| August 14, 2018 | | | |  | Spencer Doar
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Tuesday's Miscellany
Spencer Doar - JLN
Via Jim Kharouf - Longtime options industry executive Kevin Murphy has written a new book, The Three Rooms, which focuses on helping increase awareness of your own thoughts and emotions. Can't wait to read it.
E*TRADE reported its July activity. DARTs were down 8 percent from June but up 20 percent from a year ago. Derivatives represented 34 percent of DARTs.
A PowerPoint presentation from the CAT NMS, LLC Operating Committee covering recent Consolidated Audit Trail updates can be found here.
Employee stock options are not normal fodder for this newsletter, but I feel obligated to point out that a bunch of Tinder personnel are suing the owners of the app (InterActiveCorp and Match Group) saying that the owners attempted to lower the valuation of Tinder to avoid having to shell out money owed to the plaintiffs via their options.
Yesterday's top two stories from the newsletter were Risk.net's OCC's move to 'Cover 2' won't cost members more, CRO says (SUBSCRIPTION) and Tabb's CAT Is Not OATS ... CAT Is So Much More.
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Cinnober's new CEO will have to consider the next move
Jim Kharouf, JLN
The news that Veronica Augustsson was out as CEO of Cinnober Financial Technologies and newcomer Peter Lenardos was in was a shock.
Augustsson, who had been CEO the past six years and with the firm since 2002, grew up with the company and reached a pinnacle few women ever reach. She did so with warmth and a friendly smile, but she also had a vision to diversify the company into a variety of sectors beyond its core business of real-time clearing, risk and surveillance systems for exchanges. After all, there is a limited number of exchanges with clearing houses - although Cinnober's portfolio of clients is impressive.
bit.ly/2vLnzDm
| | | | | | Lead Stories | | | Controversial US derivatives rules resurface at the SEC; Derivatives rules first introduced in December 2015 have come up on the SEC's spring 2018 regulatory agenda, with a recommendation the rules be revisited.
Hayley McDowell - The Trade
Rules on the use of derivatives for registered funds in the US have been revived by US regulators three years after they were initially proposed.
/jlne.ws/2KSMycy
****SD: Is there such as thing as a non-controversial financial rule or piece of legislation?
US equity options market traders face pricing, transparency, and cost of execution issues, says TABB
Hedgeweek
According to new research from TABB Group, "Equity Options: Transparency and Simplicity are Clearly Not the Same," with no dark pools, hidden trades, internalisation schemes, and each execution hitting the tape being posted on a licensed and regulated exchange, trading in US equity options has propelled volume to more than 15 million contracts a day in May 2018 alone, as retail customers and firms continue to enter the space.
bit.ly/2MKmrX0
****SD: To purchase the study go here. Tabb and Reilly wrote a piece summarizing the theme of the $5,000, 17-page study - Equity Options Transparency: What You See May Not Be What You Get
Clients' Fear of Volatility Is an Opportunity; Options strategies can be useful, especially as markets get wobbly; here are some ways to introduce the subject to clients without scaring them away.
David S. Gilreath - WealthManagement
After becoming all too accustomed to the market's smooth ascent in 2017, many retail clients have been jolted by the return of volatility this year. Yet the resulting fear and angst present opportunities to serve clients better with options strategies that harness yo-yoing markets for additional returns.
/goo.gl/wMjR4A
****SD: The author said to talk about LTCM to illustrate excessive risk taking to clients.
As Brexit day nears, sterling is once again in for a rocky ride
The Economist
In the weeks following the Brexit referendum in June 2016 the pound gyrated wildly, losing 10% of its value. After a period of calm, sterling is looking shaky again. On a trade-weighted basis it has lost 5% of its value since April. On August 10th it fell below $1.28 for the first time in a year. Further depreciation looks likely, given uncertainty over the government's Brexit plans.
/econ.st/2P9e1Kn
ETFs Won't Cause The Next Wave Of Panic Selling In The Bond Market
Garth Friesen - Forbes
Don't believe it when people say ETFs will be responsible for the next wave of panic selling in the bond market. There is no evidence to support such a claim. In fact, they will help market liquidity, not hurt.
bit.ly/2P7BdJ6
****SD: These stories of late (Bloomberg has been banging this drum for a while) all cite a solid options market as one reason the ETFs will be OK in a pinch. For example, recently HYG (a big high-yield corporate bond ETF) has been a common entrant in the Top 10 Most Active ETF Options list and TLT (20-year Treasury ETF) sports a ton of open interest.
Emerging Markets Contagion? Maybe. Crisis? No.
Robert Burgess - Bloomberg
Emerging-market equities and currencies as measured by MSCI indexes both fell on Monday to their lowest levels since July 2017, and everyone wants to know whether the turmoil in Turkey will morph into some sort of global contagion that takes down financial markets. If you think of contagion as some sort of event that causes a broad repricing of financial assets, then, yes, contagion is a possibility. But a full-blown crisis? It's too early to say, judging by the markets.
/bloom.bg/2vHYCJb
****SD: Things have calmed down since yesterday. See BI's Turkish lira price stabilises as Erdogan attacks 'economic terrorists'
| | | | | | Exchanges and Clearing | | | Cboe Faces Moving Finish Line in Race for First Bitcoin ETF
Rob Urban and Lily Katz - Bloomberg (SUBSCRIPTION)
Cboe Global Markets Inc. wants to be the first to list a Bitcoin exchange-traded fund, though there's still a lot of work needed to win approval from the U.S. Securities and Exchange Commission.
"As we chip away at their issues to make them less concerned, at some point they'll be comfortable with an ETF," Chris Concannon, the Chicago-based exchange operator's president and chief operating officer, said in an interview.
/bloom.bg/2vLMxT6
****SD: For a great look at the issues facing a bitcoin ETF, listen to someone who would know, former Cboe employee Russell Rhoads, who penned this piece - The Reality Behind Approving a Bitcoin ETF - for his new employer, Tabb Group.
| | | | | | Strategy | | | China's Yuan Slump Almost Over, Says StanChart Veteran
Tian Chen - Bloomberg
...Offshore clients favor conservative option structures that have limited downside, which is very different from 2015; strike prices of the options are more "realistic"
/bloom.bg/2MMudzV
| | | | | | Miscellaneous | | | How EU's Biggest Polluter Escaped a Tripling of Carbon Price
Rachel Morison and Matthew Carr - Bloomberg (SUBSCRIPTION)
While carbon traders watch the cost of pollution rocket, Europe's biggest emitter of the greenhouse gas won't feel the pinch for years to come since it secured permits in advance at a third of the market rate.
/bloom.bg/2BaZ4EW
****SD: CO2 derivatives are at the center of this.
AQR: Investor Worries Over Trading Costs May Be Overblown
Julie Segal - Institutional Investor
The total costs of equity trading just went down.
In a new paper, AQR principals Andrea Frazzini, Ronen Israel, and Tobias Moskowitz argue that equity trading costs are actually lower than previous academic studies have shown. What sets their findings apart from previous studies is that the authors used execution data from $1.7 trillion worth of live trades made over 19 years by AQR Capital itself. The underlying data represented trades in 21 developed markets for nearly 10,000 stocks.
bit.ly/2vKFDNZ
****SD: It's an equities story, but is indicative of the spotlight being put on execution quality in all corners of the markets. Given that it is AQR, I'm sure they could provide valid insight on futures and options on futures transaction costs as well if they wanted.
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