| April 04, 2018 | | | | | Spencer Doar
Editor
John Lothian News | |
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| | | | Observations & Insight | | | With trade war, U.S. and China stumble into the Thucydides Trap
John Kemp - Reuters
The United States and China have fired the opening shots in a trade war that may be hard to stop.
/jlne.ws/2GxA4tV
****SD: Regardless of the situation, whenever I see Thucydides mentioned I have to reread the Financial Times Alphaville article For the love of Zeus, stop misusing Thucydides from last summer for context. It's well worth the more in depth history lesson/tuneup. Surprisingly, three of the four Trump officials referenced in the piece who are known for their Thucydides fandom are actually still in the administration. How 'bout dat? Some more on the morning's market action from TD's JJ Kinahan.
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Russian spy chief says feels like Cold War is back
Reuters
Russia's foreign intelligence agency chief Sergei Naryshkin said on Wednesday that Washington's actions toward Russia mean its possible to start speaking of a return to the Cold War era."Washington has become fixated with the fight against a non-existent, so-called Russian threat. This has reached such proportions and acquired such absurd characteristics that it's possible to speak of a return to the dark times of the Cold War," the spy chief said, speaking at a security conference in Moscow.
****SD: What year is it again? I almost wrote 1984 on my rent check.
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The 2018 Trading Tech 40
Institutional Investor
To the top innovators in trading technology, concepts like machine learning and distributed ledgers are anything but vague and futuristic.
/jlne.ws/2JkbjiC
| | | | | | Lead Stories | | | Nasdaq Options Trading Patents Challenged by Rival MIAX Exchange
Susan Decker, Annie Massa - Bloomberg
Patents cover routing security orders, financial price quotes; Nasdaq is embroiled in patent lawsuits with MIAX and IEX
Nasdaq Inc. is trying to claim that it invented the concept of options trading, rival Miami International Holdings Inc. said in a series of petitions seeking to have seven of Nasdaq's patents canceled.
/goo.gl/V3stoC
****SD: The war continues! Just some of the backstory, also from Bloomberg - Nasdaq Sues Rival Exchange, Alleging Stolen Tech Secrets. The MIAX press release about the patents is in our "Exchanges" section.
Bet Against Volatility? You Lost. Bet On It? You Lost Too!; Crisis hedge funds' lackluster performance showcases the limits of protection against volatility
Laurence Fletcher and Jon Sindreu - WSJ
One group of hedge funds has long pitched to investors the idea they can protect investors and even prosper when markets fall sharply. But when volatility returned to markets recently, these funds failed to capitalize. Their woes showcase the pitfalls of volatility-related trading, which can simultaneously foil those betting in favor and those betting against it.
/goo.gl/CbaAo4
****SD: Heads I win, tails you lose.
Market Paradigms Have Quickly Shifted on Investors
Dean Curnutt - Bloomberg
Two months after the meltdown of poorly designed exchange-traded volatility products became front page news, the broader environment for market risk is in transition. Corporate profits and economic growth are strong, but there is unease about the future path of Federal Reserve interest-rate increases, the impact of rising fiscal debt and deficits and the potential for trade wars. Realized volatility in the S&P 500 Index was 20 percent last quarter, up from just 6 percent in the fourth quarter. That is a tremendous increase.
/jlne.ws/2Ehi94A
****SD: Dean Curnutt is CEO of Macro Risk Advisors, employer of the oft-quoted derivatives strategist Pravit Chintawongvanich.
Your Diversified Portfolio May Face Harsh Lessons in Volatility
Tanvir Sandhu - Bloomberg
Cost-efficient long-volatility exposure may be the new focus; Portfolio diversification gets exposed when correlations rise
The world is short volatility. How long it can remain so is another matter.
/goo.gl/vn4qNF
****SD: This piece kind of feels like an updated TL;DR of an Artemis Capital research note.
No, Washington is not to blame for the volatility
Russ Koesterich - BlackRock Blog
Many are pointing a finger at Washington for the recent spike in volatility. But, as Russ explains, the catalysts lie elsewhere.
/jlne.ws/2JfqaKV
****SD: However, it's hard to argue Washington is not responsible for some of the heightened volatility in certain - *cough* Amazon *cough* - names.
Confusing market signals create a minefield for central banks
John Plender - Financial Times
Something curious is afoot in global funding markets, starting with the much-remarked recent surge in the London interbank offered rate. The difference between Libor and the overnight indexed swap rate has soared to its highest level since the financial crisis. A widening Libor-OIS spread, a seemingly arcane financial relationship, is important, not least because it usually implies stress in the interbank market.
/jlne.ws/2EhcV8N
****SD: Speaking of central banks, from Bloomberg - Fed's Powell Shows Markets He Won't Be Rattled by Volatility
If It's the Big One for Stocks, Hedgers Are Looking Unprepared
Dani Burger - Bloomberg
Maybe the warnings got boring.
Trade tensions between the U.S. and China are escalating, the Nasdaq 100 Index is set for its ninth straight 1 percent swing, and safe havens are in fashion around the world. Yet hedging activity is decidedly muted, all things considered.
/jlne.ws/2Ek6EJs
| | | | | | Exchanges and Clearing | | | MIAX Exchange Group Reports March 2018 Trading Activity; MIAX Files Petitions with USPTO to Invalidate Seven Nasdaq Patents
MIAX
Miami International Holdings, Inc. today reported the March 2018 trading activity for its two fully electronic options exchanges - MIAX Options and MIAX PEARL (together, the MIAX Exchange Group). The MIAX Exchange Group collectively executed over 31.7 million contracts in March 2018 for a combined average daily volume (ADV) of 1,511,612 contracts, representing a total U.S. equity options market share of 8.25%.
...In other news, the MIAX Exchange Group recently filed seven petitions at the U.S. Patent and Trademark Office, each seeking a determination that the subject Nasdaq electronic trading patents that Nasdaq asserted against MIAX last September are invalid under the current law.
/goo.gl/CpDj5Y
Intercontinental Exchange Podcast: ICE Founder and CEO Jeff Sprecher: Two Decades of Disrupting Markets
Inside the ICE House
In the early 2000s, Intercontinental Exchange Chairman and CEO Jeff Sprecher introduced electrification and transparency to the trading of energy commodities. In quick succession, he took on the futures, credit, and equities markets, building ICE from a little known exchange that he paid a dollar for to a global Fortune 500 Company. He joins the podcast to talk about how he did it, and the future of data as the life blood of trading.
/jlne.ws/2Gxajd5
Intercontinental Exchange Reports March and First Quarter 2018 Statistics, Including Record Futures Average Daily Volume and Open Interest
Intercontinental Exchange
Intercontinental Exchange, Inc., a leading operator of global exchanges and clearing houses and provider of data and listings services, today reported March and first quarter 2018 trading volume and related revenue statistics, which can be viewed on the company's investor relations website at http://ir.theice.com/ir-resources/supplemental-information in the Monthly Statistics Tracking spreadsheet.
/jlne.ws/2EjksUE
NYSE Announces B & C Tape Fees
MarketsMedia
In a Trader Update posted April 2, the New York Stock Exchange announced trading fees for Tape B and C securities.
The bourse also added that the next phase of NYSE Pillar will be the expansion of NYSE electronic and floor trading to all Reg NMS securities beginning on April 9, 2018.
/jlne.ws/2GycNrL
CME Group and GCSA Capital Collaborate to Deliver the Prefunded Treasury Facility Collateral Program for Meeting Performance Bond Requirements
CME Group
CME Group ... and GCSA Capital ... today announced they have collaborated to develop the Prefunded Treasury Facility as a permitted form of collateral at the clearing house division of CME for performance bond (initial margin) requirements for clearing members' proprietary positions in futures and options contracts.
/jlne.ws/2Gx4SLb
Exchanges Diversify, Expand Data and Technology Revenues
Larry Tabb - TABB Forum
While US exchange transactional and market data revenues have experienced downward pressure since 2010, revenues from exchange connectivity and non-traditional data, technology and services have increased, from $94 million in 2010 to $858 million in 2017. TABB Group begins tracking these numbers in its latest quarterly Equity Digest, which breaks down all the US equity volume for Q4 2017.
/jlne.ws/2GAte6H
EEX achieves new record on emissions secondary market
Hedgeweek
/jlne.ws/2Gxd5Pr
****SD: EUA options set a monthly record, breaking February's record by three-fold.
| | | | | | Moves | | | Lendingblock appoints new CTO
Finextra
Luca is an experienced software engineer and quant developer, having worked as a CTO, lead software engineer and senior quant developer at BAML, BMLL Technologies and Citigroup. During this time, he had extensive experience as a senior quantitative developer on trading desks working closely on interest rate options and exotics.
/jlne.ws/2Jfo2Tr
****SD: Emphasis added. Lots of people are finding the crypto action appealing.
| | | | | | Regulation & Enforcement | | | Algo trading India: Sebi eases algo trade rules in commodity exchanges
Economic Times
In a bid to relax algorithm trading norms at commodity derivatives exchanges, markets regulator Sebi today raised the limit to process up to 100 orders per second by a user for such trade from the existing limit of 20 orders per second.
/jlne.ws/2Jhe584
| | | | | | Technology | | | Fidessa postpones vote on Temenos bid to await possible counter offers
Justin George Varghese - Reuters
British software firm Fidessa (FDSA.L) postponed an imminent shareholder vote on whether to back a 1.4 billion pound ($2 billion) takeover bid from Switzerland's Temenos (TEMN.S), saying it might receive two more offers.
/jlne.ws/2JkIBOk
Saxo Bank launches new trading platform
Asset Servicing Times
Saxo Bank has launched SaxoTraderPRO, a new trading platform for active traders and institutional clients.
The platform is a multi-screen trading platform offering a workspace for both Windows and Mac with no monthly fees.
SaxoTraderPRO will give clients access to exchange-traded funds, stocks, bonds, contract for difference, forex, futures and options that are cross margined from a single account.
/jlne.ws/2GBu82I
Trading Technologies Extends TT Platform into Tokyo
Trading Technologies
Trading Technologies International, Inc. (TT), a global provider of high-performance professional trading software, announced today the availability of execution and client connectivity services in Tokyo via its TT platform. This move strengthens TT's presence in the Asia/Pacific region, providing users there with increased accessibility to low-latency execution through TT's worldwide network of colocated data centers.
/jlne.ws/2GufaM1
****SD: TT also looking to colocate with Korea Exchange by Q1 2019.
| | | | | | Strategy | | | Equity volatility: To hedge or not to hedge?
Sarfraz Thind - The Trade
After a freakishly calm year with volatility levels tethered to record depths the VIX, the de facto gauge for volatility, exploded on 2 February as the market was jolted by a surprisingly high US inflation number and investors rushed to hedge positions in the options markets as a result.
/goo.gl/K4c8At
Best stock market trade of 2018 is a total reversal from last year
Joe Ciolli - Business Insider
When the stock market gives you lemons, make long-volatility bets.
If you've heeded this advice this year, it has most likely been a lucrative approach. After all, as major US indexes have tested multimonth lows  including the tech-heavy Nasdaq 100 erasing its year-to-date gain entirely on Monday  volatility-linked products have surged.
/jlne.ws/2EkdcYK
Don't Sweat the Volatility. It's Time for Risk, Cantor Advises
Joanna Ossinger - Bloomberg
Still too early for sell-off to 'take on a life of its own'; Volatility in stocks hasn't spread to other assets
It's time to take on risk in U.S. equities, Cantor Fitzgerald says.
/jlne.ws/2Gwmyql
Surging Apple Hedging Costs Show It's Reeling From Trade Spat
Elena Popina - Bloomberg
Protection prices at 2-year high, top other S&P 500 stocks; Trade spat worries mount as China is 2nd-most important market
While U.S. equities continue to struggle amid trade concerns, it's a stock that has remained relatively unscathed that hedgers are focusing on.
/jlne.ws/2GwI3qY
Be Smart, Not Frightened, by Volatility
Bob Seawright - Investment Advisor
Since the Great Financial Crisis, investors have been spoiled. From March 2009 through January 2018, the S&P 500 has returned 18.3 percent annualized. Moreover, despite high levels during the GFC and spikes in 2011 and 2015, volatility has been surprisingly low for much of the past 15 years. At the end of 2017, the S&P 500 One-Month Realized Volatility Index dipped under 6 percent. For investors, high returns and low volatility are a fantastic combination.
/goo.gl/afupkZ
LME options landscape suggests one last bull hurrah for zinc
Andy Home - Reuters
Is that it for the zinc price or does the market have one last hurrah before the bull cycle turns?
/jlne.ws/2Gz8U5G
| | | | | | Miscellaneous | | | Hedge fund oil bulls downplay macro risks
John Kemp- Reuters
Hedge fund managers have turned bullish again towards oil prices, casting aside the caution that prevailed during much of February and March.
/goo.gl/FDaJcH
David Einhorn's Greenlight Capital: 'Difficult to fully explain' lost money
Business Insider (SUBSCRIPTION)
David Einhorn's hedge fund, Greenlight Capital, is having a rough 2018. The firm's flagship fund is down nearly 14% in the first quarter, and Greenlight isn't completely sure why.
/jlne.ws/2GxpyCP
****SD: Lol - that sure isn't encouraging.
Fed's Powell Shows Markets He Won't Be Rattled by Volatility
Danielle DiMartino Booth - Bloomberg
Markets are unmoored. Tried-and-true patterns that dictated trading behavior have broken down, leaving many investors at a loss, both figuratively and literally.
The Cboe Volatility Index, or VIX, a gauge of stock market volatility derived from the prices of options tied to the S&P 500, has almost doubled in this year's first quarter.
/jlne.ws/2Jiv6if
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Editor
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