| March 20, 2023 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Thousands of Stock Options on Failed Banks in Limbo as Expiration Hits; SVB Financial, Signature Bank halts cause settlement confusion; Put contracts on the banks may be worth around $292 million
Elena Popina - Bloomberg
Stock options worth hundreds of millions of dollars tied to failed lenders SVB Financial Group and Signature Bank are reaching expiration Friday with no certainty whether or how they can be cashed in. Shares of both institutions are no longer trading following their collapse this week, throwing into doubt the ability of in-the-money options holders to exercise those contracts.
/jlne.ws/3lu9Yh2
Wall Street's Fear Gauge, the VIX, Climbs After UBS-Credit Suisse Deal
Caitlin Ostroff - WSJ
Investors remain nervous despite efforts by regulators to stabilize large banks and head off a dash for cash.
The Cboe Volatility Index, or VIX, recently stood at 26.49, up from 25.51 on Friday, after regulators engineered a forced marriage between UBS and Credit Suisse, with UBS taking over its rival.
/jlne.ws/3YWjUxv
Cboe Europe Derivatives and Flow Traders Discuss European Derivatives Markets
Cboe
The highly liquid nature of U.S. derivatives markets, with multiple competing exchanges and participation from both the institutional and retail trading communities, has led to a steady increase in volumes over the last decade. By contrast, European activity has stagnated against the backdrop of a market structure which has limited on-screen liquidity and hasn't attracted retail investors in the same way the U.S. markets have experienced. Cboe Europe Derivatives, a pan-European equity derivatives exchange was launched in 2021 to help bridge the gap between the two regions and systemically grow the European market.
/jlne.ws/401YSP4
ECB Isn't Done on Interest Rate Hikes If Baseline Holds Up, Kazaks Says
Aaron Eglitis, Jana Randow and Alexander Weber - Bloomberg
The European Central Bank must fight inflation until the job is done, while acknowledging the rising risk of pushing interest rates too high as the peak nears, Governing Council member Martins Kazaks said.
Price pressures remain too strong and warrant further action â assuming the market turmoil that saw off Silicon Valley Bank and rocked Credit Suisse Group AG doesn't worsen to derail Europe's economy, Kazaks said Friday in an interview.
/jlne.ws/3ZZ8fiP
The Stock Market Is Extra Volatile Now. What It Means for Investment Returns.
Jacob Sonenshine - Barron's
Stock market volatility is back, continuing a longer term trend toward wilder swings in prices. The good news is that the market still seems likely to produce strong returns for investors with strong stomachs.
The most recent burst of volatility stems from problems in banking and the broader economy. It started with the run on Silicon Valley Bank, which forced regulators to close the lender, followed in short order by the collapse of Signature Bank.
/jlne.ws/3LDtrqe
Funds face massacre on record short US rates position
Jamie McGeever - Reuters
Hedge funds face huge losses on their record bet that the Fed will go full steam ahead with its aggressive interest rate-raising campaign, after some of the most abrupt and violent swings in U.S. rates and bond market pricing in living memory.
Commodity Futures Trading Commission (CFTC) data shows that speculators held the largest ever net short position in three-month SOFR rate futures in the week ending March 7, only a few weeks after amassing a record short position in two-year Treasuries futures.
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| | | | | | Regulation & Enforcement | | | Statement on Retail Options
Commissioner Caroline A. Crenshaw - SEC
I am concerned by reports of retail investors being unable to exercise options they purchased on Silicon Valley Bank and Signature Bank stock.[1] I am hopeful that broker-dealers and clearing agencies will make efforts to assist retail investors in exercising their options if the investors wish to do so, including by exploring possible cash settlements. In addition, I hope that FINRA and my colleagues at the SEC will move forward with efforts to establish a comprehensive regulatory framework around complex products, including options, which are risky and can expose an investor to sudden and severe losses.[2]
/jlne.ws/3ZYPmMF
'Asleep at the switch': Sen. Elizabeth Warren calls for independent probe of Fed, banking regulations
Mike Murphy - MarketWatch
Speaking Sunday on ABC News' "This Week," the Massachusetts Democrat said the chaos of the past couple of weeks - in which three U.S. banks failed, throwing financial markets, especially bank stocks, into extreme volatility - was predictable after financial-crisis-era banking regulations were eased during the Trump administration.
/jlne.ws/42rImtC
*****Also see: Elizabeth Warren Calls for Investigation of SVB and Signature Bank Collapses - The Wall Street Journal
How 'competitive' would you like your bank regulation now?
Helen Thomas - Financial Times
The UK regulatory pendulum has been halted in mid-swing.
The direction of travel for bank regulation in recent years has clearly been in the financial services sector's favour. Aided by a government eager to find benefits of post-Brexit regulatory freedom, there has been a sense of opportunity to tweak or modify, to strip off gold-plating or at least remove some of the shine.
/jlne.ws/3K37oIp
| | | | | | Strategy | | | Trader Who Made Billions in 2008 Refrains From Turmoil Bets
Bei Hu - Bloomberg
Steve Diggle, co-founder of volatility hedge fund Artradis Fund Management, which scored a $2.7 billion trading gain between 2007 and 2008, is sitting on the sidelines this time as bank woes rock markets.
While he doesn't see systemic risk akin to the global financial crisis, the "imprecise and impossible to quantify" investor sentiment is keeping him from putting on a trade, said Diggle, who now invests money for his family office Vulpes Investment Management.
/jlne.ws/3TwgqjT
Standard Chartered Blames Gamma Hedging For Overdue Oil Selloff
Markets Insider
The energy sector has emerged as the worst performer among all 11 sectors of the U.S. market in the current week, with energy prices dropping sharply as a spate of bank failures reignited a wave of risk-off selling.
Oil prices have crashed spectacularly, with WTI crude falling from $80.46 per barrel just 10 days ago to the $67 range, while Brent has declined from $86.18 per barrel to the $73 range, levels they last touched in December 2021. On Friday, things improved slightly, with Brent moving into the $75 range and WTI testing $69.
/jlne.ws/3Jnzw7m
Stay Cautious: "Fear Gauge" at a Crossroads
Todd Salamone - Schaeffer's Investment Research
Last week was a crazy one for market participants, on the heels of uncertainty related to arising problems in a few regional U.S. banks, plus one major bank overseas, Credit Suisse (CS).
Government and private sector actions that were taken to stabilize the system, at least for now, made for a particularly volatile week in the Treasury market. For example, in only a one-week period, fed funds futures traders assigned zero probability that the fed funds rate would be lower in June than it is at present. But by Wednesday, the implied odds that the fed fund rates would be lower in June climbed to nearly 80%. By Friday's close, the probability that the fed funds rate would be lower that it is now was back to less than 10%.
/jlne.ws/3YVFHVW
TSLA Leads Equity Options
Cboe (Video)
Joel Hawthorne @louiswinthrop updates us on Friday's activity in $TSLA, $NVDA, $MSFT, $AMD, $AAPL, and today's $VIX and $SPX options. #Vol411
/jlne.ws/3TtN85y
| | | | | | Miscellaneous | | | Bank Failures in Modern History: Crises, Mergers and Bailouts
Thyagaraju Adinarayan - Bloomberg
From as much as $96 billion to around $3 billion: Credit Suisse Group AG is poised to join the historic ranks of finance giants sold at fire-sale prices in the grip of a market crisis.
As UBS Group AG looks all set to snap up the once-storied Swiss institution, the emergency government-brokered deal over the weekend bears soft echoes of the 2008 banking crash as Wall Street preps for fresh volatility on Monday.
/jlne.ws/3TsM9Tc
Wait 10 Seconds, Lose $1 Million in Markets Rocked by Volatility; Big bond moves in a flash can make or break a year for traders; Waking at 3 a.m. and trading non-stop, nerves are on edge
Ye Xie, Liz McCormick and Bailey Lipschultz - Bloomberg
Holed up in a Hyatt hotel room in the Caribbean, John McClain whipped out his laptop on Sunday afternoon and started trading bonds. This was supposed to be a family vacation for McClain but, with bank failures piling up and US authorities rushing to stem the panic, that was out now. He needed to overhaul the $2.4 billion portfolio he managed for clients at Brandywine Global Investment Management and overhaul it fast.
/jlne.ws/3FCt4IF
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