| September 28, 2023 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | |
Cboe and S&P Dow Jones Unveil Innovative Cboe S&P 500 Dispersion Index
JohnLothianNews.com
In a recent video interview with John Lothian News, John Hiatt, vice president, Cboe Labs, and Tim Edwards, managing director at S&P Dow Jones Indices, provided valuable insights into the upcoming launch of the Cboe S&P 500 Dispersion Index, set to debut today, September 27, 2023. The index, jointly developed by Cboe Labs and S&P DJI, promises to add another tool for traders in the world of equity indices.
Watch the video »
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Cboe and S&P Dow Jones Unveil Innovative Cboe S&P 500 Dispersion Index in Exclusive Interview, Part Two
JohnLothianNews.com
In Part Two of an exclusive video interview with John Lothian News, John Hiatt, vice president, Cboe Labs, and Tim Edwards, managing director at S&P Dow Jones Indices, provided further insights into the forthcoming launch of the Cboe S&P 500 Dispersion Index. This groundbreaking index, scheduled to make its debut today, September 27, 2023, was jointly developed by Cboe Labs and S&P DJI and promises to give new ways for traders to analyze markets and manage risk.
Watch the video »
| | | | | | Lead Stories | | | Traders wary of volatility as JP Morgan fund's big options trade looms
Saqib Iqbal Ahmed - Reuters
A $16 billion JP Morgan fund, expected to reset its options positions on Friday, is drawing traders' attention as a potential source of additional volatility at the end of the worst month for U.S. stocks this year.
The JPMorgan Hedged Equity Fund, with about $16.05 billion in assets, holds a basket of S&P 500 (.SPX) stocks along with options on the benchmark index and resets hedges once a quarter.
/jlne.ws/3tcmNQy
JPMorgan 'Options Whale' Worries Resurface as Stocks Extend Drop; Hedged vehicle holds tens of thousands of puts expiring Friday; Benchmark equity gauge is falling toward strike price of 4,210
Lu Wang - Bloomberg
To Wall Street worrywarts, a large options position owned by a JPMorgan Chase & Co. equity fund has the potential to add fuel to this sweeping US stock selloff. The $16 billion JPMorgan Hedged Equity Fund (JHEQX), a long-stock product that uses derivatives to protect its portfolio from declines and volatility, holds tens of thousands of protective put contracts expiring Friday with a strike price not far below the current level of the S&P 500.
/jlne.ws/3RASi0C
StanChart sees big uptick in FX options positions
Joe Parsons - Risk.net (Subscription)
Standard Chartered reported a jump of almost two-thirds in the size of its foreign exchange options trading book with US mutual funds in the second quarter, significantly narrowing the gap with JP Morgan in the dealer rankings.
The boost was due to an influx of US dollar/Chinese renminbi trades from Morgan Stanley Investment Management (MSIM), in which the bank is now the dealer for 52% of the asset manager's FX options trades, up from 38% in the previous quarter.
/jlne.ws/45cAOer
MEMX expands offering with launch of US options exchange; Following approval from the SEC last year, MEMX Options will offer traders passive and active risk management capabilities, building off its existing equities exchange.
Wesley Bray - The Trade
MEMX, the member's exchange, has launched its platform for trading listed options following approval from the US Securities and Exchange Commission in August last year. Named MEMX Options, the new exchange was built to extend the firm's remit following the success of its equities exchange and member-aligned market model to the options community.
/jlne.ws/48yY4pO
VIX Index's Lone Rival Faces Extinction With Petition Denied
Katherine Doherty - Bloomberg
The financial market's only competitor to Cboe's Volatility Index was dealt a blow in its fight for survival. Miami International Holdings Inc., owner of Spikes futures, won't be able to defend its product in court after a federal judge denied the company's petition for a panel rehearing. The decision, filed Monday, means the exchange operator may have to shut down Spikes futures by year-end.
/jlne.ws/3Zw8rqh
Hedge Funds' Secret Weapon Goes Mainstream With CBOE's DSPX Debut
Benzinga via Markets Insider
Dispersion trading, a strategy beloved by hedge funds for profiting from stock dislocations, is stepping into the spotlight with the launch of the CBOE S&P 500 Dispersion Index (DSPX).
Designed to capture price differences between options on the S&P 500 and its underlying constituents, this innovative index is set to redefine how investors approach market volatility.
/jlne.ws/3REmHex
'Extreme fear' has returned to the U.S. stock market
Joseph Adinolfi - MarketWatch
U.S. investors are in the grip of "extreme fear" for the first time in six months, according to CNN's widely quoted "Fear and Greed" index.
The index, which uses a handful of inputs including the level of the Cboe Volatility Index VIX, or Vix, better known as Wall Street's "fear gauge," reflected a reading of "extreme fear" Wednesday for the first time since March 15, when markets were still reeling from the collapse of Silicon Valley Bank.
/jlne.ws/46teU7D
Recession Outlook: Consumer Spending Is Slowing
Cork Gaines - Business Insider
Even as interest rates skyrocketed over the past 18 months, a good job market and strong consumer spending kept the US economy moving.
This led to hope that a soft landing was coming, where the Federal Reserve could defeat inflation without millions of Americans losing their jobs.
However, there are growing signs that the strength of the US consumer is starting to crack.
/jlne.ws/3LCbWFV
Is it good when Wall Street compares today to 2007?
Alexandra Scaggs - Financial Times
The market for US Treasuries has gotten pretty ugly in the past week, with the 10-year yield rising to its highest levels since 2007.
Last week's projections from the Federal Reserve convinced investors the US central bank really won't be cutting rates or loosening policy any time soon. In the presser, Fed Chair Jay Powell said he "would not" call a soft landing his "baseline expectation" (though it's "plausible"), and that growth "may be decided by factors that are outside our control."
/jlne.ws/48uMKuL
| | | | | | Exchanges | | | MEMX's Options Exchange Successfully Launches; 3 symbols are now live as part of the first phase of the rollout
The Members Exchange
MEMX, a technology-driven exchange operator founded by members to benefit all investors, today announced the successful launch of its options exchange. MEMX Options was created to extend the proven success of MEMX's equities exchange and member-aligned market model to the options community. MEMX Options leverages the strength of MEMX's data-centric exchange architecture and state-of-the-art infrastructure, while providing traders with both passive and active risk management capabilities.
/jlne.ws/465g21m
OCC Welcomes MEMX Options
OCC
OCC, the world's largest equity derivatives clearing organization, today announced that MEMX LLC has become an OCC participant exchange. MEMX LLC began operating its options trading facility, MEMX Options, on September 27, 2023, bringing the total number of OCC's participant exchanges and trading platforms to 20.
/jlne.ws/467kFIs
CCP Tracker update - Q2 2023 highlights
FIA
FIA has updated its CCP Tracker visualizations with data from the second quarter.
The CCP Tracker visualizations show risk-related metrics for 15 clearinghouses side by side for each quarter going back to 2015. The metrics include initial margin, default funds, margin breaches, stress losses and concentration ratios. The data were obtained from the public quantitative disclosures published by the clearinghouses, which are generally released two or three months after the end of the quarter.
/jlne.ws/3t9CEPU
Derivatives house of the year, India: HSBC
Risk.net (Subscription)
When the Reserve Bank of India (RBI) gave the go-ahead for non-deliverable derivatives contracts (NDDCs) to be offered to domestic non-retail investors, HSBC India was ready.
"To our knowledge, we were the first bank to offer non-deliverable options on the day the regulations came in, as well as among the only banks to trade with multiple counterparties on that first day too," says Anita Mishra, head of markets and securities services for India at HSBC.
/jlne.ws/3PV1tHZ
Happy Birthday Eurex! 25 days meet 25 years in 25 questions
Eurex
Eurex was founded on September 28, 1998. What started as one of the first fully electronic exchanges with an integrated clearing house, has since developed into one of the world's leading derivatives exchanges and, with Eurex Clearing, one of the world's leading central counterparties. Many employees have also been with the company since the beginning. One of them is Jutta Frey-Hartenberger. She works in the FIC ETD Product Design department and has experienced many highs and challenges over the past 25 years. But what were the most memorable events and what were her personal highlights?
/jlne.ws/3te4FG0
| | | | | | Regulation & Enforcement | | | Gensler Reminds Hedge Funds He's Still Sheriff of Wall Street; The SEC is snooping on the alternative-investment industry's use of WhatsApp.
Paul J. Davies - Bloomberg Opinion
Gary Gensler is much more curious about what private equity and hedge fund chiefs are texting to each other and their clients than he was about bankers. The chair of the Securities and Exchanges Commission has asked staffers to pore over thousands of messages collected from investment firms as part of its probe into industry use of WhatsApp and other non-official messaging channels, according to Reuters.
/jlne.ws/3ZDfvBl
FIA issues recommendations for strengthening cyber resilience
FIA
FIA today released a report that contains lessons learned from a recent cyber incident and sets out six recommendations for improving the derivatives industry's ability to withstand future attacks.
/jlne.ws/3EWSD6h
| | | | | | Strategy | | | U.S. stocks may see volatility Friday as billions in quarterly options set to expire
Joseph Adinolfi - Morningstar
As if investors didn't already have enough to worry about, Friday's expiry of quarterly options may provoke more volatility, potentially condemning the S&P 500 index to a fourth straight weekly loss.
At the top of traders worries is a chart courtesy of analysts at Goldman Sachs Group showing that option dealers were shouldering "short gamma" exposure of $3.3 billion notional heading into Friday. According to the Goldman sales analysts who shared the chart with clients, it's the largest such position the team has ever recorded.
/jlne.ws/46a68eT
The Nasdaq 100 Is Wildly Popular. It's Also Deeply Flawed.
Lewis Braham - Barron's
If you want proof that most investors are irrational performance chasers, you'd be hard-pressed to find better evidence than the popularity of funds tracking the Nasdaq 100NDX +1.13% index. Most indexes are designed to capture as broad a swath of the market as possible, a narrowly defined specific stock sector such as technology, or a stock factor such as growth or value. But the Nasdaq 100 is neither fish nor fowl, tracking the 100 largest nonfinancial stocks listed on the Nasdaq stock exchange.
/jlne.ws/3LBwApp
Fear on Wall Street? Why investors need to 'shake it off,' say these strategists
Barbara Kollmeyer - MarketWatch
Are investors on the brink of losing a hard-fought recovery for the stock market this year? September is about to deliver the S&P 500's SPX worst monthly performance of 2023 â a 5.1% drop (December 2022 saw a 5.8% tumble.) Thanks for nothing, bond yields and King Dollar.
If the index can hang onto the 11% return earned so far this year, that's better than 2022, but maybe not the rebound many hoped for. And rising fear among investors could make the next three months tough, especially as bad news is now bad news.
/jlne.ws/3RG3glO
Contango & New Cboe Product
Cboe (Video)
In #Vol411, Scott Bauer @cboesib covers yesterday's above average trading activity (e.g. 1m VIX options & nearly 4m SPX options traded), this morning's brisk trading of VIX Dec 40 strike calls, the launch of #DSPX & the prospect for backwardation in the VIX futures term structure.
/jlne.ws/3PASVVp
| | | | | | Miscellaneous | | | Odey Joked About Accusers, Blamed Woke Brigade for Downfall; Hedge fund manager discussed 'witch hunt' with investigator; Odey was ousted from his firm after claims he assaulted women
William Shaw - Bloomberg
Crispin Odey approached a private investigator who had done work for disgraced movie producer Harvey Weinstein to discuss the "massive witch hunt" he faced after fresh claims of sexual misconduct.
/jlne.ws/3rudxqm
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