| October 07, 2022 | | | |  | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | Cboe Digital is officially Cboe Digital. The website is www.cboedigital.com.
| | | | | | Lead Stories | | | VIX Surge to 150 Is Day's Biggest Options Bet for 'Fear Gauge'
Elena Popina - Bloomberg
Uncertainty about the upcoming jobs report pushed the Cboe Volatility Index, or VIX, to close above 30 on Thursday. And someone is wagering that it won't stop there. Shortly before the market closed, a trader bet that the VIX could increase to 150 by late March. Through a series of block trades, the trader -- most likely one person, according to market participants -- bought 50,000 call options, paying $950,000. It was the most-active VIX options contract Thursday.
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Banks dial up risk-taking in OTC derivatives trades by using many of the same non-bank counterparties, a study says
Steve Gelsi - MarketWatch
A working paper on counterparty choice by major banks in the $12.4 trillion over-the-counter derivatives market offers evidence of systemic risk propagation in bank networks through non-bank counterparties in "opaque" markets. The report, Counterparty Choice, Interconnectedness, and Bank Risk-Taking, by the U.S.'s Office of Financial Regulation marks the first study to provide empirical evidence in the OTC derivative markets that "suggests the existence of endogenous risk-taking behavior by banks related to network formation," said authors Andrew Ellul and Dasol Kim of the Office of Financial Regulation.
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Market jitters spur September flight to Treasury ETFs
Steve Johnson - Financial Times
Global investors pumped more than $35bn into exchange traded funds in September, but the bulk went to US Treasury funds as investors battened down the hatches and sought the safest of safe havens.
A total of $22.1bn â more than double the total for all government bonds in August â was squirrelled away into Treasuries in September, according to data from BlackRock. The lower total of $21.9bn in inflows for all government bonds indicate that Treasuries were the star of September's show.
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ETF investors grapple with 'manic depressive' stock market after September flows signaled 'risk-off bias'
Christine Idzelis - MarketWatch
Money has kept flowing into exchange-traded funds despite a rocky September, but there were signs of wariness as investors continue to grapple with big swings in markets and anxiety over the Federal Reserve's aggressive monetary tightening.
There's been "a manic depressive quality" to the stock market, said Chris Davis, chairman of Davis Advisors, in a phone interview. "You have this dramatic oversteering" both up and down.
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Traders Press Bets That 'Fed Pivot' Isn't on the Horizon
Eric Wallerstein - WSJ
Expect higher interest rates, for longer, says the derivatives market tied to the federal funds rate.
Following Friday morning's jobs report, which showed a gradually cooling labor market but no signs of stress, traders upped their bets on Federal Reserve interest-rate increases. Those wagers countered Wall Street speculation that the central bank would soon be forced to "pivot" and stop tightening policy.
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| | | | | | Exchanges | | | Fireside Friday... with Cboe Europe's Natan Tiefenbrun; The TRADE sits down with the president of Cboe Europe, Natan Tiefenbrun, to explore the big themes impacting the European equities trading landscape, the importance of a consolidated tape and the evolution of dark pool trading in Europe.
Wesley Bray - The Trade
What are some of the biggest themes right now in Europe's equities trading landscape? Unfortunately, European markets increasingly lag the rest of the world in terms of liquidity, which creates challenges for financial services firms, but crucially, also for investors and for issuers. Our market infrastructure is complex and expensive and as a result, participants in European markets are continuing to question the incumbency of national exchanges and their associated post-trade infrastructure. Participants are concluding that more competition is required and if the desired outcome is a more open and competitive European market infrastructure, they need to vote with their feet.
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Egypt Plans New Derivatives to Build Market for Currency Hedging; Central bank working with lenders on introducing NDF contracts; Pound has depreciated to record as Egypt pursues deal with IMF
Mirette Magdy - Bloomberg
Egypt's central bank is set to allow new currency derivatives to unlock liquidity in the local market, making available instruments to hedge against risks to the pound after it fell to a record. Under the plan, domestic lenders would introduce onshore non-deliverable forwards, or NDF contracts, and options that allow companies and investors for the first time to bet on or hedge against swings in the Egyptian currency, according to people with direct knowledge of the matter.
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Miami International Holdings Reports September 2022 Trading Results; SPIKES Futures and MIAX Pearl Equities Set Year-to-Date Volume Records
MIAX
Miami International Holdings, Inc. today reported September 2022 trading results for its U.S. exchange subsidiaries - MIAX , MIAX Pearl and MIAX Emerald (together, the MIAX Exchange Group), and Minneapolis Grain Exchange (MGEXâ¢).
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TAIFEX to Launch Bi-Weekly Contracts of TAIEX Options and Mini-TAIEX Futures
TAIFEX
Taiwan Futures Exchange (TAIFEX) is scheduling to adjust the expiry cycle of TAIEX Options (TXO) and Mini-TAIEX Futures (MTX) weekly contracts from one week to two weeks by November 2022. The trading volume of TXO posted the highest and increasing average daily volume (ADV) in the second week prior to expiration, as well as the futures industry has expressed needs in trading contracts of different expirations. By then, following the current practice, bi-weekly contracts will be listed on Wednesdays, and both weekly and bi-weekly contracts will be available for trading at the same time. Besides, with the aligning expiry cycle, bi-weekly TXO and MTX could further provide more opportunities for options spread trading and provide accuracy and flexibility of strategic and arbitrage trading.
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September 2022 figures at Eurex; Interest rate derivatives continued their positive trend (up 30 percent) in September; Total Repo volumes show significant growth (72 percent y-o-y); Notional outstanding OTC overnight index swaps with growth up 108 percent
Deutsche Börse Group
Interest rate derivatives continued their strong year-on-year growth, up 30 percent from 64.6 million traded contracts to 83.7 million, followed by index derivatives which grew by 29 percent, from 84.8 million traded contracts to 109.4 million. Equity derivatives contracts traded at Eurex fell by 31 percent in September, from 29.9 million to 20.7 million compared to the same month last year. Total contracts traded at Eurex grew by 19 percent from 179.6 to 214.2 million.
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Will the stock market be open on Columbus Day?
Joy Wiltermuth - MarketWatch
It's a regular day of business for the U.S. stock market on Monday, October 10, as equity exchanges stay open for Columbus Day, a federal holiday that also has been recognized as Indigenous Peoples' Day.
Bond markets, however, take the day off, which means a long weekend for the Treasury market, corporate bonds and other forms of tradable debt, starting after the close of business on Friday.
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| | | | | | Regulation & Enforcement | | | The risks from derivatives have morphed; Well-intentioned moves to safeguard the financial system have led to new vulnerabilities
Satyajit Das - Financial Times
The writer is a former banker and author of "Traders, Guns and Money" and "A Banquet of Consequences Reloaded" In recent financial crises, derivatives have amplified and propagated losses in markets. They are now posing risks again but there has been a shift in the underlying nature of them. Vulnerabilities in the financial system have emerged, ironically, through some well-intentioned initiatives to reduce risk. Since the 2008 financial crisis, there have been moves designed to reduce the level of credit between counterparties in markets.
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****** Rule number 67: All well-intended action will have unintended consequences that might be worse.~JJL
US Probes Whether London-Based Oil Trader Manipulated Prices
Alex Longley and Tom Schoenberg - Bloomberg
A London-based oil trading company is being investigated by the US Department of Justice for potential manipulation of fuel prices. Dare International Ltd., which has quickly risen to become a major player in fuel oil derivatives, has been under scrutiny by federal prosecutors since at least last year, according to people familiar with the matter. Trading by the company, which in 2021 changed its name from Vercer Ltd., is also being examined for potential manipulation by the Commodity Futures Trading Commission, the people said.
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FIA responds to CFTC Request for Information on climate-related finanial risk
FIA
FIA has responded to the US Commodity Futures Trading Commission (CFTC) Request for Information (RFI), which sought public comment on climate-related financial risk to better inform its understanding and oversight of climate-related financial risk as pertinent to the derivatives markets and underlying commodities markets.
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| | | | | | Strategy | | | These Options Strategies Could Help Save Your Retirement
Steven M. Sears - Barron's
The stock market is a place where smart people take money from the poorly informed. Retirees and those hoping to retire are learning that lesson the hard way.
The Federal Reserve is raising rates to battle epic inflation, and that is weighing on stocks. Yet anyone who followed Wall Street's traditional advice to buy bonds because they add diversification and reduce risk likely feels nauseated. Bonds are experiencing their worst yearâin history.
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Opinion: There are early signs that the bear market is going into hibernation
Lawrence G. McMillan - MarketWatch
The stock market had two strong rally days this week.
That was mostly because of the massive oversold condition that existed, and it was aided by news from Europe that central banks were easing off on the increase in interest rates. There is some hope that could be the case in the U.S. as well, although the Federal Reserve has given no signs of that being the case.
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Dip buyers may be burned again as another U.S. stock rally falters
Lewis Krauskopf - Reuters
Friday's swoon in U.S. stocks is helping drive home a humbling message for investors: buying dips may have worked for the last decade, but it's been a losing strategy so far in 2022.
The S&P 500 has rallied four times this year by 6% or more, only to reverse course and make fresh lows. A repeat of that pattern may be in store as a sharp bounce in U.S. stocks earlier this week was faltering after Friday's stronger-than-expected jobs numbers undercut hopes that the Federal Reserve would slow its monetary policy tightening anytime soon.
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