| June 28, 2023 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | I published three short video snippets from my interview with MarkIV broker Mark LeeMaster for the story The Smart Confirm Trading Floor Renaissance Is Bringing New Life To The CME Trading Floor. You can see the video snippets HERE, HERE, and HERE of Mark talking about the advantage of the Smart Confirm technology, which has been adopted by half the SOFR options broker groups since the floors reopened and has helped trading floor volumes grow from less than 50% to a current 67%. ~JJL
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Lule Demmissie, U.S. CEO for eToro, to new users: frequent risks in smaller increments is a magic combination
JohnLothianNews.com
Lule Demmissie is the U.S. CEO of eToro, a global social trading platform with 32 million users in 100 countries. Demmissie says: "Think of it as Twitter and then on top of it a trading system and then on top of that a place for people to practice." Social engagement drives the platform. When users log in, they see a broad feed of user thoughts on the assets, markets and investing. As users navigate to each asset, they gain access to a unique feed that presents user posts related to that specific offering. People can trade crypto, stocks, ETFs and options, the latter made possible by eToro's recent acquisition of Gatsby, a commission-free options trading app. Futures could be a possibility someday.
Watch the video »
| | | | | | Lead Stories | | | That Free Options Trade Comes With Hidden Costs
Bob Henderson - WSJ
A reminder to traders piling into bullish options that the stock rally will continue: the bets can come with hidden costs.
A study by researchers at the London Business School found individuals paid $6.5 billion in hidden costs for trading options on platforms such as Robinhood during the pandemic.
/jlne.ws/3XC6Z4D
Traders Scoop Up Bets on Volatility
Gunjan Banerji and Eric Wallerstein - WSJ
The Cboe Volatility Index, or the VIX, has fallen to around 14, near the lowest levels since February 2020. Known as Wall Street's fear gauge, the index tracks the price of options often used to hedge against stock-market downturns.
Yet traders are pointing to a handful of signs, such as positioning in the options market and mammoth swings in some individual stocks, that suggest volatility has been brewing under the surface.
/jlne.ws/3XsKrDe
No Fear: VIX Edges Lower Alongside Stocks
Gunjan Banerji - WSJ
Wall Street's "fear gauge" is ticking lower in early trading Wednesday.
The move in the Cboe Volatility Index, or VIX, is small but marks a continued slide despite a move lower in the stock market today. The volatility indicator typically moves in the opposite direction of the stock marketânot in lockstep.
/jlne.ws/3ralxfy
Bitpanda Pro Spinout Raises EUR30 Million Led by Thiel's Valar; One Trading is seeking official MiFID trading venue license; Crypto shake-ups spur firms to toughen their regulatory base
Anna Irrera - Bloomberg
Peter Thiel's Valar Ventures has led a EUR30 million ($33 million) investment in a company created from the spinout of Bitpanda Pro, helping fill a gap in Europe for a regulated marketplace for crypto derivatives. The independent platform is called One Trading and has applied to the Dutch financial watchdog for a trading venue license under the Markets in Financial Instruments Directive. Thiel already backs the exchange's former parent, Vienna-based Bitpanda GmbH.
/jlne.ws/3NR7iVV
Top Central Bankers See Further Tightening to Counter Inflation
Steve Matthews - Bloomberg
Several of the world's top central bankers said Wednesday that resilient economies are keeping inflation too high, and more monetary tightening will be needed.
"Although policy is restrictive, it may not be restrictive enough and it has not been restrictive for long enough," Federal Reserve Chair Jerome Powell said at a conference at the Portuguese resort of Sintra.
/jlne.ws/4354063
The return of quantitative easing
Michael Howell - Financial Times
Rising world stock markets appear to confirm that global liquidity â the pool of cash and credit shifting around financial markets â is once again expanding after skidding lower last year.
So much then for central bank quantitative tightening, the much-mooted unwinding of the massive stimulus programmes to support markets and economies.
/jlne.ws/3Pwi9WH
| | | | | | Exchanges | | | ETD Volume - May 2023
FIA
Worldwide volume of exchange-traded derivatives reached 10.21 billion contracts in May. This was up 27.7% from April 2023 and up 56.1% from May 2022.
Options continue to gain in popularity. Global trading of options reached 7.7 billion contracts in May, up by more than 82% from last year, with most of that trading taking place in the Asia-Pacific region. Global trading of futures reached 2.51 billion contracts in May, up 7.8% from the same month last year.
/jlne.ws/3Jzhb8h
| | | | | | Regulation & Enforcement | | | Request for Comment on Derivatives Clearing Organization Risk Management Regulations to Account for the Treatment of Separate Accounts by Futures Commission Merchants
NFA
Dear Mr. Kirkpatrick:
National Futures Association (NFA) appreciates the opportunity to comment on the Commodity Futures Trading Commission's (CFTC or Commission) proposed amendments to Commission Regulation 39.13 regarding derivatives clearing organization (DCO) risk management regulations. The proposed amendments would allow a DCO to permit clearing futures commission merchants (clearing-FCMs) to treat the separate accounts of a single customer as accounts of separate entities for purposes of Commission Regulation 39.13(g)(8)(iii), provided the clearing-FCM's written internal procedures permit it to do so and the DCO requires the clearing-FCM to comply with specified conditions set forth in the proposed regulations.
/jlne.ws/3XvvIr6
Factbox: Financial firms line up spot bitcoin exchange-traded fund applications
Reuters
Financial firms are once again lining up to attempt to get their proposed spot bitcoin exchange-traded-funds approved by the U.S. securities regulator after BlackRock this month unveiled it was looking to launch such a product.
Stock picker Cathy Wood's Ark Invest and Swiss-based exchange-traded fund (ETF) issuer 21Shares on Wednesday amended their bitcoin ETF application, while asset manager Fidelity is also expected to file a spot bitcoin ETF application, trade publication The Block reported on Tuesday.
/jlne.ws/46uwXez
| | | | | | Strategy | | | Times are changing. So must portfolios.
Nick Griebenow - Cboe
Has the 60/40 portfolio gone the way of selfie sticks and the man bun? The classic 60% allocation to stocks and 40% allocation to bonds enjoyed a good, long run during the past decade of low volatility and easy money.
But the times they are a changing. Inflation and volatility are up, and so are interest rates, bank failures, and macroeconomic uncertainty. Simply put, the 60/40 balanced portfolio that worked in the past can't keep up with today's rapidly evolving market environment. Investors can't coast with complacency as they had during the 2009-2020 bull market, which was the longest in stock market history. They need to change with the times and make adjustments to take advantage of new market realities.
/jlne.ws/44eWLti
How to Turn a Disorderly World to Your Investing Advantage
Steven M. Sears - Barron's
A chasm exists between what we know about the world around us and what we think we know.
The point was raised once more as the world recently watched in surprise as the fierce mercenary Wagner Group rumbled toward Moscow in what seemed an effort to topple Vladimir Putin, one of the world's most powerful leaders.
/jlne.ws/3Xwo53P
The AI Boom Is Making Some Tech Stocks Riskier
Bob Henderson - WSJ
Tech stocks tend to be risky. But their recent AI-fueled rally is making some riskier than others, according to the analytics firm OptionMetrics.
Shares of Advanced Micro Devices are up 70% this year while Nvidia shares up 185%, fueled by enthusiasm for applications such as ChatGPT that their products can power. But both stocks could also suffer from a less attractive balance of risk versus reward, as measured by a metric called beta.
/jlne.ws/433ROlG
One Big Bet: Options Traders Are Letting Go of Recession Hedges
Eric Wallerstein - WSJ
Traders are growing fatigued hedging against a recession that refuses to come.
Options tied to the iShares High Yield Corporate Bond ETF (ticker: HYG) are a popular way to quickly profit if investors flee junk-rated company debt in a downturn. Demand for those contracts has fallen flat.
/jlne.ws/3NQS2s1
Hot Economy
Cboe (Video)
In #Vol411, Joe Tigay @JoeTigay lets us know that the $VIX Index is still below 14 level today, the #economy has defied expectations in 2023, the job and housing #markets continue to grow and more.
/jlne.ws/46oHyHQ
| | | | | | Miscellaneous | | | Libor's Demise Means No More Rigging, But Less Flexibility
Marcus Ashworth - Bloomberg
A seminal event occurs at the end of this week: Dollar Libor will finally die. The big question is does its replacement, the Secured Overnight Financing Rate, make the global financial system safer, or just exposed to different risks?
The London interbank offered rate, set daily by panels of banks, was once dubbed the most important number in finance. It was a suite of borrowing costs, covering a range of maturities for the world's major currencies. Hundreds of trillions worth of everything was tied to Libor, from floating-rate notes to residential mortgages to auto loans.
/jlne.ws/3NyDR9E
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