HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls

Takeaway: All exchange traded categories are substantially higher to start '16 with fresh new highs in CME trading volume.

Jittery markets continue to trade all over the map with significant gap up and draw down days digesting a helter skelter of global market information in 2016. The S&P 500 put in a marginally positive holiday shortened week of +1.3% but still sports a decidedly negative -7% start to the New Year. Exchange activity however continues to propel higher with incremental volatility and investor uncertainty. Cash equity volume in 1Q16TD is now up +38% Y/Y, with equity options activity now up +33% Y/Y, with futures at a +25% growth clip over 2015. CME Group (CME) thus far, half way through January, has set all-time trading volume highs of 19.1 million futures and options contracts per day, taking out the former high of 17.5 million in average daily volume (ADV) in October 2014 on the potential for a Greek exit from the European Union. While CME stock has been caught up in the market swoon (with its valuation compressing), the earnings power of the Merc has increased (and is threatening to do so for the intermediate term with the swelling of open interest as well). Thus it will just be a matter of time in our view, before CME stock perks up (although it is already outperforming the broader market by ~150 bps).


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - CME chart


Weekly Activity Wrap Up

This week, cash equity trading volume came in at 10.7 billion trades per day, bringing the quarter's ADV to 9.5 billion. Options traders exchanged 23.0 million contracts per day, bringing the 1Q16TD average to 20.6 million. Futures activity came in at 28.5 million contracts per day, bringing the 1Q16TD average to 24.9 million.


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon1


U.S. Cash Equity Detail

U.S. cash equities trading came in at 10.7 billion shares per day this week, averaging with last week to bring the 1Q16 average so far to 9.5 billion shares per day. That marks +38% Y/Y and +35% Q/Q growth. The market share battle for volume is mixed. The New York Stock Exchange/ICE is taking a 24% share of first-quarter volume, which is consistent with the prior quarter and year-ago quarter, while NASDAQ is taking a 19% share, +57 bps higher Q/Q but -91 bps lower than one year ago.


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon2 2


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon3


U.S. Options Detail

U.S. options activity came in at a 23.0 million ADV this week, bringing the 1Q16TD average to 20.6 million, a +33% Y/Y and +29% Q/Q contraction. In the market share battle amongst venues, NYSE/ICE has been trending downward at a moderate pace, but at an 18% share it is +125 bps higher than the year-ago quarter. Meanwhile, NASDAQ's recent declines bring it -440 bps lower than 1Q15. CBOE's market share is down -83 bps Y/Y but has improved recently; its 27% share of 1Q16TD volume is up +195 bps from 4Q15. BATS and ISE/Deutsche have been taking share from the competing exchanges, with BATS up to a 10% share from 9% a year ago and ISE/Deutsche taking 16%, up from 13% a year ago.


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon4


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon5


U.S. Futures Detail

22.4 million futures contracts traded through CME Group this week, bringing the 1Q16TD average to 19.1 million, a +28% Y/Y and +45% Q/Q expansion. CME open interest, the most important beacon of forward activity, currently tallies 104.0 million CME contracts pending, good for +14% growth over the 91.3 million pending at the end of 4Q15, an improvement from last week's +12%.


Contracts traded through ICE came in at 6.0 million per day this week, bringing the 1Q16TD ADV to 5.8 million, +15% Y/Y and +21% Q/Q growth. ICE open interest this week tallied 67.0 million contracts, a +5% expansion versus the 63.7 million contracts open at the end of 4Q15, consistent with last week.


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon6


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon8


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon7


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon9 


Monthly Historical View

Monthly activity levels give a broader perspective of exchange based trends. As volatility levels, measured by the VIX, MOVE, and FX Vol should rise to normal levels after the drastic compression this cycle, we expect all marketplaces to experience higher activity levels.


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon10


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon11


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon12


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon13


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon14

HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon15


Sector Revenue Exposure

The exchange sector has broadly diversified its revenue exposure over 10 years as public entities with varying top line sensitivity to the enclosed trading volume data. The table below highlights how trading volumes will flow through the various operating models at NASDAQ, CME Group, ICE, and Virtu:


HEDGEYE Exchange Tracker | Chicago...the Merc Not the Bulls - XMon19 3



Please let us know of any questions,


Jonathan Casteleyn, CFA, CMT 




 Joshua Steiner, CFA





Cartoon of the Day: Full Of Hot Air?

Cartoon of the Day: Full Of Hot Air? - long helium cartoon 01.22.2016


Happy faces aside, we think this is a market you sell on strength.

3 Must-See Market Calls On HedgeyeTV

Takeaway: There's nothing "transitory" about what's going on right now.

Our omnipotent Fed head Janet Yellen is fond of saying that virtually anything central planners missed (e.g. #Deflation, #GrowthSlowing, global market meltdowns) is merely "transitory." Okay.


Here are three videos where Hedgeye CEO Keith McCullough discusses the coming crash in equity markets, our dour U.S. economic outlook and global #GrowthSlowing.


1. The Most Important Thing Going On Right Now (12/11/2015)


Old Wall completely missed our now prescient Macro theme global #GrowthSlowing. We were espousing the idea 18 months ago. It continues to ravage portfolios today. Here's why.  




Before you watch this video, note the date. It's just before a major summer selloff in U.S. equity markets. Watch McCullough discuss the myriad market leaders primed for a plunge including Tesla, down -14.5% since then, and Apple, off -12.7%. 


3. THE U.S. ECONOMIC OUTLOOK IN 2016? NOT GOOD (12/28/2015)


Since making the #GrowthSlowing call, our Macro team has been on the right side of U.S. economic growth. Down, down, down. Meanwhile, so-called "blue-chip" economists and the Fed have are still ratcheting back their expectations. To be clear, we're not getting bullish on the U.S. economy anytime soon. 

Click here to subscribe to our YouTube channel.

the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

CALL TODAY | THE IRAN FACTOR: Contextualizing Iran's Impact on the Global Energy Industry

TODAY at 1:00 PM EST the Hedgeye Macro Team will host a conference call with former Energy Secretary Spencer Abraham and Senior Energy Analyst Joe McMonigle from Potomac Research Group to discuss the implications of the U.S. and EU lifting sanctions on the Iranian energy industry. A corresponding slide deck will be available approximately 1 hour in advance of the call.


As part of Hedgeye’s recent acquisition of Potomac Research Group , we’re excited to introduce both Abraham and McMonigle to Hedgeye subscribers.


Watch THE replay below.




This past weekend the International Atomic Energy Agency (IAEA) certified that Iran met its legal obligations as part of July’s agreement. The US and European Union (EU) lifted all nuclear related sanctions on Iran within hours.


In today’s call, we will outline some of the obvious and possibly unforeseen winners and losers after Implementation Day. The goal of the call will be to leverage the Potomac team’s policy experience, expertise, and network to contextualize key upcoming geopolitical catalysts amid a sea of mainstream noise post-deal.   



  • Near Term Surprise?: Iran has the capability to increase production near-term by a larger quantity and at a faster pace than most analysts and policymakers have forecasted.
  • Direction and Policy Tone of Releasing Deliverable Crude: We’ll give an update on the nearly 50MM barrels of crude stored on tankers offshore that is available for immediate delivery and on the move. Iran will move quickly to get into OPEC’s “market share” game (a game that Saudi Arabia will play for the foreseeable future).
  • Updated Iranian Oil Contract:  We’ll discuss the likely outcome of a re-worked Iranian Oil Contract. Iran’s Oil Ministry is planning a conference in London for oil companies and investors on February 22-24 to unveil its new Iran Petroleum Contract. In November, Iran held an introductory briefing for international oil companies on the new oil contract, and the general approach was received quite favorably.
  • Short-Term vs. Long-Term: While initial production capabilities may be significantly understated in the short-run, billions in western investment is needed to bring Iran back to pre-sanctions production levels.   
  • Which companies will participate? European oil companies are now free to do business in Iran. However, while the US lifted nuclear sanctions on Saturday, other US sanctions related to terrorism and human rights remain in effect and prevent US companies from immediately doing business in Iran.
  • Geopolitical Rivalries: A price war with rival, Saudi Arabia will commence. Russia is geopolitically-aligned with Iran, but they are business competitors. Russia was successful in taking many of Iran’s southern European clients. Iran will look to compete for this business at the same time that Europe is looking to diversify its energy needs away from Russia.  



Toll Free:


UK: 0-

Confirmation Number: 13628992

Materials: CLICK HERE






Spencer Abraham

Secretary Spencer Abraham serves as Senior Energy Analyst and is Chairman and CEO of The Abraham Group, an international strategic consulting firm focused on the energy sector and based in Washington, DC.

Secretary Abraham is a member of the Board of Directors of Occidental Petroleum, NRG Energy and PBF Energy. Secretary Abraham served as the tenth Secretary of Energy in United States history from 2001-2005 under President Bush. Prior to being named a Cabinet Member, Spencer served as an effective and highly productive U.S. Senator from Michigan for six years.

Secretary Abraham is a member of the Board of Directors of Occidental Petroleum, NRG Energy and PBF Energy.  In addition, he is a frequent commentator on FOX News, CNN and Bloomberg TV as well as a periodic contributor of op-ed articles to the Financial Times, The Wall Street Journal, The Washington Post, The Weekly Standard and other publications.

Secretary Abraham holds a law degree from Harvard University, where he co-founded the Federalist Society, and is a native of East Lansing, Michigan.


Joseph McMonigle

Joseph McMonigle serves as a Senior Energy Analyst and is president and co-founder of The Abraham Group LLC.

Mr. McMonigle is the former Vice Chairman of the Paris-based International Energy Agency. He also served concurrently as U.S. Representative to the IEA (2003-2005).

In addition, Mr. McMonigle served as Chief of Staff at the U.S. Department of Energy and also as the American co-chair of the U.S.-China Energy Cooperation Working Group. He is also an attorney and member of the Energy Bar Association as well as the Pennsylvania and District of Columbia bars.


REALITY CHECK | How 'Bout That Bounce? A Look At The Market Scoreboard

Takeaway: Stocks haven't bottomed. We reiterate our call to sell on strength.


Wacky start to 2016, eh?


Jumping right into it in this morning's Early Look, Hedgeye U.S. Macro analyst Christian Drake sums up yesterday's wild market movements from Japan to Europe to U.S.


He sums it up in one sentence:


"The 2016 equity casino is officially open."


Agreed. So, before the perma-bulls get too excited about yesterday's bounce, take a look at year-to-date global equity performance...


REALITY CHECK | How 'Bout That Bounce? A Look At The Market Scoreboard - bloomberg ytd


Even worse... how about the draw-down from those summer bubble highs?


REALITY CHECK | How 'Bout That Bounce? A Look At The Market Scoreboard - bloomberg 6 mon


The reality is that volatility is just starting to ramp. We reiterate: Sell on strength...


That in mind, here's a quick recap of yesterday's moves and an update on where we think we're going from a note sent to subscribers this morning.


"Yesterday the Nikkei rallied on a central bank rumor of more easing then sold off on a contradictory rumor, the SPX futures gapped higher on Draghi pointing to rising downside risks, oil rose on higher inventories and the U.S. equities finished higher alongside a 4th month of contraction in the Philly Fed Index and a rise in rolling jobless claims to their highest level since April of last year. 


This morning’s catalyst is Chinese officials vowing to “look after” stock investors. Manic price action in markets and reactionary policy responses out of central banks are not outcroppings of improving fundamentals. GrowthSlowing remains the call and we remain sellers of strength."


... Meanwhile in Europe


"While European equities are bouncing today, nothing has changed with our fundamental outlook of #EuropeSlowing. We got our first touch of reality on the inflation outlook from the ECB in ECB governing council member Ewald Nowotny saying there are risks inflation could turn negative due to low oil prices in H1’16.


Also as no surprise, Eurozone GDP and CPI forecasts for the next three years were largely all guided down by a group of external analysts (we expect similar results from the ECB’s staff projections at the March meeting). Finally, preliminary January PMIs for the Eurozone all fell month-over-month. Manufacturing (52.3 vs 53.2 prior), Services (53.6 vs 54.2 prior), and Composite (53.5 vs 54.3 prior).


Got #GrowthSlowing?"


Keep you head up out there.

HedgeyeRetail (1/22) | TIF - Don't Fear the Repo, NKE/Jordan

Takeaway: TIF Share Repurchase - 'Announcing' ≠ Lower Share Count.  Jordan's at ROST, Jumpman Ain't Dead.

TIF - Don't Fear the Reap-o

Share Repurchase -- 'Announcing' Lower Share Count



We're absolutely not concerned about being short TIF into the company re-upping its share repo authorization. For starters, 1) we're only talking $500mm, which is about 6% of the current market cap. This program is a drop in the bucket. 2) Next, just because a company announces a repo, it does not mean it will actually execute on it. 3) Lastly and most importantly, history does not lie. Over the past decade, TIF spent $1.1bn on share repo, and yet the share count only came down by 6.6mm, or 4.8%.  The implied repo price per share comes out to $170, and yet the stock only poked its head above $100 fewer than a dozen times, and never broke $110. But the average implied repo price was $170?


The fact is that some companies, like GPS (which we don't like) use repurchases as an offensive weapon -- cutting it share count in half over a decade. TIF is not one of those companies -- as it basically uses the repo program as a way to offset dilution from options and other non-cash compensation.


NKE, ROST - Jumpman Ain't Dead


People are finding every way imaginable to jump on the 'Jordan is Done' bandwagon, and this report is the latest. The picture shows two pairs of Jordans on the rack. We're hard pressed to find them at any other stores. The reality is that this happens all the time, even for high end product. The shoes are likely damaged, or more likely, the boxes are damaged. That's usually the factor that results in Marquee shoes ending up in off price channels. Keep in mind that 'sneakerheads' value the box almost as much as they value the shoe. All it takes is a palette of 100 pairs of shoes to get wet, or the corner of the boxes crushed, and they are deemed unsellable in full-price channels. If there's anything unusual about this it is that they did not end up in Nike outlets. Our sense is that the retailer who deflected these kicks to Ross Stores will be getting an angry phone call from someone in Beaverton. 

HedgeyeRetail (1/22)  |  TIF - Don't Fear the Repo, NKE/Jordan - 1 22 2016 chart1



WMT - NLRB Judge declares Wal-Mart violated federal law when it disciplined employees after 2013 strike -- must rehire 16 former employees with backpay



BID - Sotheby's Board of Directors eliminates the Company’s $0.10 dividend effective immediately, and allocate the capital instead to repurchase shares.



M - Macy’s new omnichannel strategy, “Pick to the Last Unit”, lets stores act as “warehouses” to utilize the full assortment of owned inventory



WSM, RH Baby & Child - Pottery Barn Kids is unveiling its first nursery collection



CAB - Cabela's trying to sell credit card business, responsible for 30% of revenue, prior to selling to company



Richemont acquires remaining 40% of luxury watch and jewelry maker Roger Dubuis



DG - Dollar General Names Michael M. Calbert as Non-Executive Chairman of the Board to Replace Rick Dreiling


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.