competition with its former merger partner in over-the-counter clearing -- a key business that Brexit has made even more politically charged.
/goo.gl/qEoKiL
| | | | | | Regulation & Enforcement | | | FCA plans three year delay for non-EU firms Written
Julie Aelbrecht - FOW
Regulator's draft implementation guidance for Mifid II contains a possible waiver
The UK Financial Conduct Authority's latest document on Mifid II contain a clause providing a three year delay for non-EU firms providing direct electronic access to UK trading platforms. The FCA's first policy statement on the Mifid II and Mifir implementation published last Friday contains a clause that could provide non-EU firms providing direct electronic access to UK multilateral trading facilities (MTFs) with a three year delay for compliance with the rest of the Mifid II rules.
/goo.gl/Q7Mzeh
| | | | | | Technology | | | JP Morgan spent $9.5 billion on tech revamp last year
Hayley McDowell - The Trade
JP Morgan spent more than $9.5 billion on implementing technology across the business in 2016, according to chief executive officer, Jamie Dimon.
/goo.gl/FZCqks
| | | | | | Strategy | | | Options bear bets emerging markets ETF in for drop
Reuters via The Times of India
iShares MSCI Emerging Markets ETF options draw bold bet on sharp near-term drop in shares
/goo.gl/VUtLlh
VIX At Lowest Level Ever Could Be Connected To French Elections
Mark Melin - ValueWalk
As the stock market appears headed towards a land where storytelling might be winning the day, odd occurrences are taking place underneath the market structure. A Goldman Sachs report notes that the previous quarter's volatility as measured by the VIX was at an all-time low "despite a quarter characterized by elevated policy uncertainty." But more ominous is a volatility term structure inversion is occurring in Europe, a CBOE volatility expert first points out. Is there a connection to the upcoming French Election ?
/goo.gl/Eikgsp
VIX, VSTOXX, and the French Election
Russell Rhoads - CBOE Options Hub
About a year ago, we were all starting to focus on the Brexit referendum which we 'knew' wasn't going to pass. There were several lessons from the Brexit experience with the top one being do not discount an election until all the votes are counted. This played out again in November, but that's not what this blog is about. This blog is about how VSTOXX and VIX are behaving in front of the pending French election process.
/goo.gl/ZtWE0m
Are Oil, Gas Producers Hedging?
Shane Randolph - Oil and Gas Investor
With the price of crude oil dropping in November 2014, many are asking if oil and gas producers are hedging at the current price levels. The following is a survey of the 30 largest public oil and gas producers and their hedging activities as disclosed in their Dec. 31, 2016 10-K filings.
/goo.gl/LNF2tn
Should you invest in an ETF that's closing?
Ryan Vlastelica - MarketWatch
An ETF announces that it will be closing. Is that a buy signal? This may sound like an obvious "no," given the security has announced its own limited shelf life, but investing in closing funds a strategy that traders have selectively done to take advantage of the way exchange-traded funds are structured.
/goo.gl/IXfxOy
****SD: Not options but a good read.
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| | | | John Lothian News (JLN) is the news division of John J. Lothian & Company, Inc. (JJLCO). The online media and financial services firm is staffed by derivatives industry, journalism and technology professionals. | | | | | | | John Lothian News Editorial Staff: | | | John Lothian
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