| October 28, 2024 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | |
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Futures Industry Still Grappling with Post-Trade Challenges, Expert Says
JohnLothianNews.com
In an interview with John Lothian of John Lothian News, Joanna Davies, a managing director at OSTTRA, shed light on the ongoing challenges in the futures industry's post-trade processes. The discussion centered around the findings of an Acuiti report and the industry's response to issues that flared up in 2020. Davies emphasized that the Acuiti report served as a validation of OSTTRA's understanding of the problems plaguing the industry. "Two themes emerged," she noted. "The risk introduced by the heavy-handed position transfer process in the ETD market, and the complexity and cost of collateral and margin optimization." The reaction from clients to the report was one of fatigue, according to Davies.
Watch the video »
| | | | | | Lead Stories | | | Election Risk Premium Continues to Widen into Elections Week
Ed Tom - Cboe
The VIX Index traded sticky-strike (i.e., in line with the pre-established skew) for most of last week - including in response to last Wednesday's -1% S&P Index pullback on lower than expected MoM Existing Home Sales. In this context, last Friday's volatility action was particularly surprising with both the VIX and VVIX Indexes rising 1.25 pts and 7.7 pts to 20 and 118 respectively despite the fact that the S&P 500 was virtually unchanged for the day (S&P -3 bps). This is due to a steepening in the skew gradient coming into the weekend. Although we believe that the steepened skew reflects a combination of positioning for both geopolitical uncertainties coming into the weekend and earnings uncertainties for 3 Mag 7's, we infer from Friday's rise in implied correlations and VVIX (both more macro sensitive measures) that MidEast tensions was responsible for a greater percentage of Friday's additional VIX risk premium. If that is indeed the case, we should see the VIX underperform skew this week.
/jlne.ws/3Un8y6g
Robinhood jumps into election trading, giving users chance to buy Harris or Trump contracts
John Melloy - CNBC
Upstart broker Robinhood is jumping into the prediction betting game, announcing on Monday that users can begin trading the 2024 presidential election that is eight days away. Users can trade a Kamala Harris or Donald Trump contract starting Monday, said the company, as long as they meet certain criteria that include being a U.S. citizen. The trading is being offered through its Robinhood Derivatives unit and ForecastEx, which is operated by Interactive Brokers. Robinhood jumps into a suddenly crowded politics prediction markets field that grew this month after platform Kalshi won a key ruling against the Commodity Futures Trading Commission, which was seeking to stop the election outcome trading. The CFTC is appealing the ruling. Shortly after, Interactive Brokers launched various political contracts, including on the election.
/jlne.ws/40lNGA7
Crypto exchanges turn to derivatives to lure cautious investors; New market entrants switch focus to offering leveraged bets
Nikou Asgari - Financial Times
Crypto trading venues are expanding rapidly into derivatives, hoping that tougher regulation and the promise of highly leveraged returns will lure cautious investors into the market. Next month Dutch crypto futures and options venue D2X will launch while London-based One Trading and GFO-X are both planning to launch early next year.
/jlne.ws/48rErQD
Asset managers roll out new ETFs to tap in to AI buzz
Suzanne McGee - Reuters
Exchange-traded funds focused on artificial intelligence are proliferating as asset managers offer investors new ways to tap in to the market enthusiasm for AI, even while it remains unclear which companies will emerge as the long-term winners from the latest technology revolution. More than one-third of the two dozen ETFs that include artificial intelligence or AI in their name have been launched in 2024 alone, according to data from Morningstar. In the past week, three more joined their ranks, including a cloud computing ETF rebranded and revamped to specifically target AI. The AI ETF group now has assets of $4.5 billion, drawing it closer to the $5.5 billion nuclear power-themed ETF universe, and pushing it well above the cannabis sector, with $1.37 billion in assets.
/jlne.ws/3YBMAid
Hedge Funds Are Gaining Influence in Market for Europe Dividends; Euro Stoxx 50 dividend futures outstanding are at a low; Multi-strats are trading other types of dividend products
Christian Dass - Bloomberg
Hedge funds are increasingly reshaping the multi-billion dollar market for European dividends. Futures on Euro Stoxx 50 Index payouts have traditionally been heavily influenced by hedging flows from structured products. But shifts in issuance have allowed multi-strategy hedge funds to play a more prominent role in the market, often using other types of derivatives. As a result, the number of listed Euro Stoxx 50 dividend futures outstanding has dropped to its lowest average since 2010 this year. The broader market, which also includes options on payouts, now counts around 8 million contracts on Eurex, down from more than 9 million at the peak in 2021, according to a presentation in September.
/jlne.ws/40rGeDD
| | | | | | Exchanges | | | Introducing the Presidential Election Market; Robinhood will begin rolling out presidential election event contracts on October 28 through Robinhood Derivatives
Robinhood
Two weeks ago, we hosted hundreds of Robinhood customers in Miami at our inaugural HOOD Summit. There, we announced Robinhood Legend, and that index options and futures would be coming soon, offered by Robinhood Derivatives, LLC (RHD). Now RHD is following up on this announcement with the launch of presidential election event contracts, ahead of the November 5 general election. Event contracts allow customers to trade on the outcome of specific events, such as whether a candidate will win an election. Robinhood's presidential election event contracts will begin rolling out to a limited number of customers today. Customers must apply and meet certain criteria to be approved for a RHD account, including being a U.S. citizen and more. Once approved, customers will be able to trade based on their prediction for "who will win the 2024 presidential election." There will be two contracts to choose from-one for Kamala Harris and one for Donald Trump.
/jlne.ws/4dZmqKV
Nasdaq Migrates ISE Options Market to Fusion
Shanny Basar - Markets Media
Nasdaq said it has migrated International Securities Exchange (ISE) to Fusion, so that four out of six of its US options markets and one European equity derivatives market are now running on Fusion, its next-generation derivatives platform.Adena Friedman, chair and chief executive, said on the third quarter results call on 24 October: "Four of our US options markets are running on Fusion, resulting in lower latency, higher throughput and overall increased productivity."
/jlne.ws/3UnTll7
Europe Needs Clearing Competition, Not a Single CCP
Vikesh Patel, Cboe Clear Europe - LinkedIn
In early September, Mario Draghi sent ripples through Europe's post-trade industry. The former ECB President suggested the region should move towards the creation of a single central counterparty (CCP) and central securities depository (CSD) for all securities, replicating the US market structure, as a way of promoting more efficient, integrated and competitive European capital markets.
/jlne.ws/3NLebr7
Cboe Global Markets Declares Fourth-Quarter 2024 Dividend
Cboe
Cboe Global Markets, Inc. (Cboe: CBOE), the world's leading derivatives and securities exchange network, today announced its Board of Directors has declared a quarterly cash dividend of $0.63 per share of common stock for the fourth quarter of 2024. The fourth-quarter 2024 dividend is payable on December 13, 2024, to stockholders of record as of November 29, 2024.
/jlne.ws/4hpOzNS
| | | | | | Strategy | | | What do Nvidia options cost into earnings?
MSN
As Nvidia (NASDAQ:NVDA) approaches its earnings announcement, investors are keen to understand the cost and value of its options. According to a recent analysis by Piper Sandler, Nvidia's near-term options appear slightly overpriced but not excessively so. Piper Sandler's report focuses on evaluating whether NVDA options are "fair" by comparing their prices to volatility forecasts rather than past volatility.
/jlne.ws/4eXXWTF
| | | | | | Events | | | TradeStation Group Announces Inaugural Crossroads Summit; Summit will feature several keynote speakers, including ARK Invest's Cathie Wood, best-selling author Peter Zeihan and Jamie Metzl, Founder and Chair of One Shared World
TradeStation Group, Inc.
TradeStation Group, Inc., a Florida-based company whose main operating subsidiary provides award-winning*, self-clearing online brokerage services for trading stocks, options, futures, and futures options, is excited to announce the inaugural Crossroads Summit, which is scheduled to take place at the University of Miami in Coral Gables, Florida, from November 21-22, 2024. The Crossroads Summit is anticipated to be a high impact gathering for visionaries and industry leaders looking to navigate and capitalize on global change. The event will bring together global industry leaders, strategists, investors, traders, some of TradeStation's top customers, and multi-disciplinary thinkers to confront the challenges of an evolving geopolitical, economic, and technological landscape. The focus-Chaos Meets Innovation-aims to inspire attendees to forecast and strategize for the years ahead.
/jlne.ws/4eYm889
| | | | | | Miscellaneous | | | Some billionaires, CEOs hedge bets as Trump vows retribution; With the race tight, some business elites are toning down past criticism of the former president.
Jeff Stein, Jacqueline Alemany and Josh Dawsey - The Washington Post
At a five-star resort in California last week, Wall Street executives, fast-food CEOs, a few dozen other industry titans and two former presidents gathered for off-the-record conversations. One subject that inevitably came up, according to two people familiar with the matter: The possibility that former president Donald Trump could return to the White House. The gathering of the Business Council - an invitation-only association of chief executives - at the Waldorf Astoria Monarch Beach in Dana Point was not supposed to be about the election, but some attendees wound up discussing how to protect themselves and their companies if Trump wins the presidency next week and tries to use the power of the Oval Office against his perceived enemies, said the people, speaking on the condition of anonymity to describe private conversations.
/jlne.ws/3C28q5M
****** CEOs always hedge, but this time the stakes are a bit higher.~JJL
How 1% of Polymarket Bettors Are Boosting Trump's Odds; An analysis of millions of transactions shows a handful of accounts with outsize impact.
Andre Tartar and Tom Fevrier - Bloomberg
Since Sept. 1, more than 102,000 Polymarket users have bet on whether Donald Trump or Kamala Harris will be the next president of the United States, propelling Trump's likelihood of victory to a high of 66.4% on Tuesday despite polls remaining close. According to trading activity, a small number of users are having an outsized impact on the odds.
/jlne.ws/3YqRJZ6
****** Here is a market that no U.S. citizens are allowed to participate in, that is being used to influence the election through substantial trades by a concentrated interest. Does not sound like a market to me. Of course, U.S. citizens are likely accessing the market despite being prohibited from trading on it by U.S. law. ~JJL
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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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| | | Jeff Bergstrom
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