| August 15, 2017 | | | | | Spencer Doar
Associate Editor
John Lothian News | |
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| | | | Lead Stories | | | Plummeting Volatility Gauges Mask Lingering Fears in Options
Luke Kawa - Bloomberg
The sharp drop in volatility may hide the extent to which U.S. stock market fears still persist.
So says Macro Risk Advisors head of derivatives strategy Pravit Chintawongvanich, who has zeroed in on September VIX call options with a strike price of 20 to show that there are still concerns about a sharp selloff in the near future.
jlne.ws/2w6J83j
***JB: Bloomberg chart suggesting something similar.
Some Soros Fund holdings may profit if stocks fall: SEC filings
Trevor Hunnicut - Reuters
Soros Fund Management LLC, whose billionaire chairman said earlier this year that markets would stumble given the uncertainty surrounding U.S. President Donald Trump, recently held positions that could profit if the financial markets falter, U.S. regulatory filings showed on Monday.
jlne.ws/2w6RR5k
****SD: Insight into the mind of a legend, but also illustrates the shortcomings of analyzing 13F filings.
Massachusetts regulator investigates trade order 'kickbacks'
Reuters
The top securities regulator in Massachusetts on Tuesday said he is investigating whether brokerages route trade orders in a way that gives them a potential financial advantage but may disadvantage clients.
jlne.ws/2w77bip
****SD: This could have huge ripples.
North Korea Has Backed Off, But Some Options Traders Remain on Edge
Gunjan Banerji - WSJ
Not every investor appears convinced that the latest Korea crisis is over.
Stocks around the world have bounced off their lows of last week, and volatility has declined, but traders are still poised for more turbulence for one of the biggest exchange-traded funds tracking South Korean stocks.
A measure of expected swings for the iShares MSCI South Korea Capped ETF remains elevated, according to Macro Risk Advisors.
jlne.ws/2w7vnkP
****SD: No, really? (See a different perspective below from ValueWalk.)
North Korean Missile Fears Starting To Subside On Markets?
ValueWalk
Deutsche Bank's Macro Economic Strategist Jim Reid and Research Analyst Jeff Cai look at the early reaction to geopolitical events particularly last week, and expect a "pivotal week" to ensure as North Korean bluster said they would be ready for a North Korean Missile attack by the "middle of the month," which is fast upon us. With markets rushing higher, the North Korean Missile issue might be a case of bluster over substance and fall into a pattern of equity markets recovering after a crisis.
jlne.ws/2w7o6RN
****SD: This includes a chart of the time it takes for equity market sell offs to recover in the period after large geopolitical developments. I would not have guessed the Israel Arab war/oil embargo would be the longest (it 1,475 days), beating out such events as Germany attacking France in WWII.
Gold's Trumpian Tinkerbell
David Fickling - Bloomberg
Gold's reputation as a refuge in times of trouble is one of those things that seems so intuitively obvious that it's more or less immune to fact.
jlne.ws/2w77g5U
****SD: From the story: "...gold and the VIX itself -- the market's traditional fear gauge -- don't fly much in tandem. The correlation between spot gold and the volatility gauge has been very slightly negative since the index started in 1990, but it went seriously out of whack over the past decade."
Vega volumes triple on Vix spike
Risk.net
Rebalancing of Vix ETPs spurred record trading in Vix futures on August 10
Trading activity in Vix futures hit record levels last Thursday (August 10) as levered and inverse volatility exchange-traded products (ETPs) scrambled to rebalance their holdings.
jlne.ws/2w7awy4
****SD: Recap of the action on the 10th.
Stocks are looking unstoppable
Joe Ciolli - Business Insider
The US stock market simply will not be defeated.
Just two sessions after the S&P 500 tumbled 1.5%, its biggest decline since May, the benchmark ended Monday back within half a percent of its level before the North Korea-fueled sell-off.
The S&P 500 edged an additional 0.1% higher in early trading on Tuesday.
But why? Nothing particularly bullish is happening in the earnings world, and no major economic data has been released.
jlne.ws/2x18tYO
| | | | | | Exchanges and Clearing | | | Bats Global co-founder Ratterman joins Axoni board
James Dornbrook - Kansas City Business Journal
Joe Ratterman, co-founder of Bats Global Markets Inc., accepted an appointment to the board of Axoni, a New York-based capital markets technology company.
Ratterman will be the only independent director at Axoni and one of five overall. He also will continue to hold his position on the board for CBOE Holdings Inc. (Nasdaq: CBOE), which acquired Bats for $3.2 billion in March 2017.
jlne.ws/2w7IAKh
| | | | | | Moves | | | UK finance firms rush to hire before Brexit
Becky Pritchard - Financial News
City employers are rushing to fill vacant positions as they, and the candidates they are chasing, scramble to make the most of the time they have left before Brexit.
jlne.ws/2w7b0nM
| | | | | | Regulation & Enforcement | | | Sebi gets suggestion on algo trade from US SEC
Times of India
Even as a probe continues into alleged misuse of co-location facility and algo trading, markets regulator Sebi has received suggestion from its US counterpart - Securities and Exchange Commission.
jlne.ws/2w7cdLX
US agencies provide respite with variation margin changes
The Trade
A group of US regulatory agencies have made changes to how variation margin is treated for certain, centrally cleared derivatives, providing significant capital relief for banks.
Under a new guidance issued by the Office of the Comptroller of the Currency (OCC), the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC), variation margin will be considered as a settlement payment for exposures to certain derivatives contracts, as opposed to being treated as collateral.
jlne.ws/2x0NNjp
| | | | | | Technology | | | How AI can help advisers with Mifid II
Mark Holmes - FT Adviser
Despite implementation deadlines being delayed by a year, many compliance managers are still ill-prepared for the introduction of Mifid II.
In fact, 90 per cent of buy-side firms risk non-compliance at the deadline, according to a recent survey.
jlne.ws/2w6VoAC
| | | | | | Strategy | | | ETF Flopper: The VIX, but it Still Might be Buyable
Crystal Kim - Barron's
The CBOE Volatility Index made big moves last week in the context of its otherwise go-nowhere year so far, but it appears to be retreating now. On Monday, the VIX fell to 12 after spiking to above 16 on Thursday. Meanwhile the Dow and the S&P 500 finished up 0.62% and 1%, respectively.
jlne.ws/2w7ukBc
Bearish Investor on China Says the Yuan Could Sink 70% Over Next 12 Months
Justina Lee - Bloomberg
Kevin Smith may not be the most famous China bear around, but he's certainly one of the most persistent.
Despite watching his bets against the Chinese currency and stock market backfire since March 2016, the Denver-based founder of Crescat Capital is as sure as he's ever been that the country is headed for a major devaluation. Smith says the yuan could sink 70 percent over the next 12 months as China's credit bubble finally bursts.
/goo.gl/X6k1Sj
****SD: "Smith, whose macro fund lost 14 percent in the first seven months of this year, is betting against the yuan with currency options and short positions in U.S.-listed Chinese stocks and exchange-traded funds." Also see Reuters' Yuan's strength against the dollar fails to snuff out depreciation expectations
2 Ways to Play Emerging Markets
Steve Sears - Barron's
In the short term, trading the emerging markets boils down to playing chicken with President Donald Trump and North Korea's Kim Jong Un.
jlne.ws/2w71T6J
Hedge funds gamble for a third time on oil rebalancing
John Kemp - Reuters
"If at first you don't succeed, try, try, try again," goes the proverb used to encourage students.
Hedge fund managers are becoming bullish towards crude oil and refined fuels for the third time this year and must be hoping the signs of market rebalancing are real this time after early setbacks proved costly.
jlne.ws/2w7aIgS
Hedge Funds Break Up With Long-Adored Apple and Facebook Shares
Simone Foxman and Brandon Kochkodin - Bloomberg
Hedge funds have adored the FAANGs for so long it's no wonder that two of them -- Apple Inc. and Facebook Inc. -- are losing their appeal.
Ken Griffin's Citadel sold 3.4 million shares of Apple, the majority of its stake. And Viking Global Investors, led by Andreas Halvorsen, shed 9.6 million shares of Facebook, or most of its holding. These are just two tidbits from the fire-hose of data hedge fund managers disclosed Monday in 13F filings, due 45 days after the end of each quarter.
jlne.ws/2x155wO
****SD: From Schaeffer's Research - Traders May Be Buying Options Hedges on These Tech Heavyweights
| | | | | | Events | | | CBOE Risk Management Conference Europe 2017
CBOE
CBOE Holdings, Inc. (BATS: CBOE | NASDAQ: CBOE) will host the 6th annual CBOE Risk Management Conference (RMC) Europe, Monday, September 11 through Wednesday, September 13, 2017, at the Grove Hotel in Hertfordshire, UK - just 20 miles from the London city center.
jlne.ws/2x0Ltcm
| | | | | | Miscellaneous | | | Short VIX ETN Soars in Biggest One-Day Gain Since 2011
Chris Dieterich - WSJ
Market volatility melted away quickly on Monday. Again.
The S&P 500 rebounded 1% in Monday's trading session, sending the CBOE Volatility Index plunging 20%, the most in nearly four months. The measure, known as the VIX, is an options-based measure of demand for S&P 500 portfolio insurance over the next 30 days.
jlne.ws/2wYB9S0
****SD: Also see Zacks' - Leveraged Volatility ETFs in Focus on Geopolitics
New Zealand's rampant dairy growth drawing to a close: Rabobank
Gerard Hutching - Stuff.co.nz
The last 20 years of runaway growth for the dairy industry will soon come to an end as environmental limits are reached, Rabobank says.
Investment in new farm conversions and the expansion of existing platforms had already virtually trickled to a standstill, it said in a new report.
jlne.ws/2w7tapk
****SD: Still plenty of action in dairy though.
As Jackson Hole looms, central banks addicted to open mouth operations
Jamie McGeever - Reuters
It is perhaps fitting that the biggest annual gathering of central banking's great and good takes place at a fishing retreat: financial markets are angling for the slightest hint on where monetary policy is headed.
jlne.ws/2w70Xz3
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