| July 18, 2016 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Brexit Swoon Boosts US Options Volume to 11-Month High
TABB Forum
US listed options traders' summer vacation ended early this year, as the United Kingdom's unexpected decision to leave the European Union (EU) rattled financial markets. In June, traders exchanged 367.6 million contracts, the highest monthly volume since August 2015. June 2016's volume was 18% higher than May's volume and 9.9% higher than the year-ago June. The S&P 500 Index dropped 5.3% in two days after UK residents voted to leave the EU in a decision known as "Brexit." During the swoon, the CBOE VIX Index jumped to 25.76, its highest closing value in four months. US stocks quickly recovered after the selloff, as the S&P 500 ended June up less than 0.1% for the month.
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Tail-Risk Hedges Sought in Another Dimension
Paul Smith - Bloomberg
With the S&P 500 index close to record highs and U.S. Treasury yields near record lows, world markets increasingly resemble the ball-on-top-of-a-hill diagram used to illustrate an unstable state in popular science books. Roll to the left for a cataclysmic stock market collapse; roll right for resurgent global growth, soaring equity prices and a crash in bonds.
bloom.bg/2antUcr
Bull and Bear take on the low Vix
Jamie Chisholm - Financial Times
The CBOE Vix index, an option-based gauge of expected US equity market volatility that tends to rise when investors are fearful, closed last week at its lowest in 11 months. Investors can look at this two ways. The bullish view is that it is less risky to stay long stocks because the cost of protecting an equity portfolio is cheap. The Vix is way below the long-term average of 20. Bears may argue a Vix so low is a traditional sign that investors are too sanguine, leaving the stock market highly vulnerable to negative developments.
on.ft.com/2anElwm
Weekly Market Outlook - A Breakout Amid High Valuations
CBOE Options Hub
The market (the S&P 500 anyway) rekindled the rally early last week, finally pushing through the resistance of its May 2015 peak at 2135 to move to a high of 2169. But, it didn't end the week with the same zeal it started it with. In fact, on Friday the index lost a little ground, and logged the first lower low in almost two weeks.
goo.gl/qXFFVd
Oil Producers Prepare for Second-Half Slump as Rally Sputters
Bloomberg
Drillers have increased bets on falling prices by 29 percent
Prices have sunk 10 percent since reaching 2016 high in June
Oil producers aren't betting on the rally. After surviving two years of low prices, they're gearing up for a third by buying protection against a renewed downturn. Laredo Petroleum Inc. said July 14 that it hedged more than 2 million barrels of 2017 output earlier this month. Drillers have increased bets on falling prices by 29 percent this year.
bloom.bg/2anAQ9h
Two thirds of traders not getting "fair execution" on FX
Hayley McDowell - The Trade
The majority of foreign exchange (FX) market participants have agreed traders do not get fair execution when trading. A poll of banks, institutional and professional proprietary traders - authored by FX multi-lateral trading facility, LMAX Exchange - found transparency and trust in FX remains a problem.
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| | | | | | Exchanges | | | SGX's recurring system glitches raise concerns about reliability
Mayuko Tani - Nikkei Asian Review
Frequent system troubles over the past two years are raising concerns over the reputation of Singapore Exchange (SGX) and casting doubt on its ambition to be the leading bourse in Asia. The bourse shut down its equity market for almost five and half hours on Thursday. SGX CEO Loh Boon Chye said Friday that a "hardware problem" had caused the system troubles, and reconciling orders made during the shutdown "took longer than anticipated."
s.nikkei.com/2anH2hJ
SGX to transfer Regulation unit to subsidiary company with separate Board
SGX
Singapore Exchange (SGX) will establish a separate subsidiary company (RegCo) to undertake all the front-line regulatory functions it currently performs. The move aims to further enhance the governance of SGX as a self-regulatory organisation (SRO) by making more explicit the segregation of its regulatory functions from its commercial and operating activities.
goo.gl/YvzoXr
Singapore Exchange Echoes NYSE in Spinning Off Policing Role
Andrea Tan - Bloomberg
Singapore Exchange Ltd. will house regulatory functions in a unit with its own board, following calls to separate the role. The subsidiary is expected to be set up by the second half of 2017 and will not add to the requirements of Singapore's initial share sale process, Southeast Asia's biggest bourse operator said in a statement Monday. SGX shares climbed 0.9 percent as of 3:42 p.m. in the city-state, resuming after a morning trading halt following a Straits Times report on the plans.
bloom.bg/2anH49r
Monetary Authority Of Singapore: Separate Subsidiary Will Strengthen Governance Of SGX's Regulatory Functions
Press Release
The Monetary Authority of Singapore (MAS) said today that SGX's move to transfer its regulatory functions to a separate subsidiary company is an important step in strengthening the safeguards to manage potential conflicts of interest between SGX's commercial and regulatory roles.
goo.gl/mR6OBj
OSE confirms go-live date for Next J-GATE
Automated Trader
OSE has been preparing for the go-live of J-GATE, intended to expand market liquidity and improve reliability and convenience for investors, trading participants, and other market users.
goo.gl/YcPC7d
Borsa Istanbul: Systems And Operations Functioning Without Interruption Or Problem
Press Release
The systems and operations of Borsa Istanbul, Istanbul Custody and Settlement Bank, Central Registry Agency together with all our stakeholders are functioning without any interruption and problem. On Monday 18 July 2016 our activities and duties will be performed as usual.
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| | | | | | Regulation & Enforcement | | | ESMA Seeking Commodity Derivatives Experts To Join Consultative Industry Group
Press Release
The European Securities and Markets Authority (ESMA) has published today a call for candidates to newly constitute a Consultative Working Group (CWG) for the ESMA Commodity Derivatives Task Force (CDTF) as the two-year-term of the existing CWG has recently expired.
goo.gl/86U8x6
Cypriot Regulator is Far from Done
Finance Magnates
The Cypriot regulator seems to be on a roll with its voraciousness and over-reaching aspirations to become a reputable and respected financial regulatory entity in Europe. Last year, after years of being known for its lax approach to financial regulation enforcement, CySEC stepped up its game by issuing an unprecedented number of fines and entering into an equally impressive number of settlements with several FX and binary options firms licensed on the island. Now, the regulator has extended its reach yet again, this time to cover the binary options market in an attempt to safeguard investors.
goo.gl/p0B6a6
| | | | | | Technology | | | Cinnober Signs Agreement with Major Exchange to Conduct Major Design Study
Finance Magnates
Cinnober Financial Technology, a provider of mission-critical solutions and services to major trading and clearing venues, including exchanges, announced today that it has signed an agreement with a major international exchange group to conduct a comprehensive design study for utilising its technology for real-time clearing for listed derivatives, including a complete CSD system (Central Security Depository).
goo.gl/yMz1wC
Java vs. C++ Performance Face-Off, Part II
Robert Engels - OptionsCity
Since live apples to apples comparisons are difficult if not impossible to implement, due to the correlated nature of trading environments, competitors often resort to generic statements like, "Java is slow!", or "Our system is in C++, so it's fast!" Well, those statements are patently false. There is nothing in a modern Java implementation that's slow, in fact, in many cases a Java based system will offer superior performance. I previously wrote a blog post comparing C++ and Java performance using "FIX FAST" decoding. Since the Java code used was proprietary it had limited usefulness, and so I've decided to revisit the topic in a more scientifically reviewable manner.
goo.gl/HzwDzK
Opening Cross: If Data and Standards Were Easy...
Max Bowie - WatersTechnology
In a recent blog post, Richard Berner, director of the US Treasury Department's Office of Financial Research (OFR), outlined how standards and high-quality "microdata" can help financial firms and regulators monitor risk and better fulfill reporting requirements, and how legacy systems, poorly integrated data platformsÂfor example, resulting from mergers of companies with different technologiesÂand prior regulatory environments that did not mandate standards to promote transparency, can result in opaque market data and increased risk.
goo.gl/WFmp6B
The 2016 Tech 50: Making Financial Services Faster, Cheaper, Bigger
Institutional Investor
Technologists in the business world set performance goals that may push their skills to the limit, but the benchmarks are simply stated: better, faster and cheaper. Those who excel in the financial services industry  including the executives, innovators and entrepreneurs spotlighted in Institutional Investor's Tech 50  are better and faster than ever before. They are applying advanced technologies that allow them to accomplish more within budget than ever before and are doing so on a large, often global, scale that has become imperative but was not feasible until recently.
goo.gl/8KXS1b
| | | | | | Strategy | | | Baseball, hot dogs, apple pie, and...VIX shortcake
Meredith Kelley Zidek - CBOE Options Hub
If you can't wear shorts in the summer, when can you? At the time of my last writing, I was showing off a pair: TVIX and UVXY, which everyone knows are really just two legs of the same thing (for my purposes, anyway). Even though I had donned one leg before the other (I put my pants on one leg at a time, just like everyone else), I took them both off in one motion, as such:
goo.gl/H1JqAT
Three Measures Identify Japanese Yen as Most Volatile Currency
Finance Magnates
The recent price action in the forex markets has driven many investors to seek out the most stable forex pairs amid a sea of volatility. I'll be happy to oblige along with offering some insight on the general concept of volatility.
goo.gl/9sZAmx
Track PCR & open interest to hedge your trades
MoneyControl
Structurally Indian markets have changed since the time derivatives were introduced on the pretext of providing a hedging instrument to retail investors and funds alike. However, the benefit of leverage and high volatility has increased its popularity and the instrument is mainly used by speculators rather than hedgers. Within derivatives, which comprises of futures and options it is the latter that has captured traders attention. Nearly 84 per cent of the trades on National Stock Exchange take place in options.
goo.gl/UhsFuk
CFTC Weekly Positions Report: Turning Positive?
FXStreet
Latest CFTC positions data, published on Friday, reveals that the market has turned more risk-positive, with safe haven positions turning less bullish. JPY, Gold and US 2-year Treasury note were the biggest losers last week in positioning term, with the leveraged community reducing defensive positions, as the market turned more pro-risk.
goo.gl/a1oLzf
Weekend Review - Volatility Indexes and ETPs - 7/17/2016
Russell Rhoads - VIX Views
Short term volatility was the big loser among the four S&P 500 related volatility indexes as VXST lost over 10% last week. This was more than two times the drop in VIX and more than three times the drop in VXV and VXMT. The result is a pretty darn steep curve indicating concerns about the second half of this year for the stock market are lurking around in option volatility.
goo.gl/xeYmA6
Weekend Review - Russell 2000 Index and Options - 7/11 - 7/15
Russell Rhoads - CBOE Options Hub
It was quite a week for small cap stocks as the Russell 2000 (RUT) rose 2.4% while the Russell 1000 (RUI) gained 1.5%. This strong week for RUT places the index up 6.11% for 2016, a tad more than RUI's 2016 gain of 5.71%. Even more impressive for RUT, the small cap index is up 26.4% since putting in a closing low of 953.72 back in February.
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Weekend Review - VIX Futures and Options - 7/17/2016
Russell Rhoads - VIX Views
With VIX testing 2016 lows this past week the soon to be retired July future headed lower at a slightly faster rate than VIX dropping 6.43% versus 4.02%. Even with the bigger loss on the week the July contract finished the week at more than a one premium to VIX. We will see on Wednesday morning if the futures or the spot index win the tug of war into July settlement. I would be remiss if I didn't point out the steepness of the VIX curve from August to December. VIX is low now, but the futures are braced for some sort of move higher.
goo.gl/TzaT8l
| | | | | | Education | | | CME Group Foundation Grants $3.6 Million to Support Math Education for Illinois Children
Press Release
CME Group Foundation today announced the launch of the second phase of its Early Math Education Initiative and $3.6 million in new grants for the program. The initiative, first established in October 2010, is a multi-year effort to enable young children from low income communities to develop proficiency in math.
goo.gl/zSmCTx
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