| October 16, 2017 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | The Trouble With Those Can't-Miss Trades; With the VIX skidding lower, shorting the fear gauge seems like a sure thing. As market history shows, that's an unsettling prospect.
Randall W. Forsyth - Barron's
"It's quiet, too quiet." That movie cliché hangs over the financial markets these days, as the volatility of virtually everythingÂstocks, bonds, and currenciesÂis apparent in its very absence.
You might think this placidity is because peace on earth and goodwill toward all had become a year-round reality rather than a wistful holiday wish. Or that our elected officials had taken seriously the people's business to solve the nation's pressing problems. Or that the threat of nuclear war was a distant memory of the Cold War. But only if you were blessedly sequestered from the world that, as Wordsworth put it, is too much with us.
jlne.ws/2xJ5Rid
Short VIX bets hit record high, remind experts of 1987 market crash
Joe Ciolli - Business Insider
Investors just can't resist making a quick buck on the motionless stock market.
With price swings already locked near record lows for weeks, traders have pushed short bets on the CBOE Volatility Index, or VIX  widely known as the S&P 500 fear gauge  to a new high.
It marks the fourth such record in just 11 weeks for hedge funds and large speculators, which have made a serious habit out of betting against the VIX, according to data compiled by the US Commodity Futures Trading Commission.
jlne.ws/2xJ1sf3
****SD: Great #TBT worthy picture accompanies this article. Bloomberg with the chart - Shorts of Volatility Futures Set a New Record
The Crash of '87, From the Wall Street Players Who Lived It
Richard Dewey - Bloomberg
...Black Monday, as the day became known, is part of financial history's fossil record, a divide between old and new markets. It was the first significant instance of computer-driven trading run amok. The nascent equity options market saw assumptions based on the Black-Scholes model overturned and replaced by a more complex world of volatility skews. And Federal Reserve Chairman Alan Greenspan, just two months on the job, got to glimpse a market panic and sell his first "ÂGreenspan Put" under the U.S. equity market.
/goo.gl/jw4ZJN
Black Monday and Long-Term Investors
Matt Levine - Bloomberg
One big takeaway from the crash, at least for connoisseurs, was that it cemented the idea of volatility skew: After Black Monday, everyone realized that options that hedge against huge moves ought to be more expensive than standard formulas suggested, because tail-risk scenarios are more common than those formulas assume.
jlne.ws/2ysgXvp
How a Bay Area man's trade signaled an end to the '87 crash
Steve Butler - Mercury News
Thirty years ago this month, the stock market experienced a single-day plunge equivalent to a 5,100-point drop in today's Dow Jones Industrial Average. It amounted to a 22 percent drop in value, the worst since 1914.
In general, we know today that computerized trading models, creating what was known then as "programmed trading," essentially faked each other out. Consider something like "Hal," the computer in the movie "2001," bidding against several electronic "brains" in a race toward the bottom, which only ended when markets were shut down.
jlne.ws/2yrG6q0
Options LiquidityMatrix - US Options Volume Slips, But Still Outpacing 2016
TABB Forum
Despite a September that saw monthly US options volumes drop 55.9 million contracts, year-to-date volume totals remain 1.8% ahead of the same period last year. September 2017 YTD listed options volume reached 3.1 billion contracts.
jlne.ws/2xJ9Xa5
****SD: Missed this at the end of last week
| | | | | | Exchanges and Clearing | | | SBI Holdings and bcause announce closing of Series "A" funding
SBI and bcause
SBI Holdings and bcause LLC announced today the closing of a Series "A" equity round in which SBI Holdings has agreed to be the lead investor. In this round, SBI Holdings has agreed to acquire a 40% holding in bcause LLC and to provide significant amounts of crypto-currency mining gear to be co-located at bcause's mining operations in Virginia Beach, Virginia. Additional equity investments will be contributed by bcause's existing equity members and other interested parties.
Yoshitaka Kitao, Representative Director, President, and CEO of SBI Holdings, Inc., said, "Our investment into bcause will help them become the first US-regulated Designated Contracts Market exchange in the cryptocurrency derivatives market in the United States that can be provided for retail investors and will support the creation of a digital currency ecosystem in the strategic US market. This is an important, long-term partnership that will advance the development and widespread use of digital currencies around the world."
Three biggest U.S. clearing houses pass liquidity stress tests - CFTC
Michelle Price - Reuters
The three largest U.S. clearing houses have all passed stress tests assessing whether they could handle a major market shock, the country's derivatives regulator said on Monday.
/goo.gl/kALWh9
Gary Cohn Calls Clearinghouses a 'New Systemic Problem'
Jeanna Smialek - Bloomberg
Ex-Goldman Sachs president raises issue at banking conference; 'It's the things we can't liquidate that scare me,' he says
President Donald Trump's chief economic adviser Gary Cohn said he sees a major risk evolving in clearinghouses, platforms that regulators turned to for swaps following the 2008 financial-market crisis.
/goo.gl/gL81Ad
| | | | | | Regulation & Enforcement | | | Fund houses and national regulators battle to be Mifid ready
Chris Flood, Jennifer Thompson and Attracta Mooney - Financial Times
Asset managers and national regulators face an uphill battle to be ready for the vast overhaul of European market rules that come into force on January 3 as the clock ticks down to the introduction of Mifid II.
jlne.ws/2xJd9lR
CSA Prohibits Sale of Binary Options
Laura Konkel - Lexology
On September 28, 2017, the securities regulatory authorities in all Canadian jurisdictions, other than British Columbia (CSA), issued CSA Multilateral Notice of Multilateral Instrument 91-102 Prohibition of Binary Options and Related Companion Policy (Instrument) in response to an increased number of complaints received relating to the marketing of binary options. Subject to the necessary approvals, the Instrument will come into force on December 12, 2017.
jlne.ws/2ys7m7U
| | | | | | Technology | | | ABN Amro Clearing extends relationship with Fidessa
Finextra
Fidessa group plc today announced that it has extended its existing relationship with ABN AMRO Clearing Bank N.V. to allow the global clearer to distribute Fidessa's derivatives EMS.
/goo.gl/PUWDgR
Guohai Liangshi Capital Management selects Horizon for options mark...
Finextra
Horizon Software, the leading global provider of electronic trading and investment management technology, today announced that Guohai Liangshi Capital Management Co Ltd,the subsidiary company of Guohai Futures, has chosen Horizon's platform for options market making and trading, as well as delta one trading.
jlne.ws/2xJclNV
****SD: The bigger point here is made by Guohai's VP Shen Xiao Chun - "We have been preparing for the launch of Dalian and Zhengzhou Commodity options markets and the stock index option market of China Financial Futures exchange (CFFEX)."
Pentagon Turns to High-Speed Traders to Fortify Markets Against Cyberattack
Alexander Osipovich - WSJ
Dozens of high-speed traders and others from Wall Street are helping the Pentagon study how hackers could unleash chaos in the U.S. financial system.
jlne.ws/2xIR86K
| | | | | | Strategy | | | The S&P Volatility Extreme That Could Signal Another Sell-Off
Todd Salamone - Schaeffer's Investment Research
Ahead of VIX options expiration, SPY is still staring down a formidable wall of call options at the 255 strike
jlne.ws/2yrqJOj
Get ready for a wild ride on earnings if you own these stocks
Fred Imberg - CNBC
MKM Partners' Jim Strugger says Michael Kors, Advanced Micro Devices and Hertz Global Holdings are among the stocks that will move more than 9 percent following the release of their earnings reports.
/goo.gl/QhmBMj
Yen & Euro Expected Volatility at Opposite Ends of the Spectrum
Paul Robinson - DailyFx
Generally speaking, FX volatility has cooled a bit recently and the options market is reflecting this with short-term implied volatility easing. Of course, this dynamic can change very quickly, so traders should always be on their toes. But even with that said, when shaping our expectations for trades we need to be mindful so as to not 'force the issue' and take what the market gives us until market conditions change.
jlne.ws/2yslTAI
| | | | | | Education | | | Are You Patient Enough?
Bob Lang - CBOE
As an options buyer, time is of the essence. The leverage from options is amazing, and if timed right some very large returns can be made, but if you're not quick on the trigger those gains can turn into losses very quickly. What's nice (and not so nice) about this market is low volatility, the VIX has spent a great deal of time around the 10% area, which is unprecedented. The unknowns of how this resolves are out there, and many believe the VIX will revert to the mean at some point, rise up and punish those who have been short volatility for a long while (and making big money doing it).
jlne.ws/2ysMFsB
| | | | | | Miscellaneous | | | Fink Sees More Systemic Risk Than the VIX Would Have You Believe
Hugh Son and Stephen Morris - Bloomberg
Larry Fink, who runs the world's largest asset manager, isn't calling for a sharp correction in global markets, but he sees how one could happen.
jlne.ws/2xIVUBk
****SD: Nothing too original in Fink's comment. Pretty much - "It may or it may not happen, but if it happens, that will be bad." So, "heads I win, tails you lose" for him on that prediction.
As the quartet breaks up, central banking leadership flux looms
Howard Schneider, Leika Kihara - Reuters
The leaders of the world's top central banks who risked trillions of dollars and their reputations to rescue the global economy are now set to walk off stage at a time when the lingering effects of the crisis, evolving technology and a combustible political landscape will challenge their successors
jlne.ws/2xIOwps
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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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Editor
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