| April 22, 2022 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Institutional Trading, Options Growth Among Q1 2022 Trends, say FIA Webinar Participants
Sarah Rudolph - John Lothian News
The trend for the first quarter of 2022 is a revival of institutional trading - along with continued rapid growth in the options space, according to an FIA webinar Thursday morning hosted by Will Acworth, senior vice president of publications, data & research, FIA, with Morgan Stanley's Reed Staub, executive director, head of US interest rate futures, and Erin Perzov, head of futures content.
Here are a few highlights from the webinar:
Options on futures, securities and indices grew 61% this quarter compared to Q1 last year, Acworth said. The futures space was flat as far as volume, but open interest in futures picked up this quarter.
Open interest in futures and options at the global level is higher than it was a few years ago but hasn't changed much since last year. Total open interest in Q1 was 1.1 billion contracts, up 1.4% from a year ago and 25% from three years ago. "So it's a slow but steady increase," Acworth said. That indicates institutional interest, he added.
To read the rest of this story, go here.
| | | | | | Lead Stories | | | Traders Add Hedges for 75-Basis-Point Fed Interest Rate Hikes, Roiling Bonds
Edward Bolingbroke - Bloomberg
The dust appeared to have settled on a rocky day for U.S. interest-rate markets -- even by recent standards -- when the options market lit up late Thursday with a couple of trades anticipating the Federal Reserve will make multiple 75-basis-point rate moves this year.
While bond bears are in control, the prospect that the Fed's six remaining policy meetings will deliver multiple jumbo rate hikes remains a minority view. Uber-bearish options structures have minimal open interest -- the number of contracts in which traders hold positions. As such, they have the potential to drive short-term rates sharply higher in a search for market equilibrium.
/jlne.ws/3rGXCBW
Inside Volatility Newsletter: The Certainty of Volatility
Kevin Davitt - Cboe
The "death and taxes" idiom traces its roots to the early 18th century play The Cobbler of Preston by Christopher Bullock. It has been referenced in many subsequent discourses by the likes of Daniel Defoe and Benjamin Franklin. Perhaps you've used the quip in recent weeks while preparing your annual statement of account for the government.
Certainty imbues this pithy statement. Death and taxes are certain.
/jlne.ws/3EHqnnz
**** JB: Kevin Davitt is leaving Cboe Global Markets for Nasdaq, starting next week. We wish him all the best.
Recession Risk Grows With Fed Rate Hikes, Regional Banks Fifth Third, PNC Say
Max Reyes - Bloomberg
The heads of some of the largest U.S. regional banks see mounting risks for a recession brought on by the Federal Reserve's interest-rate hikes, even as those increases are set to bolster lending revenue.
Fed policy makers are struggling to contain consumer prices that surged 8.5% from a year earlier in March, with Chair Jerome Powell saying a half-point interest-rate hike "will be on the table" in May.
/jlne.ws/3Lor33L
Why is the stock market falling? Dow drops over 500 points as investors weigh Fed's policy path, earnings
William Watts and Barbara Kollmeyer - MarketWatch
U.S. stocks fell sharply Friday, as investors continued to weigh hawkish comments on interest rates by Federal Reserve Chairman Jerome Powell a day earlier, as well as a fresh batch of corporate earnings that largely disappointed.
/jlne.ws/3MjxcOo
What Traders Are Watching Ahead of French Presidential Election
Michael Msika - Bloomberg
Since Emmanuel Macron became French leader five years ago, the country's equities have prospered. But with investors on edge over his presidential election opponent's less business-friendly policies, the market's future hinges on the outcome.
According to the polls at least, Macron remains ahead of Marine Le Pen, a result that most strategists and analysts would prefer. Yet the contest is close and few are prepared to rule out a surprise.
/jlne.ws/3vvjVM4
Mohamed El-Erian says 'humbled' Fed needs skill, time and luck to engineer a soft landing after Powell touts half-point hike
Hamza Fareed Malik - Business Insider
He said the central bank was too slow to tackle inflation but had now been "humbled" and understood the issue.El-Erian warned of recession after Fed Chair Powell touted half-point rate hikes to tame inflation.
Economist Mohamed El-Erian said the Federal Reserve's big steps to tame inflation may be too late and could risk a recession in the US.
/jlne.ws/3EEfbIa
Hedge funds lure biggest inflow in seven years in first quarter, data provider says
Reuters
Investors poured $19.8 billion into hedge funds in the first quarter, the biggest inflow of money since the second quarter of 2015, lured by gains some funds are posting amid volatile markets, according to data provider HFR.
Almost $13 billion flew into event-driven hedge funds, mainly to special situation funds and distressed assets, HFR said.
/jlne.ws/3MtoVYx
The Gap Between the Best and Worst Hedge Fund Strategies Just Widened
Julie Segal - Institutional Investor
Hedge fund investors might be having wildly different performance experiences.
Take managed futures funds, for example, which have turned in monthly performance numbers that haven't been this good since 2003. In fact, if 2022 were to end in March, the category's 9.7 percent return would be its best calendar year since 2014. On the other end of the performance spectrum, the equity sector index returned - 7.6 percent for the first three months of the year. If 2022 ended now, equity sector funds would have had their worst calendar year since 2008.
/jlne.ws/37Edezl
| | | | | | Exchanges | | | LME Gold, Silver Contracts to End After 5 Years on Low Volume
Eddie Spence - Bloomberg
The London Metal Exchange will abandon its attempt to break into precious-metal trading after just five years.
The LME -- the world's biggest exchange for industrial metals -- partnered with banks including Goldman Sachs Group Inc and Morgan Stanley in 2017 to launch the contracts. London is one of the two major centers of precious-metals trading, where trillions of dollars in gold, silver and associated derivatives change hands each year. It's an almost entirely over-the-counter business, dominated by top bullion banks like JPMorgan Chase & Co. and HSBC Holdings.
/jlne.ws/3EFbK47
| | | | | | Strategy | | | Crypto Traders Find Ether Options Attractive as 'Implied Volatility' Slides
Omkar Godbole - CoinDesk
The ether (ETH) spot market lull has traders focusing on derivatives, with some finding options cheaper in this low implied volatility environment.
Barring a brief spike to $3,200 early this week, ether, the second-largest cryptocurrency by market value, has mostly traded in the range of $2,400 to $3,200 since late January.
/jlne.ws/3vBIC9I
| | | | | | Miscellaneous | | | Crypto Billionaire Rankles Wall Street Titans With Derivatives Plan; FTX's Bankman-Fried wants algorithms to clear margin trades; Proposal draws pushback from execs including CME's Terry Duffy
Katherine Doherty, Allyson Versprille, and Yueqi Yang - Bloomberg
At a posh financial-industry gathering known for swaying palm trees and late-night yacht parties, this year's main attraction was a face-off between a crypto billionaire and a futures-exchange kingpin. There was Sam Bankman-Fried, whose FTX platform has rapidly become a dominant venue for investing in virtual coins, going toe-to-toe with Terry Duffy, the longtime chief executive officer of CME Group Inc. at the event in Florida. Among the topics broached in their intense conversation was an FTX proposal to execute every aspect of customers' crypto derivatives trades on its own -- thus bypassing other exchanges, banks and financial intermediaries. If FTX's bid is approved by regulators, many in traditional finance fear the model could be applied to other assets, threatening Wall Street's stranglehold over lucrative aspects of market plumbing. The centerpiece of FTX's plan is using algorithms rather than brokers to help clear trades, a crucial process for settling transactions that ensures sellers get their funds and buyers get the assets they've purchased.
/jlne.ws/3k0dcnY
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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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| | | Jeff Bergstrom
Editor
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