| August 09, 2024 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | |
Unrealized Insurance: The Futures Industry's Missed Opportunity for FDIC-Like Protection in 1973
JohnLothianNews.com
Did you know the futures industry almost had insured customer accounts akin to the Federal Deposit Insurance Corporation (FDIC) in banking when the CFTC was first proposed in 1973? I ran across this fact while working on MarketsWiki.
The Commodity Futures Trading Commission Act of 1974 was a landmark piece of legislation that fundamentally reshaped the regulation of the U.S. futures markets. One of the most intriguing aspects of the original proposal was Title III, which aimed to establish a Federal Commodity Account Insurance Corporation (FCAIC). This entity would have functioned similarly to the Federal Deposit Insurance Corporation (FDIC), providing insurance for customer accounts in the futures industry. However, this proposal never came to fruition.
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Agricultural Futures: Navigating the Fields: Futures Discovery EP 12
JohnLothianNews.com
Today, we're delving into the intricate world of Agricultural Futures-a realm shaped by the rhythm of nature and the pulse of global markets. In this episode, we'll explore the quantitative challenges that traders face in the real world. It's not just about numbers on a screen; it's about the unpredictable nature of weather, critical data in crop reports, and the global dance of trade policies.
Watch the video »
Episode: 11 - Algorithmic Adventures
Watch Video »
Episode: 10 - The role of the FCM
Watch Video »
| | | | | | Lead Stories | | | Volatility Pros Say Record VIX Surge on Monday Was a Head Fake; Wall Street's fear gauge said to overstate the market stress; Lack of liquidity and short covering seen fueling index spike
Lu Wang and Denitsa Tsekova - Bloomberg
On the surface it was a stock shock for the ages, a once-in-a-generation spike in turbulence that reverberated through global markets. But what if Monday's extreme volatility event wasn't quite what it seemed?
That's the theory now bouncing around on Wall Street, after a frantic week in which the Cboe Volatility Index staged its biggest intraday jump on record.
/jlne.ws/3WIvGfw
Retail investors sat out this week's wild market swings by trading fewer options; Risk aversion meant individual investors scaled back their options bets
Gordon Gottsegen - MarketWatch
Retail investors can sometimes get a bad rap for their risk appetite, due to their affinity for things like meme stocks and zero-day-to-expiration (0DTE) options.
So shouldn't retail traders be celebrating wild market swings like the ones we've been seeing this week? Not so fast: Data from J.P. Morgan shows that retail investors traded fewer options this week in response to heightened market volatility.
/jlne.ws/4dgndaJ
Wall Street's Fear Gauge Is Flashing Buy Sign, UBS Wealth CIO Says; VIX surge seen as contrarian-buy signal, Solita Marcelli says; More volatility may emerge, but Fed cuts set to support stocks
Alexandra Semenova - Bloomberg
As traders rattled by this week's equities cascade ponder what lies ahead, UBS Group AG's Solita Marcelli remains confident US stocks will continue their upward trajectory in the coming months.
The chief investment officer of the bank's wealth management arm said recent market gyrations haven't dented her fundamental view on stocks for 2024. The Federal Reserve's first interest-rate cut lies ahead and in times of a solid growth backdrop, the S&P 500 Index has risen roughly 17% on average over the next 12 months after the US central bank starts easing, she noted.
/jlne.ws/46Iez29
Can $2.5B Crypto Options Expiry Boost Market Momentum?
Martin Young - CryptoPotato
Friday, August 9, will see around 32,000 Bitcoin options contracts expire with a notional value of around $1.9 billion.
Today's options expiry event is slightly smaller than last week's, so its impact on spot markets is likely to be limited.
/jlne.ws/3M11ckc
Robinhood's push into futures may not be easy if not free, J.P. Morgan says
Niket Nishant and Manya Saini - Reuters
Robinhood's entry into futures trading this year could be met with some caution by retail traders if it charges a fee, J.P. Morgan analysts said on Thursday. The company has not yet disclosed its plans, but orders for futures and options are often costlier to execute than stocks, which could result in it charging a fee to cover additional costs. The product is a crucial step in Robinhood's effort to grow into a full-fledged financial services provider for retail investors looking to dabble in more complex products.
/jlne.ws/3yEOxAc
Yen Unwind to Take Many Months to Hit Fair Value, BNY Says; Japanese currency may advance to 100 per dollar over time: BNY; Carry positions dumped amid fears of US recession, BOJ hikes
Matthew Burgess - Bloomberg
Unwinding of yen-funded carry trades has further room to run and the Japanese currency may strengthen toward 100 per dollar over time, according to BNY. Investors are still too bearish on the yen and short positions will continue to be slashed, said Bob Savage, the firm's head of markets strategy and insights. An analysis shows the yen is too cheap at its current level of 147 and its fair value over time should be more toward 100, he wrote in a note.
/jlne.ws/4dhWCtI
Stocks Building on Gains. The Market May Get Back to Where It Started the Week-What That Shows.
Brian Swint - Barron's
As in politics, a week is a long time in financial markets. After some wild swings, stocks today stand a good chance of getting back to where they were before Monday's precipitous drops.
The S&P 500 had its best single-day performance since 2022 on Thursday, led higher by technology stocks. Stock futures for the Dow Jones Industrial Average were flat, those on the S&P 500 were up 0.1%, while the Nasdaq Composite was up 0.2% in premarket trading Friday. All three finished Thursday between 0.5% and 0.7% lower over the past five days.
/jlne.ws/4fy8olr
Nearly $20 billion pours into global stocks and bonds despite volatile week
Joy Wiltermuth - MarketWatch
Investors brushed off extreme volatility to pour almost $20 billion into global stocks and bonds in the past week, according to TD Securities.
"Recent extreme moves in the markets had surprisingly little impact on the fund flows data, with both bonds and equity funds seeing positive inflows, despite the repricing in the major equity indices," the TD Securities global strategy team wrote in a Friday client note.
/jlne.ws/3SJXL5j
OK, but why *did* stocks fall this week?
Bryce Elder - Financial Times
Markets go up sober and go down drunk. The workaday business of asset appreciation is interrupted sporadically by intoxicating moments of disorder. Then comes the morning after, and the crapulous task of piecing together what happened.
FT Alphaville has sided with consensus when trying to explain this week's wassail. The gradual unwinding of carry trades that started in March, most notably but not exclusively involving the yen, became much less gradual and cascaded through markets after hitting a mostly American wall of worry (weak labour market, Fed timing doubts, overcrowded positions in AI and momentum more generally, election uncertainty, etc).
/jlne.ws/46DOyRJ
What is the highest level the VIX ever reached?
Joseph Adinolfi - MarketWatch
Hint: it wasn't during the global financial crisis.
Societe Generale's Jitesh Kumar took a look at some historic data on implied volatility and found that a precursor to the Cboe Volatility Index reached its highest level ever recorded around the Black Monday crash in 1987.
While the VIX was launched by Cboe in 1993, the exchange has published data on implied volatility tied to the S&P 100 going back to 1986.
/jlne.ws/4dxv9nu
| | | | | | Exchanges | | | 'Definitely some movement' on Bitcoin ETF options as CBOE re-files application; CBOE has filed an updated 44-page rule change proposal "with more meat," which could be good news for those hoping for options trading on spot Bitcoin ETFs.
Martin Young - Cointelegraph
The crypto industry may be closer to seeing approved options trading on spot Bitcoin ETFs, seven months after issuers and their exchanges first applied for their approval with the Securities and Exchange Commission.
In a post on X on Aug. 8, Bloomberg ETF analyst James Seyffart observed that "there's definitely some movement on Bitcoin ETF options."
/jlne.ws/3yBXlXJ
Cboe Global Trading Hours
Cboe
At more than $50 trillion dollars, the U.S. market is the largest equity market in the world. With Global Trading Hours (GTH), traders can conveniently access the broad U.S. market during their local trading day around the clock.
Cboe index options, including S&P 500 Index (SPX) options, Mini-SPX Index (XSP) options, and Cboe Volatility Index (VIX) options are available to trade nearly 24 hours a day, five days a week. With 24x5 trading hours, U.S. index options are globally accessible, allowing market participants to trade or hedge the broad U.S. market and global equity volatility across all time zones, day and night.
/jlne.ws/3yxRnHj
Nodal Exchange environmental markets grew 231% in July setting a new monthly trading record
EEX Group
Nodal Exchange today announced a new monthly volume record for environmental markets with 64,562 lots traded of futures and options, surpassing the prior record by 25% set in May 2024 of 51,747 lots on Nodal Exchange. The traded volume in July 2024 was up 231% from July 2023. The product suite also posted an all-time high in open interest of 376,548 lots during July. With more than 41,000 lots physically delivered, open interest ended the month at 339,261 lots, up 40% from 242,344 lots from a year earlier. Broken down further, open Interest in environmental options, including California Carbon Allowance (CCA) options and California Low Carbon Fuel Standard (LCFS) options reached a new record of 35,155 lots at month-end. Total futures and options open interest in LCFS products ended the month with a new open interest record of 61,049 lots.
/jlne.ws/3LZcyFb
Nasdaq considers stricter delisting rules for penny stocks
Reuters
Nasdaq is proposing amendments to its rules pertaining to penny stocks to put a faster, more stringent delisting process in place for non-compliant companies, according to a filing posted on the exchange operator's website on Thursday.
Nasdaq requires companies listed on its exchanges to maintain a closing price above $1. Companies that fail to meet this criterion for 30 consecutive trading days are deemed to be non-compliant with the listing standards and are given 180 days to regain compliance.
/jlne.ws/3SKEaSt
| | | | | | Regulation & Enforcement | | | Larry Summers calls for SEC and exchanges to probe Monday's VIX surge
Chris Anstey - Bloomberg via Crain's Chicago Business
Former Treasury Secretary Lawrence Summers urged the Securities and Exchange Commission and relevant exchanges to look into the historic surge in the most-watched gauge of US financial volatility on Monday.
/jlne.ws/46HJEmH
| | | | | | Strategy | | | It's Been a Wild Week for Stocks. Hold Tight and Keep Your Nerve Ahead of Inflation Data.
George Glover - Barron's
So much for August being a quiet month for markets. Monday's dramatic selloff kick-started a week of chaos-but ahead of inflation data next week, investors who keep calm are likely to be rewarded.
/jlne.ws/3YzScdl
Term Structure
Cboe
Tune in to #Vol411 as Dan Deming @Djd551 looks at the #VIX term structure, active trading in Sept $VIX puts and what could impact the vol structure moving forward.
/jlne.ws/3Wy3UCo
| | | | | | Miscellaneous | | | Remember Trump Trades? They're So Three Weeks Ago; Markets seem to rise and fall with his chances, but perhaps that's based more on certainty than affinity for policies.
John Authers - Bloomberg Opinion
Public opinion is a fickle thing. Less than a month ago, a would-be assassin shot at Donald Trump, he responded decisively, and victory in the presidential election suddenly looked all but guaranteed. All the talk on financial markets was about the "Trump Trade" - ways to profit from and hedge against the coming Trump 2.0 administration. Famous financial figures from Elon Musk to Bill Ackman took the moment to announce that they were officially endorsing him.
/jlne.ws/3yvyG7c
Wall Street Could See Big Bonuses This Year
Liz Moyer - Barron's
Investment bankers handling initial public offerings this year could see a 20% to 30% jump in their year-end bonuses, according to a new forecast by Wall Street compensation analysis firm Johnson Associates.
/jlne.ws/3YDderm
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