| March 08, 2023 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Hedging Against Stock Market Dangers Could Make Losses Much Worse; Buying puts or long VIX added to pain in last year's selloff; Roni Israelov says finding 'panacea' insurance is unlikely
Lu Wang - Bloomberg
Stocks are unpredictable, so people buy protection in case they crash. But the tactics Wall Street has devised to protect investors at times of crisis are just as hard to forecast, and what seems like prudent hedging may just make things worse. That's a finding of new research by Roni Israelov, chief investment officer of Boston-based financial services firm NDVR, who made waves with prior papers arguing that cash is usually a better equity hedge than buying put options.
/jlne.ws/3J1WQY0
What Is Volmageddon? Why Record Options Trading Could Risk Another 20% Stock Crash
Derek Saul - Forbes
A recent surge in popularity in zero-day options contracts could fuel a massive loss for the S&P 500, JPMorgan analysts caution, as the risky short-term bets again gain popularity from investors looking to cash in on the stock market's volatility.
/jlne.ws/3ZWi1Sl
Federal Reserve's Jerome Powell Unleashes Unsettling Market Volatility
Mohamed A. El-Erian - Bloomberg
It really shouldn't be this way, and it doesn't need to be. Yet once again remarks by Federal Reserve Chair Jerome Powell fueled considerable volatility in markets that could risk both economic well-being and financial stability. It's a phenomenon that not only highlights repeated policy slippages but also the lack of important structural and strategic underpinnings at the Fed.
/jlne.ws/3ZzK0r3
Ken Griffin: Volatility Will Spur Debt Limit Compromise
Bloomberg (Video)
"The debt ceiling will be a non-event until it is an event," Billionaire Ken Griffin, founder of Citadel and Citadel Securities, says during an interview with Felipe Marques in Palm Beach, Florida.
/jlne.ws/3ZURQeP
Fed Mulls Bigger Rate Hikes To Cool US Economy
Daniel AVIS - Barron's
The United States is prepared to speed up interest rate hikes - - and could raise them higher than anticipated -- if needed to cool inflation and a strong jobs market, Federal Reserve Chair Jerome Powell said Tuesday. An "unseasonably warm" January across much of the country was likely behind the robust employment, consumer spending, manufacturing and inflation figures, which pointed to a partial reversal of earlier softening trends, Powell told the Senate Banking Committee.
/jlne.ws/3mGD6Sb
Funds presumably forge record CBOT meal long but heavily sell corn, wheat
Karen Braun - Reuters
Speculators closed out February with presumptively large selling in Chicago-traded corn and wheat. That selling has vanished so far in March as funds have seemingly shifted their interest to buying soybeans and soymeal as Argentine crops further deteriorate.
However, it is unclear when confirmation of recent investor activity will arrive given that the U.S. Commodity Futures Trading Commission's Commitments of Traders (CoT) report has been disrupted for over a month after a ransomware attack on a third-party provider.
/jlne.ws/3mwo2Xf
The rally in stocks won't be swayed by a hawkish Powell, as falling inflation still points to a 20% gain for the market this year, Fundstrat says
Jennifer Sor - Markets Insider
The rally in stocks isn't going to be derailed by a hawkish Federal Reserve, as falling inflation still points to a 20% gain for the market this year, according to Fundstrat's head of research Tom Lee. In a note on Wednesday, Lee reiterated his bullish view on stocks despite Fed Chairman Jerome Powell's hawkish testimony before Congress on Tuesday. The top central banker warned that rates would likely need to keep rising, causing investors to raise their expectations for a 50 basis-point rate hike in March and spurring a sell-off in stocks.
/jlne.ws/3L8hg4c
Hedge funds build macro firepower to capitalise on volatile markets
Laurence Fletcher - Financial Times
Hedge funds are building their firepower in global macro trading as they seek to capitalise on the most lucrative environment since the financial crisis. Macro trading, a decades-old strategy made famous by the likes of George Soros and Louis Bacon, involves betting on moves in global bond, currency and other assets.
/jlne.ws/3F7HXlN
| | | | | | Regulation & Enforcement | | | The Hack That Upended Derivatives Trading Spurs Calls for Action
Katherine Doherty and Isis Almeida - Bloomberg
A cyberattack that disrupted derivatives trading in January is prompting calls for more oversight to combat the risk of hacks across financial markets.
The top US derivatives regulator wants to update standards and monitoring systems that will help minimize the frequency and magnitude of hacks. The Commodity Futures Trading Commission is pushing for futures and swaps dealers to exercise more due diligence and oversight of the third-party service providers they work with, and requiring that they have a plan for responding to cyber incidents from the first day.
/jlne.ws/3F8FVSs
ISDA and AFME Response to HMT on Short Selling Regulation
International Swaps and Derivatives Association
On March 5, 2023, ISDA and the Association for Financial Markets in Europe (AFME) responded to His Majesty's Treasury's call for evidence on the short selling regulation review. In the response, the associations argue the current prohibition in the short selling regime for sovereign credit default swaps could be removed, as it has led to inefficiencies in the market.
/jlne.ws/3Yve9GD
Remarks of Commissioner Christy Goldsmith Romero at ISDA's ESG Forum on Promoting Market Resilience: A Thoughtful Approach to the Daunting Challenge of Climate Financial Risk
CFTC
Thank you to the International Swaps and Derivatives Association ("ISDA") for inviting me to speak at a forum on climate risk, environmental, social, and governance ("ESG") issues, the role that derivatives play in these markets, and the market and regulatory environment.
/jlne.ws/3ylpkXR
| | | | | | Technology | | | Trading Technologies acquires AxeTrading, further accelerating multi-asset class expansion with major move into fixed income markets
Trading Technologies International, Inc.
Trading Technologies International, Inc. (TT), a global capital markets technology platform provider, announced that the firm has acquired London-based AxeTrading, a leading global provider of fixed income trading solutions. The acquisition marks a significant broadening of TT's multi-asset capabilities with an expansion into full coverage of corporate, government, municipal and emerging market bonds as well as over-the-counter (OTC) interest rate swaps, strengthening TT's leading position in fixed income derivatives and U.S. Treasuries. Terms of the transaction were not disclosed.
/jlne.ws/3IZcW4D
| | | | | | Moves | | | Charles Alexander Sullivan is starting a new position as senior analyst, listing qualifications at Cboe Global Markets
| | | | | | Strategy | | | Today's JOLTS Report
Cboe (Video)
In today's #Vol411, @JoeTigay walks through his view on the relationship between equity valuations and #volatility. #stocks #markets #JOLTS $VIX
/jlne.ws/3L52ZFC
| | | | | | Miscellaneous | | | The Good Hedge Funds Always Get Paid
Matt Levine - Bloomberg
My crude model of hedge fund management is:
You'll have good times and bad times.
In the good times, investors will rush to put their money into your fund, and will do anything to get you to take their money. In the bad times, they'll rush to get out, and they'll do anything to get their money back.
You should spend the good times preparing for the bad times: In the good times, when investors say "we'll do anything to get you to take our money," you reply "okay sure no problem here's a contract locking your money up for 10 years." And then in the bad times, when investors say "we want our money back," you reply "hahahaha nice try, remember that lockup?"
/jlne.ws/3Fwgzyn
Taxation of Derivatives Held by Investors: What to Know
Andie Kramer - The National Law Review
The taxation of derivatives and financial products has developed in an uncoordinated and piecemeal fashion. Tax rules have largely been enacted in response to what the government has perceived as abusive transactions â moments where taxpayers receive tax benefits that the government thinks should not be available. Anti-abuse provisions are added one by one to the Internal Revenue Code (Code) to shut down a particular "tax loophole." At the same time, these anti-abuse provisions often provide elections or carveouts for certain transactions or taxpayers where the government wants to soften the blow of the new legislation. As a result, derivative taxation can vary widely, depending on the type of the derivative (option, futures contract, forward contracts, or swap); the underlying asset or index (stock, bond, commodity, digital asset, or currency index); the holding period of the derivative product or the underlying asset (if any); and the tax characterization of the taxpayer (investor, trader, dealer, or hedger).
/jlne.ws/3Zwfaje
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