Frans King

ESTR Futures and Liquidity... Two different exchanges, two different approaches. A question I'm fielding a lot is, where is the most liquidity? My attached grid shows outrights and the basis side by side for each expiry. ICE, the leaders by Open Interest at first glance appears to have the liquidity. What I find interesting is that each exchange has a different approach to their stacks. ICE has adopted the pro-rato model. This encourages you to show more size to do more trades. Eurex is using FIFO, first in, first out. A queue system that means should you want to trade you are rewarded for keeping your interest in the book as you make your way down the line. The question is which is the better way? #markets #futures #option #estr #ice #eurex

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ESTR Futures Update: A sharp uptick in ICE's ESTR as it marches towards the 500k mark. Eurex crosses 200k. With just under 65k on CME that makes almost 765k O.I cumulatively. Euribor open interest remains a steady ~4m Drop me a message if you're curious on where we are seeing the flows etc. #markets #futures #cme #eurex #ice #trading

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Just read that FX Trading roles has decreased by 70% over the last decade. Replaced by Devs and Quant Devs building Algorithmic models. This in turn has squeezed the fees paid by clients for a trade. Ralf Donner of Goldman has now said the decrease in fees is now putting the Developers at risk because there's no cash to innovate and build new products. What's your take on this, do you agree or disagree? Will specialist firms like XTX Markets et el take larger market share with their ability to do more with less? #fx #trading #financialmarkets #algorithmictrading

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Latest View from the desk

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6 𝐭𝐡𝐨𝐮𝐠𝐡𝐭𝐬 𝐨𝐧 𝐯𝐨𝐥𝐚𝐭𝐢𝐥𝐢𝐭𝐲 𝐚𝐧𝐝 𝐫𝐢𝐬𝐤 𝐢𝐧 𝐩𝐫𝐢𝐯𝐚𝐭𝐞 𝐚𝐬𝐬𝐞𝐭𝐬: 1️⃣ Many (not all) PA are valued infrequently and with a lag. This smooths valuations and dampens volatility. Some people like this. This is ok. Just don't automatically assume low vol = low risk 2️⃣ It's more likely for some PA to be properly revalued annually (e.g. real estate) than more frequently. A simple way to overcome the valuation problem is to shift from: - calculating vol of quarterly returns (which are smoothed) - to vol of annual returns (which are more likely to capture revaluations, even if lagged response) 3️⃣ Can also attempt to "add back" some of the vol by using statistical de-smoothing techniques. But can be v.sensitive to the data so interpret with care 4️⃣ Can lean on public market proxies e.g. BB-corp bonds or lev loans for junior infrastructure debt. But also need to appreciate the differences. e.g. infra debt issuers generate more stable cashflows and the debt benefits from backing by a hard asset with long economic life 5️⃣ There are legit reasons why some PA can argue for being lower risk than public mkts (see pic) e.g. superior access to info, asset-backing, cashflow stability, covenants. There are also valid arguments which push in the opposite direction e.g. leverage, more concentrated funds, illiquidity, perf dispersion between funds. These qualitative factors matter 𝐀 𝐜𝐨𝐧𝐭𝐞𝐧𝐭𝐢𝐨𝐮𝐬 𝐛𝐞𝐥𝐢𝐞𝐟 𝐨𝐟 𝐦𝐢𝐧𝐞: Some price movement in public markets is driven by investor fear/greed rather than fundamentals. The behavioural temptation to sell when markets are falling is in itself a contributor to vol The fact that PA investors are often unable to sell their stakes in such an environment prevents them from making the same behavioural mistakes, insulating PA from these sentiment shocks Even plays to their advantage as allows PA investment managers to act in counter-cyclical way Arguably these short-term shifts in sentiment are irrelevant to long-term investors. The fact that they are glossed over in PA vol should not necessarily be misinterpreted as an oversight or “wrong” ▶️So what? Need to look beyond numbers and take account of qualitative factors. Real estate risk is nearer to equities than bonds, despite what vol analysis might suggest. PE is highly diverse. Higher leverage in large cap buyouts means that it would be reasonable to treat the sector as riskier than public equities, but a qualitative case can be made for small/mid buyouts to treated more favourably. Individual VC investments = v.risky, but portfolios have been remarkably resilient 𝐖𝐡𝐚𝐭 𝐝𝐨 𝐲𝐨𝐮 𝐭𝐡𝐢𝐧𝐤? (note: this is summary of the vol/risk section from my recent paper on PA which I'll add a link to in the comments) 𝐋𝐢𝐤𝐞 𝐜𝐨𝐨𝐥 𝐜𝐡𝐚𝐫𝐭𝐬 𝐚𝐧𝐝 𝐢𝐧𝐬𝐢𝐠𝐡𝐭𝐬 𝐨𝐧 𝐦𝐚𝐫𝐤𝐞𝐭𝐬? Follow me 👋 And click the 🔔 at top of my profile to be notified when I post #privateassets #privateequity #schroderscapital

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This is going to be quite amusing to hear the Atlantic Council. So I think their take is that the stock market run up is just a blip, and that the Chinese economy is doomed. But I think they are all wrong. The reason that the Chinese economy was slow was because it needed some *massive* restructuring. You needed to get rid of the real estate bubble *before you dump money into the system*. *Before you pump money into the system you have to kill Evergrande and Country Garden and make sure they are dead, and you also have to punch people that invested in real estate in the face so they don't do it again* So what happened was 1) you have a whole bunch of new factories in new industries 2) because people weren't spending, everyone now has *cash*, and part of the plan was to keep inflation low so that people's bank accounts were safe 3) what is likely to happen now is that now that people have cash, they will move money into assets which will increase the wealth effect and get people to spend more 4) because you have *shiny new EV factories* all of the people are going to take their cash and buy EV's. 5) and some of this has to do with geopolitics and *thinking ahead*. Right now the US is absolutely terrified that Israel is going to bomb Iranian oil fields because that will cause oil prices to shoot up a month before an election. Turns out that all of the "overcapacity" in Chinese EV production might not have been so crazy after all. Things change and I am sure that the Chinese economy is going to have some major problem in six months. That's the thing about economies, there is always some problem, so once shouldn't be too smug, but I am pretty sure that the Atlantic Council spent a year trying to show that China is doomed, and so it's really fun to watch them have really, really bad timing. https://lnkd.in/gPdpsYzc

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FX LEHMAN MANUAL. Another chance to get this. It doesn't matter how experienced you are as a trader I really recommend you read this. Just for the Forwards calculation alone (which changed my game) I recommend all traders go through the whole manual. Back pre GFC some say Lehman was THE other Alpha bank (GS being the rival) I never worked there BUT I have mentored ex-traders who did. They are the finest traders I have ever met. Take outs for me: 1. The FWDS formula to work out a quick and dirty spot price based on rates today. 2. Crosses - say no more but if you want to know how I look at crosses DM me. 3. Swaps and Options - a nice brief outline of these. Please LIKE and make a comment for a PDF Copy. You can also join our institutional insights list The Adamis Gold to never miss out on all the future Manuals and interviews with FX legends. Click in the comments as the link is there too.

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New Debate I know the type of person who thinks they’re amazing because they’ve achieved a 100% return when their portfolio is made up of €2000, with €1800 in Nvidia and €200 in Pepecoins. Obviously, this is ridiculous. But I find it equally ridiculous to boast about having X amount in dividends. Dividend yield is determined by the market; it’s not something “earned.” Anyone can buy X number of shares and get the same yield — it’s not an achievement but something dictated by the market. Then there are people who judge how good an investor they are based on their capital invested, another foolish metric. Anyone with capital can invest it without having any idea what they’re doing. A user with 500k is no better than one with 100k. Risk/reward is the only metric that defines good management. If we only measure returns, someone who throws €200 into the riskiest stock on the market and gets lucky could be seen as a great investor, but they’re not. With a portfolio of 50k, they wouldn’t make those moves; this is what’s known as having "skin in the game." Measuring risk/reward (such as using the Sharpe ratio) disqualifies all these confusing profiles and sets things straight. That said, I don’t know why people are so eager to compare themselves to others. In my case, it’s more of an obligation because I have a copyable portfolio on eToro, but it’s not something I desire at all. It’s nothing more than additional negative pressure, which can be very damaging if not handled properly. What we need are more ratios like the Sharpe and fewer public nonsense metrics; that’s the first thing anyone serious in this industry would look at. I’ll give an example to show why someone with 500k doesn’t necessarily have more "skin in the game" than someone with 50k: Let’s take two examples: Mr. Garfield with 500k invested in stocks, with financial stability and a cushion behind him. Then, another person with 50k invested, representing 100% of their wealth — capital intended to buy a house in the future, which is vital for starting a family with their spouse. The person with 10% of their wealth invested in euros has a much higher risk and pressure level. Sure, those 50k could be earned back with one or two years of work, while the 500k cannot, but that opens up a whole new discussion about variables like the country the person lives in and their base salary. In the end, live, be happy with what you do, and enjoy what works for you. Best regards, David Bonachea Martínez eToro Popular Investor

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I get asked quite a lot what it takes to become a good trader. RISK over RATES and RATES over MACRO is my default answer. I'm not the oracle but it has worked for me for the last 15 years in Futures and then in Spot FX. It's also important to know when the market is "right" or "wrong" and It took me at least 5 years to gain enough confidence to call it. Traders like to be just ahead of the curve. Not too much so we get run over - but just enough to get value. Let's take Stagflation in the US The mere mention of it to some is unthinkable. This is GOOD because it is not priced in. I am looking at PPI, Prices Paid, Unit Costs and of course The UOM 1 Year. I tend not to look a CPI Swaps or B/E but it's a personal thing. It's one thing getting in front of a narrative curve its quite another thing as to know how to trade it. This puts the Fed in a bind with its dual mandate. CUT and jobs lift with the danger of higher PCE or HOLD for longer capping inflation but running the danger of higher UE and capping growth (IMO lower GDP is the darling child to help Stagflation bear fruits) SOLUTION: 1. Look at the reaction to USD on any sticky inflation component but realise the move may not last. Fading is my skill out of necessity but more on that later. I hope this finds you well. I have left my USDCAD chart which has been a faders paradise for the whole of Q1 If you would like to know more about my mapping with confluence please DM me for a chat. You can also book me through my Calendly link in the comments and we can discuss USDCAD and what my Q2 thoughts are.

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Given the interminable attention gained by the UK’s “hokey-cokey #Brexit”, I’m amazed “Hungout”, has not more stood out. For surely, you’ve noticed how Orban has engineered the best of all possible deals for his country? A Hungout coming without the penalties thrown at the UK with Brexit. Orban has in effect, allowed #Hungary to have its #EU cake, & eat it. What of Orban? Having been PM between ‘98 & ‘02, he returned in May ‘10; re-elected in ’14, ‘18 & ‘22. That Hungary’s accession to the EU in May’ 04 came when Orban was in opposition, is testament to his stand towards European federalism. For #Orban is staunchly a MAGyAr First Man. But what of Hungarians writ large? Let’s consider the facts behind its referendum in April ’03. True, the result was a resounding 83.8% FOR accession. There is however this detail: turnout was a mere 45.6%. For context until ’97, Hungary’s constitution demanded a plebiscite could not be considered legitimate without at least a 50% turnover. In ’97 this was lowered to 25%, yes one year before Orban first assumed the premiership. To say Orban’s approach to the EU is entirely opportunistic is classic understatement. He has taken all the nice bits of being a rusticated member of the EU, whilst declaring Hungary exempt from all the elements he dislikes. Let’s consider where Orban has placed Hungary in relation to #Russia. Whilst the EU has taken a decidedly cold turn towards Putin’s Russia, Hungary has continued to be very warmed by its energy; Vik on very good terms with Vlad. Friendly terms despite Russia’s embattlement of Ukraine, one of the 7 nations Hungary shares a border. Of Hungary’s other neighbours, 5 are ‘fellow’ EU’ers; putting it very much at EUROPE’s CENTRE. Yet, if one were seeking a single piece of evidence to prove Orban is distancing Hungary from the EU/EZ, to in effect “beggar its neighbours”, it is FX’in clear what this is. Looking at the forint against the #euro we see that since Orban returned to office, it has devalued by 1/3. For context, the £ is presently broadly where it stood against the € in ’10; despite the intervening years seeing the UK perform the Brexit “hokey-cokey”. The simple truth is that when (not if) Hungary’s central bank begins to aggressively cut the interest rate from its lofty 6.5%, the #forint could easily fall fast & far. True, the fall thus far in the forint against the €, has been nothing close to that of #Turkey’s #lira or #Ukraine’s #hryvnia, but weaken it most certainly has. That its € neighbours of #Austria, #Slovakia, #Slovenia & #Croatia, or €-hugging #Romania, have not cried foul of the forints fall, is to me at least, most surprising given the competitive disadvantage it has put them. Let me close with controversy. Rather than feral Hungary pulled-back into the federal EU fold, I expect others within it to take the nationalist lead from Hungout. That the UK will get back closer to the EU, as others carve themselves out, is just classic British irony.

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Big news: Sweeping microstructure changes to US equities and Reg NMS: 1️⃣ Half-penny tick size for stocks priced above $1 and time-weighted average spread below $0.015. This is a simpler variation of the rules proposed in 2022, which would've added variable tick sizes for 3 conditions. 2️⃣ Primary listing exchanges, and by extension, SIPs, until their retirement, required to disseminate minimum pricing increment for each NMS stock. Most equities traders hardcode their tick sizes. Rather inconvenient. A win for systematic trading folks. 3️⃣ Consolidated feeds will designate best odd lot order (BOLO). About 50% of available resting liquidity is below round lot quantity today—a widening rift in value of SIPs vs. prop feeds. The adopted rules unfortunately don't require all odd lot information to be provided as regulatory data, a compromise to make consolidated data volume manageable. A useful insight was that the SEC implemented a simulated, MDIR-compliant competing consolidator feed from the prop feeds, which it found provided better prices than the exclusive SIPs most of the time. This is no secret to market makers, who pick up the prop feeds not merely for the latency advantage to spray their ISOs, but also more accurate, aggregated book imbalance signals. (It's also why we took an unconventional path at Databento and avoided integrating the cheaper SIPs like most everyone else—we see a significant competitive advantage down the road.) 4️⃣ Existing CTA/UTP SIPs will be retired. Buried in all the litigation and legal challenges to the MDIR up to this point is that there was little prior discussion on the timetable for the retirement of the CTA/UTP SIPs. We wrote about this in Databento's last SEC comment letter, referencing Exchange Act Release No. 90610, 86 FR 18596, 18701 (April 9, 2021). This latest release preempts the retirement of the exclusive SIPs and confirms a position that's consistent with Databento's interpretation of the MDIR. (But it's quite likely that CTA/UTP, or their successors, will themselves seek to register as competing consolidators.) The next big fight is how consolidated market data is licensed and how SROs assess fees on competing consolidators for regulatory data—fees that will practically pass on to end users. It's expected that some parties will put up challenges on pricing/licensing to keep the frictions that existed under the exclusive SIPs' framework. Things like pro vs. non-pro, display vs. non-display, etc. This would effectively hamstring much of the MDIR through commercial terms. Databento advocates for a fee simple regime where existing prop feeds may be used for competing consolidation—which would be most favorable to market participants—write in and support our position!

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THIS 👇 One refrain I've repeatedly heard in recent conversations with younger developers is that we "older" people have designed API connectivity processes that simply don't work for them. When FIX was launched 30 years ago, there was no alternative to memorising FIX tags and emailing lengthy PDFs. Now there are much, much, much better alternatives, and it is embarrassing that we "older" people force new graduates to work like it's 2000. What is the very first thing every modern developer does when they need to integrate with a third party? (I'm assuming here that they are coding as opposed to asking ChatGPT to code for them 😉) ANSWER: Go to GitHub and look for an open-source library/package/SDK to take care of the API connectivity piece so they can focus on plumbing it into their code. Except this isn't what happens in FIX. Almost every exchange, broker and vendor seems to believe that the "correct" answer is to email a 100+ page PDF, give an email address for questions, and wish them luck!! No wonder connectivity takes so long and is so painful! There are solutions out there today. The hard part is changing the mindset. Well done Joan Puig and Bloomberg for recognising this shift and capturing the first-mover advantage. 👏 #fixprotocol #fixtrading #api #developerexperience #tradingmarkets

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Jobs writing C++ code for high frequency trading firms and hedge funds can be lucrative, with compensation reaching up to $600k+ in recent years. However, expertise in C++ alone is not sufficient. While the language is inherently fast, optimizing it for low latency trading applications is crucial. Stay updated on the latest trends to excel in this competitive field. #C #developers #code #HFT #Hedgefund

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This is life on a trading desk, in 2 minutes. The big short is one of the best movies I have ever seen. What I really like about it, and had rarely seen before, except for the legendary documentary "Trader" about Paul Tudor Jones, is that it perfectly captures the art and craft of trading, and what it takes to be a good trader. Very refreshing in a sea of online nonsense. We watched it with our #trading desk, and thought, yes, this is what we do, and how we feel, for real. Trading is a very tough, often lonely job, where you fight the #markets, the characters you know from your competition, and your peers and seniors challenging your positions and analysis. But it is a fun job too. I loved the life on a trading desk. A non corporate microclimate of smart, driven and dedicated mavericks, cracking jokes to deal with the intensity of the markets. There are a lot of great clips from the movie. I was looking for clips which, to me, are analogies of current financial markets, and reflect my idea that unfortunately not much has changed since 2008. But then I came across this clip which I forgot, a nicer one to head into the weekend with a smile. I laughed out loud watching it. "I am riveted by this, do you have any pictures?" 🤣 A big part of a day on a trading desk is discussing the markets and the #economy with each other, bouncing ideas off each other. Constantly with one eye looking at the screens, looking for things happening, opportunities and anomalies, making the P&L in your head. I also recognize the wrong number situation. Not exactly the same but similar, I made a post about it, was a Nigerian cocoa bean supplier calling me at a rare moment when markets were quiet and I had time to take his call. I thought it was just another sketchy guy trying to test his luck with nonsense. He said "I just want to make you happy". Right. Long story short, he became our second biggest Nigerian bean supplier. I look back at my life at the desk and the mavericks I worked with, with great pleasure.

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For those not aware, i run a Technical LONG list at Fundstrat called UPTICKS named after Sir Issaac Newton's OPTICKS newsletter from the 1500s. #UPTICKS stock Axon Enterprises ($AXON) has successfully broken out above its 5.5 month base which had been building since March-- The stock is higher by over 17% today and one can see the importance of having exceeded $326 which has been tested on three separate occasions since this past Spring. A very good move and volume likely could double its 30-day avg by end of day. Given the momentum and daily and weekly bullish range, upside targets lie initially near 367 and above that can allow for a move up to 424. Overall, a very bullish breakout for this stock today, which should lead to further gains into September. Come pay us a visit if you are not yet onboard https://lnkd.in/eCrsVbUu

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Because Hyperbole is such easy click-bait, so many of those pushing economic ‘views’, are incentivised to lace these to the very extreme. Have, that is, titles & content of such gross exaggeration, that listeners & readers feel compelled, as it were, not to switch-off, or put-down. The reality of ever so much (unrefereed) economic spiel, is that the adjectives employed, bear no relation to the actual ‘quant’ reality, being discussed or projected. We have all too often seen headlines along the lines of “Dow suffers a staggering fall”, or “Wall Street soars”. These would however accompany what was in actual fact, say a decline of 3% or respective 4% rise. Were such hyperbole not enough of a frustration, we invariably also suffer the absence of context. After all the first & second ‘daily headlines’ could book-end a week in which the DJ ended flat; & let’s be perfectly honest, ‘flat’ makes for a very flat headline. Were it not enough that commercial scribblers on economics succumb to hyperbolicBS, we have to suffer as politicians try to beguile us in the same way, with wayward exaggeration. The most recent instance of this came with the new Chancellor’s “bombshell discovery” of a ‘staggering’ £20bn annual black-hole in UK State finances. Now, imagine had the Chancellor’s staggeringly large number been presented as a % of the UK Government’s annual tax receipts of £1.1tr. This real revelation by Reeves would have been exposed for what it in fact was, underwhelmingly de minimus; a mere rounding error ‘in the greater scheme of financial things’. What then of the “the UK’s spectacular descent into deep indebtedness, hurtling up to a staggering 100% of its GDP.” Well, here the only thing that staggers me is yet another absence of context. After all, suppose we were to consider UK NATIONAL debt in the same way we treat say a residential mortgage. Using this perfectly reasonable approach, would reveal that our actual ‘Gilt burden’ is a not unreasonable c2.5 times multiple of its annual ‘tax income’. Let us continue with further perfectly sensible proportionate context. One could point to what the ONS guesstimates (one too low in my view) is the UK’s c£12tr net worth, & say that as far as LTV’s go, the UK is extremely well covenanted. The reality is that whilst economist scribblers & chatterboxes produced ragging headlines regarding the “BIG Reeves Reveal”, and the “UK’s MASSIVE DEBT BURDEN”, there was a marked absence of any meaningful headline concerning higher Gilt yields or a weakened £. And the reason there were no such headlines, was simply this. There were simply no such moves in these key markets. Now, if I wanted to perfectly easily hook an audience with shameless hyperbole I would title a piece “The reasons I am convinced Spurs will shock & win the Premier League.” I am confident you would find yourself unable to resist reading at least the first dozen lines, before you awakened to the fact there was no factual basis to such hyperbolicBS.

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Induced trading systems rely on two fundamental pillars: quantity and quality. Quantity necessitates comprehensive testing—years of data across several devices. This guarantees that a #system is not just designed for a certain #dataset but demonstrates robustness across various market conditions. When a trading strategy demonstrates consistent outcomes across all FX pairs and their crosses, even after factoring in realistic #trading expenses (e.g., $4 per lot), it indicates a strong degree of generalization. Quality, as highlighted in David Aronson’s Evidence-Based Technical Analysis, signifies the pertinence and flexibility of the rules. The regulations ought to reflect market patterns that are expected to recur. An approach predicated on #data that functions solely in ascending markets is improbable to succeed in diverse settings. A formulated rule that predicts shifting dynamics—adjusting to bullish, bearish, or lateral trends—emerges as more dependable. Generalization is essential rather than optional in every trading system. Systems demonstrating consistent performance across several #currency pairings and periods exemplify the fundamental principles of effective strategy design. Observing techniques that generalize effectively and sustain dependability beyond a particular timeframe or trend indicates that they are founded on flexible, evidence-based principles, ready for practical use. ps. #OOS starts from 2020 onwards

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