IBKR Quant Blog


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Macro

Interactive Brokers - Market Wrap


Newsletter subscribers should check out the latest market color on our all-new IBTI blog. Markets saw savage selling on Thursday. Meanwhile, 10-year US Treasury note yields fell beneath 2.30% Thursday as trade tensions sent another warning shot flying past the ears of the bull market. The slide in yields, equities and oil prices came a day after the FOMC minutes indicated that a pause in rate increases might be the order of the day, or perhaps the year. To add some perspective on where that puts yields on the roadmap, the plunge sent the 10-year to its lowest point since November 2017. And looking over our shoulders, it was in October 2018 that the same yield reached its cyclical peak of 3.26%.

Our featured article is IBKR senior market analyst Steven Levine’s excellent primer ahead of the issuance of a $500-million municipal bond proposed by the City of Chandler in Arizona. The muni issue is aimed at funding costs of acquisition, construction and installation of sewage and wastewater treatment facilities associated with Intel’s local semiconductor manufacturing factories. That’s a highly topical article given the heavier slide in semiconductor stocks at a time when bond buyers are competing in a yield race to the bottom. Is this a safer way to buy exposure to semiconductors perhaps? Who knows.

Oil prices slumped again Thursday. Finimize reports a timely deal surrounding the environmentally friendlier liquid natural gas (LNG) market, involving Saudi Aramco and Texas-based Sempra. You can read that article here.

The dollar had a mixed day as it reversed earlier gains against the euro and yen, but popped against the British pound, where investors sense a disastrous European election day in Britain for the conservative party. How this will clog up the Brexit process even further is anybody’s guess, but the pound took a shellacking in anticipation of an ugly news day on Friday. You can catch Blue Line Futures Bill Baruch with his FX Rundown video right here.

Trading volumes were robust on Thursday. By 3pmET, Micro S&P 500 index futures rang up about 250,000 contracts with an hour of trading left on a 50-point (1.8%) decline in the benchmark index. IBKR CEO and Chairman Thomas Peterffy discussed the market slide and resulting client uptake of these revolutionary futures contracts with CNBC’s Rick Santelli earlier on Thursday. You can watch that interview at this link.

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Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.

There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Macro

Interactive Brokers - Market Commentary Update


Regular readers to our Traders’ Insight blog will have noticed today’s migration to its more dynamic interface. Clients following our feed through Trader Workstation will also have found our upgraded website. As part of this transition, we are upgrading our technology over the coming weeks to continue bringing blog subscribers daily email. We look forward to notifying you of the steps to sign up to receive email, but in the meantime you can access today’s video and article content at this link.

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The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


24031




Crypto

Bitcoin Suisse: If You Blink You'll Miss It


Market Update

19th May, 2019 Since we left our last briefing we’ve seen Bitfinex raise USD 1bn in a 10 day private funding raise to plug its liquidity gap at the centre of the New York Attorney General’s court order and the Trump/China trade war intensifying a sell-off in traditional markets.  Although opaque, it is plausible to suggest some flows have entered BTC as a non-correlated asset to stock markets, particularly from the Chinese where the government has continuously tried to prevent people from selling Yuan in order to move funds out of the country. [1]

Price action in May has seen the bulls grab the popcorn as BTC broke the USD 6,400 resistance level, a key level for the favoured short positions built throughout April’s 35% positive price action. The large scale purchasing of BTC to liquidate the shorts sent the No.1 cryptocurrency by market cap through USD 8,000 and eventually peaking around the USD 8,400 level.

Blue: BTCUSD Short Positions on Bitfinex / Yellow: BTCUSD Long Positions on Bitfinex

At the time of writing BTC is above USD 8,000, however, reading between the lines and at the blink of an eye you may have missed an 18% drop to USD 6,250 on Thursday. A large sell order executed on the Bitstamp exchange around 3am UTC effectively cleaned out the order book resulting in the liquidation of USD 250m of long positions on another exchange, BitMEX. The reason for the mass liquidation was due to the calculation of the BTC index price on BitMEX being 50% weighted to the Bitstamp exchange price of BTC.[2]   

BTC might be coming of age in 2019, with more complex rhetoric, less concerns of fraud, and talk of the future rather than past [3] , however, one-sided trades can cause complacency. After a quick recovery of BTC to trade back above USD 8,000 our support and resistance levels remain as previous to Thursday’s whale trap.

A final glance to the Bitfinex exchange, as of our last commentary BTC was being traded up to a 6% premium due to concerns about Bitfinex’s USD liquidity highlighted by the New York Attorney General’s announcement in April. At the time of writing BTC is now trading at a slight discount on Bitfinex, a sign of maturity in how less favourable news is being analysed and absorbed than times past but also a highlight to inefficiencies of price discovery.

Blue: BTCUSD on Bitfinex / Orange: BTCUSD on Bitstamp

1.1.1 Institutional News

As BTC rallied up to USD 8k the CME declared its BTC futures product had recorded it’s new all-time high of 33.7k, the third time this year a new all time high for contracts sold in a day. Whereas CME futures are cash settled, Bakkt, the first regulated BTC settled futures exchange owned by the Intercontinental Exchange announced its long waited launch is planned for July.
Meanwhile Grayscale Bitcoin Trust Fund reported it’s April inflow of plus USD 58.2m, almost as high as the USD 60.8m in December 2017. The first Annual Crypto Hedge Fund report published by PwC and Elwood Asset Management found that while 2018 saw a 72 per cent fall in the price of BTC, the median crypto hedge fund returned -46% over the same period. An indication that managers were successfully able to outperform their benchmark with quantitative funds overperforming fundamental and discretionary funds.  The report was conducted on the 100 largest global crypto hedge funds by AuM. [4]

Written by Richard Wynn, Institutional Services and Sandro Huwyler, Trade Desk of Bitcoin Suisse AG

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This publication has been prepared by Bitcoin Suisse AG. The publication is solely for information purposes and should not be considered investment advice and nothing in this publication shall imply any elements of a contractual relationship nor any offering. While the information contained herein is believed to be true and accurate and the sources are believed to be reliable, Bitcoin Suisse AG does not make any warranties as to its accuracy or completeness.

The information provided is not intended for use by or distribution to any individual or legal entity in any jurisdiction or country where such distribution, publication or use would be contrary to the law or regulatory provisions or in which Bitcoin Suisse AG does not hold the necessary registration or license.

[1] https://www.forbes.com/sites/jeffkauflin/2019/05/15/fear-drives-chinese-to-buy-bitcoin/#46e538505e31

[2] https://ww.theblockcrypto.com/tiny/bitcoin-price-on-bitstamp-crashed-by-nearly-20-in-11-minutes/

[3] https://www.bloomberg.com/news/articles/2019-05-15/why-is-bitcoin-surging-alternative-data-shows-it-s-grown-up

[4] https://www.pwc.com/gx/en/financial-services/fintech/assets/pwc-elwood-2019-annual-crypto-hedge-fund-report.pdf

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TRADING IN BITCOIN FUTURES IS ESPECIALLY RISKY AND IS ONLY FOR CLIENTS WITH A HIGH RISK TOLERANCE AND THE FINANCIAL ABILITY TO SUSTAIN LOSSES. More information about the risk of trading Bitcoin products can be found on the IBKR website. If you’re new to bitcoin, or futures in general, download The Beginners Guide to Bitcoin Futures.

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Bitcoin Suisse and is being posted with Bitcoin Suisse’s permission. The views expressed in this material are solely those of Bitcoin Suisse, and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


24030




Stocks

Edison - UK Sparks: Marks & Spencer Profits Fall 9.9%


Marks & Spencer has announced a 9.9% fall in full-year pre-tax profits before adjusting items to £523m on revenues down 3% at £10.4bn. Adjusting items of £439m include £222m for the “acceleration and extension” of the company’s UK store closure programme. Statutory pre-tax profits increased by 27% to £84m, while a final dividend of 7.1p reduces the total dividend by 26% to 13.9p. Separately, the group announced a £571m rights issue at 185p per share to fund its new joint venture with Ocado Group. Chief executive Steve Rowe says: “Whilst there are green shoots, we have not been consistent in our delivery in a number of areas of the business.  M&S is changing faster than at any time in my career.” He adds that the company remains “on track” with its transformation programme.

Royal Mail has revealed a fall in full-year adjusted pre-tax profits from £565m to £398m on revenues up from £10.2bn to £10.6bn. Statutory pre-tax profits increased from £212m to £241m. The results announcement includes “ambitions” to deliver an adjusted operating profit margin of more than 4% in 2021-22, increasing to more than 5% in 2023-24. The group says it will invest £1.8bn in its UK postal business over the next five years.

As part of the “turnaround and grow” programme, the dividend will be “rebased” and the dividend policy changed. The 2018-19 total dividend increases by 1p to 25p. However, from 2019-20, the policy will be for a full year “dividend underpin” of 15p, which may be supplemented by additional payouts in years with substantial excess cashflow.

Energy group SSE suffered a 38% fall in full-year adjusted pre-tax profits to £726m after a £285m operating loss at its energy trading business. The group warns that the energy sector is under a “huge degree of uncertainty,” amidst Labour Party  plans to nationalise utilities. Separately, it has named Katie Bickerstaffe as executive chair of SSE Energy Services, with a mandate to “deliver a future outside the SSE group”.

Aerospace and defence group Babcock International has unveiled a slight rise in full-year “headline profits” from £513m to £518m on revenues down from £5.36bn to £5.16bn.

Finally, Trainline Investments Holdings, the internet travel tickets company, has confirmed plans for a stock market flotation. Chief executive Clare Gilmartin says: “Trainline is the clear leader in the online rail ticket market in the United Kingdom and we believe that we are therefore well positioned to capitalise on mobile and e-ticketing, which are changing the way consumers plan and purchase travel.”

Andrew Cave

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Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting.  Visit www.edisoninvestmentresearch.com for more information.

Edison is authorised and regulated by the Financial Conduct Authority. Our research is a marketing communication as defined by the FCA, this communication only contains information that is an acceptable minor non-monetary benefit as defined under COBS2.3A19(5).

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Edison and is being posted with Edison’s permission. The views expressed in this material are solely those of the author and/or Edison and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


24029




Macro

GUOSEN Closing Bell (May 22)


MARKET

Chinese stocks keep up downward momentum, the turbulence in currency, continuously lead investor to reassess the odds of deal between the two largest economies. Hangzhou Hikvision Digital Technology Co. is trading at its lowest since Jan. 4 as the U.S. considers curbs on component buying for as many as five Chinese companies. IT and Telecom sectors led the gains, while Non-ferrous Metal and Construction sectors led the falls. Combined turnover for both markets was CNY 466.2 billion, down 2.1% dod.

 

 

Close

% Change

Vol (bn CNY)

%YTD

Shanghai

2891.70

-0.49

193.63

15.95

Shenzhen

9041.22

-0.51

275.63

24.88

CSI 300

3649.38

-0.47

121.78

21.22

ChiNext

1488.63

-0.34

82.77

19.04

 

Sector

Top 1

Led by

Top 2

Led by

Upward-leading

IT

002512

Telecom

002104

Downward-leading

Non-ferrous Metal

600259

Construction

603388

 

NEWS   

*The U.S. is considering cutting off the flow of vital American technology to as many as five Chinese companies including Hangzhou Hikvision Digital Technology Co., widening the dragnet beyond Huawei to include world leaders in video surveillance. (Bloomberg)

*Theresa May is facing pressure to abandon her Brexit deal and quit as British prime minister within days, according to people familiar with the matter. Several senior government officials said they were shocked that the premier’s new offer intended to win votes in Parliament for her European Union divorce agreement had been so badly received so quickly. (Bloomberg)

 

FUND FLOW

Click here for more information about Guosen.

This article is from Guosen Securities Co., Ltd. and is being posted with Guosen Securities Co., Ltd.’s permission. The views expressed in this article are solely those of the author and/or Guosen Securities Co., Ltd. and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 


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Disclosures

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The material (including articles and commentary) provided on IBKR Quant Blog is offered for informational purposes only. The posted material is NOT a recommendation by Interactive Brokers (IB) that you or your clients should contract for the services of or invest with any of the independent advisors or hedge funds or others who may post on IBKR Quant Blog or invest with any advisors or hedge funds. The advisors, hedge funds and other analysts who may post on IBKR Quant Blog are independent of IB and IB does not make any representations or warranties concerning the past or future performance of these advisors, hedge funds and others or the accuracy of the information they provide. Interactive Brokers does not conduct a "suitability review" to make sure the trading of any advisor or hedge fund or other party is suitable for you.

Securities or other financial instruments mentioned in the material posted are not suitable for all investors. The material posted does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before making any investment or trade, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice. Past performance is no guarantee of future results.

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