| May 04, 2017 | | | | | Spencer Doar
Associate Editor
John Lothian News | |
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| | | | Observations & Insight | | |
FinTech Exchange: Clay on Innovating During CBOE's "Middle Age"
JohnLothianNews.com
Albert Einstein published his theory of general relativity when he was 36. Vincent van Gogh painted Starry Night when he was 36, and Mozart wrote 626 works before dying one month before turning 36. The CBOE turned 44 in April.
In that context, Catherine Clay, CBOE's vice president of integration strategy and operations, addressed how a company that has reached middle age continues to reinvent itself.
Read the rest and watch the video »
| | | | | | Lead Stories | | | Options Signal Pragmatism May Trump 'America First'
Myron Scholes and Ash Alankar - Bloomberg View
Although President Donald Trump's first 100 days in office have been deemed chaotic and unproductive by many, the options market has been consistent in its positive outlook for growth and equities. Other than for Japan, equity options markets are signaling more upside-to-downside potential in coming months, not only for Europe and emerging markets, but also for in the U.S., despite contradictory policy statements by the administration.
jlne.ws/2q3hXTK
****SD: Myron and Ash have had their columnist hats on of late. Revisit their April 20 piece in the FT if you missed it  Options market signals the need for Europe to change
Global volatility At Odds As US VIX Nears A Century Old Low
Mark Melin - ValueWalk
In a world where US political risk appears rising and nuclear threats with North Korea comes amid persistent tensions in the Middle East and with Russia, worldwide market volatility appears to have blinders on. A Bank of America Merrill Lynch report out Wednesday, noting a "fearless VIX" dropping to 90-year lows, stands with mouth agape as it explains the market action. While low volatility could persist throughout the summer, the falling asleep of market volatility is not a "new normal," the report predicted as Global volatility spreads home.
jlne.ws/2q32sLC
****SD: 90 years ago would make it 1927. And we all know how the Roaring Twenties ended. More on the BAML report from FT Alphaville here.
FinTech firms reduce trading time to 120 nanoseconds
Hayley McDowell - The Trade
Several technology firms have teamed up to develop a tool that has reduced 'tick-to-trade' latency from 250 nanoseconds to just 120 nanoseconds. SolarFlare, Xilinx and LDA Technologies explained the reduction in latency improves the queue positions of trades and increases the probability of trades being executed.
jlne.ws/2q3kbTo
****SD: And this type of speed is one reason why yesterday's story, FPGA Market Size Estimated at $9.98 Billion by 2022, makes sense. Now time for the random fact for today. Solar flares are bright flashes caused by a bunch of electrons interacting with plasma on the sun and are frequently accompanied by "coronal mass ejections," or CMEs. Coincidence?
Ex-SEC accountant to settle charges over illegal options trades -sources
Sarah N. Lynch - Reuters
A former accountant at the U.S. Securities and Exchange Commission (SEC) is expected to settle criminal and civil charges, after he was caught illegally trading options while working at the agency, according to sources familiar with the matter. The charges against David Humphrey, a 16-year SEC veteran, represent a rare instance of the SEC taking enforcement action against one of its own employees.
jlne.ws/2q2WaeT
****SD: "He will also pay more than $100,000 in penalties and ill-gotten profits to settle the SEC's civil case" Â well, at least Humphrey was successful in his options trading. To me it would feel much worse if I got penalized while unsuccessfully trading.
EU outlines 3 options for London's euro clearing business
Philip Stafford and Rochelle Toplensky - Financial Times
Brussels said on Thursday it would not be swayed by jobs or market developments as it decides whether to force sections of London's vast euro denominated clearing business into the EU after the UK leaves the bloc.
jlne.ws/2q3sXk8
****SD: No surprise as to the following  UK's Hammond warns of risks from moving clearing away from UK. Some more on the topic in our "Regulation" section.
The Investor Anxiety that the Market's 'Fear Gauge' Is Missing
Gunjan Banerji - WSJ
Volatility has nearly vanished in stocks, but investors wary about stocks are hedging in other ways. Despite geopolitical uncertainties and a mixed outlook for the U.S. economy, the CBOE Volatility Index, called VIX, sank to a decade low on Monday, fueling questions of whether investors have grown complacent and if the absence of turbulence is sustainable.
jlne.ws/2q3nF8r
****SD: From See It Market  Volatility (VIX): A Misleading Measure Of Risk. Lots of talk about the VIX of late but, as a general rule, keep in mind Steven Sears' Barron's article from the weekend  Most VIX Analysis Is Outright Nonsense.
Worries About Le Pen Evaporate Before Run Off: French Election Monitor
V Ramakrishnan - Bloomberg
With just three days to go before the final round of French elections, a sense of calm pervades markets as Emmanuel Macron looks set to prevail over rival Marine Le Pen.
jlne.ws/2q3ySG1
| | | | | | Exchanges and Clearing | | | Nasdaq's Blueprint for a New Era of Trading
Adena Friedman - WSJ
With the Nasdaq index above 6000 and the bull market in its ninth year, many investors are looking to tax reform as the next economic driver. That's a good bet. Last year the managing director of S&P Global Market Intelligence estimated that every percentage-point reduction in the corporate tax rate could boost S&P 500 profits by 1%. But tax reform isn't the only change needed to open a new era of growth in equities. Reforming financial markets is crucial too.
jlne.ws/2q3tiDt
****SD: Press release with more info on the plan here.
This Market Megamerger May Only Be on ICE
Tara Lachapelle - Bloomberg
The biggest exchanges -- the very institutions that link buyers and sellers of stocks and derivatives around the world -- have had no luck playing matchmaker among themselves. Cross-border merger attempts by exchange operators from Germany to London most recently, as well as Canada, Singapore, Australia and even New York have all fallen apart at some point in the last six years.
jlne.ws/2q3n06T
****SD: Can only be on ice for so long before it melts.
OCC Comment Letter Encourages European Commission To Extend Transitional Periods for Own Funds Requirements for Exposures Related to CCPs
OCC
In connection with its application to be recognized as a Qualifying Central Counterparty, OCC encourages the European Commission in a letter to extend transitional periods for own funds requirements for exposures related to CCPs. As noted in a prior comment on the last implementing regulation that extended the transitional periods to June 15, 2017, OCC agrees with the concerns expressed in the draft regulation that European institutions could be harmed and markets could be disrupted if the transitional periods are not extended to December 15, 2017.
/goo.gl/FgMbmH
Euronext Announces Volumes For April 2017
Press Release
Euronext, the leading pan-European exchange in the Eurozone, today announced trading volumes for April 2017.
jlne.ws/2q3fatZ
****SD: "The average daily volume on equity index derivatives reached 272,141 contracts in April 2017, up +28.8% compared to April 2016 and up +19.6% from the previous month."
ASX Group Monthly Activity Report April 2017
ASX
In April 2017, the average daily number of exchange-traded options were up 17% on the pcp. Single stock options average daily contracts traded were up 19 % on the pcp and index options average daily contracts traded were down 4% on the pcp.
jlne.ws/2q38Mmu
CBOE Begins Trading Options on VelocityShares' EVIX
Guru Focus
CBOE Holdings, Inc. (NASDAQ: CBOE) today announced it has begun trading options on the VelocityShares 1x Long VSTOXX Futures ETN (Bats: EVIX), which are based on the VSTOXX Short-Term Futures Investable Index. The options, which began trading at Chicago Board Options Exchange (CBOE) today, are listed under the ticker symbol EVIX.
jlne.ws/2q3zBac
CBOE Holdings Reports April 2017 Trading Volume
CBOE Investor Relations
Futures ADV at CBOE Futures Exchange Up 37% from April 2016; Options ADV at CBOE Holdings' Four Exchanges Up 24% from April 2016
jlne.ws/2q3dkt3
****SD: In case you missed it yesterday.
| | | | | | Moves | | | Headhunters prepare to fill banks' trader orders
Time Burke and Portia Crowe - Financial News
Investment banks have begun adding staff to their trading businesses again after more than five years of painful cuts have been alleviated by blockbuster fixed income revenues. Deutsche Bank and Nomura are among those to plan new investments as the industry puts an end to a difficult period in which many banks took the axe to their headcount.
jlne.ws/2q3hsJA
| | | | | | Regulation & Enforcement | | | EU plans to ease derivatives rules in bid to boost economy
Francesco Guarascio and Huw Jones - Reuters
The European Union has proposed easing derivatives rules in a move which will save pension funds billions of euros, as it seeks to boost growth in the bloc. New rules were introduced in 2012 after the sector was blamed for accentuating the 2007-09 financial crisis. Policymakers are now trying to help drive growth by cutting red tape for companies and investors, though not for big banks.
jlne.ws/2q33OG8
****SD: Press release on the rules here.
JPMorgan calls for tougher clearing house rules; US bank wants risk managers to have higher capital buffers to cover more disasters
Philip Stafford - FT
Global regulators should toughen standards to prevent the failure of a clearing house by raising financial buffers for risk managers and limiting the losses they can pass on to customers, JPMorgan Chase has argued.
/goo.gl/6Tpkls
BofA's Moynihan calls big bank break-up 'crazy'
Ben McLannahan and Barney Jopson - Financial Times
Breaking up the big banks would be "crazy", Bank of America chief Brian Moynihan said on Wednesday, as he took aim against moves to reinstate divisions between consumer and investment banking.
jlne.ws/2q3l2TO
Five things you need to know about the EU's review of Emir
Samuel Agini - Financial News
The European Union is proposing changes to its post-crisis overhaul of the over-the-counter derivatives markets to make the rules "simpler and more proportionate". Its aim is to reduce the burden for smaller financial services firms, corporates and pension funds.
jlne.ws/2q37E22
| | | | | | Technology | | | Regtech Reducing Compliance Costs for Early Adopters in Financial Markets
Crowdfund Insider
Last week, TABB Group released a report entitled "Financial Markets: Embracing RegTech" which focused on the growing issue of increasing regulatory compliance facing financial institutions today. TABB Group is an international research and consulting firm focused on capital markets.
jlne.ws/2q3A4ZI
Can Artificial Intelligence Improve Your Risk Management Process?
Ashley Aberneithy - Finance Magnates
It's commonplace for risk managers to group their portfolio into risk books. The process of isolating risk within their portfolio involves risk managers creating distinct groups for different types of trader. The risk manager might place large size traders into one group, whereas high frequency traders may go into another group.
jlne.ws/2q3im8G
| | | | | | Strategy | | | Hedging Volatility with Systematic Trading
Max Artemenko, Silec Software Solutions - TABB Forum
Short-term spikes in volatility might not matter to long-term investors - after all, they have a long enough investment horizon that they can weather the storm. However, what if, instead of ignoring stormy markets, they could ride these waves to greater returns? Utilizing short-term systematic hedging in long-term portfolios could be one of the most efficient methods to hedge against any kind of unforeseen market conditions, especially volatility spikes.
jlne.ws/2q3gvAJ
Take Advantage of Calm to Rejigger Investments
Zachary Karabell - Barron's
After a dramatic start to the year, with equities rallying worldwide and bond yields rising in anticipation of stronger economic growth, markets have entered one of those eerie calm periods whose very placidity tends to spook investors. It's springtime, and while the weather becomes progressively milder, investors seem less certain than ever. The "Trump rally"Âwhich we have suggested may be less attributable to Trump than commonly assumedÂst
jlne.ws/2q31Fud
| | | | | | Miscellaneous | | | Robinhood stock-trading app confirms $110M raise at $1.3B valuation
TechCrunch
"Our investors are saying 'we haven't ever seen a finance company that's managed to grow like an internet company,' " Robinhood co-founder Baiju Bhatt tells me. It's hit 2 million users, up from 1 million in October, and it's now adding around 140,000 accounts per month. That's more accounts than E*TRADE added in all of 2016.
/goo.gl/S1scvz
2017 Hedge Fund Letters: Dalio, Einhorn, Tepper, Loeb, Klarman, Simons
ValueWalk
Q1 2017 Hedge Fund Letters is now up stay tuned as it is just the first day of the quarter
jlne.ws/2q3bIzz
****SD: Links galore!
Mexican energy reform has stabilized Pemex finances: CEO - Oil
Platts
The reform of Mexico's energy sector, which has allowed state-owned energy company Pemex to form partnerships upstream, downstream and in the midstream, has been a catalyst for the company to put its financial house in order, Pemex CEO Jose Antonio Gonzalez said Wednesday.
jlne.ws/2q3bhoL
****SD: The Mexican Ministry of Finance's oil hedges, a program started in 1991, have been well documented, but Pemex is new to the game. Its hedge "covers Pemex if the price of oil drops below $42/b all the way down to $37/b."
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