| October 22, 2018 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Investment fund K2 accused of manipulative order 'spoofing' by OSC staff
Barbara Shecter - Financial Post
OSC staff allege there were about 60 incidents of 'impugned trading' involving derivatives between October and December of 2016
bit.ly/2EA9G1W
****SD: A Canadian options spoofing story! Apparently, folks at K2 would place a small electronic order on the Montreal Exchange via direct electronic access to distort the bid ask spread, initiate chats with bank desks to execute an order on the other side and then cancel the electronic order. In an example given by the OSC, K2 was able to bring down the ask for unnamed put options it wanted to buy by .20 cents. The regulatory filing can be found here. The Globe and Mail (SUBSCRIPTION) also has info on the enforcement action.
FX options flag uncertainty before U.S. midterm election; bonds complacent
Gertrude Chavez-Dreyfuss and Richard Leong - Reuters
Currency options investors are bracing for increased volatility and possible U.S. dollar weakness going into the U.S. midterm elections next month. But in the bond market, investors don't see the midterm election as a major catalyst for moves in interest rates.
/reut.rs/2EGyAwH
5th MIAX Petition for Review Granted By Patent Trial and Appeal Board Against FTEN Patent
MIAX
Miami International Holdings, Inc. (MIH), the parent holding company of the MIAX Options and MIAX PEARL exchanges (MIAX), today announced that a 5th MIAX petition for review of the patents asserted against MIAX has been granted by the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office, with the PTAB again finding that it is more likely than not that the claims of this patent are unpatentable under current law.
/goo.gl/dUW7yD
****SD: If MIAX can get the sixth and last patent dispute off its plate, it can focus on its Emerald exchange (to launch in Q1 2019) and the recently approved options on the SPIKES offering.
As Brexit Drags On, Investors Seek More Protection
Avantika Chilkoti - WSJ (SUBSCRIPTION)
For U.K. investors, an uncertain future just got more uncertainÂand many aren't taking chances.
This week's stall in Brexit talks dashed any immediate hope of clarity over what Britain's eventual deal with the European UnionÂif there is one at allÂmight look like. That left investors still looking for ways to protect themselves.
/on.wsj.com/2EDYJw3
****SD: From the piece - "Since August, the cost of long-dated currency options ... has reached its highest level since March 2017." A portfolio manager at Neuberger Berman has the best quote - "Nothing has been done, so I don't see how it can be anything other than a mess." Bloomberg has more about the pound and Brexit - Deja Vu for Weary Pound Traders as Focus Stays on U.K. Politics
OCC has Esma application suspended
James thursfield - Global Investor Group (SUBSCRIPTION)
The OCC's application for Esma recognition has been put on hold amid the EC's inability to provide equivalency
bit.ly/2ECKAPR
****SD: Gee whiz. For an idea of how long this has been slogging along, consider that the OCC applied for recognition with ESMA in 2013. For a list of those CCPs that have applied for recognition by ESMA go here.
Wall Street enjoys trading bonanza from market turmoil; Big banks have best summer for equities revenues since 2009
Laura Noonan and Robert Armstrong - Financial Times (SUBSCRIPTION)
Wall Street firms are on track for their best year in equities trading for a decade - a silver lining to the market turmoil that has created misery for big bank shareholders over the past few months.
/on.ft.com/2R96rQt
October Market Collapse Pops Illusion That Fundamentals Matter
Peter Cohan - Forbes
Netflix reported much better than expected subscriber growth on October 16. So why on October 18 did its stock trade 9% below its price the day after the announcement?
The answer is simple: fundamentals are not driving stock prices -- instead it's money flows that matter.
bit.ly/2ECynL1
Global growth outlook for 2019 dims for first time: Reuters polls
Indradip Ghosh and Rahul Karunakar - Reuters
The outlook for global growth in 2019 has dimmed for the first time, according to Reuters polls of economists who said the U.S.-China trade war and tightening financial conditions would trigger the next downturn.
At the start of 2018, optimism about a robust global economic outlook was almost unanimous among respondents.
But Reuters polls of more than 500 economists taken this month showed a downgrade to the outlook for 18 of 44 economies polled, with 23 unchanged. Only three were marginally upgraded.
/reut.rs/2ED8OcC
| | | | | | Exchanges and Clearing | | | Treasury Futures Calendar Spreads with Tails
CME Group
In August 2015, CME Group began offering User-Defined Spreads (UDS) type for Treasury Futures Calendar Spreads with Tails on the CME Globex electronic trading platform. UDS enable market participants to customize and create the precise calendar spreads with tail percentages they wish to trade in real time, and are supported alongside exchange-defined futures spreads...
bit.ly/2EAuMgk
Maker-Taker Malaise: LSE's Turquoise Bins Broker Rebates
Tim Cave - TABB Forum
The focus on exchange rebates moved from the US to Europe this month, as equity venue Turquoise announced plans to abolish certain rebates on its lit book. TABB's Tim Cave examines the maker-taker controversy as efforts to re-tilt the market structure playing field back in favour of investors gather steam globally and breaks down the drivers and implications of Turquoise's decision.
bit.ly/2EDAhLu
****SD: This is about equities, but market fee structure discussions apply to all markets.
| | | | | | Moves | | | Citi once again adding traders to its Delta One desk
Beecher Tuttle - eFinancialCareers
For the second time in as many years, Citi appears to be reloading its Delta One sales and trading teams. The bank has made at least three new hires in the last month alone.
Andrew Dawkins, former head of Delta One sales in the Americas for BNP Paribas, joined Citi in October as a managing director working out of New York. Citi also added Claus Hein, former head of synthetic equity distribution for EMEA at Deutsche Bank. Hein started in London last month as a director of Delta One sales. The bank also just poached ex-Goldman Sachs strat Sriram Bharadwaj to work on its forwards desk as a Delta One trader.
bit.ly/2ECoM6N
| | | | | | Regulation & Enforcement | | | FIA EPTA comments on ESMA Consultation Paper in relation to tick sizes for third-country instruments
FIA
FIA EPTA agrees with ESMA's suggestion to recalibrate the tick-size regime for instruments where the main pool of liquidity is located outside the EU (third country instruments). We believe that in order to ensure and preserve high-quality liquidity across financial markets, it is essential that all trading venues offering trading in a particular third financial instrument all apply to the same tick size for that instrument.
bit.ly/2EMglWW
| | | | | | Technology | | | Wall Street Horizon Upgrades its API and Web-based Application 'Enchilada'
John D'Antona Jr. - Traders News
Wall Street Horizon, a provider of market-moving corporate event data, today announced significant enhancements to its application programming interface (API) and graphical user interface (GUI) functionalities, as well as expanded access to corporate event data with the addition of 2,000 global companies to its customizable platform, Enchilada.
bit.ly/2R7hGbP
****SD: That's a lot of tortilla.
Hedge Funds See Huge Potential in Alternative Data
John Manning - International Banker
The buy side of the investment world is constantly looking for new methods to generate alpha, the metric that represents the active return on an investment versus the performance of a broader market index or benchmark. In order to beat the market, hedge funds in particular now seek new and creative ways of gaining an informational edge over their competitors. The more information they have, the more informed they should be when making trading decisionsÂand theoretically, the more returns they should realise.
bit.ly/2EDk4WH
Nasa says quantum computing is the future for funds
Owen Walker - Financial Times (SUBSCRIPTION)
Embracing quantum computing may be a small step for asset managers but it would be a giant leap for investment decision-making, says a forthcoming report co-written by the US space agency.
Nasa worked with the Universities Space Research Association, an academic group, and Standard Chartered, the UK bank, to investigate the efficiency benefits that quantum computers could bring to investment portfolios.
/on.ft.com/2R4QMkV
FlexTrade Integrates ipushpull Real-Time Interoperability Platform into FlexNOW EMS
BusinessWire
FlexTrade Systems (@FlexTrade), a global leader in multi-asset execution and order management systems, today announced the integration of ipushpull (iPP), a real-time interoperability platform, with its FlexNOW execution management system to provide users with access to iPP's live data sharing and workflow automation between desktop applications, messaging platforms, in-house systems and cloud services.
/goo.gl/3LBQwX
| | | | | | Strategy | | | Stocks Could Be Near a Bottom, Says One Options Signal
Todd Salamone - Schaeffer's Investment Research
Wait for these signs to confirm that the risk-reward scenario is tilted back in the bulls' favor.
bit.ly/2EE27XY
Last Week's Big Move Was Dominated by Options Expiration
Maleeha Bengali - TheStreet
...There is no doubt that the market is vacillating between macro headwinds following economic slowdown and robust company earnings; not sure which way to go. The volatility does not help. In addition, given the moves in bond yields and the yield differential between equities and bonds, risk parity funds have to balance their portfolios by switching out of one into the other to balance their liabilities. In this case, buying bonds and selling equities -- given the blow out in yields recently. We could see the end-of-day selling pressure as U.S. market sells off into the close over the last half an hour. According to a JPM report released on Friday, "systemic outflows were balanced by inflows from fundamental buyers, fixed weight rebalances."
bit.ly/2EPycfF
Gold Price Tempts BofAML to Wager on Short-Term Bullish Options
Cormac Mullen - Bloomberg (SUBSCRIPTION)
BofAML strategists buy January calls on SPDR Gold ETF; Recommend gold as a cross-asset hedge and value play
The burgeoning interest in gold has reached Wall Street, with Bank of America Merrill Lynch strategists backing bullish options linked to the precious metal.
/bloom.bg/2EM9RY6
| | | | | | Miscellaneous | | | Short-term boost or 'the trigger that kicks off a brutal, worldwide, financial crisis?'
Shawn Langlois - MarketWatch
Just a couple of weeks until the mayhem of the midterm elections, and a serious bump in volatility VIX, is keeping investors on their toes. One look at the overnight swings in the futures market provides the latest bit of evidence.
The silver lining is that if recent history is any indication, the choppiness might turn out to be a blessing for bulls. At least in the short term.
/on.mktw.net/2EAnc5m
What's more volatile than bitcoin? You may be surprised
Aaron Hankin - MarketWatch
Day traders looking to make a quick buck buying and selling bitcoin might be better off switching lanes as volatility in the world's largest digital currency continues to decline.
In fact, volatility in the No.1 virtual currency is now below some of the biggest and most popular stocks on Wall Street.
/on.mktw.net/2EDdNKD
Palladium Nears Record After Hedge Funds Piled In
Marvin G Perez - Bloomberg (SUBSCRIPTION)
Palladium climbed near a record as the U.S. plans to pull out of the nuclear weapons pact with Russia, fueling tensions with one of the largest producers at a time when consumers are already scrambling for supplies.
/bloom.bg/2EDnRDm
****SD: "Wagers on the metal's price advance outnumbered bearish bets by 10,122 futures and options, the most since the mid-June, Commodity Futures Trading Commission data released Oct. 19 showed."
Why Fund Investors Should Look Beyond Fees
Jeff Brown - WSJ (SUBSCRIPTION)
Fidelity Investments recently escalated the cost-cutting wars among index-fund giants such as Vanguard Group, Charles Schwab Corp. and State Street Corp. by launching four index funds that charge no management fees.
The zero-fee funds are the latest salvo in a years' long price war among fund firms seeking to attract cost-conscious investors who have been flocking to plain vanilla funds that track indexes like the S&P 500, instead of spending big money on funds run by hotshot managers.
/on.wsj.com/2ECltwt
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