| November 27, 2018 | | | | | Spencer Doar
Editor
John Lothian News | |
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| | | | Lead Stories | | | Equity Derivatives: Buyside Usage in Asia-Pacific; Survey data shows use of strategies and products in the region
Patrick Fay - MarketVoice
Each year, EQDerivatives conducts a "market mapping" analysis of the global equity and volatility derivatives market, including its potential for growth in the coming years. The analysis is based on the views of buyside firms around the globe: asset managers, hedge funds, pension funds, private banks, family offices and insurance companies. The findings and analysis provide a map of how equity and volatility derivatives are deployed by managers globally, as well as the
types of listed and over-the-counter derivatives that they tend to use most frequently.
/goo.gl/wEzqKK
****SD: So much good stuff to unpack here. (Thanks Pat!) Here are just two pertinent tidbits - "The overwhelming majority of our survey respondents said they expect to increase their use of equity and volatility derivatives in the coming 12 months, but the strongest responses came from our Asian participants" and "Within the Nikkei 225 of products, 82% respondents reported using options, 76% futures and 42% OTC derivatives based on this index. That was not a common pattern; in most markets our survey respondents said they used futures more than options."
Record October Puts US Options Industry on Track to Easily Break Volume Records
Tabb Options LiquidityMatrix
The resurgence of market volatility in October drove a spike in US options volume, with more than 567 million contracts traded, which is the largest monthly volume in the 45-plus years since the Options Clearing Corporation was founded. The total represents an increase of almost 49% compared to October 2017. All but one of the 16 exchanges that clear options through OCC have experienced volume growth through October 2018 compared to last year (see chart, below).
/goo.gl/rr1dM5
****SD: It would also make sense if this month witnessed record put trading in October, but that's not what the "Record October Puts" part of the title really means.
Tradeweb Targets Options Illiquidity
Traders Magazine
With limited liquidity dispersed across 15 options exchanges, how can institutions most efficiently find the other side of large trades?
Tradeweb is aiming to deepen electronic options markets via solicitation of competitive bid and ask prices from multiple liquidity providers. In May the trading platform operator introduced request-for-quote (RFQ) trading for options, building on the protocol it pioneered and subsequently established in fixed income and derivatives and more recently, exchange-traded funds.
/goo.gl/jYNZ5p
JPMorgan Says Plunging U.S. Options Signal Simply Shows Caution
Joanna Ossinger - Bloomberg (SUBSCRIPTION)
S&P 500 put/call open interest ratio near multiyear lows; Increased bullish options demand argues against complacency
A key gauge of S&P 500 Index options activity has tumbled to multiyear lows, which some might see as a signal investors are underhedged. But JPMorgan Chase & Co. doesn't think so.
/goo.gl/WmhRc3
My talk on Machine Learning in Finance: why Alternative Risk Premia (ARP) products failed
Artur Sepp Blog
I have recently attended and presented at Swissquote Conference on Machine Learning in Finance. With over 250 participants, the event was a great success to hear from the industry leaders and to see the recent developments in the field. The conference featured very interesting talks ranging from an application of natural language processing (NLP) for industry classifications to a systematic trading in structured products using deep learning. For the interested, the slides and videos are available on the conference page.
/goo.gl/i6Wbjw
Preparing for FX-equity market convergence
Jens Persson - Itiviti Blog
The shifts over the past decade in the structure of the flow FX and equities markets have driven a convergence of the two markets. As a result of these shifts, participants across both asset classes often face similar market structures and matching methodologies, in both cases spread across a diverse set of trading venues. It's a situation that's ripe for leveraging business benefits - particularly through the use of new trading technologies.
/goo.gl/ztLE9J
Trade Issues Come Back to the Forefront After Trump Comments
JJ Kinahan - The Ticker Tape
The up and down of the market so far this week seems to have been a tale of two types of trade.
Excitement about a potentially bumper holiday shopping season goosing domestic trade at retailers helped spark a rally yesterday. But the mood seems more somber this morning as tensions about trade between the United States and China have come back to the forefront.
/goo.gl/YMJHWV
****For more on recent activity in one particular commodity, see Bloomberg's Oil Holds Gains for Second Day as Pivotal OPEC Supply Talks Near
| | | | | | Exchanges and Clearing | | | Ice changing margin model for move into options; CCP aims for Q1 2019 roll-out of new Monte Carlo-based methodology as it plans launch of index swaptions
Tom Osborn, James Ryder - Risk.net (SUBSCRIPTION)
Ice Clear Credit has received regulatory approval to switch from its stress-based initial margin methodology to one based on Monte Carlo simulations - a step, the clearer says, that paves the way for it to launch clearing for options on credit default swaps (CDS) indexes.
/goo.gl/qSjQ1w
Crude oil options register average daily turnover of Rs 207 crore on MCX
Sutanuka Ghosal, ET Bureau
Since its launch in May 2018, crude oil options has been witnessing increased traction. MCX Crude Oil Option registered an average daily turnover and volume of Rs 207 crore and 4,73,900 barrels respectively in the month of November '18 (till November 26, 2018), in comparison to respective figures of Rs. 117 crore and 2,40,600 barrels in May '18, thereby clocking a volume growth of 97%.
/goo.gl/ebRKaU
| | | | | | Regulation & Enforcement | | | Slackening US bank regulation in the line of fire for Democrats; Party leaders plan more scrutiny of industry when they take over the House next year
Kiran Stacey - Financial Times (SUBSCRIPTION)
As the Democrats prepare to take control of the House of Representatives following this month's midterm elections, senior members say they plan to subject the financial services industry to far greater scrutiny than it has faced in the past two years.
/goo.gl/aPXPwt
SEBI fines R S Ispat Rs 25 lakh for fraudulent trade in illiquid stock options
Economic Times
Sebi Tuesday slapped a penalty of Rs 25 lakh on Kolkata-based R S Ispat for indulging in non-genuine trade which created a false appearance of trading in illiquid stock options segment of BSE.
/goo.gl/oTpHKe
| | | | | | Technology | | | CAT Roll-Out Smooth, but System Still Needs Work
Emilia David - WatersTechnology (SUBSCRIPTION)
The first roll-out of the consolidated audit trail (CAT) was largely smooth, but the system still needs to evolve further to be able to handle the influx of information coming from the industry next year, its builders say.
Thesys CAT, a unit of Thesys Technologies LLC that built the CAT system, says it processed over 58 billion records of equities, options, and market data.
/goo.gl/WcGP4B
Appian Announces "The Appian Guarantee" First Project Delivered in just 8 Weeks, Providing Rapid Path to High Productivity with Appian Cloud Platform
CSO
Appian, an enterprise Low-Code and Business Process Management (BPM) platform provider, recently announced The Appian Guarantee. The Guarantee establishes first project delivery in just 8 weeks for new Appian customers deploying in the Appian Cloud. This accelerated timeline, a first for the low-code platform market, demonstrates Appian's commitment to bring customers to high productivity quickly.
/goo.gl/vGbSL5
****SD: Who's using this? Well, check out this user quote; "'With Appian, we delivered 9 key risk mitigating applications in 18 months. We built our first application in about 6 weeks. Now we're at the point where we can build an application in a day,' said Denise Knabjian, First Vice President of Process Innovation at OCC (Options Clearing Corporation), the world's largest equity derivatives clearing organisation and a federally-designated Systemically Important Financial Market Utility."
| | | | | | Strategy | | | Hedge fund short bets against oil hit year-high; Net long positions also shrink dramatically as crude price tumbles from October peak
David Sheppard, Energy Editor - Financial Times (SUBSCRIPTION)
Hedge funds have more than tripled their bets against the oil price since the beginning of October, amassing the largest short position against crude in more than a year as prices have tumbled.
/goo.gl/HRddnE
Goldman Predicts Commodities Will Soar in 2019
Ranjeetha Pakiam - BloombergQuint
G-20 leaders' summit this week may be 'catalyst for a rebound'; Bank sees 'extremely attractive' entry point for bets on gains
Commodity bull Goldman Sachs Group Inc. is undaunted by the sell-off in raw materials and is forecasting returns of about 17 percent in the coming months, describing the current situation as unsustainable and touting this week's G-20 meeting in Buenos Aires as a potential turning point.
/goo.gl/9F5M7j
| | | | | | Miscellaneous | | | IHS Markit's Laura Misher - Demystifying Initial Margin and Collateral Management (VIDEO)
Russell Rhoads - Tabb Forum
Following the 2008 financial crisis, in addition to increasing regulatory reporting and implementing central clearing to boost transparency and reduce systemic risk in the derivatives markets, regulators also devised an uncleared margin framework. The latest component of that framework is the ongoing rollout of initial margin, which is creating big challenges for the industry, says Laura Misher, managing director, IHS Markit. Speaking with Russell Rhoads, TABB Group's head of derivatives research, at the recent Fintech Festival 2019 in November, Misher explains the complexities of instituting new margin processes and infrastructure, including documentation, calculation, and workflow/connectivity challenges, as well as the data management and technology obstacles.
/goo.gl/iDWsG4
Stacy Mallon of Vela Wins Women In Finance Award; Recognized by Markets Media for Excellence in Service Providers
Vela
Vela, a leading independent provider of trading and market access technology for global multi-asset electronic trading, today announced that Stacy Mallon, Director, Infrastructure and Security, has been honored for her achievements by Markets Media's Markets Choice Women in Finance awards presented at a dinner in New York earlier this month.
/goo.gl/qv5fUv
Can Artificial Intelligence Eliminate Your Bad Hair Days? That's the premise behind one of the hottest developments in the beauty business: customizable hair care.
Courtney Rubin - NY Times
When Renée Bibby has a good hair day, people stop her on the street and tell her they love her short curly hair. On a bad hair day, though, "I look like a dandelion puff," said Ms. Bibby, 41, a graphic designer in Tucson.
/goo.gl/AVbz6a
****SD: As we've noted before, sweeps of the web for terms like "options" and "derivatives" can net some odd results as the search terms have a variety of meanings outside of capital markets. This is a perfect example as the story references "corn derivatives that smooth and condition to fight static."
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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
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| | | Spencer Doar
Editor
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