| June 28, 2018 | | | | | Spencer Doar
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Big World Cup Correction and other Miscellany
SD - JLN
Boy oh boy did I misread the Germany v. Korea recap. It was NOT at all novel that the previous World Cup winner was knocked out in the group stage. In fact, it's the opposite. From the USA Today:: "Four of the last five winners of the previous tournament have now crashed out in the group stage the next time around."
I should stick to American football references I guess... (That doesn't alter the fact that UBS' and Goldman's computer predictions were way off, though.)
Speaking of sports, Barron's has a piece out today called Sports Betting: The Next Alternative Asset? I had to laugh when I saw that, as I'd actually wondered when some hedgies would think it was a good idea. I mean if funds can get into art investing and provide funding for drilling wells in California's drought-stricken pistachio farmland, then why not?
Business Insider pointed out that Goldman Sachs President David Solomon (aka D-Sol) put out his first single called "Don't Stop." It's an electropop track with a hook sampled from Fleetwood Mac's "Don't Stop." The most recent Youtube comment when I looked at it was "I can imagine this song being played at a bouncy castle kids party or on a Carnival cruise ship. Not bad but good thing you're not quitting your day job."
Market Action
GDP numbers came in - turns out the U.S. wasn't doing as well as we thought as the number was revised from 2.2 percent to 2 percent.
The WTI-Brent spread is narrowing.
People are wondering where China is going to get its soybeans. I saw a stat that China's demand for soybeans outpaces global exports when U.S. exports are excluded. The potential supply will likely come from Brazil, but there are concerns there because of the fallout from the recent trucker strike. Also, there are different harvest times due to geographical differences that impact supply.
The Mexican election is this Sunday - no surprise there's been some brisk activity this week in EWW (the main Mexico ETF, not a gross-out reference).
The VIX is swinging around today.
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Two Studies on Options Use - Institutional Users and European Demand
Spencer Doar - JLN
Over the past two months, two studies commissioned by the Options Industry Council were released. The studies about the varying uses of options by different market participants were conducted Greenwich Associates and Burton-Taylor International Consulting, respectively.
/goo.gl/zHeVvf
****SD: This piece contains two videos featuring two speakers each - OIC's Joe Cusick and Gary Delaney, Burton-Taylor's Andy Nybo and Greenwich's Richard Johnson. Is two-fer Thursday a thing?
| | | | | | Lead Stories | | | Hedge Fund That Made 6,000% on VIX Jump Bets on Next Blow-Up
Yakob Peterseil and Suzy Waite - Bloomberg (SUBSCRIPTION)
Austin, Texas-based Houndstooth targets long-volatility ETF; Traders may be caught off-guard in swift return to equity calm
A hedge fund that reaped an outrageous gain in February's vol-mageddon is eyeing a fresh target.
Houndstooth Capital Management LLC secured a 6,000 percent return from a bearish bet on an exchange-traded product tied to calm markets.
/goo.gl/3mecdd
Top Oil Market-Maker Closes After 'Damaging' Regulatory Changes
Catherine Ngai and Javier Blas - Bloomberg (SUBSCRIPTION)
New York-based Geneva Energy Markets has liquidated its books; GEM held 'millions of barrels' in open interest in crude oil
/goo.gl/fH9sQM
****SD: Financial Times here.
Quantitative Tightening Is Roiling Markets
Cormac Mullen and Eric Lam - Bloomberg (SUBSCRIPTION)
Investors are having to get by with much less stimulus now; Liquidity will be in outright contraction soon, analysts say
That whooshing sound you hear is the draining of $1.4 trillion worth of global liquidity.
/bloom.bg/2KsS2LI
Anxiety replaces optimism over Wall Street earnings
Nicole Bullock - Financial Times (SUBSCRIPTION)
All good things come to an end, a concern that has driven the lacklustre performance of US blue-chip equities this year.
Wall Street's optimism over blockbuster earnings growth for US companies in the first quarter has been replaced by anxiety that we have already seen peak profits. With the second quarter coming to a close, a similar scenario is likely to play out in the upcoming earnings reporting season.
/on.ft.com/2KrpKBf
BoE's Brexit derivatives markets warning not as dire as it sounds
Philip Stafford - Financial Times (SUBSCRIPTION)
The Bank of England warning about the impact of Brexit on derivatives markets on Wednesday was heady stuff, but predictions of chaos with trillions of pounds worth of swaps deals are off the mark.
/on.ft.com/2KsMVeu
****SD: Sooo, it's semi-dire?
Market Volatility Bulletin: Spot VIX Prints Below 15 Despite More Than 2% Intraday Move In S&P Futures
Seeking Alpha
/goo.gl/jXgKZN
'Trump Put' May Not Help Much When Momentum Fades: Taking Stock
Arie Shapira - Bloomberg (SUBSCRIPTION)
...The practice of trotting out White House advisers to stem any bleeding in the tape (or a "Trump Put," if you will) has become a bit of a joke among the trading community -- like the second when downticks start to accelerate, people are almost expecting an appearance from a prominent member of the administration to say something along the lines that trade talks are going well or that media reports on wrinkles in the trade war are incorrect -- Navarro worked his magic in the last half hour of Monday's session while Mnuchin hit the airwaves after Trump's decision not to invoke emergency law to hit back at China, all before Kudlow conspicuously ruined it all with a harder line stance.
/bloom.bg/2KuPPjd
****SD: This is a recap of some of the day's activity with a mention of the topic we had in yesterday's newsletter from, sigh, Zero Hedge.
| | | | | | Exchanges and Clearing | | | FX Options: Extension of trading hours
Eurex
FX trading takes place around the clock all over the world, starting on Monday morning New Zealand time and closing Friday afternoon New York time. Following the introduction of extended trading and clearing hours (23 hours) for FX Futures in February 2017, the Management Board of Eurex Deutschland decided to extend also trading of FX Options to 23 hours with effect from 2 July 2018.
/jlne.ws/2Ivu013
Jeffrey Tessler elected as Eurex Frankfurt and Eurex Clearing Chairman
Eurex Group
Jeffrey Tessler has been appointed as Chairman at both Eurex Frankfurt and Eurex Clearing. He replaces Hugo Bänziger, who had held both mandates since 2012. He resigns at his own request. Gregor Pottmeyer was elected as vice chair.
bit.ly/2KvGyqQ
****SD: Also, Global Investor names Eurex "Exchange of the Year"
Important Dates Regarding The Launch Of The New Options Exchange, MIAX EMLD In Q1 2019
Mondovisione
As previously announced in the April 17, 2018 Alert, the MIAX will launch a new Options Exchange. MIAX Emerald (EMLD) will begin trading in Q1 2019, pending SEC approval. In preparation of the launch, we have included details below.
bit.ly/2IAoUkh
| | | | | | Moves | | | Eventus Systems Appoints First Outside Directors with Three Industry Veterans
Press Release
Eventus Systems, Inc., a provider of innovative regtech software solutions for the capital markets, today announced that it has appointed three highly acclaimed industry veterans as the first outside directors on its Board. The newly constituted Board will meet for the first time this afternoon. The new Board members are Kim Taylor, former President, Clearing and Post-Trade Services at CME Group; Fred Hatfield, former Commissioner of the U.S. Commodity Futures Trading Commission; and D. Keith Ross, Jr., Executive Chairman of PDQ Enterprises, parent company to broker-dealer and independent Alternative Trading System CODA Markets (formerly PDQ ATS), and former CEO of GETCO LLC.
/prn.to/2yOwW9x
****SD: That's quite a list. Good for Eventus. In case you missed it, we put out a video with Eventus CEO Travis Schwab when we were at FIA Boca.
| | | | | | Regulation & Enforcement | | | Insider trading charge against ex-Equifax manager linked to data breach
Kate Brumback - Associated Press
Former Equifax software development manager Sudhakar Reddy Bonthu is charged with insider trading related to the data that affected 143 million people.
/goo.gl/4TjFBr
****SD: He made a $75k profit from put options which he bought through his wife's brokerage account.
Brussels steps up emergency planning for no-deal Brexit
Alex Barker, Arthur Beesley and Anne-Sylvaine Chassany - Financial Times (SUBSCRIPTION)
The EU is quietly stepping up work on emergency plans to cope with the first days of a hard Brexit, including transitional measures to mitigate damage should the UK crash out of the bloc without an exit deal.
/on.ft.com/2IzDwA9
Financial Regulator to Strengthen Rules on Short Selling
Yoon Young-sil - Business Korea
South Korean financial authorities are finally moving to impose severe punishment on illegal short selling. They will draw up a bill by the end of July to revise the current short selling regulations.
bit.ly/2IwnK9j
****SD: Korea's Kospi 200 options were the fourth most active equity derivatives contract in the world in 2017, with more than 500 million contracts traded (that's more than E-mini S&P futures). So, it's not like you can't take a directional opinion in Korean markets.
SEC Seeks Comment On Cboe Rule Change For Bitcoin ETF
Tom Zanki - Law360
The U.S. Securities and Exchange Commission is seeking public comment on a proposed rule change by Cboe BZX Exchange Inc. to list an exchange-traded fund physically backed by bitcoin that would cost about $200,000 per share, according to a notice Tuesday.
bit.ly/2IzJwJe
| | | | | | Technology | | | Money.Net chooses OpenFin to accelerate institutional deployment
Finextra
OpenFin is the secure desktop operating system built specifically for the high-performance needs of capital markets and used by more than 50 of the world's largest banks, buy-side institutions and trading platforms to launch and realize their digital transformation strategy.
/goo.gl/uWYsjh
****SD: By the end of 2017, Money.net had more than 80k subscribers.
Nodal Exchange Connects to CQG's Trading Platform
Aziz Abdel-Qader - Finance Magnates
CQG, a Denver-based provider of technology for integrating market data, technical analysis and trade routing, has expanded its list of direct trading connections to enable its clients to trade energy markets through connectivity to the US futures exchange Nodal Exchange Holdings.
bit.ly/2Izfe9A
| | | | | | Strategy | | | Volatility Traders Bet On Another Summer VIX Spike
Karee Venema - Schaeffer's Investment Research
Volatility has ramped up in the U.S. stock market recently, as concerns over a possible trade war with the U.S. and China resurfaced. The Cboe Volatility Index (VIX) -- commonly referred to as the market's "fear gauge" -- has surged nearly 59% since its early June lows, last seen at 17.87, and is pacing for its biggest monthly gain since February.
bit.ly/2IAGg0e
| | | | | | Miscellaneous | | | Are investors paying too much for 'black swan' risk?
Howard Gold - Chicago Booth Review
In US debt markets, the most common way to measure risk is by using credit spreadsÂthe difference in yield between the benchmark 10-year Treasury note and a bond or index of similar maturity. Credit spreads change in response to shifts in the markets and the economy. In general, spreads widen when investors demand a higher yield to compensate for perceived greater risk, and narrow when perceived risk falls.
bit.ly/2IDB0sC
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