| December 21, 2022 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Congratulations to Dan Busby and Mike Hansen of the OCC on their promotions. Busby is succeeding Scot Warren as the COO and Hansen is to become the chief clearing and settlement services officer of the OCC.
Last Friday, the OCC passed the 10 billion contract mark cleared for 2022, the first time in history it passed that mark. Both Busby and Hansen have their work cut out for them to keep up with the historic volume. ~JJL
| | | | | | Lead Stories | | | The Options Trades Potentially Impacting Stocks Into Year-End
Eric Wallerstein - The Wall Street Journal
Investors are closely tracking a few giant options trades for clues to the market's next moves.
A bulky options trade from a popular J.P. Morgan mutual fund may be keeping the S&P 500 calm this week, analysts from Goldman Sachs and SpotGamma said. In the coming days, however, another set of trades may become a dominant force.
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Stock Market Outlook: VIX Fear Gauge and Inflation Will Plummet in 2023
Matthew Fox - Markets Insider
After a heightened year of volatility, Wall Street's fear gauge is set to fall considerably in 2023, and that sets the stock market up for big gains ahead.
That's according to Fundstrat's Tom Lee, who expects the VIX Index to fall 20% next year after inflationary concerns among equity investors finally ease, and that would spark a big pivot from the Federal Reserve.
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New research claims the bear market won't be over until the VIX says so.
Mark Hulbert - MarketWatch
According to one prominent investment firm's analysis of the VIX, the stock market has not yet experienced the capitulation that typically signals the end of the bear market.
By capitulation, I'm referring to the deep despair that leads investors to throw in the towel and swear off equities. Though not every bear market ends with capitulation, most have. So Wall Street analysts are scouring the historical record for reliable indicators of capitulation.
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Dow Climbs 500 Points as Investors Shake Recession Worries
Jack Denton and Angela Palumbo - Barron's
Stocks are rising Wednesday after consumer confidence data were better than expected, and corporate earnings have helped investors shake off concerns around inflation, rising interest rates, and recession risks.
The Dow Jones Industrial Average advanced 479 points, or 1.5%. Both the S&P 500 and the tech-heavy Nasdaq Composite climbed 1.4%.
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Australian ETF assets forecast to reach A$150bn in 2023
Peter Ortiz - Financial Times
Exchange traded funds have been the investment vehicle of choice for Australian investors this year amid volatile markets and a challenging global macroeconomic environment, new research from BetaShares shows.
Locally listed ETFs pulled in A$12bn ($8bn) in net inflows from January to October this year, compared with A$25bn in net outflows for managed funds in the same period, according to the 2022 BetaShares Investment Trends ETF report, citing Morningstar data.
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| | | | | | Exchanges | | | OCC October 2022 Total Volume Up 10.2% Year-Over-Year, Fifth Highest Month on Record
The Options Clearing Corporation
OCC, the world's largest equity derivatives clearing organization, announced today that year-to-date average daily volume through October 2022 was 41.1 million contracts, up 5.6 percent compared to year-to-date average daily volume through October 2021. Total volume was 910.0 million contracts, up 10.2 percent compared to October 2021 and the fifth highest month in OCC's history.
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Hide-and-Seek: Hidden Liquidity on U.S. Exchanges
Cboe
Hidden orders were a major topic of discussion in past years. Despite the growth of off-exchange trading Cboe has observed a corresponding rise in on-exchange hidden volumes. It was previously very difficult to track hidden exchange volumes because they were intended to be undetected, until the Securities Exchange Commission (SEC) started providing empirical data through its now-public Market Information Data Analytics System (MIDAS). The Cboe North American Execution Consulting team has analyzed this data to provide a better picture of the evolving trends in on-exchange hidden activity.
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Crypto Giant Binance Offers Little Transparency After FTX Collapse
Patricia Kowsmann and Caitlin Ostroff - WSJ
The collapse of the crypto exchange FTX has triggered calls for transparency in the industry. To many investors, the industry's biggest player, Binance, remains a black box.
Crypto exchange Binance processes more transactions than most of its rivals combined, accounting for roughly half of crypto spot trading and two-thirds of derivatives trading, according to the research firm CryptoCompare.
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Cboe Appoints Vikesh Patel as President of Cboe Clear Europe
Cboe
Cboe Global Markets Inc. (Cboe: CBOE), a leading provider of global market infrastructure and tradable products, today announced the appointment of Vikesh Patel as President of Cboe Clear Europe, its leading pan-European clearing house. Mr. Patel will join the company in early 2023, subject to regulatory approval. Mr. Patel replaces Cécile Nagel, who stepped down from the role in September this year.
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The New York Stock Exchange Reports an Unprecedented Year of Activity in 2022
Press Release
The New York Stock Exchange, part of Intercontinental Exchange, Inc. (NYSE: ICE), today announced the culmination of an unprecedented year of activity at 11 Wall Street including an industry-leading number of transfers, the largest IPO of the year, and new initiatives driving innovation and thought leadership in the U.S. capital markets.
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MIAX Options Exchange Regulatory Circular
MIAX
MIAX Options will be extending the monthly Market Maker Incentive Program (the "Incentive Program") for SPIKES Options until Friday, March 31, 2023. Details of the Incentive Program can be found in the Regulatory Circular previously issued by the Exchange, at MIAX Options Regulatory Circular 2021-56.
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Christmas And New Years Holiday Schedule
MIAX
MIAX Options Exchange, MIAX Pearl Options Exchange, MIAX Emerald Options Exchange and MIAX Pearl Equities Exchange will be closed on Monday, December 26, 2022 in observance of Christmas Day and Monday, January 2, 2023 in observance of New Year's Day.
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HKEX In 2022: Year In Review
HKEX
2022 has been an extremely busy and productive year for Hong Kong Exchanges and Clearing Limited (HKEX). A significant number of new projects and initiatives went live or were announced, contributing to Hong Kong's ongoing competitiveness and attractiveness as an international financial centre. Against a challenging macro economic and geopolitical backdrop, Hong Kong's financial markets continued to demonstrate their resiliency and robustness, with the second half of the year showing signs of encouraging momentum in the IPO market and a particular strong performance in the derivatives market.
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Outlook 2023: Paul Houston, CME Group
Editorial Staff - Traders Magazine
What were the key theme(s) for your business in 2022?
2022 has been a record year for new market participants and new liquidity across our $81 billion per day (ADV) listed FX futures and options market. In response to central bank rate decisions and in response to new regulatory changes as well as the enhancements made to our products, we have seen firms turn to listed FX instruments as alternatives to OTC products, leading to record levels of open interest. Increasing open interest represents new or additional positioning in the market - it peaked in June at ~$295.8B notional outstanding (3.19M contracts). The number of holders of large open positions, as defined by the CFTC, reached an all-time record of 1,312 in May, with much of the increase driven by buyside firms.
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| | | | | | Regulation & Enforcement | | | CFTC Orders Minnesota Futures Commission Merchant to Pay $6.5 Million for Anti-Money Laundering, Risk Management, Recordkeeping, and Supervision Violations
CFTC
The Commodity Futures Trading Commission announced today it has issued an order simultaneously filing and settling charges against registered futures commission merchant (FCM) CHS Hedging LLC, of Inver Grove Heights, Minnesota, for anti-money laundering (AML), risk management, recordkeeping, and supervision violations. These violations are primarily a result of CHS Hedging failing to implement an adequate AML program, particularly as applied to a futures and options trading account controlled by one of its customers. In addition, CHS Hedging failed to implement risk-based limits concerning trading by that customer.
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ESMA Supports Position Limits For TTF Gas Futures
European Securities and Markets Authority
ESMA agrees with the position limits notified by the Dutch Authority for the Financial Markets (AFM) for the ICE Endex Dutch TTF Gas futures and options contracts. ESMA found that those limits are consistent with the objectives established in MiFID II and with the methodology developed for setting the limits.
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EEX and ECC react on agreement on EU wide Market Correction Mechanism
EEX
Dear Trading Participants, Yesterday's meeting of the Energy Ministers brought forward a political agreement on the so- called Market Correction Mechanism, which will enact a framework for a gas derivatives price cap. The mechanism is expected to apply as of 15 February 2023. For more information please consider the Councils press release of 19 December 2022. EEX has consistently voiced its concerns about the mechanism and continues to be concerned about the implications of such a price cap on the markets. This information is subject to final wording of the regulation which we will analyze as soon as it is published.
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Concurring Statement of Commissioner Goldsmith Romero on the Importance of Protecting Commodity Markets Against Excessive Speculation in CFTC v. Commodity Broker CHS Hedging
CFTC
One of the Commission's core functions is to ensure that derivatives markets have integrity and that there is no market manipulation and excess speculation that can artificially increase prices. This function is particularly important since the pandemic, when families have faced hard choices at the grocery store given increased costs of food. In order to prevent excessive speculation, the Commission requires limits on trader positions-limits set by exchanges, and enforced against market participants. Brokers (referred to as futures commission merchants (FCMs)) serve as critical gatekeepers in preventing excessive speculation.
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| | | | | | Strategy | | | Making Sense of Nano Index Options: What to Know Before You Trade
Cboe
Trading S&P 500 Index (SPX ) options has benefitsâyou gain exposure to the broad-based US market index in a single product, may reduce your overall portfolio risk exposure, receive possible tax benefits, and so on. If you're an individual trader, Nanos S&P 500 Index options (Nanos)* are a great way to trade index options. But they have some characteristics that are different from those you would find in single stock or ETF options contracts. So, before you trade Nanos, it's a good idea to familiarize yourself with some of their unique characteristics.
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| | | | | | Education | | | School of Quant: At $29,000, a Public NYC College Outclasses Princeton; New York's Baruch College offers a no-frills financial engineering course that's feeding some of the world's most elite global trading firms.
Heather Perlberg - Bloomberg
Princeton has its Gothic spires, MIT its Great Dome. But for a no-frills lesson in 21st-century finance, head to a lackluster high-rise on Manhattan's East 25th Street - AKA, Bernard Baruch Way. Nine flights up, along scuffed linoleum hallways, a handful of math-loving graduate students consider equations that would make most people's heads hurt. On the syllabus recently: three-dimensional volatility surface structures for options pricing models.
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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
Publisher | | | Sarah Rudolph
Editor-in-Chief
| | | Jeff Bergstrom
Editor
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