| February 23, 2018 | | | | | Jeff Bergstrom
Editor
John Lothian News | |
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| | | | Observations & Insight | | | FCMs Big And Small Suffer Major Losses On Latest Black Monday
Jim Kharouf - JLN
On February 5, the historic trading day when the Dow Jones Industrial Average fell 1,175 points and the S&P 500 plunged 113 points, many customers suffered significant losses which forced several futures commission merchants to cover those deficits. The severity of the losses on that day was reflected in major drops in FCM customer segregated funds, some to alarming levels.
Among the biggest shocks was at RBC Capital Markets, which on February 5 posted a deficiency of funds in segregation of $1.13 billion. FCMs should never post a negative amount there, as it is a potential violation of CFTC rules.
/goo.gl/x5hFe7
| | | | | | Lead Stories | | | VIX Funds Face Fresh Scrutiny From U.S. Regulators
Benjamin Bain and Matt Robinson - Bloomberg
U.S. regulators are scrutinizing this month's implosion of investments that track stock-market turmoil, including whether wrongdoing contributed to steep losses for VIX exchange-traded products offered by Credit Suisse Group AG and other firms, several people familiar with the matter said.
The Securities and Exchange Commission and the Commodity Futures Trading Commission have been conducting a broad review of trading since Feb. 5, when volatility spiked and investors lost billions of dollars, the people said.
/bloom.bg/2olRzC5
****JB: Reuters' take on this same story: SEC Commissioner questions complex financial products amid VIX drama
VIX VapoRubOut
Craig Pirrong - Seeking Alpha
Bloomberg's Odd Lots podcast from a few days ago discusses "How one of the Most Profitable Trades of the Last Few Years Blew Up in a Single Day." Specifically, how did short volatility trades perform so well for so long, and then unravel so dramatically in a short period of time?
bit.ly/2omnz98
****JB: Interesting read.
FOREX-Euro set for 2nd biggest weekly drop in 4 months as hedges in focus
Saikat Chatterjee - Reuters
The euro slipped on Friday and is set to post its second biggest weekly loss in nearly four months as investors focused on adding hedges to their portfolios before a big week for foreign exchange markets from a European politics perspective.
reut.rs/2ojw1Gs
JPMorgan's Quants Warn Risks Are Growing for Bond Short-Squeeze
Adam Haigh, Joanna Ossinger - Bloomberg
Kolanovic highlights record short position in Treasury futures; Risk of 'proper short squeeze' in bond futures: Kolanovic
Investors have become so bearish on U.S. government bonds that they risk getting caught out, according to JPMorgan Chase & Co.'s quantitative and derivatives strategy team.
/goo.gl/EaSvvC
Why insurers are being blamed for equity market instability; Annuity providers in spotlight over 'managed volatility' strategies
Alistair Gray and Robin Wigglesworth in New York - FT
Computer-powered hedge funds shouldered much of the blame for exacerbating turmoil in markets this month but some are pointing the finger at a pillar of the financial system: the insurance sector.
/goo.gl/wdc7HN
| | | | | | Regulation & Enforcement | | | Austria Eyes Bitcoin Rules Based on Gold, Derivatives
Bloomberg
Austria's finance ministry is looking at the trading rules for gold and derivatives as inspiration for drawing up regulations on cryptocurrencies for the nation and for the European Union.
The goal is to prevent Bitcoin and similar virtual currencies from facilitating money laundering -- a crime that's no stranger to the precious metals business -- and to bring trading platforms under the kind of oversight that already exists for financial instruments, Finance Minister Hartwig Loeger said in a statement on Friday. Loeger is meeting his Portugese counterpart Mario Centeno in Lisbon today and will raise the issue, he said.
/bloom.bg/2ojG8eo
| | | | | | Strategy | | | 2 VIX Extremes Not Seen Since 2016
Karee Venema - Schaeffer's Investment Research
About two weeks ago on Feb. 6, the Cboe Volatility Index (VIX) broke out above the 50 mark for the first time since August 2015. This volatility explosion coincided with the worst week for the U.S. stock market in years. Since then, the market's "fear gauge" has retreated back to 18.41, though this remains well above its one-year average daily mark of 11.78. But amid this stock volatility, VIX call buyers have seemingly vanished.
bit.ly/2olCErG
Gold is nearing what could be an ultra-bullish key level
Matt Maley - CNBC
Gold's relationship with inflation expectations has gotten interesting lately, and I'm watching one key level for gold in particular.
Consider this conundrum in the gold market: The metal has traditionally been a good hedge against inflation, but it hasn't seen much demand lately even in the face of rising inflation fears. It's not like gold hasn't rallied, of course; it's up a little over 6 percent since mid-December.
Still, the yellow metal hasn't broken out.
cnb.cx/2ombVLv
Goldman sees a red flag for Amazon, Citi in these options-market moves
Ryan Vlastelica - MarketWatch
The U.S. stock market has retraced much of the ground it lost in its recent correction, giving some support to the idea that a near-term bottom may have been achieved. However, there are still pockets of the market that investors are skeptical about.
According to Goldman Sachs, options activity surrounding the health-care and consumer-staples sectors indicates caution that the industries could see additional downside ahead. The firm noted that the price of hedging downside risk in the sectorsÂbased on puts for the most widely used exchange-traded funds that track themÂwas "substantially higher" now than before the recent selloff.
on.mktw.net/2omm22P
| | | | | | Miscellaneous | | | Jeffrey Gundlach trolls Treasury's Mnuchin about wage inflation in tweetstorm
Barbara Kollmeyer - MarketWatch
Treasury Secretary Steven Mnuchin must be dreaming.
So says DoubleLine Capital's chief executive Jeffrey Gundlach, who took to Twitter with a retort to Mnuchin over a Bloomberg interview given Thursday that attempted to cool investor worries about inflationary pressures.
In the interview, Mnuchin maintained that economic policies of President Donald Trump and his administration could successfully lift the wages of the American worker without triggering overall higher inflation.
Gundlach fired off a comeback tweet.
on.mktw.net/2omDAfw
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