| July 22, 2022 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | Goldman Floats Case for Lower VIX Even in Event of Recession
Isabelle Lee and Lu Wang - Bloomberg
A recent bout of volatility in US equities has prompted some traders to think Wall Street's so-called fear gauge should be higher. For Goldman Sachs Group Inc., that isn't necessarily the case.
In fact, strategists led by Rocky Fishman recommend investors buy puts on the Cboe Volatility Index, effectively betting on relative calm in coming months. The VIX, a gauge of cost for S&P 500 options, historically tends to move in the opposite direction of the equity gauge 80% of the time. At one level, the team's prediction for lower VIX implies a call for higher share prices.
/jlne.ws/3v9GUwH
China's launch of small-cap derivatives spawns new strategies, funds
Jason Xue and Brenda Goh - Reuters
Futures and options based on China's small-cap CSI 1000 Index (.CSI1000I) started trading in Shanghai on Friday, spawning fresh products and strategies from fund managers seeking to capitalize on the new hedging instruments.
The derivatives, which debuted on the China Financial Futures Exchange (CFFEX), offer investors tools to manage risks in a basket of 1,000 mostly innovative small tech companies, drumming up interest in the sector.
/jlne.ws/3zrtz5G
Hang Seng Tech Index: China Stocks Struggle to Lure Buyers After Epic Rout
Jeanny Yu - Bloomberg
A 40% slump in shares over the past year, the winding down of a hallmark investigation and vows of support for the sector should offer a solid buy signal for China's tech giants. But investors aren't so sure yet.
As the Hang Seng Tech Index approaches the second anniversary of its inception next week, traders say they remain wary about plowing money into companies in the benchmark. Their angst centers on the year-long government crackdown, which they see persisting even if the worst of the punitive measures may be over.
/jlne.ws/3z11LUb
'We are not offering forward guidance': ECB ditches policy that blocked earlier rate rise
Martin Arnold - Financial Times
The European Central Bank was unable to react to soaring inflation by raising rates as early as many policymakers wanted because of a commitment to forward guidance that it has now ditched after nine years, according to people involved in the decision.
The ECB surprised many economists by raising interest rates for the first time in over a decade by half a percentage point on Thursday, despite having guided until recently that it intended a move of only half that size.
/jlne.ws/3PMK8hz
2022 Is the Worst Year for Europe Stocks Since 2008, Goldman Says
Michael Msika - Bloomberg
Strategists have been slashing their year-end targets for European stocks, with those at Goldman Sachs Group Inc. and UBS Group AG now expecting the worst year for the region's equities since 2008.
The Stoxx Europe 600 Index will end 2022 at 444 index points, down 9.1% for the year and the worst annual performance since 2018, according to the average of 16 estimates in Bloomberg's monthly survey. Targets of the more pessimistic strategists indicate the poorest return since the 46% drop during the global financial crisis.
/jlne.ws/3aWhqfq
European shares log best week in two months despite volatility
Susan Mathew - Reuters
European shares notched up their best week in two months on Friday as concerns over an energy supply crunch eased, bringing some calm to investors worried about a big rise in interest rates and a political crisis in Italy.
The pan-European STOXX 600 index (.STOXX) closed 0.3% up at its highest level since June 10, while for the week it jumped nearly 2.9%.
/jlne.ws/3PNyfbj
| | | | | | Exchanges | | | London Can't Rebrand Its Way to Nasdaq Domination
Chris Hughes - Bloomberg
The UK financial regulator is worried that London's two-tier stock market â with its confusing "standard" and "premium" routes to listing - isn't working. Companies that don't qualify for the top slot would rather go to exchanges like Nasdaq or Euronext Amsterdam than take their place in what they see as a second-class category. The snag is that the Financial Conduct Authority's tentative solution risks some unintended consequences.
/jlne.ws/3PrOpY0
SGX Group and the New York Stock Exchange announce wide-ranging collaboration including dual listing of companies
SGX
Singapore Exchange (SGX Group), Asia's leading and most international multi-asset exchange, and the New York Stock Exchange, part of Intercontinental Exchange, Inc. (NYSE: ICE), a leading global provider of data, technology and market infrastructure, announced today the signing of a new agreement to collaborate on the dual listing of companies on both exchanges and work together in a number of other key areas focused on the capital markets.
/jlne.ws/3v9Lye7
| | | | | | Regulation & Enforcement | | | EU lawmaker calls for ban on 'payment for order flow'
Javier Espinoza, Sam Fleming, Philip Stafford and Adam Samson - Financial Times
A key EU lawmaker is set to back calls for a formal ban on brokers selling customers' share trades to market intermediaries, adding to momentum in favour of clamping down on the practice.
Danuta Hübner, a senior lawmaker in the European Parliament, said in a draft statement seen by the Financial Times that the concerns around the practice known as payment for order flow are "symptomatic of a broader issue" of national EU regulators interpreting rules differently.
/jlne.ws/3cudS4y
Don't Call it a Swap: The CFTC Asserts Jurisdiction Where it Shouldn't
Jones Day
On April 27, 2022, the CFTC took the position in a complaint alleging fraud filed against Archegos, and in related settlements with Archegos executives, that certain derivatives with returns based on shares of ETFs that track broad-based security indexes, such as the S&P 500, are swaps rather than SBSs. In settlements with two senior Archegos employees, the CFTC stated in a footnote that "because certain swaps in connection with the fraud . . . are based on a broad-based securities index, this matter falls within the [CFTC's] jurisdiction[]" (and there is substantively similar language in the Archegos complaint).
/jlne.ws/3zmpZcX
****** Covet not thy neighbor's regulatory turf.~JJL
| | | | | | Moves | | | NYSE has made two personnel moves, naming Meaghan Dugan head of options and Jim Hyde as head of business development and strategic partnerships, according to a reliable NYSE source. In the head of options role, Dugan replaces Ivan Brown, who quietly left the NYSE prior to the Options Industry Conference. Brown was head of options and business development for NYSE. Both Dugan and Hyde are part of John Harrick's team at NYSE Markets and are well-liked and respected industry professionals.
Dugan was interviewed by JLN for The Path to Electronic Trading video series from JLN and MarketsWiki Education and started in the industry at the Pacific Stock Exchange. Hyde is a former vice chairman of the American Stock Exchange. Congratulations to Meaghan and Jim on your promotions.
| | | | | | Strategy | | | The contractual dividend bleed
Francois Henneton, Amrit Sharma and Benjamin Carton de Wiart - Risk.net (Subscription)
There is evidence that some desks are still risk managing dividend protected options using a simplified Black-Scholes approach. Francois Henneton, Amrit Sharma and Benjamin Carton de Wiart demonstrate how this leads to a one-sided daily bleed, and they present some simple estimates of the valuation adjustment under a cash dividend model that, under idealised scenarios, exactly compensates for the bleed
/jlne.ws/3OwnLfg
Why Options Traders Should Start Monitoring The Hang Seng Index
Bhavik Nair - Benzinga
After the steep fall beginning in February, when Hong Kong's Hang Seng lost a quarter of its value, the benchmark index has relatively stabilized. Between April and May, the index traded between 22,502 and 19,380.
The range narrowed even further between June and July when the index seesawed between 22,418 on the upside and 20,297 on the downside. This pattern clearly shows that volatility has been on a downtrend.
/jlne.ws/3OuOMQl
Stocks Rise Again As Liquidity Wave Nears Its End
Michael Kramer - Investing.com
The market increased again yesterday, which has forced me to believe that the rally I thought was coming after the FOMC meeting has arrived earlier than I expected. That largely seems to be due to the arrival and timing of how reserve balances have worked their way into the market in the form of additional leverage.
/jlne.ws/3B91IZ6
| | | | | | Miscellaneous | | | Stock market turbulence may not be scaring off retail investors: 'We're not seeing investors respond the way they typically have'
Andrew Keshner - MarketWatch
For all its downward dips so far this year, the stock market may not scaring off many retail investors, polling and purchase data suggest.
In fact, their mood may arguably be more upbeat than some of the big institutional heavyweights as inflation stays red hot, recession talk continues and everyone waits to see just how far the Federal Reserve will go to curb inflation.
/jlne.ws/3BbgVsP
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| | | Jeff Bergstrom
Editor
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