| | | | | | | February 21, 2025 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Wall Street Pushes Back on Tough Margin Rule for Zero-Day Options; Broker-dealers face intraday margin calls, add-on charge; New measures, if approved, will be implemented in September
Lu Wang and Katherine Doherty - Bloomberg
Wall Street brokers and dealers are pushing back on a new margin rule that the world's largest derivatives-clearing house has proposed to address the risk from the boom in zero-day options even after some revisions. Options Clearing Corp. should consider rolling out a new add-on charge - one that's designed to mitigate spillovers in the event of market turmoil - in phases before sunsetting it within two years, the Securities Industry and Financial Markets Association, or SIFMA, wrote in a letter Thursday.
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Hedge Funds Reload Option Trades for Yen Gains in Coming Months; Macro funds buying yen call options versus various currencies; Yen call volume larger than put volume on CME on Friday
David Finnerty - Bloomberg
After their bullish yen trades were tested last week, hedge funds have wagered again that the Japanese currency will outperform its major peers in coming months. So-called macro hedge funds that try to profit from market swings caused by political or economic events have continued to buy yen call options this week against a range of currencies including the dollar, euro and Swiss franc, according to traders. Yen call options trading volume versus the dollar on the Chicago Mercantile Exchange Group's options central limit order book was 93% of the total compared with just 7% for put options as of 2:37 p.m. in Hong Kong.
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VIX, Rates Vol, Gold With Susquehanna: All Options Considered
Bloomberg (Podcast)
There has been a lot of information for the market to digest so far this year and rates volatility has drifted lower with the Fed on hold for now, while elevated US economic policy uncertainty has helped support VIX. In this edition of the All Options Considered podcast, BI's Chief Global Derivatives Strategist Tanvir Sandhu is joined by Chris Murphy, Co-Head Derivative Strategy at Susquehanna, to discuss cross-asset volatility and flows. All Options Considered is part of BI's FICC Focus podcast.
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Markets Are Complacent on Euro as German Vote Raises Parity Risk; Options market shows majority of euro bets favor more gains; Surprise outcome could push euro below $1.03, Pepperstone says
Naomi Tajitsu and Vassilis Karamanis - Bloomberg
Euro traders risk getting too comfortable as the clock ticks down to German elections this weekend.
There's an unusual calm in the derivatives markets: the majority of euro options expiring the day after Sunday's vote tilt in favor of more gains and bearish sentiment on the common currency has faded. Stock markets are also pricing a benign outcome, with Germany's benchmark DAX gauge at a record high.
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Wall Street Is Selling ETFs That Mimic the Private Equity Boom
Vildana Hajric - Bloomberg
Wall Street is still awaiting regulatory approval for the first full-blown private-asset ETFs, but for now opportunistic issuers are continuing to churn out products that claim to replicate the booming asset class - and stretching the definition of "liquid private equity." The movement to debut private-asset ETFs gained momentum last year after Apollo Global Management and State Street Global Advisors filed for a fund that would directly hold private credit investments. Regulators are still considering whether - and how - such a product would be allowed to function given that the underlying instruments are inherently hard to trade.
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How Banks Turned Into Giant Synthetic Hedge Funds; Are lenders in the business of making big bets?
Joe Weisenthal and Tracy Alloway - Bloomberg
Hedge funds are notorious for making big and sometimes risky trades. Banks, meanwhile, are supposed to be a lot more boring by comparison - for obvious reasons. But in recent years, we've seen banks like Silicon Valley Bank make some pretty bad bets themselves. Elham Saeidinezhad, an assistant economics professor at Barnard College, Columbia University, argues that banks have been turning into giant "synthetic hedge funds" by blending traditional lending activities with advanced financial strategies. The big question, of course, is whether they should be doing this at all, given that banks typically operate with a lot more regulatory constraint and might not be as nimble when it comes to entering or exiting positions.
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SwapsInfo Full Year 2024 and the Fourth Quarter of 2024
ISDA
Interest rate derivatives (IRD) trading activity increased in 2024, driven by interest rate volatility, adjustments in central bank policies and shifting market expectations on inflation and economic growth. Index credit derivatives also saw increased activity, as measured by traded notional, as market participants responded to a changing macroeconomic environment. Factors including credit spread fluctuations, corporate default concerns and geopolitical uncertainties led to higher demand for credit hedging.
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| | | | | | Exchanges | | | 2024 Year in Review
Walt Lukken and Alicia Crighton - FIA
As we close out another consecutive year of record growth in our markets, a review of FIA's work throughout 2024 demonstrates the breadth, effectiveness and depth of our engagements.
Fundamentally, that record growth would not have occurred without open, transparent and competitive markets. Other drivers of that growth stand out, too.
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| | | | | | Regulation & Enforcement | | | Canadian Securities Administrators Announces Temporary Exemptions For Derivatives Market Participants
Mondovisione
The Canadian Securities Administrators (CSA) today published Coordinated Blanket Order 96-933, which provides temporary exemptions from certain derivatives data reporting requirements relating to unique product identifiers for commodity derivatives. The Coordinated Blanket Order enables market participants to continue to report unique product identifiers for commodity derivatives as required under current derivatives trade reporting rules after amendments to those rules come into effect on July 25, 2025.
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| | | | | | Moves | | | OCC Welcomes J.P. Morgan Executive Michael Kurd to Board of Directors
OCC
OCC, the world's largest equity derivatives clearing organization, today announced the appointment of Michael Kurd, Managing Director, Head of Americas Prime Financial Services at J.P. Morgan, as a Member Director to its Board of Directors. Kurd brings with him more than 20 years of experience, primarily in equity derivatives trading. "We're pleased to welcome Michael to our board as a Member Director," said Craig Donohue, OCC Chairman. "His familiarity with our industry will serve as a valuable addition to our leadership bench. Together, our Board's collective experience and guidance support our goals of driving operational excellence and innovation, helping OCC ensure confidence in the global financial markets."
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| | | | | | Strategy | | | Stock markets may face correction, says Goldman Sachs
Nell Mackenzie - Reuters
Wall Street stocks could be facing a correction because of ructions in the options market, Goldman Sachs specialist Scott Rubner said in a Thursday note seen by Reuters on Friday.
Roughly $2.7 trillion of U.S. stock market derivatives are due to expire on Friday, which if not exercised, will put pressure on stock markets and stoke volatility, the note said.
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Opinion: Nvidia options traders are vastly overestimating how earnings will move the stock. Just look at these charts.; Nvidia options aren't a good trade, this expert says. Here's what he likes.
Lawrence G. McMillan - MarketWatch
Tech bellwether Nvidia is due to report earnings on Feb. 26 after the close of trading. The price of options can give you an idea of just how much a stock will move after earnings are reported. Specifically, the price of the at-the-money straddle (call price + put price) is the market's estimate of the size of the move that is going to take place after the earnings announcement.
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Volatility May Surge As Options Expiration Unleashes Market Forces
Seeking Alpha
Volatility (VIX) will likely return to the market in a big way starting next week, as realized volatility levels have fallen sharply and the stabilizing forces from the February options expiration pass. This reset in the options market should allow for daily trading ranges to expand, increasing realized volatility and, more importantly, pushing implied volatility levels higher.
To make matters worse, it is happening when implied correlations are low and demand for tail risk protection is high. The conditions seem ideally aligned for the recent period of calm to end.
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| | | | | | Miscellaneous | | | Trump's Cuts at US Agencies Starve Internet Watchdogs That Fight Disinformation; Fact-checking groups warn against surge of online falsehoods; Nonprofits slash operations and staff as US reduces support
Jeff Stone and Daniel Zuidijk - Bloomberg
An internet watchdog that identified participants in the Jan. 6 Capitol insurrection is preparing to cut staff. A media startup in Kosovo that hunts Russian disinformation has shuttered a weekly show amid a divisive political landscape. Privacy advocates are dialing back work in Iran that helps users in the Islamic Republic browse the web freely. Around the world, nonprofits that target online extremism and authoritarian propaganda are slashing operations and laying off employees after a government cost-cutting push led by X owner Elon Musk with President Donald Trump's blessing halted vital US support, according to nearly a dozen people familiar with the moves.
/jlne.ws/4gXQ98d
OCC Stories: Sirisha Tallapragada on Building Confidence as a Team
OCC
Sirisha Tallapragada is a software engineer on the Data Management team in OCC's Chicago office. In her OCC story, she describes how her team supports her professional development, whether it's providing encouragement to take on a new task or sharing advice for troubleshooting code.
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