| September 23, 2024 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | |
Volatility Insight of the Week: While underlying Gold futures prices have risen, options traders are increasingly positioning for downside risk as measured by the 30-day moving average of Gold Skew Ratio (GCSK). For more information, please visit here. | | | | | | Lead Stories | | | SEC Approves Nasdaq to List Options on iShares Bitcoin Trust ETF
Michael P. Regan - Bloomberg
The US Securities and Exchange Commission has approved Nasdaq Inc.'s application to list options on the iShares Bitcoin Trust ETF, marking the clearing of an important hurdle before derivatives tied to the product can begin trading. The contracts still need to be approved by the Options Clearing Corp. and the Commodity Futures Trading Commission before trading can begin. Other exchanges have also filed applications to list options on the iShares fund and other spot-Bitcoin ETFs.
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Foreigners' Derivatives Bets Hit Record $116 Billion in India; Indian equities have rebounded 18% from a low in June; Foreigners expected to stay bullish, market watcher says
Ashutosh Joshi - Bloomberg
With Indian stocks hitting successive records, global funds have pushed up their derivatives wagers to unprecedented levels. By Friday, foreign institutional investors owned 9.7 trillion rupees ($116 billion) of options and futures on equity indexes and single stocks listed on the National Stock Exchange, according to data compiled by Bloomberg. That day, they bumped up their bullish bets on index futures, including those tied to the NSE Nifty 50 gauge, to over 500,000 contracts. That's the highest level since 2015.
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Stocks' Post-Fed Rally Risks Adding 'Accelerant Fuel' to Selloff; Investors' hedging may build up dealer short gamma: Nomura; Options skew, VIX volatility hold above pre-summer levels
Jan-Patrick Barnert - Bloomberg
While the stock market rallied after the long-awaited Federal Reserve rate cut last week, there's a sense of unease accompanying the gains.
Referring to the Fed's shift to a bigger rate cut than had been expected even a week before the meeting, Charlie McElligott, cross-asset strategist at Nomura Securities, wrote in a note that the "'fear of left-tail' then self-fulfills the right-tail outcome" and that it's "pushing the market out of recession trades, instead capitulating back into soft-landing" expectations.
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Trading the U.S. Globally
David Howson - Cboe
As a Brit who has lived all over the world and currently calls the U.S. home, I have always been interested how markets around the globe are intertwined. Lately, I have had a lot of conversations with people around the world who are interested in participating in their own local markets and the U.S. market. They are not particularly keen on investing in other foreign markets outside of their home country, but nearly everyone wants a piece of the U.S. pie. These conversations piqued my curiosity, and I am always eager for the cold, hard facts, so I looked at the data.
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Forget September. This Is the Stock Market's Most Volatile Month.
Mark Hulbert - Barron's
September may have the reputation for being the worst month on Wall Street, but in fact October is the month with the greatest average stock market volatility.
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US equity markets have never been safer
George Steer - Financial Times
The number of trading suspensions implemented "for the protection of investors" by the US Securities and Exchange Commission has collapsed, according to the regulator's own figures, down from over 100 in 2020 to just a handful in recent years - and one in the past nine and a half months.
FTAV would love to tell you the headline for this post is accurate. But the truth is the sharp drop-off coincided with the adoption of amendments to an old investor protection rule that barred broker-dealers from publishing quotations for issuers who hadn't filed their finances accurately and on time.
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| | | | | | Exchanges | | | Robinhood Touts Rock-Bottom Fees for Options Trading. Then Come the Hidden Costs.; Customers using the platform face higher transaction costs than those of other brokers, a study finds
Alexander Osipovich - The Wall Street Journal
Robinhood Markets advertises rock-bottom fees for options trading-but a new study finds that its customers face hidden costs far higher than those of other brokers.
The findings, released this month, offer a rare glimpse into brokers' transaction costs-the spreads between the price you pay when buying options and the price you get when selling them. While brokers disclose how much they charge in fees, they shed little light on the costs associated with such spreads.
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Eurex to expand into the U.S. dollar Credit Index Futures market
Eurex
On 23 September Eurex is launching Bloomberg US Corporate Index Futures and Bloomberg US High Yield Very Liquid Index Futures. Eurex becomes the first exchange to offer a global product suite of Credit Index Futures. This will help clients to capitalize on risk management efficiencies across products and reduce capital costs. Eurex is a pioneer in the futurization of traditional OTC traded financial products and is now expanding its global offering for trading and clearing of Credit Index Futures. As of 23 September, Eurex is launching futures on the Bloomberg US Corporate Index and the Bloomberg US High Yield Very Liquid Index and will be the first exchange with a truly global offering of Credit Index Futures.
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Updated SEBI Study Reveals 93% of Individual Traders Incurred Losses in Equity F&O between FY22 and FY24; Aggregate Losses Exceed 1.8 Lakh Crores Over Three Years
SEBI
A new study conducted by the Securities and Exchange Board of India (SEBI) has revealed that over 9 out of 10 individual traders in the equity futures and options (F&O) segment continue to incur significant losses. The aggregate losses of individual traders exceeded 1.8 lakh crores over the three-year period between FY22 and FY24. This study follows up on a report published by SEBI in January 2023, which found that 89% of individual equity F&O traders lost money in FY22. With increased participation of individual investors in equity and equity derivatives markets, the current study was undertaken to analyze profit and loss patterns for individual traders in F&O during the three years FY22 to FY24, and for all the categories of investors in F&O during the single year FY24.
Key Findings:1.High Loss Rates Among Individual Traders: 93% of over 1 crore individual F&O traders incurred average losses of around 2 lakh per trader (inclusive of transaction costs) during the three years from FY22 to FY24.Top 3.5% of loss-makers, approximately 4 lakh traders, faced an average loss of 28 lakh per person over the same period, inclusive of transaction costs.
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| | | | | | Regulation & Enforcement | | | EU Raids Financial Firms in Derivatives Antitrust Probe; Raids follow a series of financial cases in past decade; Other cases have targeted manipulation of benchmarks and bonds
Samuel Stolton and Peter Chapman - Bloomberg
European Union antitrust watchdogs raided the premises of unidentified financial services firms suspected of involvement in a cartel related to "financial derivatives."
The Brussels-based European Commission gave no further details in a statement on Monday beyond confirming that the raids took place across two EU states and that the targeted firms may "have violated EU antitrust rules that prohibit restrictive business practices."
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CFTC Approves Final Guidance Regarding the Listing of Voluntary Carbon Credit Derivative Contracts
CFTC
The Commodity Futures Trading Commission today approved final guidance regarding the listing for trading of voluntary carbon credit derivative contracts. The guidance applies to designated contract markets (DCMs), which are CFTC-regulated derivatives exchanges, and outlines factors for DCMs to consider when addressing certain Core Principle requirements in the Commodity Exchange Act (CEA) and CFTC regulations that are relevant to the listing for trading of voluntary carbon credit derivative contracts. The guidance also outlines factors for consideration when addressing certain requirements under the CFTC's Part 40 Regulations that relate to the submission of new derivative contracts, and contract amendments to the CFTC.
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Statement of Support of Chairman Rostin Behnam on the Commission's Final Guidance Regarding the Listing of Voluntary Carbon Credit Derivatives Contracts
CFTC
The Commission's final guidance for designated contract markets (DCMs or Contract Markets) that list derivatives on voluntary carbon credits (VCCs) as the underlying commodity is a critical step in support of the development of high-integrity voluntary carbon markets (VCMs). For the first time ever, a U.S. financial regulator is issuing regulatory guidance for contract markets that list financial contracts aimed at providing tools to manage risk, promote price discovery, and foster the allocation of capital towards decarbonization efforts.
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Dissenting Statement of Commissioner Summer K. Mersinger on Guidance Regarding the Listing of Voluntary Carbon Credit Derivative Contracts
CFTC
Today's non-binding guidance[1] to designated contract markets ("DCMs") regarding listing of voluntary carbon credits ("VCCs") derivative contracts is a solution in search of a problem. The Commodity Futures Trading Commission[2] has no shortage of topics that warrant our immediate attention. But instead of addressing those, we are issuing guidance on an emerging class of products that have very little open interest and comprise a miniscule percentage of trading activity on CFTC-regulated DCMs.
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| | | | | | Strategy | | | Wall Street Wants You to Be Manic. Be Focused Instead.
Steven M. Sears - Barron's
Wall Street wants you to be a short-term event addict. If you are overly focused on daily happenings, you will often be confused, make suboptimal decisions, and likely lose lots of money because you don't understand how to focus upon, much less find, the path that leads to consistent returns. By obsessing over event outcomes-like this week's Federal Reserve interest-rate decision -you are essentially wagering on costly flip-of-the-coin trades. The Street's sophisticated practitioners, though they rarely mention this in public, consider market events to be notoriously hard to predict. But they're all too happy to profit from amateur investors.
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Wall Street's most cautious voice says defensive stocks are now too rich. What alternatives are left?
Steve Goldstein - MarketWatch
The S&P 500 has jumped 5.4% over the last two weeks and sits just inches from a record closing high. Fed Chair Jerome Powell last week threaded the needle in delivering a half-point rate cut without triggering growth concerns, says Mike Wilson, Morgan Stanley's chief stock-market strategist.
Wilson has been one of the most cautious voices on Wall Street, but even caution can become too expensive. He says the firm is now neutral on defensives vs. cyclical stocks because of valuation.
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Hedge funds snap up US tech stocks amid falling rates, says Goldman Sachs
Nell Mackenzie - Reuters
Hedge funds bought U.S. tech and media stocks at the fastest pace in four months last week, said a Goldman Sachs prime brokerage note to clients seen by Reuters on Monday, spurred by the Federal Reserve's anticipated 50-basis point rate cut.
Falling rates are expected to rejuvenate industrial spending, making it easier for companies to borrow money at lower costs and for consumers to buy tech products, all of which might benefit the stock prices of these companies.
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| | | | | | Miscellaneous | | | Bloomberg's $140 Million Push to Get Lower-Income Students Into Top Colleges Falls Short; A college advising program struggles to reach students, while schools' recruiting efforts have been limited
Melissa Korn and Matt Barnum - The Wall Street Journal
Billionaire Michael Bloomberg has spent more than $140 million over the past decade to get tens of thousands more talented, lower-income students into top-flight colleges. Those big ambitions have so far fallen short. The bulk of Bloomberg's millions have gone to a remote college-counseling program. Bloomberg Philanthropies, the ex-New York City mayor's charitable arm, also invested in the American Talent Initiative, a group of college presidents that aimed to attract 50,000 more lower-income students to schools with high graduation rates.
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