CME Group CEO On Low Volatility: "Traders Are Too Afraid To Buy...And Too Afraid To Sell"

Tyler Durden's picture

With realized volatility having fallen to near-record lows this month, CME Group Chairman and CEO Terry Duffy tapped into the trepidation that many traders feel about today’s unsettlingly placid markets during an interview with CNBC Thursday, saying that he’s “surprised” at the present lack of volatility, adding that many market participants are essentially too afraid to trade.

Ultimately, the torrid pace of this year’s advance in global stocks, which has sent US shares sailing through record high after record high, has made traders too fearful to sell for fear of missing out on further gains - but they’re also too afraid to buy because of the precarious situation with North Korea, and uncertainty surrounding the path of domestic fiscal and economic policy.

To be sure, subdued volatility isn’t happening in isolation. Low rates and low commodity prices (among a host of other factors) have helped propell shares higher. But right now, markets are essentially in a “wait and see mode.”

“It’s a function of volatility, but that’s not the only component, you know, you’re looking at low interest rates you’re looking at commodity prices being depressed, you’re looking at a whole host of issues. And right now, people just aren’t trading the markets, they’re afraid to buy, they’re afraid to sell at the equity markets because of the levels were trading at right now i think it’s a wait and see game.”

CME Group CEO: Tax reform would allow us to reinvest in our business from CNBC.

Asked for his thoughts on tax reform, Duffy said it will be the “biggest issue” for equity markets in the coming months, regardless of outcome.

“Corporate tax reform is the biggest issue that will have a shakeup in the equity markets, one way or the other.”


“There’s no question about it, we’re one of the highest tax payers people are referring to, so yes it would allow us to reinvest in our business and grow, but yes it does fall through the bottom line.”

Duffy, like many others in his line have work, has struggled to find a suitable justification for the contemporary low volatility environment, adding that he’s seen geopolitical incidents that were orders of magnitude less terrifying than the standoff between President Donald Trump and North Korean leader Kim Jong Un rattle markets.

“I’m surprised by the lack of volatility. I’ve been around this business a long time, I’ve seen some geopolitical events make people’s teeth rattle, and what you’re seeing recently which traditionally would’ve moved markets is just not doing it.”

Of course, the current regime can’t last forever...and a correction will probably begin sooner than people think...

“People get jaded to volatility because of current events in North Korea, or other geopolitical events...whether we’re going to have oversupply or undersupply. But certain hings will change the fundamental factors of the market place.”


“And in return, you’re going to see a change in pricing not only in interest rates, but in equities and all different products.”


“You saw that when West Texas Intermediate traded at $92 a barrel for years, then next thing you know, it was $26.50 a barrel.”


“When volatility comes, it comes fast and furious.”

Asked about recent criticisms of clearinghouses levied by National Economic Council head Gary Cohn, Duffy rebutted Cohn’s assertion that clearinghouses like CME threaten financial stability. Quite the opposite, Duffy said.

“I don’t believe they present a systemic problem. I did not get a chance to talk with Mr. Cohn, but the very next day, the federal government released its assessment of clearinghouses, and it showed that two could fail and the system could still function...I don’t agree with those comments for CME Group,  most of the stuff we clear is futures and options and base products...what I imagine Mr. Cohn was referring to was the swaps clearing...we don’t do a tremendous amount of swaps clearing here at CME. It’s mostly base products.”

“What clearinghouses do to mitigate risk has been a major benefit to the US financial system.”

Duffys remarks come as October continues on pace to become the least volatile October in history…

... and third least volatile month ever.

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ted41776's picture

worry not, for the "federal" "reserve" will buy and buy some more with money they pull out of their assholes

YUNOSELL's picture

The next few months will be perfecting the art of 'stealth selling'

cossack55's picture

Did not buy, do not have to sell.  Easy-peasy

NoDebt's picture

You know how they say "bull markets don't die of old age"?  Well, meet the first one that's going to.  

(Or maybe I just made that up.  If you knew all the stuff that rattles around in my head you'd have a hard time distinguishing reality from fantasy, too.)


lasvegaspersona's picture

When folks start dancing the Charleston again...that might be a good sell sign...when 'Happy Days ARe Here Agiain' knocks rap off the radio...another sell sign.

When the fed chair announces that stock have reached a permanent high plateau (or that we won't have a down turn in our lifetimes)...think maybe....?

cossack55's picture

Or when Ginger Rogers sings "We're in the Money"

small axe's picture

"CME Group has a number of international incentive programs that provide its global customer base with discounted pricing on certain CME, CBOT, NYMEX, and COMEX products. ...

Central Bank Incentive Program (CBIP)

The Central Bank Incentive Program allows Central Banks to receive discounted fees for their proprietary trading of CME Group products traded electronically. Foreign branches of Central Banking groups may participate, as well as accounts traded by an external asset manager on behalf of the applicant Central Bank.


markitect's picture

How does one take a position against a central bank?  If they know what they are going to do to move a market isnt that the definition of "rigged"?  Do they just say "Chinese wall" and it's all the sudden ok?

small axe's picture

When dealing with central banks, I believe the standard position is bend over and spread 'em.

Rainman's picture

It'll be a hoot when all those ETFs head for the door at the same time.

lester1's picture

Why would they be scared about selling? They could easily sell to the unaudited Federal Reserve's Plunge Protection Team who have been covertly buying up stocks like crazy since summer of 2015.

Al Huxley's picture

'Scared to sell' - this is just a fairytale made up by this mouthpiece for one of the most crooked of all the crooked financial institutions that make a profession and a career of transferring earned wealth from average Americans into their silk-lined pockets - be sure that whatever the CME group or any of the other exchanges, or 'watchdogs' or analysts tell you is related to the truth only coincidentally.  These guys are all professional crooks, conmen and cocksuckers of the highest order.

RawPawg's picture

I remember when i got my first Silver 1 oz'er

i jumped...a little at first

well,y'all know how my story ends

Stan522's picture

So........ is this why we haven't seen the crash yet......?

JMKeynez's picture

So far predicting VIX and markets Shepwave has been dead on Target.

supernintendosegagenesis's picture

false evidence appearing real

VWAndy's picture

 Smoking belly button lint? Cant have it both ways son.

VWAndy's picture

 The guy looks baked too. just sayin

VWAndy's picture

Whats his buis again?

Juggernaut x2's picture

Low commodity prices? WTF is this guy smoking? Has he looked at RBOB, lumber and copper prices lately?

Aireannpure's picture

Nooooo... its opiods that give you this market and this guy looks pretty oyp'ed.

DirtySanchez's picture

cme is one more rigged marketplace.

How does a cme trader end up with a million dollars?

He started with 10 million and pissed the rest away trading.

Reichstag Fire Dept.'s picture

Sell everything that market has touched.

pndr4495's picture

I was told that the Irish in Chicago are known as Puddin' Heads.