| March 07, 2024 | | | | | Jeff Bergstrom
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Term of the Week - Compensation for a Potential Obligation
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This week's Term of The Week is Compensation for a Potential Obligation.
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| | | | | | Lead Stories | | | Zero-day hedging takes root in new asset classes; Option users move beyond equity indexes in search of cheaper, sharper hedging tools
Faye Kilburn - Risk.net
Zero-days-to-expiration (0DTE) options trading is moving beyond equity indexes to other asset classes and sectors - notably exchange-traded funds (ETFs) - as investors seek to achieve more cost-effective and precise protection against same-day risks.
The market is "very hungry" for liquid ways of putting on targeted hedges, across assets and sectors on a shorter time scale, says Amit Deshpande, head of fixed income quantitative investments and research at asset manager T Rowe Price.
/jlne.ws/3v3Jzv7
CEO of Options Powerhouse Cboe Swats Down Talk of a Takeover; Fredric Tomczyk has slowed M&A, focused on organic growth; Exchange has made it 'very expensive' for potential acquirers
Katherine Doherty - Bloomberg
Cboe Global Markets Inc. is aiming to grow too large for potential acquirers to swallow up. After years of speculation about takeover possibilities, the exchange operator's new chief executive officer says it's unlikely a suitor will make an offer that works. "We're 100% focused on making it very expensive if anybody wants to acquire us, and we'd be very suspect of what would actually get done," Fredric Tomczyk said in his first media interview since taking over in September. "If you walk through the logic, it's not obvious to us that anybody would be allowed or able to do it."
/jlne.ws/3V5dAW0
SEC Defers Decision on Spot Bitcoin ETF Options Trading
Emily Graffeo - Bloomberg via Yahoo Finance
The US Securities and Exchange Commission has extended the timeline for which it will make decision on approving the trading of options on exchange-traded funds that invest directly in Bitcoin.
/jlne.ws/3v1BQh4
Spike in Bitcoin Volatility Heralds an Early Test of US ETF Demand; Gauge of implied Bitcoin swings is at highest since FTX crisis
Sunil Jagtiani - Bloomberg
Bitcoin price swings are becoming more intense following the digital asset's run to a record high, and a key question now is how investors in US exchange-traded funds for the cryptocurrency will react.
The T3 Bitcoin Volatility Index, which uses options prices to give a sense of expected 30-day swings in the token, has jumped to the highest level since the aftermath of the collapse of Sam Bankman-Fried's FTX exchange. The spike suggests the crypto market should brace for more Bitcoin gyrations.
/jlne.ws/3ItRWDo
Bitcoin's record-breaking run could postpone Fed rate cuts, JPMorgan says
Matthew Fox - Business Insider
The record rally in bitcoin could lead the Federal Reserve to delay its planned interest rate cuts later this year, according to JPMorgan.
Strategist Marko Kolanovic said in a recent note that bitcoin's rally above $60,000, combined with record highs for stocks, suggests that "froth" is beginning to accumulate in risk assets.
/jlne.ws/4a4HuxM
Stocks are taking the elevator up and the escalator down, which is very unusual
Joseph Adinolfi - MarketWatch
There is an old saying on Wall Street: stocks take the escalator up and the elevator down.
It is rooted in the notion that while selloffs are often swift and intense, bull markets typically take more time to play out.
/jlne.ws/3V7DzfC
The hedge fund-bank nexus
Robin Wigglesworth - Financial Times
The Bank for International Settlement's latest Quarterly Review is out, and it includes an interesting little aside on prime brokerages, the corner of investment banks that service hedge fund clients.
PBs are one of the main links between traditional banks and shadow banks, offering services like custody, margin loans, derivatives, research and introduction to companies and investors. In return, they hope to get thiccc trading commissions.
/jlne.ws/3V5eou0
Inflows into bullish Nvidia ETF hit record on AI frenzy
Bansari Mayur Kamdar - Reuters
Investors have piled into Nvidia-focused exchange-traded funds (ETFs) this year on the frenzy around AI, with inflows into a bullish fund that tracks the shares of the chip designer hitting an all-time high on Wednesday.
Net daily inflows into the GraniteShares 2x Long NVDA Daily ETF (NVDL.O), opens new tab hit a record of $197 million, according to LSEG Lipper data. The assets managed by the ETF have grown to $1.41 billion from $213.75 million at the start of the year.
/jlne.ws/49HWamS
| | | | | | Exchanges | | | Miami International Holdings Reports Trading Results for February 2024; MIAX Exchange Group YTD Options and Equities Volumes at Record Levels while MGEX Futures Volume Surges 30.3%
Miami International Holdings
Miami International Holdings, Inc. (MIH) today reported February 2024 trading results for its U.S. exchange subsidiaries - MIAX , MIAX Pearl and MIAX Emerald (together, the MIAX Exchange Group), and Minneapolis Grain Exchange (MGEX). February 2024 and Year-to-Date Trading Volume and Market Share Highlights. Total multi-listed options volume for the MIAX Exchange Group reached a monthly total of 145.3 million contracts, a 6.0% increase year-over-year (YoY) and representing an increase of 3.4% from January 2024.
/jlne.ws/3V2ursB
February 2024 SEF trading activity
FIA
Trading volume on swap execution facilities reached a record $1.24 trillion in average notional value per day during February 2024. This was down 16.4% from the previous month but up 13% from the same month of the previous year. Compared to January 2024, trading was down in every sector.
Trading of interest rate swaps and other non-FRA rates products was $927.3 billion per day in February. This level was down 13.5% from January 2024 but up 15.9% from February 2023. Tradeweb had the largest share of trading volume with 65%. Tullett Prebon had the second highest share with 10.2%.
/jlne.ws/4a0fc7G
| | | | | | Regulation & Enforcement | | | Is One-Day Options Trading Gambling? Ex-SEC Chairman Says Yes
Gunjan Banerji - The Wall Street Journal
Investors have flocked to shorter-dated options contracts, creating frenetic around-the-clock activity.
The one-day options have come to be known as "0dte" trades, short for zero days to expiration. In one sign of their popularity, the 10 most actively traded contracts in the options market Wednesday expired the same day. They were all tied to S&P 500 and Nasdaq-100 exchange-traded funds.
/jlne.ws/3V7eDoi
SEC 'caution' extends Vanguard's ETF share class monopoly; Six managers have applied to use ETFs as share class of mutual funds but regulatory approval seems a long way off
Will Schmitt - Financial Times
More than nine months after Vanguard's lucrative patent on using exchange traded funds as a share class of existing mutual funds expired, rival asset managers are still waiting for approval to copy the structure. Guinness Atkinson, the first firm to convert a mutual fund to an ETF, is the latest to file for permission to add ETF share classes to its mutual funds. It is the sixth US asset manager to do so, joining Morgan Stanley, PGIA (the US division of Australia's Perpetual), Dimensional Fund Advisors, Fidelity and First Trust. Meanwhile, F/m Investments has filed to launch mutual fund share classes of its ETFs, bringing to seven the total filing for a multi-share class structure.
/jlne.ws/3wNCwra
| | | | | | Strategy | | | SPX Realized Skew Most Inverted in Over 20 Years
Mandy Xu - Cboe
Cross-Asset Volatility: Implied volatilities were mixed across asset classes last week as PCE inflation gained in line with expectations. Equities rallied to new highs, while the VIX index fell 0.6 pt wk/wk to 13.1% (24th percentile low). US rates vol declined marginally while the implied odds of a June rate cut increased to 66% (vs. 57% a week ago). The decline in real rates (US 10-year real yield fell 7bps on Friday) led to a surge in gold prices, with GLD ending the week at a record high. GLD implied vols saw a meaningful bid on the rally, with 1M implied vol up almost 2 vol pts on Friday to 11.4% (39th percentile) and screening as the richest cross-asset vol currently.
/jlne.ws/3v0N85g
Options Volume
Cboe (Video)
Scott Bauer looks at elevated YoY index options #trading activity, active $SPX strikes and busy single names ($JD $PLTR $NYCB) in today's #Vol411.
/jlne.ws/49FiUE3
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