| May 31, 2019 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | 
The Spread - Mind the Litigation
JohnLothianNews.com
This episode of The Spread takes a look at the court's decision to dismiss the class action against Cboe regarding VIX manipulation.
Watch the video »
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Trump to Impose Tariff of Up to 25% on Mexico Over Migrants
Jenny Leonard and Shawn Donnan - Bloomberg (SUBSCRIPTION)
White House says trade action is separate from new Nafta; Republican Senator Grassley calls move 'misuse' of authority
President Donald Trump vowed to impose a 5% tariff on Mexican goods until that country stops immigrants from entering the U.S. illegally, brandishing a weapon used against a widening group of countries and jeopardizing a new North American trade agreement.
/bloom.bg/2XgPfMg
****SD: See live updates on the Mexico tariff development via CNN.
| | | | | | Lead Stories | | | Vanishing Short-Volatility Structures May Slow Treasury Rally
Edward Bolingbroke - Bloomberg (SUBSCRIPTION)
An options-based source of fuel for the Treasury market rally may be drying up.
Short-volatility structures, made from options on Treasury futures, can add momentum to a move in yields. Changes in yield affect the quantity of futures needed to hedge the positions, in a way that can spur buying in a rally and selling in a sell-off.
/bloom.bg/2HNqfXA
JP Morgan turns to machine learning for options hedging; New models sidestep Black-Scholes and could slash hedging costs for some derivatives by up to 80%
Nazneen Sherif - Risk.net (SUBSCRIPTION)
JP Morgan is using machine learning to automate the hedging of some equity options, a move that one quant calls a "game-changer".
The bank started using machine learning to hedge a portion of its index vanilla flow book last year. Since then, it has been able to hedge its exposures faster, and quote higher volumes as a result.
bit.ly/2MhIIzI
Poker-Playing Hedge Fund Managers Have an Edge; A new study strengthens the case that skill at the card game helps in the investment decision-making process.
Aaron Brown - Bloomberg Opinion (SUBSCRIPTION)
Do poker players make good hedge fund managers? On one hand, there's skill overlap. Both activities demand aggressiveness, accurate calculations under pressure, keen behavioral insight and shrewd risk-taking. On the other hand, poker seems like a risk-seeking activity, suggesting reckless and overconfident managers. Poker requires deception and gamblers are often considered untrustworthy. Also, time spent learning and playing poker is time taken away from investing.
/bloom.bg/310mi9q
****SD: If you're great at poker, it means you grasp probabilities and risk/reward profiles and can speedily evaluate a developing situation with unknown variables. How could those qualities not help?
I'll refer you to a comment I made in mid-May in this newsletter:
"I did not realize it has a blog dedicated to games and gambling called Raise Your Game. Posts include "How Do We Quantify the Value of a Defensive Basketball Player?," "NHL Draft Pick Probability," and "Poker Tournament Tips for New Players."
But this isn't really surprising considering SIG's focus on the application of game theory in trading. Per its site, the team has three employees that have won World Series of Poker bracelets. Green traders have weekly "strategic gaming classes" with board games like Settlers of Catan and an array of popular poker variants like Limit Hold'Em. And campus recruiting events frequently take the shape of gaming tournaments.
Bloomberg's Annie Massa - who won the inaugural STA Women in Finance Committee's Excellence in Journalism Award (cool!) - wrote a long(ish) form story about SIG at the end of 2018 that mentioned some of the above: The Poker Aces Playing a Key Hand in the $5 Trillion ETF Market.
Top banks' revenues drop in Q1 - report
Louisa Chender - Global Investor Group (SUBSCRIPTION)
Coalition report said a combination of factors led to the first Q1 decline since 2016
bit.ly/310QXno
****SD: Overall revenue is down, but revenue from futures and options rose 7% on the back of growth in EMEA and APAC markets.
| | | | | | Exchanges and Clearing | | | CME Group Sets a Number of Volume, Open Interest Records in Agricultural and Interest Rate Products
CME Group
CME Group, the world's leading and most diverse derivatives marketplace, announced an all-time daily volume record for agricultural futures and options of 3,228,143 contracts traded on May 29, surpassing the previous record of 3,197,646 set on June 19, 2018. CME Group Agricultural options also reached a record 901,106 contracts and corn options reached a record 582,364 contracts.
bit.ly/2XdlxYA
****SD: This ag record is far from surprising. All you have to do to see the plight of U.S. farmers right now is check out the #noplant19 hashtag.
NSE gets regulator's nod to launch derivatives market
Business Daily
The Capital Markets Authority (CMA) has given the Nairobi Securities Exchange the nod to launch and operate the long-awaited derivatives market, setting the stage for introduction of new products this year.
bit.ly/310LInp
| | | | | | Regulation & Enforcement | | | FIA files amicus brief on permissible venues to arbitrate futures disputes
FIA
FIA has submitted an amicus brief to the U.S. District Court for the Northern District of Illinois in a case that will decide the permissible venues for the arbitration of futures trading disputes under CFTC rules.
The brief argues that CFTC rules do not allow firms to select FINRA to hear a dispute that exclusively relates to futures transactions. FIA warned that allowing firms to "arbitrate disputes over futures transactions executed by an intermediary dually registered with the CFTC and SEC...would result in potentially duplicative or inconsistent regulations in the futures markets that Congress sought to avoid by granting the CFTC exclusive jurisdiction over those markets."
bit.ly/2HLrOp4
Closing Speech By Tan Boon Gin, Ceo Of Sgx Regco, At The Sgx Regulatory Symposium 2019
SGX
Today's topic was really what kind of regulation do you want anyway. As you have seen from the preceding discussion, different people have different views.
bit.ly/2XhIjOZ
Speech By Chew Chin Yee, Head Of Regulatory Development And Policy, Singapore Exchange Regulation, At The Sgx Regulatory Symposium 2019.
SGX
It is heartening to see so many of you, representing the various constituents of our market, present today. As Cheng Han has eloquently noted, SGX RegCo must always listen closely to outside voices. Be it criticism or praise, every piece of feedback helps to inform and educate us in the regulation of our market. In this same vein, the participants in the upcoming round-table this morning are diverse, and represent investors (institutional and retail), market professionals (in this case lawyers), business leaders and commentators. All of you play an important part in the market eco-system. I know that you are as eager as I am for the insights that will be gleaned from their discussions.
bit.ly/2XgT3x2
| | | | | | Technology | | | IRESS announces acquisition of international market data provider QuantHouse
QuantHouse
IRESS today announced it has acquired QuantHouse, a leading international provider of market data and trading infrastructure.
bit.ly/311Imkn
| | | | | | Strategy | | | How Options Traders Are Reacting to the China-U.S. Trade War
Bloomberg (VIDEO)
On this edition of "Options Insight," Randy Frederick, Charles Schwab vice president of trading and derivatives, discusses recent market volatility with Bloomberg's Abigail Doolittle on "Bloomberg Markets: The Close."
/bloom.bg/2HMbEvA
| | | | | | Miscellaneous | | | Modeling Ray Dalio's Modeling: The Art of Position Concentration
Paul Rowady - Alphacution
When we first exposed our initial thoughts on this legendary hedge fund manager in Bridgewater Associates: Modeling Ray Dalio's Modeling, the key finding was that their investment strategy was impersonating that of a macro manager (which historically relied largely on futures) by using ETFs to shoulder the primary market factors. In the chart below, Alphacution presents an illustration of the portion of 13F market value represented by a very short list of ETFs:
bit.ly/2HLIZXm
****SD: If you missed Alphacution's earlier options-related post, check it out - Volatility, Accidental Alpha and the Ghost of GETCO.
What will billionaire Ken Griffin build on his huge Palm Beach estate?; The Chicago hedge fund manager got permission to demolish a 36-year-old house on the property.
Carolina Gonzalez - Crain's Chicago Business
The Architectural Commission of Palm Beach unanimously gave billionaire Ken Griffin permission to knock down a lakefront house built in 1983 in his 17-acre Florida property on Wednesday, according to the Palm Beach Daily News. There is no information on what he plans to build in its place.
bit.ly/2EWJjB5
GlobalCapital Americas Derivatives Awards 2019: the winners
Ross Lancaster - GlobalCapital
From January, GlobalCapital began to consult with market participants on the firms that have excelled during 2019 and deserved to be on the nominee list for this year's awards. Then, during February and March, we interviewed the candidates for each category to determine the winners.
bit.ly/30Xwobj
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