| June 27, 2016 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Good Morning
By John J. Lothian
Good morning! I say that with all earnestness.
Friday the world changed, or so it seemed. Brexit happened, markets fell and journalists went to work to cover this story from every conceivable angle. The newsletter below is an aggregation of that news. You will find only two stories on the LSE-Deutsche Boerse merger and the CME Group did something in Palm risk management. There are a few other non-Brexit stories, but they were hard to come by.
Lots of rich people lost money, but so did poor people; they just don't have as good portfolio measurement tools to show them their balances. It was the $2.08 billion dollar loss in the global equity markets that garnered a headline below.
Our friends at the FIA have set up a Brexit page on their website here
Changing themes from global financial destruction to building for the future, please sign up your interns and newer employees for our MarketsWiki Education World of Opportunity series in Chicago and New York. Please help get the word out. A recommendation from an experienced colleague or supervisor goes a long way.
We have added the lineups of speakers for each session in Chicago to the event page
We are asking you to Tell The Story about our industry and help recruit the next generation of market participants and professionals. After Friday's action, you should have no problem telling stories.
| | | | | | Lead Stories | | | What's Up With The VIX? Fear Gauge Lower Even As Stocks Plunge
Chris Dieterich - Barron's
Stocks plunged on Monday as fallout from Brexit spread across global financial markets. Meanwhile, the CBOE Volatility Index (VIX) fell, a perplexing move for the market's so-called fear gauge.
on.barrons.com/29hj5YU
Uncertainty Is the New Normal After U.K.'s Startling Vote
Conor Sen - Bloomberg
When investors see a market-moving event coming -- be it a merger, an election or an FDA approval -- many turn to the options market to hedge their bets leading up to the event, increasing the cost of insurance, and once the event happens volatility reverts back to normal. Britons' vote last week to leave the EU may not follow that pattern, if uncertainty remains high even after the event.
bloom.bg/29heDcJ
Big London Bets Tilted Bookmakers' 'Brexit' Odds
Jon Sindreu - WSJ
When Britain's soccer Premier League started its latest season in August of last year, bookmakers said Leicester City, a team from England's midlands, only had a 0.0002% chance of winning it all. When Leicester lifted the trophy at the end of the season, a few die-hard fans won thousands of pounds, but most bettors lost all their money.
A similar thing happened Friday as the U.K. voted to leave the European Union, leaving financial markets flabbergasted. As polls closed, some betting shops were putting the odds of a vote to leave at less than 10%.
"I can't remember any time when the bookies were so wrong," said Christian Gattiker, chief strategist at Swiss private bank Julius Baer Group AG .
bit.ly/28Y1yI3
Surprised by Brexit? These markets were prepared
Annie Pei - CNBC
Despite the global market chaos after Britain's vote to leave the EU, one key measure barely budged: the VIX. The CBOE volatility index spiked nearly 50 percent, hitting a high of 26 Â but that paled in comparison to the high seen during the August swoon (above 40).
cnb.cx/295wwPo
Weekly Market Outlook - Where Things Stand After Brexit
Moby Waller - CBOE Options Hub
Through Thursday, not only was the market's action palatable, it was downright bullish. Investors were increasingly confident the Brexit wouldn't happen. Big mistake. When traders realized the "leave" crowd just edged out the "remain" crowd, it pulled the rug out from underneath the bullishness. When all was said and done, Friday's 3.6% plunge from the S&P 500 (SPX) (SPY) translated into a loss of 1.6% for the week.
bit.ly/295xwmz
Hedge Funds Limited Risk Ahead of 'Brexit' Vote
Laurence Fletcher and Giles Turner - WSJ
London's hedge-fund executives returned Monday to an industry bloodied but unbowed by Friday's market turmoil.
Several traders in London's Mayfair district went into Thursday's referendum positioned for a rally in assets such as the pound and stocks and were caught out by the U.K.'s shock vote to leave the European Union.
on.wsj.com/29hgfTO
Soros looks set to make a killing on Brexit result
Mark DeCambre - MarketWatch
George Soros may be getting rich on an implosion in British markets  again.
The landmark vote in the U.K. to leave the European Union has rocked global markets, sending the British pound GBPUSD, -3.5464% to its lowest level in more than 30 years. Futures for the Dow Jones Industrial Average DJIA, -1.30% plunged as much as 700 points at one point, and Europe's benchmark stock index SXXP, -4.11% was facing its worst one-day plunge since 1987.
on.mktw.net/2959c4f
Scientist Turned Hedge-Fund Founder Lured to Pound, Euro Swings
Netty Idayu Ismail - Bloomberg
AE Capital, a hedge fund run by a former atmospheric scientist, is seeking to take advantage of price swings in the pound and euro versus other currencies as the aftershocks of Brexit rumble across the globe.
Volatility in the pound will remain elevated in the coming months after the U.K. opted to quit the European Union last week, said Lyle Pakula, the fund's Melbourne-based chief investment officer. There is also "more risk in the euro" as the outcome fuels populist and nationalist sentiment across Europe, he said.
bloom.bg/29heSUU
VIX Index Jumps 49.3% on Friday, with Record Overnight Volume for VIX Futures
Matt Moran - VIX Views
The CBOE Volatility Index (VIX) rose 49.3% on June 24, after the results of the Brexit referendum were announced. The VIX Index is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.
goo.gl/9nL3xx
Left Tail Risk for CBOE Benchmark Indexes: Nine Histograms
Matt Moran - CBOE Options Hub
Volatility in the many worldwide markets shot up last week, which has left investors looking for the better ways to manage risk. Some investors still have the misconception that all options strategies are more risky than common stock and bond strategies, but the histogram analysis below shows that nine CBOE benchmark indexes have less left tail risk than the S&P 500 total return index since mid-1986. A total of 9 histograms were created, directly comparing the monthly returns of the PUT, CNDR, BXM, CMBO, CLLZ, BXMD, PPUT, CLL, and BFLY indexes with those of the S&P 500, from July 1986 through May 2016.
bit.ly/29hfQAB
Brexit Provides a Review of Pitfalls for Options and Futures Traders
Fred Oltarsh - Inside Futures
As news poured in regarding the outcome of the Brexit Vote it became increasingly clear that Great Britain had voted out. Markets reacted as Futures Markets often do in adverse times: extreme volatility. The E-mini S&P traded at an intra-day session low, the permissible limit at the time, of 1999. Gold rallied to a high 1362.60 and the currency markets had tremendous volatility which was led by the British Pound which fell by more than 10% from the session high.
bit.ly/2955wPY
Brexit Winners Emerge in Hedge-Fund Community Amid Market Chaos
Will Wainewright, Nishant Kumar and Saijel Kishan - Bloomberg
Hours after Britain's decision to leave the European Union sparked mayhem across global financial markets, a handful of prescient investors began to emerge as big winners.
Hedge fund manager Crispin Odey, an advocate of a British exit, gained more than 15 percent in his flagship fund on Friday, according to a person familiar with the situation. Several hedge funds that use computers to follow trends, including David Harding's Winton Capital Management, also reported gains. Shares of a Canadian insurer that was betting on deflation rallied.
bloom.bg/2953W0s
Why are Nadex Traders so Calm in this Brexit Storm?
Vikram Rangala - Nadex Binary Options
Despite the panicked headlines, the "limit down" drops in stocks, and David Cameron's tears at the result of a referendum he called, some traders are calm and profiting amid the Brexit chaos. They're not all at Nadex, but here's what we can learn from those who are.
bit.ly/29gTOOB
Collateral Damage of Brexit on the FX/CFD/Binary Options Industry
Ron Finberg - Finance Magnates
With the UK heading out of the EU, a lot of the immediate attention has been rightfully focused on the Brexit referendum's effects on the financial markets and 30 year lows for the British pound. But, beyond the current volatility in stocks and currencies, the online trading industry for both the EU and UK have plenty of regulatory issues that they will have to digest.
bit.ly/29hfGZZ
| | | | | | Exchanges | | | New Records Hit at BATS Europe, CME's GBP FX Futures, and CBOE's VIX Futures
Finance Magnates
Heightened volatility in financial markets today brought benefits to a number of exchange operators in terms of trading volumes as new record-highs were made at exchanges such as BATS across Europe, and trading products from the CBOE and CME in the U.S., following the global reaction to the UK's Referendum result.
bit.ly/2957AYw
VIX Futures Volume in Non-U.S. Trading Hours Sets New Daily Record
Press Release - CBOE
The CBOE Futures Exchange, LLC (CFE) today announced record volume was set in VIX Futures traded in non-U.S. trading hours with an estimated 235,000 contracts changing hands. Today's record surpasses the previous single-day record of 140,811 contracts set during the overnight session on August 24, 2015.
bit.ly/28SgLup
CME Group Expands Suite of Palm Risk Management Products
Press Release - CME Group
CME Group, the world's leading and most diverse derivatives marketplace, today announced the launch of four new palm contracts to its suite of agricultural products, to begin trading on July 11, 2016, pending all relevant regulatory review periods.
bit.ly/29gTuzh
| | | | | | Technology | | | Intercontinental Exchange Launches Expanded ICE Data Services
Press Release - Intercontinental Exchange
Intercontinental Exchange (NYSE: ICE), a leading operator of global exchanges, clearing houses and data services, today introduced the expanded ICE Data Services, bringing together proprietary exchange data, valuations, analytics, desktop tools and connectivity solutions from across ICE and the New York Stock Exchange, Interactive Data and SuperDerivatives. This milestone is part of the ongoing integration of Interactive Data, which ICE acquired in December 2015.
bit.ly/29gTyif
| | | | | | Strategy | | | The Critical Post-'Brexit' Volatility Level to Watch
Todd Salamone - Schaeffer's Investment Research
In the immediate days leading up to the referendum determining whether or not the U.K. would stay in or leave the European Union (EU), polls suggested the vote would be close, but both polls and betting sites suggested a "remain" vote was highly probable. The prospect that uncertainty related to a "Brexit" would be removed sent the S&P 500 Index (SPX - 2,037.41) and the related SPDR S&P 500 ETF (SPY - 203.13) surging, coincident with voters determining the fate of U.K.'s status in the EU.
bit.ly/295wR4O
Where to Put Your Money Post-Brexit: What Wall Street's Saying
The Street
The second day of trading in the U.S. is upon us after the U.K.'s dramatic decision to leave the European Union, and analysts are admittedly unsure about what's coming next.
A referendum on Thursday decided that Great Britain would leave the European Union after decades of agreement between 28 European countries. The Dow Jones Industrial Average is down more than 300 points in morning trading Monday after plummeting more than 600 points on Friday.
With many investors searching for how and where to invest now, here's what some analysts are saying:
bit.ly/295wS8Y
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