| October 03, 2024 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | India has rapidly become the world's largest equity derivatives market, driven primarily by inexperienced retail investors engaging in speculative trading, Bloomberg reports. The market's annual turnover now surpasses the total output of India's economy, with risky options trading posing potential financial instability. The Securities and Exchange Board of India (SEBI) has introduced new regulations, set to take effect in November 2024, aimed at curbing speculative trading by limiting short-term option contracts and increasing margin requirements. Despite benefiting stock exchanges like the National Stock Exchange of India (NSE), these changes are expected to reduce trading volumes and hurt high-frequency traders and domestic funds.
Trading Technologies (TT) has created a new Platform Services business unit, merging its global Product Development and Services teams. Jason Shaffer has been appointed Chief Platform Officer to lead this integrated unit. This move finalizes TT's organizational changes following the establishment of six business lines earlier in the year, including Futures & Options, Fixed Income, and FX. CEO Keith Todd emphasized that the new unit will provide the core platform for all TT's services, which have processed over 2.5 billion transactions in 2024. Former Chief Services Officer Vasco Sousa has left the company.
Intercontinental Exchange (ICE) reported strong trading volumes for September and Q3 2024, with notable records in energy and interest rate derivatives. September saw total average daily volume (ADV) up 29% year-over-year, driven by a 24% rise in energy ADV, with Brent and WTI futures and options hitting record levels. Natural gas ADV surged 45%, including a 110% jump in Asia Gas. Environmental products also saw a 60% increase. In financials, total ADV rose 40%, with interest rates ADV up 50%. For Q3, total ADV grew 28% year-over-year, with energy up 23%, and record performances in Brent, WTI, and natural gas trading. ~JJL
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Indexing the Future: How AI and ESG are Reshaping Asset Management
JohnLothianNews.com
In the ever-evolving world of finance, asset managers are facing a new frontier: the intersection of artificial intelligence, environmental, social, and governance (ESG) concerns, and the growing appetite for private markets. Rick Redding, CEO of the Index Industry Association, offers a glimpse into this brave new world.
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Corties Draper - John Lothian News
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Corties Draper - John Lothian News
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| | | | | | Lead Stories | | | Why India's Giant Options Market Poses a Danger to Financial Stability
Chiranjivi Chakraborty - Bloomberg
India has gone from being a small player in the equity derivatives market to the world's largest, all within just five years. Most of the new demand is coming from inexperienced retail investors with an appetite for risk. Annual turnover in the market is now greater than the entire output of Asia's third-biggest economy. Dabbling in these options can land investors with big losses when bets go wrong. Regulators are increasingly concerned about the potential danger to financial stability, and India's securities watchdog introduced a slew of steps in October to limit equity derivatives trading, attempting to shield retail investors whose appetite for the products fueled their rise.
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US Election Hedging Likely to Be Last-Second, Options Pros Say; Heightened volatility at present is more about Fed, economy; One exception is solar sector, where candidates clearly differ
David Marino - Bloomberg
Volatility in US equity options remains relatively high by some measures, and while there are handful of reasons for that, the upcoming presidential election isn't one of them, market flows indicate. The Cboe Volatility Index - or VIX - tends to increase into October during election years before selling off just before the event, said Tanvir Sandhu, chief derivatives strategist at Bloomberg Intelligence. This year, though, concerns about the US economy and pace of Federal Reserve interest-rate cuts are more in the forefront of investors' minds, at least for now, options pros say.
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Oil Options Show Market Braced for More Gains on Mideast War; Brent, WTI options skews showing a bias toward calls over puts; Bullish Brent call option volumes hit a record on Wednesday
Yongchang Chin and Alex Longley - Bloomberg
Options show investors are betting that oil prices will rise further as escalating hostilities between Israel and Iran risks damaging energy infrastructure in the Middle East.
Call options, which profit from when prices rise, were at a premium to puts at Wednesday's close for the first time since the middle of August. The volume of bullish Brent calls hit a record - propelled higher by activity in contracts at $100 and above.
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India's BSE to discontinue weekly options linked to Bankex after new derivatives rules
Jayshree P Upadhyay - Reuters
India's BSE said it will discontinue weekly derivative contracts linked to Bankex and Sensex 50, indicating the stock exchange operator will retain only contracts linked with its benchmark BSE Sensex, an index of 30 bluechip stocks.
The move follows the Securities and Exchange Board of India's order on Tuesday that requires exchanges to cut down the number of weekly options contracts available to investors to one from Nov. 20.
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ANALYSIS: Cboe's derivatives head Clay reflects on a volatile year
Radi Khasawneh - Cboe
Cboe Global Markets one year ago embarked on an effort to align its global derivatives business under one umbrella, and the decision has proved prescient as the markets have been buffeted by unexpected bouts of volatility.
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Ethereum Options Volatility Outstrips Bitcoin's as US Election Looms. Why it Matters; Traders are positioning for volatility tied to a cloud hanging over the future of decentralized finance regulations in the US.
Sebastian Sinclair - Decrypt
Ethereum's volatility readings are outpacing Bitcoin, with the gap growing over the last few months as traders brace for impact ahead of the upcoming US election in November.
Implied volatility for 30-day at-the-money Ethereum contracts relative to Bitcoin has widened to almost 7%, Nick Forster, founder of DeFi derivatives protocol Derive, told Decrypt.
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Bank of England warns of 'future stress' from hedge fund bets against US Treasuries; Report also identifies geopolitical turmoil and cyber attacks as major risks to UK financial stability
Martin Arnold - Financial Times
The Bank of England has warned of rising "vulnerabilities" in the financial system stemming from increased bets by hedge funds against US government bonds, which reached a record high of $1tn in recent months. The BoE said on Wednesday that if hedge funds unwound these "short" positions it would have "the potential to amplify the transmission of a future stress". These short bets are often part of so-called basis trades, where hedge funds aim to profit from small discrepancies between prices of US Treasuries and futures contracts linked to them.
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ETF flows smash record in third quarter; More than $500bn pumped into the fund format despite volatile markets
Emma Boyde - Financial Times
Quarterly flows into global exchange traded funds have smashed previous records with investors throwing half a trillion dollars worth of new money into the vehicles over the past three months. Data from ETFGI, a consultancy, indicates that $501bn of net new money had already flowed into ETFs by the end of trading on September 27, which means that with one trading day to go until the end of the third quarter flows had already soared past the previous record of $398bn set in the first quarter of this year.
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Hedge Funds' Big China Bets Score 25%-Plus September Gains; Blue Creek, Yunqi funds also up more than 25% last month; Bullish China funds reaped big gains from early equity rebound
Bei Hu and David Ramli - Bloomberg
China's stimulus blitz handed more than 25% returns in September to some hedge funds as the nation's stocks surged, according to people with knowledge of the matter.
Triata Capital's China fund soared 44% last month, while that of Blue Creek made an estimated 31% gain and Yunqi Capital's jumped 26%, the people said, asking not to be named discussing private information. Some funds wiped out earlier losses for the year. The MSCI China Index advanced 23% in September, the most since November 2022.
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| | | | | | Exchanges | | | Trading in Tuesday and Thursday Crude Oil Options Surpasses 100,000 Contracts as Demand Soars
CME Group
CME Group, the world's leading derivatives marketplace, today announced that combined trading in its Tuesday and Thursday Crude Oil Weekly options has surpassed 100,000 total contracts traded since launching on July 22, 2024. This week, more than 50,000 Crude Oil Weekly options also traded on a single day for the first time ever as demand for short-term options soars.
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CME Group to Launch Options on E-mini Select Sector Futures and Dow Jones U.S. Real Estate Index Futures on October 28
CME Group
CME Group, the world's leading derivatives marketplace, today announced plans to launch options on six E-mini Select Sector futures, as well as on Dow Jones U.S. Real Estate Index futures, on October 28, pending regulatory review.
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Intercontinental Exchange Reports September and Third Quarter 2024 Statistics
Intercontinental Exchange
Intercontinental Exchange, Inc. (NYSE:ICE), a leading global provider of technology and data, today reported September 2024 trading volume and related revenue statistics, which can be viewed on the company's investor relations website at https://ir.theice.com/ir-resources/supplemental-information in the Monthly Statistics Tracking spreadsheet. "ICE began building a global multi-asset network of exchanges and markets over two decades ago, and this past quarter we witnessed record trading across commodities, specifically in our global energy markets, as well as interest rate derivatives," said Ben Jackson, President of ICE. "Notably, Brent futures and options, used to price three quarters of the world's internationally traded crude oil, traded at record quantities in the last quarter, solidifying its role as the global benchmark price for oil."
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Miami International Holdings Announces Renaming of Minneapolis Grain Exchange to MIAX Futures Exchange
MIAX
Miami International Holdings, Inc. (MIH), a technology-driven leader in building and operating regulated financial markets across multiple asset classes, today announced the renaming of Minneapolis Grain Exchange, LLC (MGEX), a wholly owned subsidiary of MIH, to MIAX Futures Exchange, LLC (MIAX Futures). MIAX Futures provides MIH with a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO) to list and trade futures and options on futures products. MGEX's flagship Hard Red Spring Wheat (HRSW) futures and options will be rebranded as Minneapolis Hard Red Spring Wheat futures and options concurrent with the name change to MIAX Futures.
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US NYMEX natgas average daily futures, options volumes rise in September
Reuters
Average daily volume (ADV) in U.S. natural gas futures and options on the New York Mercantile Exchange rose in September from a year earlier, data from its owner CME Group showed.
For the month, futures ADV was 492,825 contracts, up 35.3% from a year ago. Futures ADV hit a monthly record of 677,112 contracts in November 2018.
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CME Group Sets New, All-Time Quarterly and September ADV Records Driven by Growth Across All Asset Classes
CME Group
CME Group, the world's leading derivatives marketplace, today reported its Q3 and September 2024 market statistics, with average daily volume (ADV) reaching new, all-time records of 28.3 million contracts in Q3 and 28.4 million contracts in the month of September, and growth across all asset classes in both periods.
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| | | | | | Regulation & Enforcement | | | Betting on US Elections Gets Fresh Green Light From Court; Court lifted stay on Kalshi's politics derivatives contracts; CFTC failed to prove threat to integrity of vote, judge says
Sabrina Willmer and Lydia Beyoud - Bloomberg
Americans can again legally wager millions of dollars on the outcome of congressional races after a US appeals court set the stage for a deluge of bets just five weeks before the November election. The US Court of Appeals for the District of Columbia on Wednesday lifted a stay on trading in Kalshi Inc.'s derivatives contracts over which party will control the House and Senate. The Commodity Futures Trading Commission has argued against the products, saying they would harm the public by affecting the integrity of elections.
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SEC Enforcement Director Who Pushed for Big Fines Steps Down; Gurbir Grewal took a tough stance on the fast-growing cryptocurrency industry and pushed for big fines against Wall Street firms
Dylan Tokar - The Wall Street Journal
Gurbir Grewal, who oversaw a stepped-up period of enforcement against Wall Street and the fast-growing cryptocurrency industry, is departing the U.S. Securities and Exchange Commission, the agency said Wednesday. Grewal, a former New Jersey attorney general, was little-known on Wall Street when he was appointed in 2021 to serve as director of the agency's enforcement division. There, he became known for advocating for bigger fines against securities law violators and for taking a tough stance on cryptocurrency, which he cast as a new form of the same activity the SEC had regulated for decades. "The technology is actually beside the point. We have to regulate markets and protect investors based on current realities and existing risks," Grewal said, at a law school symposium in July.
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Bitwise Makes XRP ETF Plans Official With SEC Filing; The asset manager's S-1 comes a day after it registered a trust entity with the state of Delaware.
Helene Braun - CoinDesk
Bitwise took a big step toward launching an exchange-traded fund tied to XRP (XRP), the Ripple-associated token that's among the biggest cryptocurrencies in the world. On Wednesday, the asset manager submitted an S-1 form to the U.S. Securities and Exchange Commission, a requirement for companies seeking to issue a new security and be listed on a public stock exchange. "Today we filed an S-1 for a Bitwise XRP ETP!" Bitwise CEO Hunter Horsley wrote in a post on X. "For more than a decade, XRP has been an enduring crypto asset that many investors want exposure to."
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| | | | | | Technology | | | Trading Technologies establishes Platform Services business unit
Trading Technologies via PR Newswire
Trading Technologies International, Inc. (TT), a global capital markets technology platform provider, today announced the creation of a Platform Services business unit, bringing together the company's global Product Development and Services teams into a single group. Jason Shaffer assumes the new role of Chief Platform Officer with responsibility for leading the newly integrated unit. The move represents the final organization change following the establishment of six lines of business - Futures & Options, Fixed Income, FX, Data & Analytics, Compliance and QTS (Quantitative Trading Solutions) - at the start of the year.
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| | | | | | Strategy | | | S&P 500 Could Jump Another 5% This Year, Goldman Says. Expect Volatility First.; The benchmark index could pass 6,000 points by the end of 2024, technical strategist Scott Rubner said in a research note.
George Glover - Barron's
Stocks will rack up more gains over the final two months of 2024-but investors will have to weather a stormy three-and-a-half weeks before that, according to Goldman Sachs.
In a research note published Wednesday, technical strategist Scott Rubner wrote that he's "bullish on U.S. equities for a year-end rally starting on Oct. 28," adding that his prediction the S&P 500 would end 2024 at 6,000 points now looks "too low." The benchmark index would have to climb another 5.1% to hit that level.
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The strategy a $69 billion hedge fund uses to make sure it never loses money in the stock market
Matthew Fox - Markets Insider
The $69 billion Millennium Management hedge fund employs a simple yet effective trading strategy to make sure it almost always makes money in the stock market: cut losing stock positions as quickly as possible.
The firm, which is one of the largest hedge funds in the world, was founded in 1989 and since then has lost money in just a single year - 2008, when a financial crisis turned into a sharp recession and sent the S&P 500 crashing 38%.
The fund still managed to massively outperform the S&P 500 that year, delivering a small loss in the low single digits.
/jlne.ws/4dz13zV
The $50K SPY Options Hedging Strategy
John Bowman - Seeking Alpha
As a financial advisor, I often consider how to hedge portfolios. This is not a straightforward question. My first response is, "what are we hedging against?"
In the most common scenario, the answer I get from clients boils down to systemic risk. When they own an index like the S&P 500, which will frequently be through the SPDR S&P 500 ETF Trust (NYSEARCA:SPY), they want to hedge against dramatic events outside their control, like wars or stagflation like we saw in 2022.
/jlne.ws/3NdEfuG
| | | | | | Miscellaneous | | | Betting on sports is just like betting on the stock market, right? Wrong.
Tessa Campbell - Business Insider
Gambling is a high-risk, heart-pounding activity that can drain people's wallets. While some hands-on traders approach betting on the stock market similarly to betting money on sports, the truth is they should have very little in common.
"Good investing isn't exciting, but gambling is," Dan Egan, a financial planner and VP of behavioral finance and investing at Betterment, told Business Insider.
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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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