Friday 23rd February 2018
February 23rd 2018: John Hardy, head of FX Strategy at Saxo Bank says in today’s client note that: “The latest European Central Bank minutes showed a debate on leaving the door open to QE resumption if conditions warranted, ultimately leading to the dropping of this language in the forward guidance. The headlines have seized on the discussion of the volatility of the euro in the minutes and the phrase that this provided “a source of uncertainty that required monitoring". ECB president Draghi offered a stern rebuttal at the most recent ECB meeting to a (likely offhand) statement by US Treasury Secretary Mnuchin that a weak dollar is a benefit to the US economy. The expectations for ECB policy unwinding have gone into neutral over the last couple of weeks, even with the recent recovery in risk appetite, and this kind of language from the ECB, heavy EUR long speculative positioning, and a rather sharp deceleration in the most recent PMIs are making it tough sailing for EUR bulls. Speaking of positioning, the JPY short is shrinking but still very large. Often, when the JPY is on the move, it is directly traceable to something else afloat in the markets, whether from direct signals from the central bank, or large swings in risk appetite or bond yields. But this recent move feels qualitatively different and rather significant, as if the market is changing its mind about its underlying assumptions (that the BoJ will forever be the policy laggard and as long as we aren’t seeing a market meltdown, carry trades versus the JPY are a no-brainer) and this could lead to a broad-based repricing of the G10’s cheapest currency” -

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Derivatives

PEGAS, the pan-European gas trading platform operated by Powernext, part of the EEX Group, achieved its best trading results in 2017, touching a new record with 1,953.9 terawatt hours (TWh), improving its previous record (1,733.3 TWh in 2016) by almost 13%.

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Some 60% of institutional investors use derivatives. Good news then that derivatives-based investment strategies add value in terms of both optimising returns and minimizing risk according to a new study carried out by Union Investment in cooperation with Professor Alexander Szimayer of the University of Hamburg.

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In May 2017, the European Energy Exchange (EEX) achieved a total volume of 246.9 TWh on its power derivatives markets (in May last year, the figure was 287.8 TWh).

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Singapore Exchange (SGX) announced today that Waterland Futures Company Limited (WLF) has become a Trading Member in its derivatives market. Established in 1993, Taipei-based WLF focuses on three main areas in futures and options – brokerage, advisory services, and proprietary trading. Its largest shareholder is Waterland Securities Company Limited.

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CME Group says it will launch physically delivered European Union (EU) wheat futures and options on futures contracts to begin trading on September 12th this year, pending all relevant regulatory review periods. These contracts will be listed subject to the rules and regulations of the Chicago Board of Trade (CBOT). The new EU Wheat futures and options contracts, says the exchange, are the result of in-depth consultation with customers and industry participants who want risk management tools that better reflect physical storage practices in the EU. EU wheat futures and options will be denominated in euros, priced relative to the Rouen market, and will enable users to take delivery of wheat at exchange-approved warehouses in key locations across France or hold onto wheat certificates for delivery at a future date.

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In a week in which it has announced a number of initiatives, the Moscow Exchange (MOEX) has launched a new transactional binary protocol for its derivative market. The TWIME protocol, which came into effect on Tuesday this week, adds more functionality and, coupled with the FAST protocol, offers an improved automated trading solution, says the exchange. A The TWIME protocol adds more functionality and, coupled with the FAST protocol, offers the optimum automated trading solution. At the same time, the exchange says it has enhanced its FX offering, improving the exchange’s risk management services.

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Fidessa says it has signed a partnership agreement with Alpha Omega that will leverage Fidessa's post-trade Affirmation Management Service (AMS). The utility provides alternative low-cost affirmation processing. The partnership effectively unites the Alpha Omega customer base with the Fidessa AMS community. David Pearson, head of post-trade services at Fidessa explains that:  "The AMS utility is all about helping the industry achieve its need for lower cost and more efficient affirmation processing. By partnering and collaborating with Alpha Omega, we strengthen that vision and accelerate the growth of our global network."

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The European Securities and Markets Authority (ESMA) has fined the trade repository DTCC Derivatives Repository Limited (DDRL) €64,000, and issued a public notice, for allegedly negligently failing to put in place systems capable of providing regulators with direct and immediate access to derivatives trading data. ESMA found that DDRL failed to provide direct and immediate access to derivatives data from 21 March 2014 to 15 December 2014, a period of about nine months in which access delays increased from two days to 62 days after reporting and affected 2.6 billion reports. This is the first time ESMA has taken enforcement action against a trade repository registered in the European Union (EU). DDRL is the largest EU registered trade repository.

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