| June 29, 2016 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Stars Of The Next Generation
Jim Kharouf
John and Doug are in New York today drumming up support for our MarketsWiki Education series in the Big Apple on July 19.
If you have not signed up your interns, or know of someone who would benefit from hearing the likes of Adena Friedman of Nasdaq, Jenny Knott of ICAP, Steve Gibson of Euclid Opportunities, Gary DeWaal of Katten, Bill Harts of the MMI, Kevin Wolf of Eris and Kenny Polcari of O'Neil Securities, then register here: http://bit.ly/1XxdC46. Chicago's series runs July 12, 14 & 15.
Meanwhile, the media spotlight is easing up on the Brexit a touch, and shining its light back on the LSE-Deutsche Boerse merger. There are a host of stories looking at the obstacles still to face. Germany's top regulator said he would not allow London to be the headquarters for the merged company. Britain's Nigel Farage probably didn't help matters in his unwelcome visit to Brussels. And that's just the start.
Stay tuned. Our Brexit coverage will be here for some time to come.
Finally, thoughts and prayers go out to the victims of another bombing, this time in Istanbul. The senselessness has to stop. How is the ultimate question.
| | | | | | Lead Stories | | | Is VIX The Tail Wagging The Dog?
Forbes
There was a time when VIX was a relatively obscure data point that only a handful of traders, mostly with arcane models, focused on. Over time it became elevated to the the status of 'fear gauge' and hardly a day goes by, particularly a down day for U.S. stock markets, where it is isn't mentioned. But now, I wonder if it hasn't surpassed that, and become the driver of the markets. The proliferation of VIX futures and VIX based ETNs and ETFs have enabled more and more investors to express views directly on VIX than ever before. What was once merely a calculation, based on observed values in the options space, has become a force of its own.
goo.gl/hbkWGz
The S&P 500 And The VIX Just Flashed A Very Rare Signal
Seeking Alpha
Yesterday something happened that has only occurred twice in the last twenty years. The S&P 500 fell by over 1.5% and the VIX fell over 5% on the same day. This is counter to how the VIX normally performs when the market is down.
bit.ly/29ps0Yi
Why the EU's euro clearing Brexit threat may never happen
Financial Times
One of the shadows hanging over the City of London is whether it will lose its highly-prized business of clearing euro-denominated derivatives. It has around 70 per cent of the business while the nearest competitor, Paris, holds just 11 per cent, according to 2013 data from the Bank of International Settlements. Those fears may be realised especially since François Hollande, the president of France, spelt out his view. "The City, which thanks to the EU, was able to handle clearing operations for the eurozone, will not be able to do them," he said this week. "It can serve as an example for those who seek the end of Europe?...?It can serve as a lesson."
This threat too easily simplifies a complex relationship between trading and location across global markets.
/goo.gl/xTZu7X
****SD: The Bloomberg story on Hollande's euro clearing threat is in our exchange section.
Options Show Just How Badly Brexit May Hurt EU Carbon Market
Bloomberg
Premium to buy put options advances faster than calls
U.K. seen 'left out in the cold' should trade talks fail
Brexit is sending prices in the European Union carbon market lower, and options traders expect it to get worse.
bloom.bg/29psRIg
Post-Brexit Safe Stock Binge Tests Limits of Defensive Valuation
Bloomberg
In a move that shocked nobody, the post-Brexit downdraft unleashed a rush into defensive stocks. What's surprising is how much U.S. investors are willing to pay for safety. As the S&P 500 Index slumped 5.3 percent in two days following the vote, investors gorged on utilities, telecom, consumer-staples, dividend payers and low-volatility funds, sending prices and valuations to all-time highs.
bloom.bg/29cmUmb
Who Made Money in the Brexit Chaos? Machines, Not Humans
WSJ
Wall Street is tallying up the winners and losers after the severe market reaction to last week's Brexit vote. One theme has emerged earlyÂthe computers got it right and the humans got it wrong. Part of the reason: Too many investors bet on the outcome they preferred, economists and analysts say, a powerful example of "projection bias" in the markets.
on.wsj.com/29cu1Li
****SD: Too bad machines don't have much to spend it on.
The Role of Central Clearing and How it Could be Applied to Securities Lending
OCC
OCC, in its role as a Systemically Important Financial Market Utility, serves 14 options exchanges, four futures exchanges, two securities lending programs and approximately 115 clearing member firms. OCC operates under the jurisdiction of the U. S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC), and clears transactions for put and call options on common stock and other equity issues, stock indexes, foreign currencies, interest rate composites, stock loan, and single stock futures. As a registered derivatives clearing organization under CFTC jurisdiction, OCC offers clearing and settlement services for transactions in futures and options-on-futures contracts.
goo.gl/Rb8lhg
Volatility plagues U.S. cattle markets
Capital Press
Extreme week-to-week price swings in cash markets, combined with equal volatility in the futures market has made marketing decisions difficult to impossible for U.S. cattle producers, especially feeders. The fed cattle cash market has been swinging in increments of $4 to $6 per hundredweight every one to two weeks, creating a week-to-week uncertainty of $85 to $100 a head. And daily and weekly price volatility has been just as striking in the futures market, according to Rabobank's beef quarterly report released June 17.
bit.ly/29m5nnE
****SD: At least there isn't anthrax in the beef like what's happening in Kazakhstan right now: Two in central Kazakhstan died recently after eating beef infected with anthrax
24Option Extends Partnership With Juventus Football Club
Finance Magnates
24Option, one of the world's largest binary options brokers, announced today that it has extended its partnership with Juventus Football Club. As a result, 24Option will continue as the club's exclusive partner on a global level, while retaining possession of its offline and marketing rights.
bit.ly/29cwpSk
****SD: Who's celebrating the third of July by watching France v. Iceland square off in the Euros quarter-final?
| | | | | | Exchanges | | | Hollande Takes Aim at City of London in Euro Clearing Threat
Helene Fouquet and John Detrixhe - Bloomberg
The City of London is facing the first direct threat to its role as Europe's dominant financial center as French President Francois Hollande takes aim at a key pillar of the U.K. industry.
"The City, which could handle clearing operations in euros thanks to the U.K.'s presence in the EU, won't be able to do them any more," Hollande said after the first day of a European Union summit in Brussels.
goo.gl/Gnmm6N
Deutsche Börse chairman insists LSE merger still on
Financial Times
Deutsche Börse's chairman has insisted that the German group will push on with its planned merger with the London Stock Exchange, despite growing reservations among German politicians and regulators about the tie-up. Joachim Faber said on Wednesday that in the wake of UK's shock decision last week to leave the EU it was "more important than ever" to maintain stable financial relations between the EU and Britain, and that the proposed merger could play a "key role" in this.
/goo.gl/ulZpwf
****SD: What else could he say? "Yeah, we have no clue what's gonna happen." That's not chairman-esque talk.
Top German regulator says no to London HQ for Deutsche Boerse-LSE
Reuters
Germany's financial market regulator delivered a double blow to London on Tuesday, saying it could not host the headquarters of a planned European stock exchange giant after Britain leaves the EU, and nor could it remain a centre for trading in euros.
reut.rs/293gzEW
Brexit: Impact on the LME
Investing News
The London Metal Exchange (LME) has long been stalwart of the metals industry. As one of the largest metals trading platforms in the world, the LME often dictates global benchmark prices for a number of metals, specifically copper and other base metals. But with the result of the recent Brexit referendum last week, could there be changes on the horizon for the LME?
According to Hong Kong Exchanges and Clearing, which controls the LME, the answer to that question is no.
bit.ly/29pooWd
PHLX, NOM and BX Options Professional Order Calculation
Nasdaq
Effective Friday, July 1, 2016, pending filing with the SEC, the following amendments to the Professional definition shall apply to NOM and BX Options.
bit.ly/29cva5L
MIAX Options - July 1, 2016 Fee Changes
Press Release
Effective July 1, 2016, pending SEC approval, the MIAX Options Fee Schedule will be amended.
bit.ly/29coKTU
| | | | | | Regulation & Enforcement | | | CFTC Charges Former CBOE Member Alvin Guy Wilkinson And His Connecticut-Based Entities With Fraud, Misappropriation, Failing To Register With The CFTC, And Making Misrepresentations To The NFA
Press Release
The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement Complaint in the U.S. District Court for the Northern District of Illinois, charging Alvin Guy Wilkinson, of San Juan, Puerto Rico, and his limited partnerships Chicago Index Partners, L.P. (CIP) and Wilkinson Financial Opportunity Fund, L.P. (WFOF), both located in Sharon, Connecticut, with fraud and acting as Commodity Pool Operators or Associated Persons without being registered with the CFTC, as required.
goo.gl/8R7A4h
Derivatives associations urge CFTC to split RegAT
Joe Parsons - The Trade News
Trade bodies representing the largest US derivatives traders has urged the Commodity Futures Trading Commission (CFTC) to split regulation on automated trading (RegAT).
In a joint letter to the derivatives watchdog, the bodies including the Futures Industry Association (FIA), International Swaps and Derivatives Association (ISDA), and the Managed Funds Association (MFA), has called for the regulation to be split, focusing on pre-trade risk controls and separate legislation on algorithms.
goo.gl/i9rsek
****SD: FIA: Industry groups urge focus on risk controls in CFTC's proposed rule on automated trading
U.S. Questions Whether Futures Markets Can Police Themselves
Bloomberg
A top executive at 3Red Trading LLC reassured his co-founder about the future of the firm, even as federal regulators and two exchanges were investigating them for alleged market manipulation. "Just finished up with the head honchos," Edwin Johnson wrote about a meeting with Intercontinental Exchange Inc. executives. "We will do a very basic phone interview next week. Then it will all go away," he texted his partner in the spring of 2013. "I was given their word last night." Likewise, he texted, top brass at CME Group Inc. "are 100 percent behind us."
goo.gl/3eG1mR
CFTC's Proposal Allowing Futures Exchanges and SEFs to Make Certain Bona Fide Hedge Determinations Could Impose Additional Burdens on Commercial Hedgers
The National Law Review
For the second time since 2013, when the Commodity Futures Trading Commission (CFTC) issued its still-pending pair of position limits rulemaking proposals,[1] the CFTC has proposed to revise those 2013 proposals.[2] Specifically, on June 13, 2016, the CFTC published a much anticipated amendment to its 2013 Position Limits Proposal that, if adopted, would, among other things, permit CFTC-registered futures exchanges - such as NYMEX and ICE Futures U.S. - and approved swap execution facilities (SEFs) to grant non-enumerated Bona Fide Hedge exemptions to market participants applying for such exemptions.[3] Comments on the 2016 Supplement are due on July 13, 2016.
goo.gl/hiUWwy
Former federal prosecutor Renato Mariotti joins Thompson Coburn
Press Release
Former Assistant U.S. Attorney Renato Mariotti has joined Thompson Coburn as a partner in the firm's business litigation practice in Chicago. During his nine years as a federal prosecutor in the Northern District of Illinois, Mariotti, 39, handled some of the jurisdiction's most high-profile, complex cases. Just eight months ago, Mariotti obtained a guilty verdict on all counts in the landmark, first-ever prosecution of a high-frequency trader under the anti-spoofing provision of the Dodd-Frank Act in U.S. v. Coscia.
goo.gl/Gq5aZ0
| | | | | | Technology | | | Streamlining Big Data (AUDIO)
Inc. Radio - ERNLive.com
David Widerhorn, Founder and CEO of Neurensic (@Neurensic), explains in laymen's terms the purpose and function of Neurensic in the financial market. Don't be surprised if any of it is over your head - Alan's just as blown away as you will be.
bit.ly/29lt5A7
****SD: The other two parts of the interview: Widerhorn talks about starting Neurensic and Widerhorn talks about misconceptions about AI
Brexit & New Regulations: The Impact on Fintech
TABB Forum
As the journey of new regulations is about to begin in the UK, there is a good opportunity for the regulatory authorities to engage the fintech solution providers at an early stage for collaboration and leverage their digital capabilities. In the backdrop of last week's Brexit verdict, the subject matter experts from various areas are sharing their thoughts and views on the impact it could potentially have on the UK financial markets.
goo.gl/94rJ4Q
| | | | | | Strategy | | | Indicator of the Week: Will Stocks Boom After Independence Day?
Schaeffer's Research
Monday is July 4, so U.S. stocks and traders get a day off. This week, I'll take a look at how stocks have performed in the past during the Independence Day holiday week. Also, I'll see if there's anything interesting in the individual days leading up to, and immediately after, July 4.
bit.ly/29puHZN
****SD: Sooo, there could be an Independence Day: Resurgence? (I heard that flick is a stinker.)
What is the VIX telling us?
optionshouse
As the shock of the result of the British EXIT referendum wears off Traders appear to be hunting for bargains in Tuesday's session after two days of absolute carnage. Energy and financial stocks enjoyed the largest bounce back with the XLE Select Energy ETF up almost 2% and the Financial XLF up over 1.5%.
bit.ly/299DvqQ
| | | | | | Education | | | Volatility correlations odd
ValueWalk
The Brexit vote led to odd volatility correlations. Friday's stock market volatility was unusual from several standpoints. Key volatility correlation breakdowns noted by several market analysis headlined the surprise result. The revolt by a slight majority of the UK electorate triggered a historic global risk off move, a Goldman Sachs options report notes. Asset returns were sharply "polarized" and the US VIX engaged in rather odd statistical behavior relative to the S&P 500 and European volatility.
bit.ly/29ppdye
How Brexit caused a Wall Street sell-off
Financial Times
Surveying the market wreckage almost a week after the UK voted, some things are easy to explain, others not. Everyone knew that a vote for a Brexit would be a major international event, and yet markets reached the referendum with almost no hedging against the eventual result. So sudden and dramatic falls for sterling, the euro, and European stock markets were virtually a given. They came to pass. But why has it had such an impact on the US stock market? If British exit from the EU were to metastasise into a re-run of the eurozone sovereign crisis, the effect on the US could be serious. But the indications so far are that it will not trigger such a market event. And the US economy looks reasonably strong, and accounts for 69 per cent of S&P 500 sales (and 80 per cent of Russell 2000 sales). The US consumer, as David Kostin of Goldman Sachs puts it, should matter far more than the British voter.
/goo.gl/knwxcj
Goldman Sachs' Favorite Books List - Options/Derivatives
ValueWalk
Goldman Sachs put together a list of the best books and it is impressive and long - unfortunately it is hard to sift through since it just has the title and the author without any information on the book so we are helping you out by filing in that info. If you want to find the full list go here we also list it below at the bottom along with descriptions.
bit.ly/29pjDvG
| | | | | | Miscellaneous | | | Lunch with the FT: Nigel Farage
Financial Times
Nigel Farage has an adjective for the good things in life  "proper". Proper blokes, proper jobs, proper markets. And when we meet at The Lamb, a pub in London's Leadenhall Market, he clearly is in the mood for a proper lunch. "Have we got an order in?" the leader of the UK Independence party exclaims within two minutes of our arrival. "A man could die of thirst in here."
on.ft.com/1SF5KY8
****SD: Given the referendum result, I wanted to include this non-options story from April. For good or ill, I feel like I have a much better understanding of what makes Farage tick after reading the piece. (I find that to be the case with most of the FT's "Lunch with" series.)
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