| March 21, 2018 | | | |  | Spencer Doar
Associate Editor
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The Spread - The (Out)Take from FIA Boca
JohnLothianNews.com
After much travel and a spell of ill health, we can confidently say The Spread is back in action. Our "weekly" options news recap will be much more of a weekly affair now. (Flu season is pretty much over, right?)
The JLN crew was at FIA Boca last week and your humble host really struggled without our usual teleprompter rig. As such, welcome to a rambling, stumbling version of The Spread that includes some outtakes from my poor pool performance. If you just want the behind the scenes action, skip to the last minute.
The following are stories referenced in this week's episode of The Spread:
Maven Wave - FIA Boca 2018 - Day One; FIA Boca 2018 - Day Two; FIA Boca - Day Three
JLN - Potential CME-NEX Deal Is Full of History, Dilemma, Risk and Reward
CNBC - It is 'hard to understand' why investors are suing Credit Suisse over volatility product, says its CEO
Reuters - Chicago firm files lawsuit alleging manipulation of Cboe volatility index
Watch the video here »
****SD: This was our most technically challenging episode yet.
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Federal Reserve Interest-Rate DecisionÂLive Analysis
WSJ
Join us for all the news and analysis of the Federal Reserve's interest-rate decision and economic projections Wednesday, along with Jerome Powell's first press conference as chairman.
on.wsj.com/2FYCpcU
| | | | | | Lead Stories | | | One of the market's favorite scapegoats is actually shockingly helpful, UBS' US equity chief says
Joe Ciolli - Business Insider Prime (SUBSCRIPTION)
When the stock market melted down in early February, blame was spread far and wide. But even then, everyone seemed to agree on one aspect of it: the shorting of volatility made everything worse.
The evidence was largely indisputable, and everyone carried on as price swings normalized once again, much wiser about the exacerbating effect of such volatility strategies.
read.bi/2G0TxPd
Trafigura moves hedging out of Europe, leads U.S. oil exports race
Julia Payne, Dmitry Zhdannikov - Reuters
Trading giant Trafigura has moved its commodities hedging operations to the United States and Asia and away from Europe to avoid being subject to new, tighter MiFID II market regulations.
/goo.gl/qPYfBt
****SD: Speaking of big energy houses, see the FT's Leading energy traders see more industry consolidation ahead
Options Market Showing Little Fear of Facebook Fallout Spreading
Sarah Ponczek, Joanna Ossinger and Luke Kawa - Bloomberg
Facebook protection costs well off highs from early February; One stock where implied volatility is showing stress - Twitter
Facebook Inc.'s bad week has dragged tech shares lower, but options investors are betting the fallout will be contained.
/bloom.bg/2u7zQnl
****SD: Bloomberg has It's Getting Expensive to Hedge Against More Twitter Losses and WSJ has Plunge in Facebook Stock Unleashes Near Record Trading of Options
Oil: Could Iran Risk Reverse Options' Bearish Signal?
Erik Norland - CME Group
The removal of Secretary of State Rex Tillerson and replacing him with CIA Chief and former Congressman, Mike Pompeo, has implications for nearly all aspects of U.S. foreign policy, including Middle East relations. More specifically, Tillerson supported the Iran nuclear deal (Joint Comprehensive Plan of Action or JCPOA), whereas Pompeo was one of its fiercest opponents on Capitol Hill.
bit.ly/2G0NWbu
China Inc. Feels Heat From $668 Billion Puttable Bond Cooker
Bloomberg
It seemed like a good idea at the time, but now an incentive that helped sell $668 billion of corporate bonds to Chinese investors is coming back to haunt borrowers.
/bloom.bg/2u6OfAl
****SD: This is one of those ongoing weird storylines when compared to most options-related news.
Cofco arm pledges to challenge international traders
Neil Hume and Emiko Terazono - Financial Times (SUBSCRIPTION)
The international arm of China's state-owned food behemoth Cofco is not just a procurement arm for Beijing and wants to build a trading house that can compete with the biggest names in the industry.
on.ft.com/2u6Pr6B
Historic jump in 'fear index' in February sounds a stock-market warning
Mark DeCambre - MarketWatch
...According to a Goldman Sachs research note dated Monday, the rise of high-frequency traders, which employ lightning-fast computers to execute trades, aren't prone to step in the stem the bleeding during market selloffs, citing February's spike in the Cboe Volatility Index VIX, which is calculated using options on the S&P 500, is a measure of expected, or implied, volatility over the next 30 days.
on.mktw.net/2GObulb
Commentary: "Frothy" markets vulnerable to growing global trade war risks
Jamie McGeever - Reuters
For the first time in over a year, a global trade war is the biggest "tail risk" for investors. And given the increasingly fragile environment for financial markets, their worries may be justified.
reut.rs/2uaNG8B
| | | | | | Exchanges and Clearing | | | CME pursuit of Nex reflects shift in US money markets
Philip Stafford - Financial Times (SUBSCRIPTION)
CME Group's potential purchase of the UK's Nex Group looks like a contrary move.
The world's largest exchanges operator's influence in Washington remains undimmed while it has retreated from London. International investors prefer to trade CME's Treasury futures, which track the prices of the US government debt, and eurodollar futures, which are a proxy for US interest rate moves, in Chicago.
on.ft.com/2GO9fyc
****SD: From Bloomberg - Big Changes May Be Coming for the Treasury Market
CME Group Inc. Announces First-Quarter 2018 Earnings Release, Conference Call
CME Group
CME Group Inc. will announce earnings for the first quarter of 2018 before the markets open on Thursday, April 26, 2018. Slides and written highlights for the quarter will be posted on its website at 6:30 a.m. Central Time, the same time it provides its earnings press release. The company will hold an investor conference call that day at 7:30 a.m. Central Time, at which time company executives will take analysts' questions.
bit.ly/2u7kvD8
Deutsche Boerse could be fined for not updating market on CEO search
Reuters
Germany's financial markets watchdog is investigating whether Deutsche Boerse (DB1Gn.DE) should have provided more information to investors during its search for a new chief executive, with a ruling against the company potentially leading to a fine.
reut.rs/2FWGNsR
JP Morgan: Sell Cboe stock because of slowing popularity
Thomas Franck - CNBC
A slowdown in VIX futures trading will weigh on shares of Cboe Global Markets, J.P. Morgan warned clients Wednesday as it downgraded shares of the international exchange operator.
cnb.cx/2GPTG9v
PEGAS Records Its First TTF Option
Mondovisione
PEGAS, the pan-European gas trading platform operated by Powernext, has registered the first trade on its new OTC Options registration service. The trade was a Put on the TTF Summer 2018 contract at a strike price of 17 Euros/MWh, with an Options premium of 0,290 Euros. It was brokered by Marex Spectron and amounted to a total of 527,040 MWh.
bit.ly/2u8vw7b
| | | | | | Regulation & Enforcement | | | UK's FCA plots global expansion of FinTech sandbox; FCA FinTech sandbox creates safe space for firms to test new products and services.
Hayley McDowell
The Financial Conduct (FCA) is looking to expand its FinTech regulatory sandbox operations to meet demand from firms to roll it out globally.
/goo.gl/Jajx1Q
****SD: So does that mean that the CFTC and FCA regulators are going to be competing over their sandboxes?
Brussels to offer City market access  but on EU's terms
Jim Brunsden, Mehreen Khan and George Parker - Financial Times
The EU is to promise the City of London "appropriate" market access after Brexit, but only on terms dictated by the union, in a guarded overture to the UK's valuable financial sector.
on.ft.com/2G26oAv
| | | | | | Technology | | | Fintech vulnerable to dishonesty and corruption, warns senior British judge
Martin Arnold - Financial Times
One of Britain's most senior judges has warned that the dishonesty and fraud that have plagued the traditional banking system could spread to the new financial technology businesses that are springing up to challenge them.
on.ft.com/2FYIg1D
****SD: Call me cynical, but isn't any industry "vulnerable" to dishonesty and corruption?
New white paper calls for cross-industry coordination to mitigate impact of financial system cyber attack
Hedgeweek
Cross-industry coordination around response and recovery mechanisms are essential to mitigating the systemic consequences of a large-scale attack on the global financial system, according to a white paper published by The Depository Trust & Clearing Corporation (DTCC) and Oliver Wyman, a global management consulting firm.
/goo.gl/nzmjcg
| | | | | | Strategy | | | The bulls are trapped, and that could mean more pressure ahead: BofA
Keris Lahiff - CNBC
A steep market sell-off trapped bulls above a key level of resistance at the beginning of this week, according to one technician. That may have triggered a series of technical signs that imply near-term pain.
"We gapped up on March 9th, we gapped down on the 19th," Stephen Suttmeier, chief equity technical strategist at Bank of America Merrill Lynch, told CNBC's "Futures Now" on Tuesday. "We had six days of price action above those gaps where we trapped the bulls on this breakout."
cnb.cx/2GPPjv3
****SD: Ever seen that video of a bullfight where the bull jumps into the stands? Scary, but it taught me never to think of a bull as "trapped." (Plus, as an NBA fan in Chicago, I'm biased when it comes to cattle.)
| | | | | | Events | | | Report from FIA Boca 2018: Blockchain, Brexit, Bitcoin and More
Elise Fleischaker - Trading Technologies Blog
The 42nd annual FIA Boca conference took place last week, with the global derivatives industry's leaders gathering on Florida's Atlantic coast for a busy week of sessions, networking and dealmaking. The robust lineup of topics and high-profile speakers generated many noteworthy takeaways. But before I get to that...
bit.ly/2FWTbZT
| | | | | | Miscellaneous | | | Hedge-fund managers that do the most research will post the best returns, study suggests
Thomas Franck - CNBC
A working paper finds that funds accessing one or more SEC filings in a month exhibit 1.5 percent higher annualized abnormal returns in the next month.
"The fact that public information acquisition relates to performance is surprising," wrote the researchers. Using SEC filings "should not be profitable."
By mapping hedge fund IP addresses to those accessing financial filings, the team identified information gathering by hedge funds such as Renaissance Technologies and AQR.
/goo.gl/srbiiD
****SD: I would hope so.
The Easy Pickings
Michael Batnick - The Irrelevant Investor
The Great Northern Expedition was one of the largest exploration endeavors in human history. The grueling state sponsored trip, which lasted ten long years (1733-1743) and covered thousands of miles, cost one-sixth the annual income of Russia.
bit.ly/2G00i3M
****SD: Read this if you want to see a comparison between otter clubbing in the 18th century and investing.
Return of Volatility Raises Liquidity Question for ETFs; The ETF industry is now worth more than $4 trillion, magnifying the risk if the funds run into difficulties
Mike Bird - WSJ
Are ETFs getting too big for their own good? The return of volatility to financial markets this year is reviving concerns about liquidity shortages in exchange traded fundsÂwhich have surged in popularity since the 2008 market crisis ?due to flexibility and low fees, but have yet to face a bear market at their current size.
/goo.gl/XQVfCi
****SD: Unexplored waters.
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