Are leveraged Gen Z traders the next systemic risk?; ‘Red flags’ over market abuse rise at asset managers during lockdowns

Feb 15, 2021

First Read

$28,251/$300,000 (9.4%)
Adam Spence


Hits & Takes
John Lothian & JLN Staff

Here is my comment about the recent impeachment verdict by the United States Senate. It is a quote from Robert F. Kennedy, a man whose life and work I greatly admire. This is an excerpt from RFK’s “Day of Affirmation” speech given at the University of Cape Town, South Africa, on June 6, 1966, two years to the day he was shot and killed in Los Angeles.

Every time we turn our heads the other way when we see the law flouted, when we tolerate what we know to be wrong, when we close our eyes and ears to the corrupt because we are too busy or frightened, when we fail to speak up and speak out, we strike a blow against freedom, decency and justice.

~Robert F. Kennedy

My CBOT Building 16th floor neighbor Blair Hull is the guest on a podcast called Risk of Ruin and the episode is titled “From Black Jack to Black Monday.” You can hear it here on Apple Podcasts.

In case you are not in Chicago, it has been rather cold and snowy here lately. How cold and snowy? Well, according to WGN meteorologist Mark Carroll, the average temperature in Chicago from Feb. 5 to Feb. 14 is 7.8 degrees. This is the 4th coldest of all the Feb 5-14 periods since 1871. The last time a Feb. 5-14 period has been colder was 122 years ago in 1899. The 28.1″ of snow in Chicago since January 25 make the Jan. 25 to Feb. 14 period the 3rd snowiest on the books since the 1884-85 snow season. The last time a Jan. 25 to Feb. 14 period has been snowier in Chicago was 1978, 43 years ago. And, with 11″ or more snow on the ground over the past 15 consecutive days, this has tied for the 5th longest consecutive stretch of 11″ or greater snow cover on the books. The last time we had more days in a row with 11″ or more of snow on the ground for more than 15 days was 2001. Then just for fun, the forecast calls for 8 to 12 inches of snow in some Chicago locations in the next two days.

Chicago is not the only cold and snowy location. Bloomberg is reporting that cold weather has cut Permian oil production – oil produced in the Texas and New Mexico area – by 1 million barrels a day. The coldest weather in 30 years has led to a combination of well shutdowns, flow-line outages, and disrupted road transport.

Moving to things hot, Japan’s Nikkei 225 has exceeded the 30,000 yen level for the first time since 1980.

Your crypto thought of the day. If bitcoin was worth stealing when it was between $300 and $20,000, how much more is it worth stealing now that it is near $50,000? Maybe it’s time to double check your wallet security.

On Tuesday, I am moderating a panel discussion for the DePaul Arditti Center on “Securing a Risk/Finance Internship or Career.” We are recording the panel on Zoom for play at a later date. This is a first for me.

As the vice president for development of the Pathway to Adventure Council, I helped put in place a new policy for the Friends of Scouting program whereby the Scout units get to keep 10% of the money raised if the unit hits their goal, which is just $50 per Scout registered in the unit. This gives the units incentive to make the FOS program work for the Council and for the units.

RSM’s Adam Spence is the latest to give to the JLN MarketsWiki Education GoFundMe campaign. Adam is a financial services tax manager at RSM and worked under the revered Harlan Ten Pas. Thank you to Adam and all who have given and all who have yet to give. Support our efforts to preserve industry history by giving to our GoFundMe campaign.

Have a great day and stay safe and treat people the same way you want to be treated: with respect, equality and justice.~JJL


Eero Pikat – The Path to Electronic Trading

Barchart Executive Reflects on the Changes in Quote Technology That Fueled the Development of Electronic Trading

Watch the video »


The Spread: A Penny Stock For Your Thoughts?

This week on The Spread, the CME announces the launch of new volatility benchmark indexes, Amsterdam’s trading volume surpasses London’s, and more.

Watch the video »



2021 Is a Tipping Point for Female Leaders; Female-led countries like New Zealand, Germany, Finland, Iceland, Denmark, Norway and Taiwan have fared better during Covid-19.
Stefanie K. Johnson – Bloomberg
Will 2021 be the year that leadership becomes feminine? As the year begins, there are more top female leaders than ever before. In the U.S., about a quarter of the legislature is female. Kamala Harris just became the first woman Vice President. Half of the Biden-Harris administration’s cabinet is female — another first. Women leaders are making gains in business as well. For the first time in history, all S&P 500 firms have at least one female board member. The number of women CEOs in the S&P 500 hit an all-time high (though still only 7.8%) at the end of 2020.

*****This makes me happier that we have Kamala Harris as our vice president than before.~JJL


Speculative Traders Add Billions to ‘Meme’ Stocks at New Records
Justina Lee – Bloomberg
Pot stocks, micro caps, trendy technologies all see big moves; Record equity inflows show extreme levels of bullish sentiment
In a quiet week by 2021 standards, the speculative excesses that have defined this bull market hit new records with little fanfare. Wild trades from penny stocks and “meme” cryptocurrencies to cannabis companies surged to all-time highs. U.S. equity indexes rose anew. And skeptics on the everything rally found more reasons to fret over market froth.

*****It is not unusual for pot stocks to hit new highs.~JJL


French workers can now eat lunch at their desks without breaking the law
Saskya Vandoorne – CNN Business
Many French workers can now eat at their desks without breaking the law.
To help curb the spread of Covid-19, the country has suspended a longstanding prohibition on desk lunches, according to a government decree published Sunday.

*****I have been breaking the law for my entire career.~JJL


Bill Gates Has a Master Plan for Battling Climate Change; The co-founder of Microsoft became obsessed with developing clean tech through his philanthropic work. With a new book, ‘How to Avoid a Climate Disaster,’ and a cadre of billionaire partners, he now has an action plan for ending the world’s carbon dependency.
Christina Binkley – WSJ
A day before the inauguration, as Lady Gaga rehearsed “The Star-Spangled Banner” in Washington, D.C., wildfires burned in Sonoma, Santa Cruz and Ventura counties in California, shocking climatologists who had never witnessed the state’s fire season extend into January. NASA had just announced that 2020 tied with 2016 for the warmest year on record. As the Covid-19 pandemic drove city dwellers to search for places that felt surer, safer—Vermont, Kansas, Idaho—the FBI began arresting Americans who had rioted in the U.S. Capitol. Online sales of “prepper” gear (gas masks, food preservation kits) were brisk.

*****I can’t wait for Master Plan XP.~JJL


Friday’s Top Three
Our top story Friday was Introducing D-Limit | Heated Conversation Part 1, from IEX (via YouTube). Second was Crain’s Chicago Business’ Illinois bids for NYSE data hub—but the door may be open to a bigger move. Third was Bloomberg’s City of London’s Brexit Tab Rises With Stock and Swaps Moves.


MarketsWiki Stats
200,315,174 pages viewed; 25,377 pages; 230,278 edits
MarketsWiki Statistics


CryptoMarketsWiki Website»
CryptoMarketsWiki, our archive of the cryptocurrency and blockchain world, is going strong and keeping pace as this area of finance grows and evolves.Recently Updated Pages

Recently updated pages include
Jack Dorsey
Coin Center

CryptoMarketsWiki Stats

1,495 pages; 13,579 edits
CryptoMarketsWiki Statistics

Lead Stories

Are leveraged Gen Z traders the next systemic risk? Magnified bets on a soaraway market by have-a-go investors may be a broader threat to stability
Patrick Jenkins – FT
Back in 2008, the world’s biggest banks were, infamously, leveraged to the hilt. Barely 3 per cent of their assets were funded with equity, down markedly on the level of prior years, as managers gorged on cheap debt finance to maximise profits and bonuses. Spoiler alert: it ended in tears. Excessive leverage has often ended that way — from the panic of 1772, when an international credit squeeze helped trigger the American war of independence, to the global financial crisis, when losses rooted in the US subprime mortgage bubble caused economic turmoil.

‘Red flags’ over market abuse rise at asset managers during lockdowns; Alerts pointing to possible manipulation have swelled as investors remain at home because of coronavirus
Katie Martin and Philip Stafford – FT
Possible market abuse in fund management firms accelerated globally after staff first worked from home last year and have not fully fallen back since, according to data from TradingHub, a monitoring group.

Reddit day traders wanted to beat Wall Street to prove the system is rigged. Instead, they did it by losing.
Tyler Sonnemakern – Business Insider
A group of demonstrators are gathered by the New York Stock Exchange;A group of demonstrators are gathered by the New York Stock Exchange Andadolu Agency/Getty Images; Reddit day traders tried to beat Wall Street at its own game to prove that the system is rigged.
Keith Gill, the day trader and member of Reddit group WallStreetBets who is widely credited with igniting the recent GameStop trading frenzy, claimed in late January that he had turned his $54,000 investment into a $48 million dollar fortune.

GameStop Investors Who Bet Big—and Lost Big; GameStop and the Reddit-fueled frenzy around it have been celebrated as a triumph for small investors. But lots of them are in the red.
Rachel Louise Ensign – WSJ
Salvador Vergara was so enthusiastic about GameStop Corp. GME 2.54% in late January that he took out a $20,000 personal loan and used it to purchase shares. Then the buzzy stock plunged nearly 80%. GameStop’s volatile ride is hitting the portfolios of individual investors like Mr. Vergara who purchased the stock in a social-media-fueled frenzy. These casual traders say GameStop was their “YOLO,” or “you only live once,” trade. They bought around its late January peak, betting it would continue its astronomical climb. While some cashed out before it crashed, others who hung onto their shares are in the red.

Robinhood CEO admits communications shortcomings, ahead of House testimony
John McCrank – Reuters
Robinhood, the trading app popular with young investors, could have better explained why it restricted the buying of heavily shorted stocks caught up in the social media-fueled trading frenzy around GameStop Corp, said the company’s chief executive officer.

Bitcoin’s rise reflects America’s decline; Cryptocurrencies have a place in a new world order where the dollar has less of a starring role
Rana Foroohar – FT
A little over 100 years ago, there was a bubble asset that rose and fell wildly over the course of a decade. People who held it would have lost 100 per cent of their money five different times. They would have, at various points, made huge fortunes, or seen the value of their asset destroyed by hyperinflation.

European Banks Use Pandemic to Clean House; Long resistant to change, Germany’s Commerzbank and others are slashing jobs, closing branches and forcing customers online
Patricia Kowsmann and Margot Patrick – WSJ
European banks are using the pandemic to make changes investors have wanted for years: slash jobs, shut branches and force customers online. Germany’s second-largest lender, Commerzbank AG CRZBY -0.49% , said Thursday that it would cut a third of its domestic staff and almost half of its bricks-and-mortar presence after pressure from U.S. shareholder Cerberus Capital Management. Bank mergers under way in Italy and Spain are expected to close thousands of overlapping branches. Business consulting firm Kearney predicts one-quarter of Europe’s 165,000 bank branches will be gone in three years.

Clear crypto rules urgently needed as major companies embrace asset: SEC official
Chris Prentice and Katanga Johnson – Reuters
A clear cryptocurrency regulatory regime is urgently needed as major companies like Tesla Inc, BNY Mellon Corp and Mastercard Inc embrace the alternative asset class, a top Securities and Exchange Commission (SEC) official said.

Bitcoin’s Epic Run Is Winning More Attention on Wall Street
Lynn Thomasson and Joanna Ossinger – Bloomberg
A Morgan Stanley unit is exploring a possible bet on Bitcoin; The cryptocurrency neared $50,000 in weekend trading
Want the lowdown on what’s moving Asia’s markets in your inbox every morning? Sign up here. Signs of a widening embrace across the financial services industry sent Bitcoin to new heights, with the cryptocurrency closing in on $50,000 for the first time before falling back. A week after Tesla announced its $1.5 billion investment in Bitcoin, the digital asset continues to make inroads into traditional finance, including news that an investment unit of Morgan Stanley is considering whether to bet on Bitcoin. Canada also approved the first North American Bitcoin exchange-traded fund.

A Week Inside the WallStreetBets Forum That Launched the GameStop Frenzy; Five days of chaos on Reddit: ‘This is the most fun I’ve ever had losing money’
Caitlin McCabe – WSJ
In a video posted to Reddit’s WallStreetBets forum, a man hurtles down a long, steep slide, arms flailing, before slamming into the muddy ground. He then sits up, dazed. The title for the video: “A WSB-hyped stock as soon as I buy it.” The meme is a hit, skyrocketing to the top of the subreddit’s page. “Buy high, sell low, right?” a user replied.

The Currency-Market Snoozefest Might Not Last; Foreign-exchange markets have returned to their pre-pandemic placidity even as stock-market volatility remains elevated
Mike Bird – WSJ
It is quiet in foreign-exchange markets. Maybe too quiet. All the action has been in stocks this year, as any bored foreign-exchange trader will tell you. The market is usually a hub for raucous retail trading but has been largely quiescent during the meme-stock phenomenon. The risk of a rise in currency volatility is something worth considering for investors with overseas exposure, as well as for corporate treasurers.

Deutsche Bank Quietly Plans to Offer Crypto Custody, Prime Brokerage; The bank’s game plan was hidden in plain sight in a widely overlooked report by the World Economic Forum.
Ian Allison – Coindesk
Deutsche Bank has joined the growing ranks of large financial institutions exploring cryptocurrency custody, with aspirations to offer high-touch services to hedge funds that invest in the asset class. The Deutsche Bank Digital Asset Custody prototype aims to develop “a fully integrated custody platform for institutional clients and their digital assets providing seamless connectivity to the broader cryptocurrency ecosystem,” according to a little-noticed report by the World Economic Forum, host of the annual gathering of muckety-mucks in Davos, Switzerland.

The World Federation of Exchanges welcomes EU’s principles-based approach to Digital Resilience
World Federation of Exchanges
he World Federation of Exchanges (WFE), the global industry group for exchanges and CCPs, has responded to the EU’s proposals for a Digital Operational Resilience Act (DORA) for Financial Sectors. nThe WFE welcomes the ambitions of the EU Commission in seeking to improve and harmonise operational resilience requirements across the financial ecosystem – especially those purely operating in digital-based environments.


Johnson Faces Calls to Ease Curbs as Vaccines Milestone Hit
Andrew Atkinson – Bloomberg
England sees first doses delivered to four priority groups; Johnson due to speak Feb. 22 on possible lockdown easing
The U.K. recorded 15 million vaccinations against the coronavirus, a milestone that is set to increase pressure on Prime Minister Boris Johnson to begin reopening the economy.

Don’t Let Down Guard on Virus, CDC Head Warns Amid Lethal Strain
Jennifer A Dlouhy and Alyza Sebenius – Bloomberg
U.K. variant of virus more lethal, transmissible, data show; School reopening tied to community spread, Walensky says
A top Biden administration health official warned Americans not to get complacent about rapidly falling coronavirus cases as a potentially more lethal variant spreads in the U.S. The U.S. has seen more than 1,000 cases of the strain first identified in the U.K., with infections across at least 39 states, said Rochelle Walensky, head of the Centers for Disease Control and Prevention.

Covid’s Puzzling Decline in India Sparks a Shopping Spree
Chris Kay and Vrishti Beniwal – Bloomberg
Coronavirus infections have plummeted since a September peak; Some of India’s biggest retailers have reported bumper sales
For the home to the world’s second-largest Covid-19 outbreak, life in India is almost back to normal. Shopping mall parking lots are full again. Stores are buzzing, and there are long lines for hair salons and restaurants.

Are planes as Covid-safe as the airlines say?
Modern air filters are highly effective but studies suggest on board transmission can still happen
Michael Skapinker – FT
The vaccinations have begun, but so have the coronavirus mutations. We may be able to limit Covid-19 but it’s going to be around, as UK government chief scientific adviser Patrick Vallance says, “probably forever”.

EU faces brutal choices over coronavirus corporate rescue money; Member states will need to decide which companies to support and which to allow to fail
Sam Fleming and Javier Espinoza – FT
Early in the coronavirus crisis, it became abundantly clear that EU member states were going to have to pump vast sums of money into keeping their corporate sectors afloat as the pandemic forced economies into deep freeze.

Covid-19 Vaccine Approval Process: Does It Take Too Long? Here are answers to some questions about the FDA review panels
Thomas M. Burton and Peter Loftus – WSJ
The Food and Drug Administration will convene an independent panel of experts Feb. 26 to recommend whether the Johnson & Johnson Covid-19 vaccine should be authorized for use in the U.S. The hearing comes 22 days after J&J submitted its application and supporting test data. That’s on par with the timetable the FDA set for review of the vaccine from Pfizer Inc. and partner BioNTech SE, but nearly a week longer than the one for the vaccine from Moderna Inc. Both were approved in December.

Why So Many Covid-19 Workers’ Comp Claims Are Being Rejected; Employees who allege they contracted coronavirus on the job can face a high bar to prove their cases
Lauren Weber – WSJ
Jose Rivero, an attorney in Chicago, has filed more than 30 workers’ compensation claims for people who said they contracted Covid-19 while on the job. In 10 of his cases, including one involving an employee at a meatpacking plant, the workers died.

Exchanges, OTC and Clearing

Japan’s Nikkei 225 Tops 30,000 for First Time Since 1990
Gearoid Reidy and Min Jeong Lee – Bloomberg
Japan’s Nikkei 225 Stock Average topped 30,000 yen for the first time since August 1990, as it continued its charge back up through levels not seen since the collapse of the bubble economy.

Euronext statement on governance evolution
Euronext today confirms that Piero Novelli has been nominated by the Supervisory Board as an independent member of the Supervisory Board, to become the next Chairman of Euronext N.V. Mr. Novelli will step down from all executive positions before becoming Chairman. The appointment of Mr. Novelli remains subject to the approval of the relevant regulatory authorities and of Euronext shareholders.

Eurex EnLight product scope extension
As of 22 March 2021, 273 Eurex products from various product groups already available for trading in the Eurex order book and on the Eurex T7 Entry Services will also become available for trading on Eurex EnLight.

Eurex Exchange Readiness Newsflash | Introduction of Eurex Daily Futures on KOSPI 200 Futures – prerequisites for trading and simulation
The introduction of Eurex Daily Futures on KOSPI 200 Futures on the Eurex/KRX Link was announced in Eurex circular 013/21. With this Newsflash, we would like to provide you detailed information about prerequisites for trading of the new products and participating in the simulation.

Notification of dividend / distribution

Performance Bond Requirements: Energy, Agriculture – Effective Date: February 16, 2021
CME. Group
As per the normal review of market volatility to ensure adequate collateral coverage, the Chicago Mercantile Exchange Inc., Clearing House Risk Management staff approved the performance bond requirements for the following products listed in the advisory at the link below.

Withdrawal of Application for Increase in Approved Livestock Yard for Live Cattle Regularity
From Registrar’s Office
CME Group
Notice herby is given that The Chicago Mercantile Exchange Inc. (CME) received a request from Ogallala Livestock Auction Market, Inc. to voluntarily withdraw their application for an increase in their livestock yard maximum daily live delivery limit regularity at Ogallala, NE.

Trading to Continue (as Normal) from Tomorrow (Feb. 15)
A magnitude 7.1 earthquake hit Fukushima and Miyagi prefectures on February 13. Despite this, trading on all markets of Tokyo Stock Exchange, Osaka Exchange and Tokyo Commodity Exchange is scheduled to continue as normal from tomorrow, February 15, and beyond.

ToSTNeT Trading Information – Super-Block Execution of Single-Issue Trading
This page contains information on trading whose trading value is JPY 5 billion or higher in single-issue trading (ToSTNeT-1) (excluding trading for which both sale and purchase are entrusted by customers).
The following table lists will be posted for 2 weeks.

Enhancing Corporate Governance
Corporate Governance Reports
Tokyo Stock Exchange (TSE) requires every listed company to prepare a report on corporate governance (“Corporate Governance Report”), which provides investors with information on corporate governance in a comparable format.


Automating client outreach and reporting within investment management
The Trade
Whether it be standardised client statements, marketing factsheets or other investor communications, investment management firms face a myriad of challenges when trying to provide accurate reporting to clients, consultants and other third parties. Investment managers seeking to automate client outreach and differentiate themselves from their competitors through better reporting face significant obstacles that prevent the timely and accurate publishing of information.

GuardianCard launches virtual card to protect the vulnerable; UK-based fintech launches solution after founders saw the need for a secure solution for vulnerable people
Joanna England – Fintech Magazine
GuardianCard – a fintech headquartered in Hull, UK, – has launched a virtual card created to safeguard the finances of vulnerable customers. The card, which provides a solution for vulnerable people open to financial abuse, was created following personal experiences of the fintech’s founders. Aiden McAllister and Nick Thompson both drew on their knowledge of caring for the finances of elderly relatives in conceptualising the card, which acts as a safety net for their daily monetary management.

Multiplayer fintech, and the muddled world of startup data
Natasha Mascarenhas – Tech Crunch
There’s always a fintech angle, even on Valentine’s Day. This week, I covered Zeta, a new startup working on joint finances for modern couples. It aims to take away the money chores of a relationship, from splitting the bill at dinner to requesting rent through a payment app every month. Aditi Shekar, the co-founder, gave me some notes about why the ongoing popularity of Venmo is validation for the company, instead of competition.

Asian authorities clamp down on digital lenders
Benjamin Parkin in Mumbai and Mercedes Ruehl – FT
Authorities in Asia are clamping down on digital lenders, stepping up to rein in a sector that has charged ahead with little oversight in credit-hungry large economies such as India and Indonesia. Apps and websites offering easy loans have proliferated in India and south-east Asia, where hundreds of millions of people are unable to access the formal credit system. In India, 190m people did not have bank accounts as of 2017, according to the World Bank, along with 95m in Indonesia. But officials have struggled to control the fast-growing sector. While many apps are licensed, thousands operate illegally. They are notorious for preying on consumers with limited financial literacy by charging exorbitant interest rates and harvesting data from phones, used for example to embarrass debtors by calling family members.

Project Investigates How Fintech Can Deepen UK-India Trade Relations
Claire Woffenden – The Fintech Times
A new project will investigate the untapped potential of fintech in helping deepen trade relations between the UK and India. The three-year study brings together leading research institutions, government organisations and fintech firms from both countries. Led by University of Essex, the knowledge exchange study will assess the role of fintech in expanding bilateral trade between the UK and India.


Bitcoin Nears $50,000 as It Hits a Record in Weekend Action
Joanna Ossinger – Bloomberg
Bitcoin reached a new record on Sunday, rising above $49,000 for the first time. The world’s largest cryptocurrency reached about $49,694 earlier in the day, before paring gains to around $48,904 as of 10:10 a.m. in New York. It’s now up almost 70% so far this year. Rival cryptocurrency Ether hit a record on Saturday and is up about 150% year-to-date.

Tesla Buys Bitcoin. We Should Have Seen It Coming; Elon Musk tweets, Tesla buys Bitcoin — this is what inevitability looks like.
Brooke Sample – Bloomberg
Tesla bought Bitcoin. It feels as if that sentence should properly begin with “Imagine if …” and a wry chuckle. But no. Imagine no longer. Tesla Inc.’s annual report disclosed the electric-car maker updated its investment policy last month and then bought $1.5 billion of the crypto. That news added roughly $5,000, or 14%, to said crypto on Monday morning, sending it to an all-time high. Tesla’s own stock rose about 3%, adding roughly $11 billion in market cap, because — well, probably because of this. I don’t know.

Coinbase Ventures, Paradigm Invest $12M in Synthetix DeFi Platform
Daniel Kuhn – Coindesk
Decentralized trading platform Synthetix has raised $12 million from venture capital firms Coinbase Ventures, Paradigm and IOSG. The raise looks to be a rare occurrence of VCs investing through the purchase of a platform’s native token directly from its treasury rather than wiring funds to its founders. Synthetix is run by a DAO, or a decentralized automatic organization, a way for a project to govern itself without a traditional corporate structure. Token holders are typically encouraged to vote on the direction the DAO will take.

Elon Musk Says He’ll Support Sales by Top Dogecoin Holders
Yueqi Yang – Bloomberg
Musk took issue with concentration of coins among top holders; Dogecoin falls 14% and now ranks 13th in market capitalization
Elon Musk, who’s been a vocal supporter of Dogecoin, said there’s too much concentration of the coins among its major holders and he will support them if they sell their coins. “If major Dogecoin holders sell most of their coins, it will get my full support,” the Tesla Inc. co-founder and chief executive tweeted Sunday evening. “Too much concentration is the only real issue.”

Bitcoin’s Latest Record Run Is Less Volatile Than the 2017 Boom
Joanna Ossinger – Bloomberg
The token’s realized volatility is lower than three years ago; Crypto believers see the beginning of a mainstream asset class
Bitcoin’s record-breaking rally has come with some extreme moves, but by one measure, it’s not as chaotic as 2017. For instance, on a rolling 60-day basis, the swings in Bitcoin are generally smaller now than when Bitcoin was peaking in 2017. Part of the reason is that prices have steadily climbed for the last year, and the January selloff was orderly.

ECB official floats idea for limits on digital euro holdings to discourage hoarding
Michael McSweeney – The Block
Officials at the European Central Bank have said in recent weeks that they continue to assess all the factors behind a potential launch of a digitized version of the euro. Among those areas of consideration: the potential effect a digital euro might have on the integrity of the European banking system — and how a digital euro may alter consumer behaviors to the detriment of the health of consumer-facing banks. This consideration has proven to be a consistent theme among public statements from central banks on the topic of central bank digital currencies, or CBDCs.

ConsenSys Grants Help Iranian Women Learn Solidity; The Ethereum incubator’s instructional program offers scholarships to help developers get started with coding in Solidity.
Anna Baydakova – Coindesk
Seven female coders from Iran got scholarships and graduated from a bootcamp of ConsenSys Academy, Ethereum startup incubator’s educational branch. The scholarships, a part of ConsenSys’ global program to help developers start coding on the Ethereum blockchain, might provide additional opportunities for people in the country largely cut off from the international tech community. Women account for 70% of university graduates in science, technology, engineering and mathematics (STEM) in Iran – more than in many developed countries around the world. But tech professionals in Iran are struggling with more roadblocks building their career than their peers in Europe and the U.S.

Industry Group Says Hong Kong’s Proposed Crypto Rules Could Drive Traders Underground; Hong Kong’s plan to restrict cryptocurrency investment to professionals means retail investors could move to unlicensed venues, said Global Digital Finance.
Tanzeel Akhtar – Coindesk
A cryptocurrency advocacy group has warned that Hong Kong’s proposed rules on digital asset investment could drive traders toward unregulated platforms. In November, Hong Kong’s Financial Services and the Treasury Bureau (FSTB) said its new framework would put all digital asset exchanges under the oversight of the Securities and Futures Commission and limit trading in cryptocurrencies to professional investors only. If implemented, the new regime would encourage retail investors to seek out unlicensed and peer-to-peer platforms, according to Global Digital Finance (GDF), an industry body representing cryptocurrency firms including OKCoin, BitMEX, and Coinbase.

A $150 billion investment unit of Morgan Stanley is exploring bitcoin: report
Frank Chaparro – The Block
Counterpoint Global—a unit of Morgan Stanley Investment Management—is exploring whether it will make a bet on bitcoin, according to a Bloomberg News report. Citing sources, the report said that the unit, which manages $150 billion, would need approvals from the wider firm and regulators to make such an investment. Still, it represents Wall Street’s broader push into the cryptocurrency, which is increasingly being viewed as an inflation hedge asset. A spokeswoman for Morgan Stanley declined to comment on Bloomberg’s report.

Elon Musk wants major Dogecoin holders to sell
Noah Manskar – NY Post
Elon Musk wants Dogecoin moguls to share their wealth. The billionaire Tesla CEO urged Dogecoin’s largest owners to sell most of their holdings as he expressed concern about a small number of people hoarding too much of the cult cryptocurrency.


Interior Secretary Nominee on Collision Course With Oil Industry; Deb Haaland, poised to be first Native American cabinet secretary, has joined pipeline protests and opposed fracking
Timothy Puko – WSJ
Deb Haaland is poised to make history on two fronts, as both the first Native American cabinet secretary and as the architect of what could be a landmark change in the U.S. government’s relationship with oil. First, she will need to be confirmed by the Senate as President Biden’s nominee for interior secretary—and Republicans are girding for a fight.


Bank of England plans break from EU with tougher bank capital rule; Five biggest UK lenders will suffer EUR3.6bn hit from proposed change to software treatment
Stephen Morris and Nicholas Megaw and Martin Arnold – FT
The Bank of England is preparing its first significant break from EU regulations with a proposal that would make bank capital rules tougher in the UK than on the continent. The European Banking Authority decided late last year that lenders should be able to count investment in software towards their core capital levels. For example, if a bank spends EUR100m on a new trading system, much of that can now be counted as loss-absorbent capital.

FINRA Amends Arbitration Codes to Increase Arbitrator Chairperson Honoraria and Certain Arbitration Fees
Effective Date: April 19, 2021
FINRA has amended its Codes of Arbitration Procedure for Customer and Industry Disputes (Codes) to: (1) increase the additional hearing-day honorarium chairs receive for each hearing on the merits from $125 to $250 and (2) create a new $125 chair honorarium for each prehearing conference in which the chair participates.1 To fund the increase in payments to chairs, the amendments make minimal increases to certain arbitration fees.

If you got PPP loan, here’s what you need to know to file taxes
Kelsey Sheehy – Associated Press
The approaching tax season is raising fresh questions for business owners who received a loan through the Paycheck Protection Program. Can you deduct expenses paid with your loan funds? Do you need to do anything differently this year? And if your loan is forgiven, is it considered taxable income?

IOSCO Reviews The Impact Of COVID-19 Government Support Measures On Credit Ratings
The Board of the International Organization of Securities Commissions (IOSCO) today published a report analyzing the observed impact of COVID-19-related government support measures (GSM) on the credit ratings of the three largest credit rating agencies – Fitch, Moody´s and Standard & Poor´s (collectively the “CRAs”).

FCA launches another crackdown on cryptocurrency firms; The world’s Forex industry news source; Quite rightly, Britain’s regulator, which outlawed cryptocurrency trading last year, is going after crypto firms with 52 new investigations being launched.
Andrew Saks – Finance Feeds
The Financial Conduct Authority (FCA) has launched a crackdown on cryptocurrency firms amid an explosion of interest from investors.

FCA’s 52 crypto investigations ‘tip of the iceberg’ – law firm; Regulator received 343 calls in October
Sophie King – Investmentweek
The Financial Conduct Authority (FCA) opened 52 investigations into cryptocurrency businesses in the last year, according to City-law firm RPC. According to a Freedom of Information request submitted by the law firm, the FCA had been receiving an increasing number of calls to its consumer helpline about cryptocurrencies – receiving a total of 343 calls in October, almost twice the 176 calls it received six months earlier in April.

Cryptocurrency exchanges warn Hong Kong’s new rules will drive retail investors onto unregulated platforms
Hong Kong’s proposed rules on licensing virtual money platforms could encourage financial crime, say OKCoin, BitMEX and Coinbase; Proposal also widens due diligence on politically exposed persons to include officials from mainland China
Georgina Lee – South China Morning Post
Cryptocurrency exchanges are on tenterhooks as they await the outcome of a proposal by Hong Kong’s government to ban retail investors from trading in the city, at a time when digital assets are winning acceptance as mainstream forms of payment and market leader bitcoin rises to a record level.

Investing and Trading

Blackouts in Texas as Big Freeze Upends Energy Markets
Brian K Sullivan, Naureen S Malik, and Javier Blas – Bloomberg
As much as 10.5GW of power demand cut to ease strain on grid; Storm warnings, advisories stretch from New Mexico to Maine
Texas began rolling power blackouts for millions of households for the first time in a decade as an unprecedented Arctic freeze wrought chaos in U.S. energy markets. The operator of the state’s power grid ordered network operators to reduce strain on the system as people crank up heaters to try and keep warm. About 10.5 gigawatts of demand was reduced, equivalent to 2 million homes. Supplies are scarce as the extreme weather conditions have caused 30 gigawatts of generation to halt.

Ex-UniCredit CEO Plans SPAC Amid ‘Transformation’ in Finance
Ambereen Choudhury, Jan-Henrik Foerster, and Sonia Sirletti – Blomberg
Mustier and De Giorgi will be operating partners of company; Mustier sees ‘massive transformation’ in Europe finance
Ex-UniCredit SpA Chief Executive Officer Jean Pierre Mustier plans to raise funds for a special purpose acquisition company, backed by billionaire Bernard Arnault and French asset manager Tikehau Capital. Mustier is working on the SPAC with former Bank of America Corp. executive Diego de Giorgi, according to a statement on Monday from Tikehau. Bloomberg first reported the news on Saturday. The company will invest in financial services, including wealth management and fintechs, it said.

Global Oil Markets Are Now Balanced, Russia’s Novak Says
Yuliya Fedorinova and Olga Tanas – Bloomberg
Deputy premier sees crude prices at $45-$60 a barrel this year; Those levels ‘correspond’ to current market situation, he says
Global oil markets have rebalanced following last year’s historic collapse in demand, according to Russia’s deputy prime minister. “The last few months we have seen low volatility, which means the market is balanced, and the prices we see today certainly correspond to the situation in the market,” Alexander Novak said on state television channel Rossiya 1 on Sunday. Crude will probably average $45 to $60 a barrel this year, according to Novak, who was Russian energy minister before President Vladimir Putin promoted him in November.

JPMorgan’s Barometer Says Markets Most Complacent in Two Decades
Cecile Gutscher – Bloomberg
Global investors are the least fearful they’ve been in two decades, and perhaps the most greedy. A JPMorgan Chase & Co. gauge of cross-asset complacency based on valuations, positioning and price momentum is nearing the highest level since the time the dot-com bubble burst and some companies found out burning cash faster than they made it wasn’t quite effective as a long-term survival strategy.

Cold Weather Cuts Permian Oil Output by 1 Million Barrels a Day
Javier Blas and Sheela Tobben – Bloomberg
Texas isn’t well prepared for unusual Arctic weather; Supply loss expected to be short-lived as weather improves
Permian oil production has plunged by as much as one million barrels a day as the coldest weather in 30 years brings havoc to a region that seldom faces frigid Arctic blasts. Oil traders and company executives, speaking on condition of anonymity, lifted their estimate of supply losses in the region as the temperature in Midland, the capital of the Permian basin, dropped to -1 Fahrenheit (-18 Celsius), the lowest since 1989, according to the U.S. National Weather Service. Traders had previously estimated losses at several hundred thousands barrels per day.

Tin-buying frenzy sends prices to seven-year high; Stocks of the metal used in global electronics sector fall to record lows
Neil Hume – FT
Tin prices have soared to a seven-year high after a manufacturing-driven buying frenzy that has drained physical stocks of the commodity. The dark grey metal, usually associated with cans, has become a key material for the global electronics industry. It is used to make solder — the substance that binds together circuit boards and wiring. The shift to working from home has boosted demand for computers and other electronic devices, while China has also been stockpiling the metal to meet its goal of self-sufficiency in semiconductors, according to traders.

The consensus is wrong on European stocks; Given current low expectations, there are opportunities for investors
Karen Ward – FT
European stocks have been strongly out of favour in recent years. And, in a recent call with clients, it appears this lack of enthusiasm is still present. When I asked what clients thought would be the top-performing regional market this year, only 3 per cent of the 700 respondents felt it would be continental Europe. More than three times the number thought it would be the US, despite the fact that at this point the S&P 500 index sat at a valuation equivalent to 23 times forward earnings versus 18 times for the MSCI Europe ex-UK.

Borrowing Binge Reaches Riskiest Companies; Demand for corporate debt has offered lifelines to struggling firms that can borrow at interest rates once reserved for the safest type of bonds
Sam Goldfarb and Matt Wirz – WSJ
Investors’ near-insatiable demand for even the riskiest corporate debt is fueling a Wall Street lending boom, offering lifelines for struggling companies even as the coronavirus pandemic still drags on the economy.

If Tesla Bubble Bursts, Catastrophe Won’t Follow; Not all bubbles are equal. Britain’s bicycle-stock bubble of the 1890s holds lessons for today’s electric-vehicle mania.
James Mackintosh – WSJ
Recent experience and financial lore have created the impression that the bursting of market bubbles brings economic destruction. But it isn’t always so. The excess in today’s story stocks—electric cars, clean power and cannabis in particular—surely poses a threat to the wealth of their shareholders. Even if there is a wider bubble, it might not be a catastrophe for the country.

Environmental, Social and Corporate Governance

Transportation Climate Initiative May Have Significant Impacts on Fossil Fuels Commodity Contracts in the Northeast USA
Vinson & Elkins
Beginning in 2023, sellers and owners of fossil fuels for use in transportation markets in three states and the District of Columbia may need to purchase allowances for sales in those jurisdictions based on a recent agreement to implement a new cap-and-trade regime for emissions of carbon dioxide (CO2). Massachusetts, Rhode Island, Connecticut and Washington D.C. recently signed on to implement a cap-and-trade program that will set declining annual limits on CO2 emissions from the transportation sector. The proposed program is a significant departure from California’s Low Carbon Fuel Standard and the EPA’s Renewable Fuel Standard, which seek to reduce greenhouse gas emissions from the transportation sector by requiring transportation fuels to contain a minimum volume of lower carbon fuels. Instead, the Transportation and Climate Initiative Program more closely resembles the Regional Greenhouse Gas Initiative’s market-based emission reduction program focused on decreasing CO2 emissions from the power sector. The objective of the program is to reduce direct carbon emissions from transportation by adding additional costs to buy automotive fuels in the participating jurisdictions.

Bill Gates Shows How Hard It Can Be to Divest From Fossil Fuel; The world’s third-richest person says he’s decided to dump all his oil and gas assets. Delivering on that promise will take time
Akshat Rathi – Bloomberg
It was a 90-second video addressed directly to Bill Gates in 2015 that finally convinced the billionaire to take his climate activism one step further by divesting from fossil fuels. But the actual process of disentangling the world’s third-largest fortune from oil and gas is taking years—and hasn’t prevented Gates from investing in other carbon-heavy businesses.

Top Economists Warn U.S. Against Underestimating Climate Damage; A new paper argues that returning to estimates for the cost of carbon dioxide used in the Obama era would leave the U.S. far behind its Paris Agreement goals.
Eric Roston and Will Wade – Bloomberg
Nobel laureate Joseph Stiglitz and Lord Nicholas Stern published a paper on Monday excoriating the U.S. government—and many of their own peers in economics—for methods used to estimate the cost of climate change. The warning from two influential economists that policymakers are understating the looming damage from warming temperatures comes just days before President Joe Biden’s administration is expected to release an interim report on what’s known as the “social cost of carbon.”

Central Banks Criticized for Risky Gamble on Climate Fight
Jana Randow – Bloomberg
NGFS climate scenarios could cause more harm than good; Activists say temperature paths too high, transition too slow
Climate activists are warning that central banks are taking a “risky gamble” with their strategies for addressing the financial risks from global warming. The scenarios being used to guide the transition to a carbon-neutral economy are biased toward temperatures that are too high and fossil-fuel phase-outs that are too slow, according to a study by Oil Change International and Reclaim Finance.

H&M Plans Foray Into Sustainability-Linked Bond Market
Maciej Onoszko and Leo Laikola – Bloomberg
Swedish clothier plans euro bonds tied to sustainability goals; Company said in late January it was operating in ‘crisis mode’
Hennes & Mauritz AB plans to join a growing pool of issuers of bonds with coupons tied to targets aimed at protecting the environment when it makes its bond market debut The Swedish clothing retailer hired banks to arrange a 500-million-euro ($607.1 million) offering of eight-and-a-half-year bonds, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. The bond will be structured in a way that will encourage H&M to increase use of recycled materials and cut greenhouse gas emissions, the person said.

‘Green steel’: the race to clean up one of the world’s dirtiest industries; After the intense pressure on oil and gas, heavy industry’s role in the climate crisis is now under growing scrutiny
Michael Pooler – FT
Skyscrapers and bridges, cars and cruise ships, guns and washing machines. All have one thing in common: steel. As a key input for engineering and construction, it is the world’s most commonly used metal, providing the foundations of the modern industrial economy. Since a method for inexpensively mass producing the iron alloy was developed by English inventor Henry Bessemer in the 1850s, a sprawling industry has grown which today turns over $2.5tn and employs millions of people.

Norway’s $1.3tn oil fund calls for greater gender equality; World’s largest sovereign wealth fund had held back on making views public
Richard Milne – FT
Norway’s $1.3tn oil fund has finally revealed its position on gender equality as the world’s largest sovereign wealth investor said that all companies with fewer than 30 per cent female directors should consider having a target to boost the number.


Brevan Howard Has a Plan to Outlast Its Billionaire Founder
Nishant Kumar – Bloomberg
New CEO Aron Landy tasked to transform the macro trading firm; Alan Howard has given up management fully to focus on trading
Alan Howard is synonymous with the hedge fund he founded nearly two decades ago. His chief executive officer is on a mission to change that. Aron Landy, who replaced the billionaire at the helm of Brevan Howard just over a year ago, is shifting the famed macro investing firm away from being a founder-led hedge fund toward a broader financial-services operation, readying it to survive beyond the man whose name is above the door.

Leadership change at Amundi and BlackRock sparks fresh rivalry; Competition between France and US heats up across Europe’s asset management industry
Chris Flood – FT
The simultaneous arrival of two new chiefs at Amundi and BlackRock in Europe promises more fireworks in the fierce battle already under way between the region’s two largest asset managers.

US ETF investors mainly motivated by tax loophole, study shows; $1tn has been pulled from US mutual funds in past decade with ETFs attracting a similar amount of inflows
Steve Johnson – FT
A shift in US investor flows away from mutual funds towards exchange traded funds is being driven primarily by a tax loophole, rather than any inherent advantage of the ETF structure, a team of academics has concluded.

UBS appoints sole president of investment bank as Novelli departs; Robert Karofsky will become sole president at the investment bank business at UBS following his co-president Piero Novelli’s decision to step down on 31 March.
Annabel Smith – The Trade
UBS has appointed Robert Karofsky to take sole leadership of its investment bank business after confirming the departure of Piero Novelli on 31 March. Karofsky will assume the role of president when Novelli steps down to pursue new opportunities, including non-executive chairman positions and roles in academia teaching finance and business.

Commerzbank exits equity trading business under major restructure plans; Under Strategy 2024, Commerzbank plans to cut 10,000 full time employees in a bid to save EUR1.4 billion in the next three years.
Hayley McDowell – The Trade
Commerzbank has confirmed plans to shut down its equity sales trading business as part of radical restructure plans that will see the loss of 10,000 full time employees by 2024. Speaking on the bank’s Capital Markets Day, Commerzbank CEO Manfred Knof outlined plans to wind down its equity business and streamline its product portfolio to reduce ‘costly complexity’.


Crown CEO Ken Barton Quits After Scathing Casino Report
Angus Whitley – Bloomberg
Chair Helen Coonan to lead Crown as executive chairman; Barton clung onto his job for almost a week after the report
For a fresh perspective on the stories that matter for Australian business and politics, sign up for our weekly newsletter. Crown Resorts Ltd. Chief Executive Officer Ken Barton stepped down, bowing to days of pressure after a scathing regulatory report found the Australian casino operator facilitated money laundering and wasn’t fit to hold a license in Sydney.

Japan Assesses Damage After Earthquake Struck Near Fukushima
Aaron Clark – Bloomberg
No deaths reported but about 150 people injured by tremor; Six thermal power plants remain offline with no restart plan
Japan began assessing damage and restoring power after a magnitude-7.3 earthquake struck off Fukushima late Saturday, leaving about 150 people injured and temporarily cutting power to almost a million households. No deaths were reported, according to public broadcaster NHK, and Prime Minister Yoshihide Suga said at a press conference on Sunday that no incidents were reported from reactors. Six coal- and gas-fired power units, with a combined capacity of about 3.6 gigawatts, are offline due to the quake without any timeline for restart, according to the Japan Electric Power Exchange.

Uniper Plans Small Reactors as Swedish Power Demand Set to Jump
Jesper Starn – Bloomberg
German utility seeks funding for non-nuclear prototype reactor; Sweden needs new power capacity to meet electrification demand
Uniper SE is making plans to build small-scale nuclear reactors in Sweden as demand for electricity is poised to climb in the next decade. Four older reactors have shut permanently in the past few years, leading to soaring costs in the south during cold winter days and even triggering the start of an almost 50-year-old oil plant. This caused a fierce political debate about the need for more local generation as most new capacity is wind turbines in the north.

Mexico’s investment drought holds back recovery from pandemic; Electricity sector rule change is latest in series of investor-unfriendly decisions
Jude Webber – FT
When Mexican president Andrés Manuel López Obrador swept to a landslide victory in July 2018, his government pledged to push public and private investment to 25 per cent of GDP in a bid to jolt the country’s economy out of a longstanding rut.

Private equity firms eye UK stock market for cheaper deals; Buyout groups make flurry of approaches to London-listed companies in bet on recovery from pandemic
Kaye Wiggins – FT
Private equity groups are stepping up their pursuit of British companies, capitalising on a UK stock market that has fallen even though resurgent US equities have set record highs. Pub chain Marston’s, private jet services group Signature Aviation and power supplier Aggreko are among the London-listed companies targeted by buyout firms this year.


Brexit trade disruption fuels boom at French and Irish ports; Customs paperwork diverts trucks from UK ‘land bridge’ on to EU-Ireland sea routes
Victor Mallet in Cherbourg and Arthur Beesley – FT
Before Brexit, lorry driver Patrick Kirwan would have typically taken his load of frozen meat from France to Northern Ireland on the quick ferry across the English Channel, followed by a drive across Britain and then an Irish Sea sailing — but on a cold winter night in February he was preparing to take the 17-hour ferry trip direct to Ireland from the Normandy port of Cherbourg.

Brexit woes: small UK distillers struggle to ship gin and whisky to EU; Confusion over paperwork makes it very difficult to ship single pallets of spirits to the bloc
Peter Foster in Brighton and Mure Dickie in Edinburgh YESTERDAY
Many small UK gin and whisky distillers and suppliers are struggling to ship their products to EU customers seven weeks after the introduction of post-Brexit trading rules, the industry has warned. Multiple distilleries told the Financial Times that confusion over paperwork for alcohol shipments was making it next to impossible to ship single pallets of spirits to the EU.

Covid has damaged our small businesses. Now Brexit might finish them off; Multinationals can just about cope with the new UK-EU trading rules, but independent businesses are mired in problems
John Harris – The Guardian
If you had to design a scenario guaranteed to fatten up big business while squashing the rest of the economy, it would probably resemble what Britain is living through. Thousands of independent businesses are shuttered up. Amazon and the big supermarkets, boosted by the suspension of anything other than “essential” retail but gleefully selling a huge range of stuff, have carved up consumer spending between them. And the economic impact of Covid-19 is now fusing with an issue that will endure even as lockdown restrictions are eventually eased: the dire effects of Brexit on smaller companies staring into the future with a mixture of fear and bafflement.

Brexit trade disruption fuels boom at French and Irish ports; Customs paperwork diverts trucks from UK ‘land bridge’ on to EU-Ireland sea routes
Victor Mallet and Arthur Beesley – FT
Before Brexit, lorry driver Patrick Kirwan would have typically taken his load of frozen meat from France to Northern Ireland on the quick ferry across the English Channel, followed by a drive across Britain and then an Irish Sea sailing — but on a cold winter night in February he was preparing to take the 17-hour ferry trip direct to Ireland from the Normandy port of Cherbourg. “I’d say it’s because of the paperwork,” he explained from the cab of his O’Donovan truck at the docks. Northern Ireland, which is part of the UK, remains in the EU’s trade area under the terms of the Brexit deal agreed in December.

Raab shrugs off Brexit troubles, urging people to take ’10-year view’; Foreign secretary talks up global growth opportunities and says Brussels ‘imposing obstacles’ to trade
Peter Walker – The Guardian
Potential losses in UK trade with the EU because of Brexit will be more than made up by more opportunities in developing markets, Dominic Raab has claimed, saying people should take a “10-year view” of the current troubles faced by companies. Questioned about warnings from a number of firms that bureaucracy and duties means they will go out of business, or have to relocate operations inside the EU, the foreign secretary also appeared to blame Brussels, saying it was “imposing” obstacles to trade.


‘Authentic’ leaders who lack skill are doomed to fail; The late Gareth Jones’s ideas on how to lead are needed more than ever as companies plot a path out of the crisis
Andrew Hill – FT
I have a question for Bill Michael, former chairman of KPMG UK: why would anyone want to be led by you? That is what Gareth Jones and Rob Goffee used to ask groups of executives. “Without fail, the response is a sudden, stunned hush. All you can hear are knees knocking,” they wrote in Harvard Business Review in 2000, in the article that spawned their bestseller Why Should Anyone Be Led By You?

John Lothian Newsletter

We visit more than 100 websites daily for financial news (Would YOU do that?)

“John Lothian and Company… our industry intelligence.”

Rick Lane

CEO, Trading Technologies

Past JLN Newsletters

Market Narratives Have Pushed Aside Fundamentals

Market Narratives Have Pushed Aside Fundamentals

First Read $46,041/$300,000 (15.3%) ++++ Hits & Takes John Lothian & JLN Staff We have a new and improved version of The Spread today. We have overhauled our approach to this video series and have the whole JLN team contributing to it. Suzanne Cosgrove has...

Pin It on Pinterest

Share This Story