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Editor
John Lothian News | |
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| Lead Stories | Currency Traders Are Ditching Dollar for Euro on Option Bets
Naomi Tajitsu and Vassilis Karamanis - Bloomberg
The euro has rallied 11% against the dollar this year, hitting its highest since 2021, while the dollar has slid against every major currency, undermining trust in US assets.
The euro is taking on a bigger role in the global currency options market as traders skirt around the dollar given the risks from unpredictable US policy and a global trade war.
There's been a shift in trading volumes. Around 15% to 30% of contracts tied to the dollar versus major currencies were switched to the euro, looking at data from the Depository Trust & Clearing Corporation for the first five months of this year versus the final five months of 2024. There are also signs the euro is being used as a haven - traditionally the dollar's role - and for bets on big moves.
/jlne.ws/4k181Rq
A $6.5 Trillion 'Triple Witching' Heralds Return to Volatility
Bernard Goyder - Bloomberg
Investors are bracing for $6.5 trillion of notional US options expiring on Friday, in a move that could free stocks to swing more wildly than the subdued changes seen in recent weeks. Every quarter, a cluster of different exchange-traded derivatives contracts all terminate on the same day, leading to what is sometimes dubbed a "triple witching" event by market watchers. The event isn't expected to add additional volatility on Friday itself, but could open a path to more sudden stock market moves next week.
/jlne.ws/4jXL8Ow
Morgan Stanley to Shutter Electronic Equity Market-Making Unit
Justina Lee and Bernard Goyder - Bloomberg
Morgan Stanley is shuttering a unit focused on electronic market-making for US equity options, retreating from a corner of the derivatives landscape that's grown increasingly popular with retail investors, even as trading volumes boom. The business, known internally as automated market-making, is being closed, according to two people familiar with the matter, who asked not to be identified because the information is confidential. While US derivatives activity has surged, the space has come to be dominated by proprietary firms like Citadel Securities and IMC Trading BV. The exit underscores how traditional players have struggled to keep pace with businesses natively built for speed and scale, aided by specialized technology and fewer regulatory constraints.
/jlne.ws/3SXT3QY
European Defense ETFs are the Break Out Theme of 2025
Eric Balchunas - Bloomberg
One of the hottest themes of 2025 is defense companies as potential US isolationism has other countries scrambling to beef up their military. And within that it is European stocks that have really led the charge. This theme went from rags to riches overnight practically but it's been largely a winner takes all category. On this episode of Trillions Joel and Eric speak with Bloomberg Intelligence's Senior ETF Analyst for Europe, Henry Jim about the wild frenzy to launch European defense ETFs around the world to catch this massive wave of returns.
/jlne.ws/3TvhZzv
ETFs have transformed European markets - but choose one carefully; There are a number of guidelines investors should use before picking an ETF
David Stevenson - Financial Times
It was 25 years ago that the world of investment and funds in Europe experienced a revolution, with the arrival of the continent's first exchange-traded funds (ETFs). The choice available now is staggering and, as with all transformative changes, there is a mix of hype, extremely useful stuff, and frankly, scary elements. I wrote my first book about ETFs for the FT back in 2009. Even I find the pace of change incredible. The story began on April 11 2000, with the listing on the Deutsche Borse of the LDRS DJ Stoxx 50 and LDRS DJ Euro Stoxx 50, sponsored by Merrill Lynch. Shortly after, on April 28 2000, the iShares FTSE 100 ETF was listed on the London Stock Exchange.
/jlne.ws/4kPp8Xx
Oil, war and tariffs tear up markets' central bank roadmap
Naomi Rovnick and Dhara Ranasinghe - Reuters
Investor unease about an increasingly uncertain environment is rising, as Norway's shock rate cut on Thursday highlights how U.S. tariffs, Middle East conflict and a shaky dollar make global monetary policy and inflation even harder to predict.
Norway's crown slid roughly 1% against the dollar and the euro in a sign of how unexpected the move was. And Switzerland, which cut borrowing costs to 0% on Thursday, confounded some expectations among traders for a return to negative rates in the deflation-hit nation, as its central bank warned of a cloudy global outlook.
/jlne.ws/3ZENVoE
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| Exchanges | Coinbase Derivatives, Nodal Clear Plan to Use USDC as Collateral for Futures Trades
Francisco Rodrigues - CoinDesk
Coinbase Derivatives and Nodal Clear are working to integrate the USDC stablecoin as collateral in regulated U.S. futures markets, aiming to launch the new framework in 2026. If approved by the Commodity Futures Trading Commission (CFTC), the plan is expected to mark the first time a stablecoin is formally accepted as collateral for margined futures in the U.S. Coinbase Custody Trust would hold the USDC. Nodal Clear, a CFTC-regulated and part of the Deutsche Börse-owned EEX Group, would handle clearing.
/jlne.ws/4ebCvP5
KuCoin Allows Institutional Clients to Trade Without Having to Pre-Fund Wallets
Jamie Crawley - CoinDesk
Crypto exchange KuCoin is now allowing institutional clients to trade without having to pre-fund wallets, recreating a trading experience that they would recognize from the traditional finance (TradFi) world. The Seychelles-based exchange teamed up with BitGo Singapore and will use the crypto custodian's Go Network for off-exchange settlement (OES), KuCoin said. "KuCoin's full suite of products - spot, margin, options, and perpetual futures - can now be accessed through Go Network, ensuring assets remain protected," the exchange said in Thursday's announcement. As crypto companies seek to cash in on increasing crypto institutional adoption, they're faced with having to introduce tools that a familiar in TradFi. In this case, institutional clients' assets remain in BitGo Singapore's storage, following the model of separating custody and execution to mitigate counterparty and systemic risk.
/jlne.ws/4ekCAAk
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| Regulation & Enforcement | ESMA launches CTP selection for shares and ETFs; Interested parties have until 25 July to submit requests to participate in the selection procedure.
Claudia Preece - The Trade
The European Securities and Markets Authority (ESMA) has today launched the first selection procedure for the shares and ETF consolidated tape provider (CTP). Interested parties have until 25 July to submit requests to participate in the selection procedure. Following this, the watchdog will assess these against the exclusion and selection criteria before inviting successful candidates to submit their applications.
/jlne.ws/4k0SEse
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| Technology | From Paper to Python: A History of Options Trading Processes
Spencer Doar - Cboe
In today's information-rich, fintech-forward, low-commission trading environment, retail investors can access the options market more easily than ever before. The tools to analyze, implement and execute automated options trading strategies at levels of sophistication previously reserved for institutional-type market participants are now easily accessible for retail investors. The cherry on top? These tools are frequently available at a low cost. We discussed these ideas with Kirk Du Plessis of OptionAlpha on a recent episode of Cboe's Tales of the Tape podcast. Access the show on the below platforms (or watch it at the end of the article).
/jlne.ws/44peIId
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| Strategy | How CALD May Help Investors Navigate Market Turbulence with Precision
Cboe
The start of 2025 was marked by significant market volatility driven by geopolitical tensions, economic uncertainties and the impact of new trade tariffs, leading to sharp swings across U.S. cash equities. While the market appears to have passed peak tariff pessimism, the overall sentiment remains cautious, with concerns about trade policies and the implications for economic growth remaining. Volatility reduction strategies, such as covered calls, are now in high demand to help investors navigate the heightened market volatility.
/jlne.ws/4kRA3QA
Catch the Move Before It Happens
tastylive - (Video)
In this Options Jive session, the hosts discuss how to gauge expected stock movements using options pricing. They explain the two main formulas for calculating expected moves-the traditional method and another based on weighted straddles and strangles. The conversation touches on the impact of implied volatility on expected outcomes, particularly during earnings announcements, and emphasizes the importance of adapting strategies depending on volatility levels. Key takeaways include how real-time updates on expected moves can facilitate better trading decisions.
/jlne.ws/4eghCm3
The Dollar Is Hanging On to Its Haven Role by a Thread, Survey Shows
Kristine Aquino and Carter Johnson - Bloomberg
The escalating Middle East conflict is likely to help the dollar hold on to its haven role - but only just, the latest Bloomberg Pulse survey shows.
A little more than half of 251 respondents think the US currency will regain its status as a safe asset as Iran and Israel continue to carry out attacks on each other. Yet participants also see the Bloomberg Dollar Spot Index falling over the next month, according to the poll conducted June 13-18.
/jlne.ws/464fFHa
Traders Resist Defensive Stocks' Haven Status Amid Mideast Risk
Esha Dey - Bloomberg
Some market pros are advising investors to make a bigger defensive move, such as boosting exposure to utility stocks, which can act as a hedge against market volatility and economic risks.
US equities investors are reluctant to seek safety amid flaring geopolitical tensions, raising the risk of getting caught off guard if the conflict between Israel and Iran takes an unexpected turn in the days ahead.
Normally, this level of anxiety would be enough to send money managers scurrying into stocks offering shelter, especially with President Donald Trump weighing whether to offer Israel military backing in its conflict with Iran. That step could roil crude prices and stoke worries about inflation, and potentially reignite a rush for investment havens.
/jlne.ws/3T1LOrq
Russell Reconstitution
Cboe (Video)
Catherine Yoshimoto of FTSE Russell joins Angela Miles for a special edition of the #RUTreport all about the Russell Reconstitution.
/jlne.ws/44rCROo
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| Miscellaneous | Gillian Tett on Complex Derivatives and the Fifth Stage of Capitalism; What is the role of modern finance?
Joe Weisenthal and Tracy Alloway - Bloomberg
After the global financial crisis, there was a lot of angst over the fact that so much effort and brainpower went into designing complex derivatives, and other financial instruments. Not only was this seen as wasteful, the complexity was deemed to be the heart of the crisis, and therefore bad. But all these years later, looking back, how bad is financial complexity really? What do things look like from the perspective of 2025. On this episode we're joined by Gillian Tett, a columnist at the Financial Times, and also the author of several books including Fool's Gold: The Inside Story of J.P. Morgan and How Wall St. Greed Corrupted Its Bold Dream and Created a Financial Catastrophe. We talked about her reporting on the evolution of financial derivatives, their legacy, what she is concerned about now, and why she sees the world entering into a new, post-neoliberal, fifth stage of capitalism.
/jlne.ws/460aLuL
****** One part of the fifth stage of capitalism is that financial markets are increasingly shaped by complex instruments and global standards. Like tokenization? Where have I heard that before?~JJL
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| | | Jeff Bergstrom
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