| September 18, 2017 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Exchanges Cite Hacking Risk of SEC's Planned Market Data Repository; Stock-exchange executives worry the Consolidated Audit Trail will be a juicy target for hackers
Dave Michaels - WSJ
Stock-exchange executives are warning a planned comprehensive data repository designed to help regulators detect market manipulation faces hacking risks, one week after Equifax Inc. disclosed one of the biggest data breaches in U.S. history.
/goo.gl/6gi5oi
****SD: Plenty of CAT talk at the STA Market Structure conference in D.C. last week. My brief recap of the conference is below, as well as more of JLN's CAT coverage this year.
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The CAT Scratches: Fees for Options Exchanges
JLN
... I'll set the table with this stat from a Reuters story earlier this month - "Options execution venues with more than 1 percent of industry volume will pay $57,615 per quarter and those with less than 1 percent will pay $39,612 per quarter." "Per venue" means per medallion/exchange.
/goo.gl/7huQ9A
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Thesys vs. Goliath: That's One Big CAT
Spencer Doar - JLN
FINRA, FIS, Cinnober, Thomson Reuters - what do they have in common? They are just a few of the 30 bidders who lost out on developing the Consolidated Audit Trail (CAT) to Thesys Technologies LLC, a subsidiary of the proprietary trading firm Tradeworx, founded in 2009. To develop and implement the CAT, Thesys partnered with IBM (which was a bidder on its own, too), as well Rosenblatt Securities and law firm Latham & Watkins.
/goo.gl/Fj8uiv
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Markets as Guinea Pigs (and Other Notes from STA's 84th Annual Market Structure Conference)
Spencer Doar - JLN
The STA's 84th Annual Market Structure Conference was held in Washington D.C. last week and its theme was "The Challenge of Change."
SEC Commissioner Michael Piwowar was the first in the spotlight, highlighting those challenges which would be discussed over the course of the conference  the plight of ma and pa investors (now dubbed Mr. and Mrs. 401(k) courtesy of Commissioner Jay Clayton's comments), capital formation for small and mid-cap companies and an array of regulatory qualms pertaining to the Consolidated Audit Trail (CAT), MiFID II and pilot programs.
/goo.gl/JhSPSu
| | | | | | Lead Stories | | | Wall Street's volatility gauge dips below 10 for first time since early August
Robin Wigglesworth - Financial Times
Wall Street's main volatility index has dipped below the 10 mark for the first time since early August, as markets simmer down from bouts of nervousness triggered by North Korea.
jlne.ws/2xgmuF0
US Options Market Quality Improves as Volume Surges in August
Options LiquidityMatrix - TABB Forum
Listed options volume totaled 381 million contracts in August 2017, a sharp increase of 21.5% from July 2017 and an increase of 58.3 million contracts compared to August 2016. The increase in volume contributed to spreads tightening, from $0.28 in July 2017 to $0.26 in August 2017.
jlne.ws/2xfEtes
****SD: Chart of the average bid-ask spread at each exchange shows narrowest is CBOE's C2 at .09 and widest is ISE Mercury at 1.34. CBOE and ISE Gemini are tied with largest YoY increase in market share at 3.1. percent. Largest average trade value goes to CBOE at more than $10k per trade.
Volatility as an Asset Class
Dan Collins - Futures Magazine
The history of managed money in the futures world since its early days in the 1980s has been about one thing: Trend following. However, a niche strategy that dates to the first options on futures contracts has been option writing. Prudent traders since the launch of options have used the product to mitigate risk, but there had to be someone on the other side of those defined risk long options positions.
jlne.ws/2xggCvs
****SD: From the October issue of Modern Trader (published in September).
Top dealers post $1.4 trillion of collateral for derivatives trades
Hayley McDowell - The Trade
The 20 largest derivatives dealers posted $1.41 trillion of collateral for cleared and non-cleared derivatives trades, according to research.
jlne.ws/2xfVKV5
IEA Sees Risk of Volatile Oil Prices on Weak Upstream Investment
Vivian Nereim - Bloomberg
A dearth of new investment in oil production is stoking a risk of tighter crude supply and unstable prices, even as demand growth is expected to slow over the next five years, according to a senior International Energy Agency official.
jlne.ws/2xfTwVr
Rosenthal Collins Group Statement On The Passing Of Futures Industry Pioneer Les Rosenthal
PRNewswire
Rosenthal Collins Group LLC (RCG), a leading independent futures brokerage and clearing firm, today issued the following statement on the Sept. 16 passing of its co-founder and Managing Partner Leslie Rosenthal at the age of 84 after a brief illness:
/goo.gl/6z7KBS
**If you haven't read about some of the key initiatives Les lead during his career, it's worth checking out at Les Rosenthal on MarketsWiki.
What's The India Volatility Index Telling Us Now
Nancy Gondo - Investor's Business Daily
Unlike more popular metrics such as the PE (Price to Earnings Ratio) and the P/BV (Price to Book Value Ratio, the India VIX (Volatility Index) is rarely, if ever, looked at by investors. However, this unassuming number might actually offer important market cues, particularly for value investors.
jlne.ws/2xfSx7L
| | | | | | Exchanges and Clearing | | | Deutsche Boerse combines selected Eurex products in a cost-effective data package for private investors; Data from Mini-DAX futures, STOXX Europe 600 derivatives and major stock options by the end of the year free of charge
Deutsche Boerse
Effective immediately, Deutsche Boerse Market Data + Services will provide the market data for selected Eurex products to private investors free of charge in the new information product "Eurex Retail Europe". After the free introductory phase, the data will be available from 1 January 2018 for 1 euro per month. The data package is tailored to private investors in Europe and includes Mini-DAX futures, STOXX Europe 600 derivatives and important options on European equities.
/goo.gl/zJEMXg
****SD: I usually say, "heck yes, I'd buy that for a dollar" - with current exchange rates, I'd say $1.19 also seems reasonable, given some of the other data prices being bandied about recently.
Indian stock exchange seeks to draw line under scandal; Chief admits there were shortcomings and says NSE must rebuild market's trust
Simon Mundy in Mumbai - FT
A failure to deal transparently with a scandal around high-frequency trading has left India's National Stock Exchange facing an uncertain timeline for its long awaited flotation, its chief executive said.
/goo.gl/Zt33pN
| | | | | | Strategy | | | They Said What? Volatility Shock
Barron's
Experts discuss whether investors are vulnerable to a spike in volatility.
jlne.ws/2xgjlEQ
Why Last Week's SPY Breakout is Suspect
Todd Salamone - Schaeffer's Investment Research
How to trade when the trend is your friend, but the headlines are scary
jlne.ws/2xfxQsz
| | | | | | Education | | | Weekend Review of VIX Futures and Options - 9/11/2017 - 9/15/2017
Russell Rhoads - CBOE Options Hub
VIX threatened to close the week with a 9 handle, but managed to stay out of single digit territory. Spot VIX was down over 16% and the standard September futures contract which goes off the board on the open Wednesday was down 16% as well. There's still a premium of 0.95 between spot and September VIX, but the gap that has persisted until recently is closing. October, which will take over as the front month, remains at a premium of about 1.75.
jlne.ws/2xfWPw1
Weekend Review of Russell 2000 Options and Volatility - 9/11/2017- 9/15/2017
Russell Rhoads - CBOE Options Hub
Small cap stocks had a great week last week with the Russell 2000 (RUT) rising 2.25% which the large cap focused Russell 1000 (RUI) was up about 1.6%. For the year RUI still has just over a 6% lead on RUT.
jlne.ws/2xfZ8zh
| | | | | | Miscellaneous | | | FX swaps and forwards: missing global debt?
Claudio Borio, Robert Neil McCauley and Patrick McGuire - BIS
Every day, trillions of dollars are borrowed and lent in various currencies. Many deals take place in the cash market, through loans and securities. But foreign exchange (FX) derivatives, mainly FX swaps, currency swaps and the closely related forwards, also create debt-like obligations. For the US dollar alone, contracts worth tens of trillions of dollars stand open and trillions change hands daily. And yet one cannot find these amounts on balance sheets. This debt is, in effect, missing.
jlne.ws/2fuFF4t
As Wealthy Millennials Take Control Of Family Fortunes, Impact Investing Is Set For A Big Boost
Ben Schiller - Fast Company
The world's richest families are increasingly investing their money in good causes, giving a boost to the growing, if still challenged, impact investing space. More than a quarter (28%) of ultra-net-worth "family offices" are now putting money into social and environmental areas. And, as younger generations take the reins, that percentage is likely to rise significantly in the years ahead.
jlne.ws/2xg6ZwM
****SD: If you haven't heard the TLA "ESG" in the context of investing then you should brush up and fast.
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