A New Journey Begins

A New Journey Begins

The first trading day after, Joe Biden was declared the President-elect of US, markets opened with a broad risk-on in the Asia equity market. The Nikkei was up 2.17% to 24858, indicating a breakout if maintained.

The dollar is currently weak against most G-20 currencies, excluding the Japanese Yen and Hong Kong. The implied futures opening for the Nasdaq +248, Dow +341 and S&P 500 +53 points.

A New Journey Begins

Deutsche Börse Acquires Quantitatative Brokers

Deutsche Börse buys majority shares in Quantitative Brokers – an independent provider of advanced execution algorithms and data-driven analytics for global futures, options, and interest rate for expansion in the buy-side markets. 

  • The transaction repositions Deutsche Börse closer to the source of trading interest in the buy-side value chain.
  • Creates synergies in quant competency with Quantitative Brokers 

Thomas Book, Head of the Trading & Clearing Division of Deutsche Börse and Member of the Executive Board: “We are investing in a growth business with a renowned, innovative and leading quant team delivering a unique set of competencies in algorithmic execution. The exciting QB platform and team are a perfect fit with both our existing business and our long-term strategic perspective.”

Christian Hauff, CEO and co-founder of Quantitative Brokers: “The QB team is thrilled to join Deutsche Börse’s portfolio of strategic companies to accelerate further our institutional client uptake and global expansion across markets and asset classes. Our partnership with a 30 billion-dollar, global, multi-asset exchange group will provide even greater momentum to our growth plans.”

Robert Almgren, Chief Scientist and co-founder of Quantitative Brokers: “Deutsche Börse’s global relationships with buy and sell-side customers will help us add value to an even broader range of clients. Our intelligent solutions will provide them with additional tools to better manage order execution in an increasingly complex market environment.”

Source: DeutscheBörse

A New Journey Begins

Hong Kong Linked Exchange System Triggered

Hong Kong Monetary Authority’s strong-side Convertibility Undertaking (CU) of HK$7.75 to US$1, was triggered during the Hong Kong trading hours on the 21 April 2020. The CU was last triggered in October 2015.

The CEO of HMA said “The Hong Kong dollar exchange rate has been on a strengthening bias recently, mainly driven by increases in market carry-trade activities and equity-related demand for Hong Kong dollars. In addition to the current strong market demand for Hong Kong dollars, increases in fiscal spending will also raise demand for Hong Kong dollars. Upon triggering of the strong-side CU, the HKMA bought US dollars from and sold Hong Kong dollars to the market. This was conducted in accordance with the design of the LERS, which has been operating effectively.”

The LERS ensures that the Hong Kong dollar exchange rate remains stable within a band of HK$7.75-7.85 to one US dollar.

The LERS was implemented, on the 17 October 1983 as the cornerstone of the Hong Kong Monetary and financial stability. It has been weathered many economic cycles and has proved highly resilient in the face of regional and global financial crises over the years.

Further Reading

Hong Kong Monetary Authority – Linked Exchange Rate System

A New Journey Begins

Crude Oil May Futures Negative!!

I have never seen this before wow!! This is historical! What does this mean? Producers paying buyers to take delivery.

Well the physical price never got to the negative value.

Historical contango!

Worth taking a picture of this close -13.37 and low of –40.32!

Source: https://www.cmegroup.com/trading/energy/crude-oil/light-sweet-crude.html

Market Circuit Breakers

Market Circuit Breakers

What are the reasons behind the recent circuit-breakers in the US equity markets? The definition of such mechanisms by IOSCO offers an insight into the underlying market functioning shown below:

“Trading interruptions are utilized in all jurisdictions, most commonly in one of two sets of circumstances.

In the first, the trading interruption is designed (principally) to facilitate the orderly absorption by market users of new information material to the valuation placed on an issuer’s securities.

The second main set of circumstances in which trading interruptions are used occurs when there is an order imbalance, excessive volatility, or when there is some other indication of disorderly trading. In these cases, the trading halt generally provides time for supply and demand to rebalance at a new trading price .”

In the context of the above definition, the current use of circuit-breakers denotes order imbalance, excessive volatility as evidenced in the spiking in the value of the VIX and some sense of disorderly trading imbalance in supply and demand for securities.

A real-time persistence impact analysis reveals the followings points
— the reduction of price valuation of the US securities market, and the correlated equity markets
— the collateral value of all industry exposures in Dollar, impacting all Dollar based positions
— the benefit of all central bank reserves with exposure to US equity and bond market
— the real-time value of US Dollar reflected in the Dollar index
— liquidity in the repo markets evidenced through the recent announcements of the New York FED liquidity offering in repurchase agreements offering to market participants
— central bank monetary policy changes evident by rate cuts by the central banks and global fiscal stimulus

The above factors are due to tail risk. There is a need for a dynamic autonomous risk mitigation dashboard for every type of participants in all markets, to alert and help response appropriately in any given context of market volatility.

VIX Index

VIX Index

The index measures the market’s expectation of future volatility. Based on options of the S&P 500® Index, the CBOE VIX index is widely used in the U.S to gauge the market volatility.

So why do you need this in your portfolio, and why is it different from volatility?

As discussed in my previous post, volatility is ex-ante. On the other hand, the Vix index uses options of the S&P 500® Index to calculate the market’s expectation of future volatility. The Vix index is a leading indicator.

Click on the image below to view the interactive dashboard.

Data source : CBOE