In April 2016, the international derivatives markets of Eurex, part of Deutsche Börse Group, recorded an average daily volume of 8.4 million contracts (April 2015: 8.3 million). Of those, 6.1 million were Eurex Exchange contracts (April 2015: 5.9 million), and 2.3 million contracts (April 2015: 2.4 million) were traded at the New York based International Securities Exchange (ISE). The volume traded on the spot and derivatives power markets of the European Energy Exchange (EEX) amounted to 416.3 terawatt hours (TWh). Eurex Repo recorded in all markets in April 2016 an average outstanding volume of 150.8 billion euros.
read more...Trading Statistics April 2016 - Eurex Exchange: ADV 6.1 Million Contracts, ISE: ADV 2.3 Million Contracts
PEGAS Trading Volumes In April 2016 - PEGAS Volume Doubles Year-On-Year
The pan-European gas trading platform PEGAS registered a total volume of153.7 TWh in April 2016, which represents almost the double of the volume traded over the same period last year (April 2015: 77.0 TWh). The increase was driven by a volume increase on the futures market with 104.2 TWh (April 2015: 30.5 TWh).
read more...The European Federation Of Investors And Financial Services Users: Democratic Oversight Financial Reporting Standards Found Lacking By European Parliament
The Committee on Economic and Monetary Affairs (ECON) of the European Parliament (EP) voted on the text of an own-initiative report evaluating the International Accounting Standards (IAS) and highlighting some of the shortcomings in the standard-setting activities of the International Financial Reporting Standards (IFRS) Foundation and the European Financial Reporting Advisory Group (EFRAG).
read more...MGEX Reports 12th-Highest Monthly Volume Of All-Time
MGEX, a Designated Contract Market (DCM) and Derivatives Clearing Organization (DCO), reports a total volume of 212,021 from the month of April, making it the 12th-best month in the history of the Exchange.
read more...DCF Myth 3: You cannot do a valuation, when there is too much uncertainty!
- Low Interest Rates: In my post on negative interest rates, I pointed to the fact that as interest rates in many of the leading currencies have dropped to historic lows, risk premiums have increased in both stock and bond markets. The expected return on the S&P 500 in early 2008, before the crisis, was 8% and it remains at about that level today, even though the treasury bond rate has dropped from 4% to less than 2%, but the equity risk premium has risen to compensate. Even though the expected return may be the same, the fact that more of it can be attributed to a risk premium will increase the market reaction to news, in both directions, adding to price volatility.
- Globalization: Globalization has not only changed how companies and investors make choices but has also had two consequences for risk. The first is that there seem to be no localized problems any more, with anyone's problem becoming everyone's problem. Thus, political instability in Brazil and too much local government borrowing to build infrastructure in China play out on a global stage, affecting stock prices in the rest of the world. The second is that the center of global economic power is shifting from the US and Europe to Asia, and as it does, Americans and Europeans are starting to bear more of world's economic risk than they used to.
- Media/Online Megaphones: As an early adopted of technology, I am far from being a Luddite but I do think that the speed with which information is transmitted around the world has allowed market risks to go viral. It is not just the talking heads on CNBC, Bloomberg and other financial news channels that are the transmitters of these news but also social media, as Twitter and Facebook become the place where investors go to get breaking investing news.
- Paralysis and Inaction: The most common reaction to uncertainty, in my experience, is inaction. "There is too much uncertainty right now to act" becomes the refrain, with the promise that action will come when more of the facts are know. The consequences are predictable. I have friends who have almost entirely been invested in money market funds for decades now, waiting for that moment of clarity and certainty that never seems to come. I have also talked to investors who seem to view investing when uncertain as a violation of value investing edicts and have found themselves getting pushed into smaller and smaller corners of the market, seeking elusive comfort.
- Denial and Delusion: At the other end of the spectrum, the reaction that other investors have to uncertainty is go into denial, adopting one of two practices. The number crunchers fall back on false precision, where they add more detail to their forecasts and more decimals to their numbers, as a defense against uncertainty. The story tellers fall back on story telling, acting as if they have the power to write the endings to every uncertain narrative, when in fact they have little control over either the players or the outcome.
- Mental Accounting and Rules of Thumb: The brain may be a wondrous organ but it has its own set of tics that undercut investing, when uncertain. As Richard Thaler has so convincingly shown in his work on mental accounting, investors and analysts like to use rules of thumb, often with no basis in fact or reality, when making judgments. Thus, a venture capitalist who is quick to dismiss the use of intrinsic value in a young start-up as too fraught with estimation error, seems to have no qualms about forecasting earnings five years out for the same company and applying a price earnings ratio to those earnings to get an exit value.
- Outsourcing and Passing the Buck: When stumped for answers, we almost invariably turn to others that we view as more knowledgeable or better equipped than we are to come up with solutions. Cynically, you could argue that this allows us to avoid taking responsibility for investment mistakes, which we can now attribute to consultants, text book writers or that person you heard on CNBC.
- Prayer and Divine Intervention: The oldest response to uncertainty is prayer and it has had remarkable staying power. There are large segments of the world where big investment and business decisions are preceded by prayers and divine intervention on your behalf.
If you are a value investor, you will notice that I have not mentioned one of value investors' favorite defenses against uncertainty, which is the margin of safety. Seth Klarman is one of my favorite investment thinkers but I am afraid that the margin of safety, at least as practiced by some in the investing community, has become an empty vessel, an excuse for inaction rather than a guide to action in risky times. I will come back to this measure as well in another post in this series.
Conclusion
YouTube Video
Uncertainty Posts
- DCF Myth 3: You cannot do a valuation, when there is too much uncertainty
- The Margin of Safety: Excuse for Inaction or Tool for Action?
- Facing up to Uncertainty: Probabilities and Simulations
Introductory Post: DCF Valuations: Academic Exercise, Sales Pitch or Investor Tool
- If you have a D(discount rate) and a CF (cash flow), you have a DCF.
- A DCF is an exercise in modeling & number crunching.
- You cannot do a DCF when there is too much uncertainty.
- The most critical input in a DCF is the discount rate and if you donât believe in modern portfolio theory (or beta), you cannot use a DCF.
- If most of your value in a DCF comes from the terminal value, there is something wrong with your DCF.
- A DCF requires too many assumptions and can be manipulated to yield any value you want.
- A DCF cannot value brand name or other intangibles.
- A DCF yields a conservative estimate of value.
- If your DCF value changes significantly over time, there is either something wrong with your valuation.
- A DCF is an academic exercise.
The Arab Federation of Exchanges Annual Conference 2016
The Arab Federation of Exchanges Annual Conference ended on Thursday 28 April, 2016 which was hosted by Amman Stock Exchange (ASE) under the patronage of the Prime Minister H.E Dr. Abdullah Ensour over two days 27&28 April, 2016. More than 400 participants attended the conference from local, regional, and international exchanges, regulatory bodies of the financial markets, brokerage firms, investment fund managers, investment banks, selective high net worth individuals, economic journalists, research firms, corporate/listed companies, rating agencies, technical associations, and banks.
read more...OneChicago Announces Trading Volume For April 2016 - YTD Volume Outpacing 2015 By 38%
OneChicago, LLC (OCX), a securities finance exchange, today announced its April 2016 volume of 799,990, an increase of 41% year-over-year. OneChicago is a CFTC and SEC regulated exchange offering Single Stock Futures (SSF), a Delta One product, on approximately 1,800 equities, including ADRs and ETFs.
read more...OCC Cleared Contract Volume Increased Two Percent In April - Securities Lending Activity Up 46 Percent In April And 44 Percent Year-To-Date - ETF Options Volume Up 13 Percent From 2015
OCC, the world’s largest equity derivatives clearing organization, announced today that cleared contract volume in April was 339,522,257 contracts, up two percent from April 2015 monthly volume of 331,552,965 contracts. Average dailyvolume at OCC is up five percent in 2016 with 17,123,650 contracts. OCC’s stock loan program reported strong volume numbers in April with year-to-date activity up 44 percent.
read more...Statement of CFTC Commissioner J. Christopher Giancarlo Regarding the Final Rule on Amendments to the Definitions of âPortfolio Reconciliationâ and âMaterial Termsâ for Purposes of Swap Portfolio Reconciliation
Statement Of CFTC Commissioner J. Christopher Giancarlo Regarding The Final Rule On Amendments To The Definitions Of âPortfolio Reconciliationâ And âMaterial Termsâ For Purposes Of Swap Portfolio Reconciliation
I support the final rule amending the definitions of portfolio reconciliation and material terms for purposes of swap portfolio reconciliation. I commend the Commission and Division of Swap Dealer & Intermediary Oversight staff for replacing no-action relief with a rulemaking subject to a cost-benefit analysis and the notice and comment requirements of the Administrative Procedure Act.
read more...PEGAS - Statement Regarding The Process For Adjustment Of The Conversion System In Quality-Overlapping Market Areas
In 2012, the German gas industry largely agreed on a phase-out of the fee for converting H-Gas into L-Gas and vice versa within the framework of Konni Gas. After a gradual reduction, the conversion fee was to be abolished on 1stOctober 2016. Until Friday 22nd of March, the German Bundesnetzagentur consulted on a possible extension to end of March 2017 and beyond that date. In its statement, PEGAS acknowledges that the cost of conversion, which have lately increased, need to be covered. However, while this can be achieved via the conversion fee, alternative measures that are market based should be explored first. Details can be found in the statement.
read more...CFTC Approves Final Rule On Amendments To The Swap Portfolio Reconciliation Requirement
The U.S. Commodity Futures Trading Commission (CFTC) today approved a final rule to amend a requirement that swap dealers (SD) and major swap participants (MSP) exchange the terms of swaps with their counterparties for portfolio reconciliation so that SDs and MSPs need only exchange the “material terms” of swaps. This requirement is found in CFTC Regulation 23.500(i).
read more...Key Figures SIX Swiss Exchange And SIX Structured Products Exchange: April 2016
Trading turnover, including all securities traded on SIX Swiss Exchange and SIX Structured Products Exchange, increased by 9.7% month-on-month in April 2016 to CHF 127.0 billion. However, this trend is not reflected in the number of trades, which declined by 12.0% compared to March to 3,709,919. Average trading turnover per day rose in April from CHF 5.7 billion the previous month to CHF 5.8 billion.
read more...The Buy Side Report Q1 2016t - Toronto Stock Exchange And TSX Venture Exchange
Please click here for the Q1 2016 Buy Side Report.
SEC: Silicon Valley Executive Settles Insider Trading Charges
The Securities and Exchange Commission today announced that a Silicon Valley executive has agreed to pay more than a half-million dollars to settle charges that he traded on inside information received from a board member at a Minnesota-based company that was trying to solicit a competing bid in advance of a merger.
read more...CME Group Achieved Average Daily Volume Of 13.8 Million Contracts Per Day In April 2016, Up 21 Percent From April 2015, Including Record Agricultural Volume
CME Group, the world's leading and most diverse derivatives marketplace, today announced that April 2016 volume averaged 13.8 million contracts per day, up 21 percent from April 2015. CME Group April 2016 options volume averaged 2.6 million contracts per day, up 15 percent versus April 2015, with electronic options averaging 1.6 million contracts per day, up 31 percent over the same period last year. Total open interest at the end of April was 110 million contracts, up 20 percent from year-end 2015.
read more...EEX: First Trade Registered In Dry Bulk Freight
The European Energy Exchange (EEX) has registered its first dry bulk freight derivative trade for clearing last Friday, marking an important milestone for its new global commodities segment. The trade was registered for 90 lots of the Q4 2016 Capesize 4TC contract at a price of 8,750 US Dollar per lot. The trade was conducted by Gunvor Group company Clearlake Shipping, and another counterparty, having been arranged by the broker Freight Investor Services.
Steffen Köhler, Chief Operating Officer of EEX, comments: “The trade in our freight sector represents another important landmark for EEX. With these trades, we are entering a completely new sector, beyond energy and energy related products”.
The EEX Trade Registration service provides shipping companies and cargo owners with a framework that allows for registration of dry bulk freight derivatives trades under the rule book of a regulated European market. Customers benefit from the fast and efficient clearing services of European Commodity Clearing (ECC), including EMIR trade reporting and the accounting of margin requirements with other positions in energy derivatives. Significant cost advantages can be achieved through cross-margining of power, emissions, coal and freight products traded through EEX.
Tikehau Capital Appoints Carine Lecadre-Perrier As Head Of Group Compliance
Tikehau Capital today announces the appointment of Carine Lecadre-Perrier as Head of Group Compliance and a Member of the group’s Management Committee.
read more...May 3, 2016 - SS&C and Moco, Inc. Accelerate Adoption of Portable Tenant Screening with Industryâs First Applicant Initiated Screening Service
LME And LME Clear Boards Appoint New Independent Director
The Boards of the London Metal Exchange (LME) and LME Clear are pleased to announce the appointment of Antony Stuart as an independent non-executive director.
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