| February 13, 2023 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Why Investors Are Piling Into Funds That Promise Not to Beat the Stock Market
Jason Zweig - The Wall Street Journal
Finally, you can earn income of 4% or more on cash and bonds. What if you could earn monthly dividends on stocks at an annual rate of at least 11%? That's the pitch for exchange-traded funds that are generating eye-popping yields by selling options contracts. These ETFs, known as covered-call or option-income funds, also shielded investors from some of the pounding that stocks took last year.
/jlne.ws/3lspycy
Bank of Japan Policy Outlook Has Yen (USD/JPY) Volatility Overtaking Peers
Robert Fullem - Bloomberg
The Japanese yen is not taking part in the great moderation.
Forward-looking measures of equity and bond volatility around the world have been largely sliding this year on hopes that China's reopening and disinflation will help the global economy navigate a soft landing.
/jlne.ws/3E6sMsy
Mystery upstarts crash Robinhood's retail options party
Bernard Goyder - Risk.net (SUBSCRIPTION)
An insurgent market-maker teamed up with a US fintech to topple Citadel Securities as the top destination for Robinhood's options trades last December, signalling the start of what could be a new era of competition for retail order flow.
/jlne.ws/3Yk8qUV
FOMO Dominates Trading in 2023
Gunjan Banerji - WSJ
FOMO is back.
The intense fear of missing out dominated trading activity for much of 2020 and 2021. Then last year, investors for the most part grew more discerning. The rush into risky bets that would profit if stocks kept soaring fell out of favor.
/jlne.ws/3YLgXQv
Salomon Trader's Debt-Funded Empire Left Reeling by Russian Hack
Donal Griffin, Mark Burton and Isis Almeida - Bloomberg News
A cyberattack that wreaked havoc across derivatives firms last week has left Andrea Pignataro, the Italian tycoon who heads the software company at the heart of the storm, grappling with something he has avoided for decades: publicity. The former Salomon Brothers bond trader who helped set up ION Trading in the mid-1990s has largely shunned the limelight, rarely speaking at events and never once giving an interview to the English-language media. While ION staff worked around the clock to resolve the cyberattack and reassure clients as their systems were being held to ransom by Russian hackers Pignataro, 52, remained out of sight.
/jlne.ws/3E2cbpX
****The FIA Smartbrief headline for this story was "ION head Pignataro forced into public eye by cyberattack." Andrea Pignataro continues to be one of the most searched pages on MarketsWiki. In 2022, he was the 10th most searched page, and ION Group itself was the 2nd most searched term on the site. ~JJL
Mutual Fund-to-ETF Conversions Failed to Attract Investors in 2022
Emily Graffeo - Bloomberg
A parade of money managers who converted mutual funds into exchange-traded funds in a bid to ride rampant demand for the newer, easier-to-trade structures are discovering it may not be so simple to tap the ETF boom.
More than one-third of converted funds have posted net outflows since they made the switch, according to data compiled by Bloomberg, while 61% have attracted less than $10 million each. In fact, only quant giant Dimensional Fund Advisors's funds have seen significant positive net flows since converting. Even JPMorgan Asset Management, whose overall ETF business is booming, saw net outflows for its converted funds.
/jlne.ws/3IntnZH
Insider traders use ETFs to front-run M&A deals, academics say
Steve Johnson - Financial Times
Insider traders have used exchange traded funds to conceal billions of dollars' worth of trades, according to a team of academics who say their finding may be just the "tip of the iceberg".
Their analysis suggests at least $2.75bn worth of anomalous trades occurred in US-listed ETFs before merger and acquisition announcements between 2009 and 2021.
/jlne.ws/3XzWjSE
The stock market rally of 2023 is losing steam - the Nasdaq and S&P 500 just notched their worst weekly runs in nearly 2 months
Zahra Tayeb - Business Insider
The Nasdaq and S&P 500 indexes fell 2.14% and 1.11%, respectively, last week - the biggest five-day losses since mid-December. The Dow Jones Industrial Average dropped 0.17%. The declines ended a five-week advance in the Nasdaq and pared the SP 500's year-to-date gains to about 7%.
The stock market is seeing an increase in volatility as investors get ready for Tuesday's inflation print, where some economists expect a 0.5% month-on-month rise for the first time in three months.
/jlne.ws/3lnsSFK
| | | | | | Exchanges | | | MIAX Warns that MIAXAX Website is not Affiliated with MIAX or any of its Subsidiaries
MIAX
Miami International Holdings, Inc. (MIH), owner of Miami International Securities Exchange, LLC (MIAX ), MIAX PEARL, LLC (MIAX Pearl ), MIAX Emerald, LLC (MIAX Emerald ), Minneapolis Grain Exchange, LLC (MGEXâ¢), The Bermuda Stock Exchange (BSXâ¢), and Dorman Trading LLC has been made aware of a company and website operated at "www.miaxax.com" through which an entity using the name "MIAX" has been marketing its platform and services to consumers.
/jlne.ws/2K3gU18
| | | | | | Regulation & Enforcement | | | Deutsche Bank Probe Says Staff Deliberately Mis-Sold Derivatives (ETR:DBK)
Steven Arons - Bloomberg
An internal review at Deutsche Bank AG found that some employees deliberately circumvented controls to make big profits by mis-selling products.
The probe known as Project Teal showed that some employees on a London-based foreign-exchange desk sold derivatives to small and medium-sized Spanish companies even though they knew that the products were too complex for those clients, according to people familiar with the matter.
/jlne.ws/40Pnyv8
FIA urges CFTC to codify no action relief for DCO reporting
FIA
FIA has filed comments with the US Commodity Futures Trading Commission that respond to the pending notice of proposal rulemaking on reporting requirements for derivatives clearing organizations (DCOs). In its letter, FIA addresses the discrete topic of codification of no-action relief for variation margin reporting, in order to make that relief made permanent in the Part 39 rules governing DCOs.
/jlne.ws/3jWf3O8
CFTC Issues Statement on the Ongoing Impact to Reporting
CFTC
Staff of the Commodity Futures Trading Commission Divisions of Clearing and Risk, Market Participants, Data, and Market Oversight today released the following statement to update the public on reporting delays due to the cyber-related incident at ION Cleared Derivatives (a subsidiary of ION Markets), a third-party service provider of cleared derivatives order management, order execution, trading, and trade processing:
/jlne.ws/3XzfXOE
| | | | | | Education | | | What Is Hedging?
Jeffrey Fischer - Seeking Alpha
In a financial setting, risk, or more specifically holding risk, is a position that implies the potential to suffer financial losses. Risk is not limited to just investing or business, but also everyday financial decisions.
In the world of investing and asset pricing, risk is inherently linked to potential return. Investors may be familiar with the term risk-reward, which is an assessment of how much a financial position could benefit as compared to the amount of risk carried by holding that position.
/jlne.ws/3RTRX7A
| | | | | | Strategy | | | SPX Pullback Avoids Technical Damage, For Now
Todd Salamone - Schaeffer's Investment Research
The first full week of trading in February was a contrast to what we had become used to in January, when the S&P 500 Index (SPX--4,090.46) rallied each week above the next level of resistance. Last week was different, as the resistance level that came into play on Friday, Feb. 3 continued to act as resistance last week.
Specifically, the SPX area that is a round 10% above its late-December closing low and a 50% retracement of the January 2022 all-time high and October 2022 low in the 4,150-4,160 range continued to act as resistance. This area, by the way, also marked a major short-term peak in June 2022. After various Fed officials indicated the inflation fight is not over throughout the week, the SPX closed lower, due to a combination of technical and monetary factors.
/jlne.ws/3YF3Xw0
Inflation data rocked the U.S. stock market in 2022: What investors need to know about Tuesday's reading
Frances Yue - MarketWatch
Few things moved the U.S. stock market last year like inflation data and the next reading is due this week.
Under the spotlight is the January consumer price index, which is set to be released at 8:30 am Eastern on Tuesday. Traders are expecting the data to provide more clues on whether the Federal Reserve may pause its interest rate hikes later this year in its combat with inflation that was running at a 40-year high last year.
/jlne.ws/4155T2T
Options Demand Increasing
Cboe (Video)
Dan Deming @djd511 on increasing demand for #options in the wake of sell offs in bond and equities markets, the $VIX #futures term structure as we enter expiration week and key events on the horizon, all in today's #Vol411
/jlne.ws/3YDJwPU
| | | | | | Events | | | The Derivatives Forum Frankfurt will be March 22-23 in the Congress Center Messe Frankfurt, in Germany. The forum will focus on trading and clearing for derivatives and securities financing across asset classes, and will feature 35 panels, discussions and keynotes. A networking reception will take place on the evening of the first day. You can participate in person or virtually. The agenda for the Derivatives Forum Frankfurt is now live and you can view it and learn more here.~SAED
| | | | | | Miscellaneous | | | Cyberattack on ION Derivatives Unit Had Ripple Effects on Financial Markets; Last week's ransomware attack showed big financial firms can also be harmed by breaches at fintechs and other third parties that provide even small pieces of the technical machinery underlying the markets
James Rundle - The Wall Street Journal
A ransomware attack on a technology company that helps underpin the financial markets gave the sector a preview of the havoc a large-scale attack might inflict. The cyberattack of the cleared derivatives unit of Dublin-based ION Trading Technologies Ltd. sent financial institutions scrambling to confirm trades manually after Jan. 31, when the strike occurred and the firm took its systems offline. ION builds software that automates the matching of both sides of a trade and clearing the transaction.
/jlne.ws/3YO2TFN
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| | | | John Lothian News (JLN) is the news division of John J. Lothian & Company, Inc. (JJLCO). The online media and financial services firm is staffed by derivatives industry, journalism and technology professionals. | | | | | | | John Lothian News Editorial Staff: | | | John Lothian
Publisher | | | Sarah Rudolph
Editor-in-Chief
| | | Jeff Bergstrom
Editor
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