| December 21, 2018 | | | | | Spencer Doar
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Holiday Update
Spencer Doar - JLN
The JLN Options newsletter will be on a reduced publishing schedule next week - look for one in your inbox on Friday, December 28.
If something really nuts happens - and this sure doesn't feel like usual holiday trading lull - we will send out an abbreviated newsletter if needed.
Happy Holidays to all, and to all a good knife fight, or something.
| | | | | | Lead Stories | | | OCC Clears More Than 5 Billion Options Contracts in 2018
OCC
OCC, the world's largest equity derivatives clearing organization, today said its total cleared options contract volume on behalf of the U.S. equity options and futures industry has exceeded 5 billion for the year, a new record. OCC has cleared 5.01 options contracts year-to-date, surpassing the previous record of 4.56 billion cleared options contracts, set in 2011. The new industry volume record will be finalized at year-end, since 6 business days remain in 2018.
/goo.gl/Fsp5xM
****SD: According to Trade Alert's Henry Schwartz, the five billionth contract traded was part of a sweep of Disney February 95 puts.
Surging Volume Deluges NYSE as Witching Day Caps Turbulent Week
Lu Wang, Bloomberg via Yahoo Finance
Volume, volatility tend to spike around market open and close; Expirations come amid an unstable market with traders on edge
Equity traders battered by the worst sell-off since the global financial crisis are enduring a surge in volume Friday as futures and options on indexes and individual stocks expire.
The S&P 500 rebounded from a two-day slide, with the number of shares changing hands as of 10:45 a.m. in New York almost triple the 30-day average. The spike comes after Thursday's session saw the busiest day of the year when more than 12 billion shares traded on U.S. exchanges. An average of 10 billion shares moved in the first four days of the week, putting it on track for the busiest pre-Christmas period since at least 2008.
/goo.gl/rKan6A
Wild Days Return to Stock Market as VIX Surges Like Never Before
Cecile Vannucci and Abhishek Vishnoi - BloombergQuint
Cboe Volatility Index has surged 157 percent this year; U.S. 'playing catch up' after EM sell-off: Saxo Capital
The days of low volatility are far gone, and recent tumult in the stock market has the VIX set for its biggest annual surge on record.
/goo.gl/HKF6pH
****SD: "'Pain, that's what it's about,' said Kay Van-Petersen, a global macro strategist at Saxo Capital in Singapore."
VIX should be much higher, says Goldman Sachs
ZeroHedge via ETF Daily News
In a surprisingly candid note out of derivatives strategist Rocky Fishman, the Goldman analyst - whose employer has a base case 2019 price target of 3,000 for the S&P - notes that in light of recent market performance, the current VIX, which is trading just around 25, is "unusually low" for the 14% selloff the S&P has suffered from its Sept 20 high.
bit.ly/2EzZULk
****SD: It's a reprint of ZeroHedge's recap of the analyst note - we just didn't want you to be forced to that website and all its other weirdness.
U.S. Stocks Are Now More Volatile Than Emerging Market Peers
Elena Popina - BloombergQuint
Stocks in emerging markets have historically been more volatile than their U.S. peers. Not anymore.
After a 29 percent gain in the first week of December and a 20 percent advance last week, the VIX Index reached 28.12 on Thursday. That's 2.4 points higher than the volatility gauge in emerging equities.
You've reached yo
/goo.gl/RRxSFt
Mnuchin Forgot to Check His Figures on Volatility
Nir Kaissar - BloombergQuint
U.S. Treasury Secretary Steven Mnuchin is concerned about market volatility.
So concerned, in fact, that he said in a roundtable interview at Bloomberg's Washington office on Tuesday that he plans to ask the Financial Stability Oversight Council, which he oversees, to look into what's causing the turbulence. His working hypothesis is that high-speed traders and the Volcker Rule are to blame.
/goo.gl/V6QAfr
Banks' Trading Optimism Fades as Bad Volatility Strikes
Lananh Nguyen and Michelle Davis - BloombergQuint
Financial-market turbulence is supposed to be a good thing for Wall Street trading desks -- not so this quarter.
Banks are struggling to capitalize on tumult across stock, bond and currency markets, in part because many investors are staying on the sidelines as year-end approaches.
/goo.gl/NFTVq8
| | | | | | Exchanges and Clearing | | | SEC Approves MIAX Emerald Exchange; February 22, 2019 Launch Expected
MIAX
Miami International Holdings, Inc. (MIH) today announced that the SEC has approved MIAX Emerald 's application for registration as a national securities exchange. MIH expects to launch its third options exchange on February 22, 2019 . Following launch, MIAX Emerald will be the newest member of the MIAX Exchange Group, which currently consists of MIAX Options and MIAX PEARL, and its hybrid market model with pro rata allocation and maker - taker pricing will enable the MIAX Exchange Group further meet the needs of its member firms by providing access to a specific market segment.
/goo.gl/VuqSve
OCC AA+/Stable Rating Reaffirmed By S&P
OCC
OCC, the world's largest equity derivatives clearing organization, today commented on the reaffirmation of its AA+/Stable rating by Standard & Poor's (S&P), which was published on Thursday, December 20.
bit.ly/2Crs89A
NASDAQ PHLX Give Up Rule (SR-PHLX-2018-72)
SIFMA
SIFMA provides comments to the Securities and Exchange Commission (SEC) on on NASDAQ OMX PHLX LLC (Phlx) Rulemaking in response to the Notice of Filing of Proposed Rule Change to Establish Rules Governing the Give Up of a Clearing Member by a Member Organization on Exchange Transactions (Release No. 34-84624; File No. SR-Phlx-2018-72)
bit.ly/2Ct9xu6
SR-NASDAQ-2018-107 - Penny Pilot Renewal
Nasdaq Filing
...Under the Penny Pilot, the minimum price variation for all participating options classes, except for the Nasdaq -100 Index Tracking Stock ("QQQQ"), the SPDR S&P 500 Exchange Traded Fund ("SPY") and the iShares Russell 2000 Index Fund ("IWM"), is $0.01 for all quotations in options series that are quoted at less than $3 per contract and $0.05 for all quotations in options series that are quoted at $3 per contract or greater. QQQQ, SPY and IWM are quoted in $0.01 increments for all options series. The Penny Pilot is currently scheduled to expire on December 31, 2018. 5 The Exchange proposes to extend the time period of the Penny Pilot through June 30, 2019 or the date of permanent approval, if earlier, and to provide a revised date for adding replacement issues to the Penny Pilot .
bit.ly/2Ct8gDk
SR-CBOE-2018-076 - Penny Pilot Renewal
Cboe Filing
...The Penny Pilot Program (the "Pilot Program") is scheduled to expire on December 31, 2018. The Exchange proposes to extend the Pilot Program until June 30, 2019 . The Exchange believes that extending the Pi lot Program will allow for further analysis of the Pilot Program and a determination of how the Pilot Program should be structured in the future.
bit.ly/2CrofS3
Options Trader Alert #2018 - ORF Announcement
Nasdaq Trader Alert
Effective Friday, February 1, 2019, pending filing with the SEC, NASDAQ PHLX (PHLX), The NASDAQ Options Market (NOM), and NASDAQ GEMX (GEMX) will amend their current Options Regulatory Fees (ORFs) as specified below. Additionally, the NASDAQ MRX (MRX) will introduce an ORF. The amended ORFs will recoup regulatory expenses while also ensuring that the ORFs will not exceed costs.
bit.ly/2Crn05l
Options Regulatory Alert #2018 - ISE, GEMX and MRX Amends Primary Market Maker Allowance for Trading in Non-Appointed Options Classes
Nasdaq Trader Alert
Effective December 19, 2018, Nasdaq ISE, LLC (ISE), Nasdaq GEMX, LLC (GEMX) and Nasdaq MRX, LLC (MRX) amended the total number of contracts that a Primary Market Maker (PMM) is permitted to execute in non-appointed options classes from 10% to 25% of the PMM's total number of contracts executed.
bit.ly/2CsnHeF
HKEX In 2018: Year In Review
HKEX
Hong Kong Exchanges and Clearing Limited (HKEX) has had an exceptional year, reporting record January-September results, record high trading activity and a return to the top of the world's IPO fundraising table. Other highlights have included the opening of the HKEX Innovation Lab, new rules that support the listing of more, and more varied companies in Hong Kong, and exciting and sustainable momentum in derivatives trading.
/goo.gl/L1kLYx
| | | | | | Regulation & Enforcement | | | ISDA Urges European Authorities To Extend Equivalence Derogation Under Clearing RTS
Nihal S. Patel, Cadwalader, Wickersham & Taft LLP - Mondaq
ISDA urged the European Commission ("Commission") and the European Securities Authorities ("ESA") to extend certain derogations relating to clearing and margin. ISDA said the derogations remain valid and have yet to be addressed...
...ISDA also urged the Commission and the ESA to extend a time-limited derogation under Article 38 of the Margin RTS relating to the treatment of single-stock equity options and index options (currently set to expire on January 4, 2020).
/goo.gl/dBXh7u
| | | | | | Technology | | | Rival Systems on LinkedIn
We're excited to share our infrastructure build out in Frankfurt is now complete and our first client is live! We can now offer clients across the globe server hosting and direct connectivity to Eurex in FR2 datacenter.
| | | | | | Strategy | | | Goldman Sachs says stock-market volatility is going to spike 50% in 2019 Â and it's formulated the perfect strategy to take advantage of the chaos
Joe Ciolli - Business Insider Prime (SUBSCRIPTION)
The stock market has been swinging wildly in recent months. And if new findings from Goldman Sachs are any indication, investors better get used to the turbulence.
The firm says baseline S&P 500 realized volatility will average 13.4% in 2019, which is 4.8 points  or 56%  higher than what economics implied for price swings in 2018, according to Goldman data.
/read.bi/2EFQcaB
Wall Streeters Are Priming for a Tradeable Bounce: Taking Stock
Arie Shapira - Bloomberg
Investors continue to flee U.S. stocks in droves, just like last week. That's not surprising given that so many indices and sectors are already in or approaching bear market territory, but the data is still pretty astonishing.
U.S.-based stock funds have seen almost $81 billion of outflows in the 14 days through Dec. 19, according to Lipper data; that figure represents about one percent of total assets in this particular type of fund. If the pace holds through the New Year, December will go down as the largest monthly exit from U.S. equity funds on record (dating back to 1992).
Could that be a contrarian indicator?
bit.ly/2ED6D7i
World's biggest hedge fund says stocks aren't pricing in 'near-recession' U.S. growth next year
Barbara Kollmeyer - MarketWatch
Winter is coming, literally, as Friday marks the winter solstice and the shortest day of the year though Wall Street has been feeling the chill since October.
Global equities continued to wobble and Europe's main index, along with the Nasdaq Composite, was flirting with a close in bear-market territory. Add a shutdown threat and quadruple-witching Friday, and it's hard to see where the breaks are going to come, as big money managers start to leave for vacation ahead of the holidays.
/on.mktw.net/2EF0g3h
| | | | | | Miscellaneous | | | Event Risk Enters Phase 3: What's At Stake in 2019?
CME Group (VIDEO)
Event risk outcomes could be dragged out in 2019 as issues like the trade war and questions over when the Fed might halt rate hikes simmer in markets.
bit.ly/2EAhi2O
Dollar rebounds from post-Fed losses as U.S. shutdown looms
Gertrude Chavez-Dreyfuss - Reuters
The dollar gained on Friday, reversing most of its losses after the Federal Reserve flagged fewer interest rate hikes earlier this week, as investors sought the currency's safety amid persistent equity market volatility and a possible U.S. government shutdown.
/goo.gl/qZ4n8j
****SD: Other currency update from Reuters - Euro cedes early gains as FX derivative bets weigh
All We Want for Next Year Is Not Another 2018: Taking Stock
Michael Msika - BloombergQuint
The last time European equities had a year this bad, you were probably fearing for your job. It was 2008, the global economy was on its knees, banks were going belly up or getting bailed out, and the VIX had just surged to 90. George W. Bush was in the White House, Gordon Brown in 10 Downing Street, and we were still using Blackberrys.
bit.ly/2EGwfA6
Volatility ravaged the stock market this year. Here's what that was like for first-time investors. Rebecca Ungarino - Markets Insider
The stock market was relentless in 2018. The tone was often uncertain, with the market many times opening higher only to turn red in the afternoon. Trade wars, rising interest rates, and concerns around slowing economic growth dominated the fundamental backdrop.
Investors who entered the market for the very first time at the start of this turbulent year probably didn't know they'd be in for such an uneven ride. The S&P 500 posted 60 intraday moves of 1% in either direction, the most since 2015, according to LPL Research. But they're holding on as the major US indexes have plummeted into a correction  down at least 10% from their recent peaks.
/read.bi/2EGxO0W
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| | | | John Lothian News (JLN) is the news division of John J. Lothian & Company, Inc. (JJLCO). The online media and financial services firm is staffed by derivatives industry, journalism and technology professionals. | | | | | | | John Lothian News Editorial Staff: | | | John Lothian
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Editor
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