| August 24, 2018 | | | |  | Spencer Doar
Editor
John Lothian News | |
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| | | | Observations & Insight | | | VIX (and Other Friday Stuff)
Spencer Doar - JLN
The Cboe quietly dropped a proposal to amend its interpretation of rule 6.2, which you might know better as "stuff pertaining to VIX settlement." The proposed rule change expands/clarifies the exchange's interpretation of "strategy orders" and "non-strategy orders" to better determine whether or not someone is gaming the settlement calculation.
Fed Chair Powell's comments from Jackson Hole are in. He stuck by his guns, saying that steady rate hikes are the best way to keep the recovery going. (I'm mildly surprised there has not been a presidential tweet about this yet...)
The CME's FedWatch Tool now puts odds of a rate hike in September to 200-225 bps at ~98 percent. In December, the odds of the target rate being 225-250 bps stands at ~65 percent.
For a longer look down the road, check out the eurodollar options story in our lead section. (And in case you're wondering about gold as a safe haven, it's rallying with the market...)
In acronym news, BAIT is the Chinese alternative to the FAANG stocks. BAIT is Baidu, Alibaba, IQIYI and Tencent.
| | | | | | Lead Stories | | | OCC Recovery Tools, Recovery and Orderly Wind-Down Plan Approved by SEC; First CCP to receive SEC approval for plan and associated recovery tools
OCC
OCC, the world's largest equity derivatives clearing organization, today announced that the U.S. Securities and Exchange Commission approved the company's proposed recovery tools and proposed recovery and orderly wind-down (RWD) plan, providing critical tools designed to enable OCC to successfully manage extreme market disruptions in future financial crises.
/goo.gl/jUWpxx
****SD: Despite the WSJ story, it's been good news for the OCC this week.
Eurodollar Whale Betting on Fed Rates Looks Well Beyond December
Edward Bolingbroke - Bloomberg
Large bets have been amassed in puts expiring in 2020-2021; December eurodollars face IOER uncertainty, among other risks
It looks as though there's a new eurodollar options whale in town who doesn't care whether the Federal Reserve raises rates in December. With the market assigning near-even odds to a fourth rate increase in 2018, the newly popular wager is on where the benchmark rate will come to rest well beyond that.
/jlne.ws/2w79noE
****SD: I'm dubious that anyone making huge moves in eurodollars is "new." It's not like some teenager with an inheritance decided to buy up a huge chunk of a penny stock's float.
Firstrade Moves To Free Online Trading - Stocks, ETFs, Options, Mutual Funds
Firstrade
Firstrade Securities, Inc., a leading online brokerage firm, has eliminated its commissions for all stocks, exchange-traded funds (ETFs), options, and mutual funds, effective today. Firstrade customers will now be able to trade for free with no time restrictions, no limits on the number of trades allowed and no minimum account requirements. The move is part of Firstrade's ongoing commitment to offer the best investment choices for self-directed investors at little or no cost.
/goo.gl/DVUgRg
****SD: Firstrade's steps in the last two years seems like a good example of how discount brokerages have had to evolve. In September 2017, the firm reduced commissions from $4.95 to $2.95 and fees per options contract from $0.65 to $0.50. Then, in April 2018, Firstrade removed commissions on some 700 ETFs (that free offering trumped all the larger competitors - TD's offering was next in line with some 300 ETFs). In hindsight, you could almost see this "free" move coming as CEO John Liu said in July that despite its relatively diminutive status, technology was going to allow the company to continue to compete and draw market share from larger online players. And they're also launching a robo-advisor - seems like they've touched all the key talking points, right?
Brace For Volatility as Populists Take the Wheel
Lionel Laurent - Bloomberg
Financial markets are god-like in their ability to shrug in the face of extreme policy shifts. The conflagrations of Donald Trump's election and the U.K. Brexit vote were quickly smothered by faith in "synchronized" economic growth, low inflation and central bankers' willingness to keep interest rates low.
/bloom.bg/2NdUPdk
How a hacker network turned stolen press releases into $100 million
Isobel Koshiw - The Verge
At a Kiev nightclub in the spring of 2012, 24-year-old Ivan Turchynov made a fateful drunken boast to some fellow hackers. For years, Turchynov said, he'd been hacking unpublished press releases from business newswires and selling them, via Moscow-based middlemen, to stock traders for a cut of the sizable profits.
bit.ly/2o92KxC
****SD: Yes, there are some timely options trades involved.
Juxtaposition and Paradox
Anu Ganti - S&P Dow Jones Indices
Effective prior to the market open on Sept. 24, 2018, the Telecommunication Services sector will be replaced with a new Communication Services sector, which will combine telecom with parts of the Information Technology and Consumer Discretionary sectors.
bit.ly/2o6JZe1
****SD: Some commentary (from the horse's mouth) about potential volatility of the new "Communications Services" sector, an attempt to incorporate "new" tech giants with "stodgy" old guard companies.
| | | | | | Exchanges and Clearing | | | What's Driving 24-hour Trading of WTI Options?
Jeff White - CME Group OpenMarkets
You may already know CME Group's NYMEX WTI options on futures are among the most actively traded commodity options in the world. You may also know that traders from global macro hedge funds to physical oil producers all use WTI options each day to hedge risk or express market opinions. What you may not know is that trading during non-U.S. hours by traders outside the U.S. has been the fastest growing component of the WTI options market. Volume growth outside U.S. hours has outpaced U.S. trading hours volume by over 20% year-to-date in 2018.
bit.ly/2BL096w
Cboe Plans September 10 Launch of U.S. High Yield Corporate Bond Index Futures Trading
Cboe
Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE), one of the world's largest exchange holding companies, today announced that Cboe Futures Exchange (CFE), plans to offer trading in Cboe iBoxx iShares $ High Yield Corporate Bond Index (IBHY) futures beginning September 10, 2018, pending regulatory review.
/goo.gl/DPYeob
****SD: The fact sheet for the contract can be found here and the index methodology can be found here.
Annual SIFMA BCP/ Reg SCI Test - October 13, 2018
BOX
In coordination with other market centers and in support of Regulation SCI, BOX Options Exchange ("BOX") will be participating in the annual SIFMA BCP Test on Saturday, October 13, 2018
/goo.gl/My7rPY
Update: ISE, GEMX and MRX Disciplinary Rules - Public Notification of Rule Changes
Nasdaq
As discussed in Options Regulatory Alert #2018-23,Nasdaq ISE, LLC ("ISE"), Nasdaq GEMX, LLC ("GEMX"), and Nasdaq MRX, LLC ("MRX") (together, the "Exchanges") each amended their investigatory and disciplinary processes to be identical in all material respects to the investigatory and disciplinary processes of Nasdaq BX, Inc. ("BX"). The new rules provide uniform investigative and disciplinary processes to Members and Associated Persons of each Exchange and members and persons associated with members of BX and Nasdaq, and harmonize the work FINRA conducts for these Exchanges.
bit.ly/2BL4HKp
| | | | | | Regulation & Enforcement | | | Illinois Court refuses to dismiss indictment against software developer in spoofing conspiracy case
Maria Nikolova - FinanceFeeds
A spoofing case targeting Jitesh Thakkar, the founder and principal of Edge Financial Technologies Inc., continues at the Illinois Northern District Court after the Honorable Robert W. Gettleman has refused to dismiss the indictment against the defendant.
/goo.gl/UuJ675
****SD: Law360 has the story here and the initial indictment from February can be found here.
EU extends emergency ban on selling binary options to retail clients
Hannah Murphy - FT
Europe's financial regulator has said it will extend a temporary ban on complex speculative products known as binary options to retail punters, as it continues to wield its new "emergency intervention" powers.
/jlne.ws/2waJFQ6
| | | | | | Technology | | | Interactive Brokers' TWS platform facilitates search for tools
Maria Nikolova - FinanceFeeds
The latest version of the platform introduces an easier way to find and open any tool from the "New Window" drop-down tools list.
/goo.gl/n29wZh
| | | | | | Miscellaneous | | | China Keeps Promises to Wall Street Even as Trade War Drags On
Bloomberg
China removed limits on foreign ownership of its banks and bad-debt managers, pushing ahead with a previously announced plan to open its financial system despite rising trade tensions with the U.S.
/bloom.bg/2o6Elsz
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