| May 15, 2023 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Lead Stories | | | US Stocks' Trading Range Is Among Most Painful Since 1980, Citi Says
Lisa Abramowicz - Bloomberg
It's common these days to hear traders and analysts heave big sighs before saying, "This is the longest year ever."
A grinding mess of uncertainty has left the S&P 500 whipping around in a tight range and 2-year US Treasuries trading like penny stocks, as Jon likes to say. If you get the sense that it's been painful, you'd be right. So much so that Citigroup's Stuart Kaiser put some numbers on just how tightly range-bound equities have been.
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Transcript: The CME's Terry Duffy on the Big Risks He's Seeing Now
Bloomberg (Audio/Transcript)
Terry Duffy is the chairman and CEO of CME Group, the world's biggest derivatives exchange and a trading behemoth whose name is synonymous with Chicago's financial industry. In this wide-ranging interview, Duffy talks about the big risks in the market he's seeing right now and how the CME is preparing for them. He discusses everything from complaints over a lack of liquidity in Treasury futures, to the impact of the debt ceiling on CME's risk management, interest rate hedging trends in the aftermath of the recent banking crisis, and the exchange's expanding suite of crypto offerings. We also talk about how Duffy is viewing the CME's future in Chicago and, finally, his take on the onion futures debate. This transcript has been lightly edited for clarity.
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Turkish Markets Slump as Bets on Return to Orthodoxy Unravel
Tugce Ozsoy, Kerim Karakaya and Netty Idayu Ismail - Bloomberg
Turkey's markets slid as the nation heads for a runoff election, with stronger-than-expected support for President Recep Tayyip Erdogan wrong footing investors who were betting on a quick end to his unconventional economic policies.
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Algorithms prop up the market as fretful humans sit out the uncertainty; Quant funds have been piling into US equities in response to falling volatility
Nicholas Megaw - Financial Times
While human portfolio managers fret over economic uncertainty and the health of the US banking system, some algorithmically driven hedge funds have been buying stocks at one of the fastest rates in a decade, according to bank trading desks. Quant funds have been piling into US stock markets in response to falling volatility, helping to prop up the market as active managers sit on the sidelines.
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EU gas derivatives market becoming less transparent, watchdog warns; ESMA says Russian invasion of Ukraine pushes more deals off-exchange
Shotaro Tani and Alice Hancock - Financial Times
More deals in Europe's EUR4tn natural gas derivatives market have moved off-exchange since Russia's full-scale invasion of Ukraine as squeezed companies try to save trading costs, the European Union's securities watchdog has warned. A report on Friday by the European Securities and Markets Authority found the share of trades on the opaque over-the-counter market had jumped from 15 per cent last summer to 27 per cent this year, shifting from the regulated futures exchanges.
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A debt ceiling debacle might actually be good for Treasuries
Robin Wigglesworth - Financial Times
Almost every day, there is a new warning of how the US not raising the debt ceiling will cause a cataclysmic debt default that will reverberate through global financial markets.
"The default would cause interest rates to skyrocket," says the CEA. It would unleash an "economic and financial catastrophe" according to Janet Yellen. "It would have very significant, hard to predict, and likely lasting effects on investors, issuers, and markets alike," argues Gary Gensler.
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Big banks performed well in Q1 despite 'gut-wrenching volatility': analyst
Steve Gelsi - MarketWatch
JPMorgan Chase & Co. and Goldman Sachs Group Inc. earned the highest praise from KBW analyst David Konrad for their first-quarter profits, according to a research note.
"Despite the gut-wrenching volatility in bank stocks, the overall market has performed well, supporting growth in wealth and investment management revenues," Konrad said in a report published Sunday.
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Column: Funds bearish on oil even after price slide
John Kemp - Reuters
Portfolio investors are very bearish about the outlook for oil in the short term even though prices are already below their long-term average in real terms.
Hedge funds and other money managers sold the equivalent of 17 million barrels in the six most important futures and options contracts over the seven days ending on May 9.
/jlne.ws/42OmJTA
| | | | | | Exchanges | | | Shanghai's Nasdaq-style Star Market to launch options trading linked to ETFs, giving investors hedging choices against volatility
Zhang Shidong - South China Morning Post
The Shanghai Stock Exchange unveiled plans to launch options linked to exchange-traded funds (EFTs) in the Nasdaq-style US$955 billion Star Market which will offer investors a hedging tool against volatility in China's second best-performing equity benchmark this year.
The exchange will prepare the ground for options trading under the guidance of the China Securities Regulatory Commission (CSRC) in an important measure to support China's tech innovation strategy, the Shanghai bourse said in a statement. It did not provide a timeline for the launch.
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CME Group U.S. Treasury Futures Open Interest Surpasses Record 17 Million Contracts
CME Group
CME Group, the world's leading derivatives marketplace, today announced that open interest (OI) in its U.S. Treasury futures reached a record 17,222,551 contracts on May 12, the fifth consecutive day of record OI. Prior to the record week, the previous OI record of 16,698,659 contracts was set on February 19, 2020.
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Trends in ETD trading activity Q1 2023
FIA (Video)
FIA's quarterly overview of trends in futures and options trading worldwide. This quarter we will focus on commodity markets, with insights from our guest speaker, Guy Wolf, global head of market analytics at Marex.
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| | | | | | Regulation & Enforcement | | | A ban on short selling is a bad idea
Jim Overdahl - Financial Times
Following weeks of declining prices for US regional bank stocks, short selling of equity shares is once again coming under scrutiny with calls for more regulatory oversight of the practice. In a letter to clients this past week, a major Wall Street law firm argued that the Securities and Exchange Commission should impose a 15-trading day prohibition on short sales of the stock of financial institutions. Jamie Dimon, chief executive of JPMorgan Chase, has also called on regulators to look into the behaviour of short sellers.
/jlne.ws/3IbCpIy
US crypto tsar promises crackdown on digital platforms; Justice department steps up scrutiny of industry wracked by scandal and volatility
Stefania Palma - Financial Times
The top US cryptocurrency enforcement tsar is promising a crackdown on illicit behaviour on digital platforms, saying the scale of crypto crime has grown "significantly" in the past four years. The Department of Justice is targeting crypto exchanges along with the "mixers and tumblers" that obscure the trail of transactions, said Eun Young Choi, who was appointed director of the agency's national cryptocurrency enforcement team last year. The DoJ is targeting companies that commit crimes themselves or allow them to happen, such as enabling money laundering, she said.
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| | | | | | Strategy | | | AQR Sees a Risk-Parity Rebound as 'Teflon' Stocks Ignore Trouble
Eva Szalay - Bloomberg
One year after the inflation shock wreaked havoc for diversification strategies on Wall Street, AQR Capital Management sees brighter days ahead for a popular quant trade that spreads money across assets.
According to the Greenwich, Connecticut-based systematic manager, so-called risk parity investing â which allocates to everything from stocks and debt to commodities based on their volatility â is ready for a revival as bonds re-establish their traditional role as a portfolio diversifier.
/jlne.ws/42Bz7Xq
Earnings This Week
Cboe (Video)
In #Vol411, Joel Hawthorne @louiswinthrop covers Friday's #trading activity, today's most active $SPX & $VIX #options and what to look for in the week ahead that can impact #markets.
/jlne.ws/3o64uKs
| | | | | | Miscellaneous | | | 'Every Family Should Be Concerned' About US Debt Ceiling Says Watchdog
Huileng Tan - Business Insider
The ongoing US debt ceiling debate should concern everyone, the head of America's top consumer watchdog told CNN last Thursday.
That's because borrowing costs on everything â from credit cards to car loans and mortgages could spike if the US defaults on its debt, cautioned Rohit Chopra, the director of the Consumer Financial Protection Bureau, or CFPB.
/jlne.ws/42BCs8U
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