| May 23, 2023 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | From our friends at Cboe Global Markets
The Cboe's Options Institute recently became a sponsor of the Big Shoulders Fund's Stock Market Program, which provides the opportunity for eighth grade students to learn about the financial markets, personal savings and investing concepts, and careers within the financial industry. This interactive learning project is taught by volunteer teachers, including professionals from the financial industry, with an interest in sharing their expertise and mentoring talented and committed children who otherwise would not have the benefit of being exposed to such concepts. Significantly, students in the program are able to build a virtual portfolio tied to actual financial incentives for their school - benefitting both the school and the students.
For more than 35 years, Big Shoulders Fund has helped Chicago's children in need achieve their dreams through access to a quality, values-based education.
Earlier this month, Big Shoulders Fund held a capstone event for the Stock Market Program. Students participated in a mock investors meeting, heard from industry professionals about careers in finance and planning for the future, and also marked the occasion with a trophy ceremony.
Gina DeRaimo, head of the Options Institute at Cboe, states: "The Options Institute believes experiential learning transforms both students and teachers alike. When the team at the Big Shoulders Fund Stock Market Program invited us to sponsor, teach, and engage with their community of 8th grade students, we were thrilled to say yes and get started. By introducing students to financial concepts and career possibilities early, we hope to nurture their interests, empowering them to explore and leverage their many talents in a supportive, structured environment."
| | | | | | Lead Stories | | | US debt ceiling crunch threatens to roil complacent stock market
Lewis Krauskopf - Reuters
Strategists at some of Wall Street's biggest banks are sounding increasingly worried about potential market fallout from the standoff over raising the U.S. debt ceiling, even as stocks continue grinding higher. The S&P 500 (.SPX) is up more than 9% this year and stands around its highest point since August 2022. For now, equity investors seem unflustered as the deadline to avoid a catastrophic first-ever U.S. government default draws nearer, in part because most are confident lawmakers will eventually reach a deal.
/jlne.ws/3WyEgxg
TRY/USD Bets Against Turkish Lira Hit Record With Controls Under Strain
Netty Idayu Ismail and Tugce Ozsoy - Bloomberg
Traders are more bearish than ever on the Turkish lira on expectations that market forces will eventually overwhelm government exchange controls.
Traders are already testing policymakers' resolve. The lira slid past 20 against the dollar for the first time in Istanbul on Monday, weakening as much as 4.1%, before wiping out the losses to end the day little changed. The currency fell briefly beyond the 20 mark again the following day, before paring its drop.
/jlne.ws/3oiS820
Stock Market Will Crash 45% If US Defaults on Debt, White House Warns
Matthew Fox - Markets Insider
A US debt default could spark a 45% crash in the stock market and generate a deep recession akin to the 2008 Great Financial Crisis, the White House's Council of Economic Advisers warned earlier this month.
The deadline for lawmakers to lift the debt limit is rapidly approaching in early June as Treasury Secretary Janet Yellen exhausts all of the department's extraordinary measures. If a debt ceiling deal isn't reached, it could mean the Treasury forgoes Social Security payments, payments to Medicare and Medicaid, and ultimately payments to US bond holders.
/jlne.ws/3IBJeDC
US Debt Ceiling Latest: PGIM Bets on CDS Seeing Future Rancor
Alice Gledhill - Bloomberg
As US politicians hold talks to avoid a historic debt default, PGIM Fixed Income has spotted an opportunity to bet on the next crisis.
Greg Peters, the firm's co-chief investment officer, has bought long-dated credit default swaps â insurance against a future default â on the basis that the US will find itself in a similar impasse all over again.
/jlne.ws/3ovEKHJ
US Default Scenarios Span From Localized Pain to Jamie Dimon's 'Panic'
Chris Anstey and Liz McCormick - Bloomberg
Investment bank clients are peppering Wall Street with questions about what happens if the US Treasury in coming weeks runs out of cash and does the unthinkable â failing to make payments due on Treasury securities, the bedrock of the global financial system.
With the clock ticking to June 1, the date by when Treasury Secretary Janet Yellen has advised her department may run out of sufficient cash, as of Monday there was still no deal announced between President Joe Biden and Speaker Kevin McCarthy on raising the federal debt ceiling.
/jlne.ws/3MSfWTG
Can Markets Handle the Debt Ceiling?
Matt Levine - Bloomberg
For many, many, many purposes in financial markets, you have to post collateral. Most importantly, if you want to borrow money in some of the biggest lending markets, you put up some collateral and get the money; when you repay the money you get the collateral back. If you do certain derivatives trades, you have to post collateral to ensure that you are good for your obligations. If you want to sell a stock short, you borrow the stock and post collateral to secure your obligation to return it. If you are a retail brokerage, your customers do trades today but actually hand over the money on Friday, and meanwhile you post collateral with a clearinghouse to guarantee their trades. The plumbing of global finance works through collateral: You and I can agree to do stuff in the future, without necessarily knowing each other well or trusting each other much, because we have posted collateral to ensure that we're good for our promises.
/jlne.ws/3MPXbjQ
Retail Investors are in Love with Same Day Options
Larry Swedroe - Wealth Management.com
Most investors are risk averse, leading them to dislike securities exhibiting negative skewness (longer/fatter left tails, with the risk of a large loss), creating a risk premium for those securities. Assets with negative skewness are associated with higher expected returns. However, as skewness increases and becomes positive, the relation between volatility and returns becomes negativeâinvestors may accept low returns and high volatility because they are attracted to high positive skewness. This is referred to as the "lottery effect"âa large chance of a negative outcome, with a small chance of an extreme positive outcome).
/jlne.ws/3BSiURW
| | | | | | Exchanges | | | Modernizing Market Infrastructure: OCC on Reaching a Key Milestone in its Journey to the Cloud
Nasdaq
Over the past several years, the move to modernize market infrastructure has accelerated as trading volume and activity surged during the pandemic and has remained at elevated levels, underscoring the need for scalable, resilient and adaptable systems. As such, more central counterparty clearing houses (CCPs) and central securities depositories (CSDs) are turning to the cloud to enhance their infrastructure. In fact, The Options Clearing Corporation (OCC), the world's largest equity derivatives clearing organization, reached a key milestone in its efforts to migrate its clearing, risk management, and data management systems to the cloud after it received a no-objection notice from the U.S. Securities and Exchange Commission (SEC) in October last year, enabling OCC to move forward with its Renaissance Initiative to redevelop and modernize its technology infrastructure.
/jlne.ws/3Myh0us
Open Interest Across WTI-Linked Futures Surpasses 500,000 as Global Significance of U.S. Oil Grows
CME Group
CME Group, the world's leading derivatives marketplace, today announced that open interest across its suite of WTI-linked futures, which include WTI Houston (HTT), WTI Midland (WTT) and Mars (YV) spread futures contracts, surpassed 500,000 contracts on Friday, May 19, 2023. Average daily open interest in the Argus-settled contracts has also increased 49% year-to-date as the inclusion of U.S. oil into the Dated Brent pricing mechanism begins.
/jlne.ws/3BOsULY
| | | | | | Regulation & Enforcement | | | India regulator proposes curbs on derivative-linked share moves
Reuters
India's market regulator proposed measures to contain extreme price movements in shares on which futures and options trade, including longer trading suspensions and restricting price movements. The Securities and Exchange Board of India (SEBI) proposed in a consultation paper late on Sunday that if a share in the futures and options segment falls or rises by 10% a day, trading would be suspended for an hour, up from the current 15 minutes, and then allowed to move only a further 2%, down from the current 5%.
/jlne.ws/45rOhAk
Keeping derivatives markets "open and safe for the real economy"
Walt Lukken - FIA
Good afternoon! Bonjour! It's great to be back here in Brussels.
Two weeks ago, in Washington DC, I was honored to attend an event at the Swedish Embassyâheld by the EU ambassador to the USâto celebrate Europe DayâMay 9th
All 27 ambassadors of the EU member states were in attendance.
I learned that May 9th celebrates the Schuman Declarationâotherwise known as the Day of the United Europeâthat marked the start of cooperation between a core group of European countries that ultimately would become the European Union.
/jlne.ws/3onZktD
| | | | | | Technology | | | TradeStation Collaborates with Plaid to Enhance Financial Account Connectivity Capabilities; TradeStation integrates with Plaid to create a more secure and efficient client experience
TradeStation Group, Inc.
TradeStation Group, Inc. ("TradeStation"), a Florida-based company whose operating subsidiaries provide award-winning*, self-clearing online brokerage services for trading stocks, ETFs, options, futures, and crypto that aim to offer the ultimate trading experience, has announced its integration with Plaid, a data network powering the digital financial ecosystem.
/jlne.ws/3MTDTtX
BMLL expands data coverage to include Hong Kong Stock Exchange; New offering compliments data from Tokyo Stock Exchange as well as recently added coverage from Cboe Global Markets Japan, Japannext Co. and SGX Group.
Wesley Bray - The Trade
Historical Level 3 data provider BMLL has expanded its data coverage to now include Hong Kong Stock Exchange (XHKG). The expanded offering compliments data from Tokyo Stock Exchange which is already offered in its product suite.
/jlne.ws/3q4zKu9
| | | | | | Strategy | | | Summer Rate Hikes?
Cboe (Video)
In #Vol411, Tim Biggam @Delta_Desk talks about the debt ceiling, the prospect for rate hikes and action in $VIX derivatives.
/jlne.ws/3MPY5Ng
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| | | Jeff Bergstrom
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