| August 19, 2024 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | |
Bitnomial's Strategic Move: Expanding Bitcoin Futures with Hash Rate Hedging
JohnLothianNews.com
Bitnomial President Mike Dunn, in an interview with John Lothian News, shared the company's strategic vision and recent developments in the cryptocurrency derivatives market. Founded in 2014, Bitnomial has been at the forefront of creating a futures market for Bitcoin, recognizing its potential as a commodity and the need for risk management tools in the volatile cryptocurrency space.
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Anthony Attias - Euronext
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James Putra - TradeStation
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| | | | | | Lead Stories | | | How does high-frequency trading in the stock market affect liquidity? New research, led by the University of Edinburgh Business School, has examined how high-frequency trading in the stock market affects the liquidity of the options market.
Khaladdin Rzayev - University of Edinburgh Business School
High-frequency trading (HFT) involves using advanced algorithms and high-speed data networks to trade stocks quickly, and whilst HFTs aim to capitalise on tiny price discrepancies that exist for very short periods, they also play a role in providing liquidity to the market by being ready to buy and sell at any given moment. The study, led by Dr Khaladdin Rzayev, focuses on understanding how these rapid trading activities influence the 'bid-ask spread' in the options market. 'Bid-ask spread' is the difference between the price at which sellers are willing to sell and the price at which buyers are willing to buy. A key finding of this paper was that increased HFT activity in the stock market leads to wider bid-ask spreads in the options market, making it more expensive for people to trade options. This happens for two main reasons: First, there is 'latency arbitrage' where aggressive HFTs exploit time lags between the stock and options markets to make profits. This forces options market makers to increase their spreads to protect themselves from potential losses. Second, when there is informed trading in the options market, we see a simultaneous increase in aggressive HFT activity in the stock markets and the bid-ask spread in the options market.
/jlne.ws/3YP4TAU
***** Fascinating article about the impact of HFT on stocks and options bid-offers and how they are linked.~JJL
Wall Street Whiplash Schools Traders on Fragile Modern Markets; Herding, dicey liquidity and systematic selling add pressure; VIX sees fastest-ever spike, recovery of at least 25 points
Denitsa Tsekova and Isabelle Lee - Bloomberg
Greed has overcome fear on Wall Street - and the market cataclysm that shook up the world in recent weeks may well prove a mere blip on long-term price charts. Yet the summer rout will also go down as a particularly extreme example of a trend that's shaped modern finance for years now: Increasingly frequent shocks blowing up with little warning.
/jlne.ws/3yL2X1S
It's a Bull Market for Fear
Gunjan Banerji - The Wall Street Journal
There has been an explosion in volatility bets this August, sending activity in VIX wagers to the highest level in six years.
More than 1.5 million options tied to the VIX have changed hands on an average day this month, on track for the highest level since February 2018, according to Dow Jones Market Data.
/jlne.ws/3WQt8fB
Levered trade that blew up in 2008 gets a $600M ETF Redo
Lu Wang - Bloomberg
A leveraged strategy for diversifying investments that crashed spectacularly in the financial crisis is back. This time, the designers say they've ironed out the problems. The offering, known as portable alpha since the 1980s but recently rechristened "return stacking", has caught on in exchange-traded funds sold by Newfound Research and ReSolve Asset Management. Cash is creeping into the ETFs billed as one-stop shops for cross-asset diversification that use borrowed money and derivatives to amp up firepower.
/jlne.ws/4fTHQLF
As Tech Stocks Rebound, High Hedging Costs Indicate Skepticism; Cboe gauge tracking Nasdaq 100 Index remains above average; Investors more nervous about Nvidia downside, Sosnick says
Natalia Kniazhevich - Bloomberg
The recent rebound in US tech stocks isn't convincing options traders just yet.
While the shares have led market gains since a meltdown earlier this month, the cost of contracts hedging against volatility in the largest exchange-traded fund tracking the Nasdaq 100 Index remains high relative to contracts on the SPDR S&P 500 ETF Trust.
/jlne.ws/3WPa69j
Citi, Barclays raise FCM target residual interest 28% in June; Backstop funds also marginally up as a proportion of required customer funds
Lorenzo Migliorato - Risk.net
The futures commission merchant (FCM) arms of Citi and Barclays each increased target residual interest (TRI) for futures and options (F&Os) by 28% in June, data from the Commodity Futures Trading Commission shows (CFTC). TRI - the amount the FCM communicated to its regulator it intends to keep on hand in the event a customer cannot meet its requirements - was $446 million at Citi, up 28.1% or $98 million compared with May. The target amount equated to 2.8% of required customer funds in the
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Oil bears turn cautious as financial market strains ease
John Kemp - Reuters
Investors trimmed their bearish short positions in petroleum after other financial markets steadied following a sudden plunge earlier this month and crude prices found support above $75 per barrel.
Hedge funds and other money managers purchased the equivalent of 74 million barrels in the six most important petroleum futures and options contracts over the seven days ending on Aug. 13.
/jlne.ws/4dQXQfh
| | | | | | Exchanges | | | ICE Enhances Encompass Digital Mortgage Lending Platform, Helping Lenders Connect Homebuyers to Affordable Financing Options
Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE: ICE), a leading global provider of technology and data, today announced several new enhancements to the Encompass à digital mortgage lending platform. As part of its mission of making the path to homeownership - and the experience from then on - as fast, accessible, and as simple as possible, ICE is making significant, ongoing investments to help lenders improve productivity, lower operational costs and provide more value to homebuyers.
/jlne.ws/3MbuvAz
Bitcoin ETF Options Applications Withdrawn By New York Stock Exchanges; Both the NYSE and NASDAQ have withdrawn their Bitcoin ETFs options applications involving Bitwise, Grayscale, and others
BLOCKHEAD
Both NASDAQ and the New York Stock Exchange (NYSE) have withdrawn their applications to list Bitcoin ETF options. According to a filing on 14 August with the US Securities and Exchange Commission (SEC), the NYSE has pulled its application that would see a rule change to allow it to list and trade options on the Bitwise Bitcoin ETF (BITB) and the Grayscale Bitcoin Trust (GBTC). Earlier this month, BlackRock and the NASDAQ filed to list options on the asset manager's Ethereum ETF. "The exchange believes that offering options on the Trust will benefit investors by providing them with an additional, relatively lower cost investing tool to gain exposure to spot ether," the filing said.
/jlne.ws/46PRnzb
ICEâEURâ¢s NYSE launches unicorn index for private markets
Gregory Rosenvinge - FOW
Intercontinental Exchange (ICE) has launched a new index tracking a basket of US-based, privately-held and venture-backed unicorn companies on its NYSE venue
/jlne.ws/4dwti2Q
CME Group Clarifies and Emphasizes the Duty to Supervise Trading on its Markets
Clifford Histed and Cheryl Isaac - Investment Law Watch
If you or your company trades on CME, CBOT, NYMEX or COMEX (CME Group exchanges, collectively referred to herein as "CME"), you will need to take note of CME's new Market Regulation Advisory Notice (MRAN), which became effective on 16 July. The new MRAN is called "Supervisory Responsibilities for Employees and Agents" and should be reviewed closely to understand CME's expectations related to diligent supervision, including policies, trainings, monitoring, remediation and sanctions.
/jlne.ws/3ADEtIi
Cboe Global Markets Announces Increase in Share Repurchase Authorization; Declares Increased Third-Quarter 2024 Dividend
Cboe Global Markets
Cboe Global Markets, Inc. (Cboe: CBOE), the world's leading derivatives and securities exchange network, today announced its Board of Directors has authorized the company to repurchase up to an additional $500 million of its outstanding common stock and declared an increased quarterly cash dividend of $0.63 per share of common stock for the third quarter of 2024. The increased third-quarter 2024 dividend, representing a 15 percent increase from the prior quarter's dividend of $0.55 per share, is payable on September 13, 2024, to stockholders of record as of August 30, 2024.
/jlne.ws/3yGiGzl
| | | | | | Strategy | | | Options Traders Hedge for Dollar Losses Ahead of Jackson Hole; Key dollar index extends falling streak to hit five-month low; Risk reversals show higher costs to hedge against dollar drop
George Lei - Bloomberg
Options traders are positioning for further dollar losses amid bets that Federal Reserve Chair Jerome Powell will reinforce the case for interest-rate cuts during the central bankâEURâ¢s annual gathering in Jackson Hole. Traders are paying more for options that benefit if the dollar slumps over the next week and month than for those looking for gains, according to indexes of risk reversals on a basket of the currencyâEURâ¢s major trading partners.
/jlne.ws/4cvu5Qf
| | | | | | Miscellaneous | | | Time to shine a light on the shadowy carry trade; Transparency will help to avoid financial blow-ups
The Economist
Soon after markets tumble, the search for the culprits begins. Choppy trading over the past two weeks has put a dent in stock prices globally, while safe government bonds have rallied. Concerns about the health of America's economy and its expensive tech stocks are part of the explanation for the surge in volatility. Analysts and investors have identified another culprit behind the tumult: the reversal of opaque "carry trades", particularly in the Japanese yen.
/jlne.ws/3Mby9dJ
'Hedging their bets': how CEOs are navigating the Harris-Trump race; Executives hope for a more business friendly Democrat but remain reluctant to take a public position
Brooke Masters, Stephen Foley and Alex Rogers - Financial Times
In a deeply divided US, everyone has strong views about the presidential election - except, it seems, most of the people running the country's biggest companies.
All year, corporate leaders have publicly ducked questions about the race, even as many of them were privately torn.
/jlne.ws/4fJPTdT
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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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