How Meme Stocks Impact Options Trading

Dec 17, 2021

First Read

Cannabis Shares Underperform Going Into Year-end Amid U.S. Regulatory Logjam
By Suzanne Cosgrove – John Lothian News

Although adult-use sales of cannabis remain robust in U.S. states where it is legal, Nasdaq IR Intelligence analyst Saleem Daya sees continued stock underperformance across the cannabis space going into year-end, building on activity in the second and third quarters of 2021.

In an interview with John Lothian News, Daya notes the benchmark Solactive North American Marijuana Index is about 13% lower this quarter and is down close to 20% year-to-date, a move he attributes to disappointment that the U.S. federal reform that many were hoping for in early 2021 has not taken place and impatience with a regulatory process that remains mired in disagreement over its scope and depth.

To listen to the podcast, click HERE.


Hits & Takes
John Lothian & JLN Staff

Today is Thomas J. Cashman‘s 83rd birthday, the man who helped me get into the futures industry. Tom is a 50+ year member of the Chicago Board of Trade who toiled in the soybean pit as a trader and broker from the 1960s until the pit was closed in 2015. It would mean a lot to me if you might send an email to Tom in celebration of his birthday. You can do so at this email address:

Tom is a former neighbor of mine in Wisconsin who gave me my start in the futures industry by hiring me to be his driver when I was 17. I drove Tom and some other traders and others into Chicago and back out to Southern Wisconsin every day during the summers of my late high school and college years. He backed me when I was a trader on the MidAmerica Commodity Exchange.

But most importantly, he set a standard for class, integrity, honesty, fairness and humility that I have done my best to live up to. In my book, Tom is a member of the Futures Hall of Fame. He should be in the FIA Futures Hall of Fame, in fact.

When Tom ran for election to the CBOT board of directors back in the 1980s, he earned the votes of some 1,100 of the 1,402 members. The next member elected received just 400 or so votes. Tom was that respected. When the FBI investigation in the late 1980s of the futures markets prompted the Chicago Board of Trade to establish a blue ribbon Ethics and Integrity Committee, Tom was chosen as its chair. From my perspective, he carried on and epitomized the “my word is my bond” ethos of the CBOT and set the moral and ethical standard that undergirded the exchange.

He most recently was the chairman of the 100 Club of Chicago, which provides moral and financial support to the families of fallen first responders in Chicago. Tom’s father was a fireman and his uncles were policemen. He is one of the most generous people I know and taught me much about giving and happiness. The lesson that the happiest people are those that give is one that I learned first hand from Tom’s professional, community and personal work.

Tom is part of a prominent CBOT family that began their CBOT membership when his uncle George was given money from his parents’ home being sold to make way for the Eisenhower Expressway in the 1950s. George brought his brothers to the exchange and they brought Tom in as a member in the early 1960s. His uncle Gene Cashman was the most successful CBOT trader of his era, at least according to a Chicago Tribune Sunday Magazine article from the early 1980s.

It was Tom’s son Thomas F. Cashman who gave me the idea for the Open Outcry Traders HIstory Project. TFC was also a member of the CBOT, and traded in the beans, but is also a lawyer and member of the John J. Lothian & Company, Inc. Advisory Committee. I used to coach TFC’s little league team in Wisconsin and today he is one of my longest-standing and best friends.

For many years when I would run into Tom in the CBOT Building he would share the names of various former CBOT members who had passed away and he would attend two or three funerals or wakes a week. One of the punishments for living a long life is that death claims so many friends along the way. So it would be great today if you paid your respects to the man who gave me my start, who taught me much about treating all people well, about being a leader and to never stop giving by sending him an email wishing him a happy birthday.

The CME Group reported on LinkedIn that “for the first time ever, open interest in CME FX products has exceeded 3 million contracts (~$293.7 billion) as macro factors, including UMR and SA-CCR, have combined with the fundamental benefits of cleared, listed derivatives to accelerate client adoption.”

PEAK6 is looking for women engineering students for internships for this summer. More details are HERE.

Mexican Stock Exchange derivatives exchange subsidiary MexDer – Mexican Derivatives Market – recently celebrated its 23rd anniversary. MexDer began operations on December 15, 1998.

Allston Trading is being acquired by DV Group, it was announced yesterday. DV Group signed an agreement to acquire Allston Holdings LLC, parent to Allston Trading and Allston Capital. The deal is expected to close by year end.

Matt Leising is offering 1000 copies of a special edition of his book, “Out of the Ether,” as an NFT that can be registered on the blockchain. More details HERE.

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


In a new “thought leadership” essay from Qontigo, titled “The Pandemic Profiteers,” analyst Melissa Brown notes that markets “continued to decouple from one another in the fourth quarter, as COVID and its ‘beneficiaries’ continued to drive the prices of some stocks higher, while economic and policy issues, such as inflation and central bank activity, loomed large for others.” More analysis here. ~SC


Viewpoint – Our heads in the clouds; 2021 was the year that Big Tech and Big Finance converged
Walt Lukken, President and CEO
As we look back on a year most of us would like to forget, I am struck by the enormous change that seemed to happen under our noses in our capital and risk markets—mostly driven by disruptive technology and the convergence of big tech and Wall Street. We have been talking about these things for years; our conferences have been filled with discussions of clouds, blockchain, and big data for some time. But 2021 seemed to be the year that these issues ripened in a big way.

***** Walt Lukken is confusing the steam coming out of his dryer in his basement laundry room office for clouds? ~JJL


FT Financial Literacy and Inclusion Campaign: The US must confront financial illiteracy head-on; We freely discuss which vaccine we received. But conversations about money are somehow taboo
Mellody Hobson – FT
I have worked in the investment field for 30 years, and there’s still one mystery that eludes me: why is it so hard for people to talk about money? By talking about money, I don’t mean showing off. I mean discussing financial matters to inform, not impress. We’ll freely discuss which vaccine we received in an elevator with strangers. But a conversation about money rarely happens, even in a private setting with close friends.

***** Mellody Hobson is co-CEO and president of Ariel Investments, chair of the Starbucks Corp. and a director of JPMorgan Chase.~JJL


Offices Shut and Holiday Parties Dim as a Familiar Feeling Sinks In; Employers mandate boosters, postpone return dates and brace for an Omicron surge.
Emma Goldberg and Lananh Nguyen – NY Times
It was three words that workers don’t hear every day from their bosses: “I was wrong.” Morgan Stanley’s chief executive, James Gorman, asked this week about employees returning to the office, said his projection about the pandemic subsiding was off. “I thought we would have been out of it past Labor Day,” Mr. Gorman said on CNBC. “And we’re not.”

***** Yes, that sinking feeling is hitting again. We are in the soup of COVID-19 again.~JJL


U.S. Senate Unanimously Confirms Behnam as Chairman
The U.S. Senate last night voted unanimously to confirm Rostin Behnam as Chairman of the U.S. Commodity Futures Trading Commission. Behnam has served as Acting Chairman since January and issued the following statement regarding his confirmation: “I would like to thank President Biden, Majority Leader Schumer, Republican Leader McConnell, Chairwoman Stabenow, and Ranking Member Boozman for the honor to serve as the CFTC’s 15th Chairman. I would also like to thank Commissioner Stump for her public service and leadership at the Commission and for her ongoing support as a friend and colleague.

*****Unanimous? The Democrats and Republicans can’t agree that today is Friday.~JJL


Thursday’s Top Three
Our top story Thursday was DV Group to Acquire Business of Allston Trading, a press release via PR Newswire. Second was Wednesday’s No. 1 story, Bloomberg’s Best Books of 2021: The 49 Most Fascinating, Mind-Blowing, Challenging, Hilarious, and Urgent Titles of the Year. And third was Forbes’ 6 Timeless Lessons From Leo Melamed’s Book: Man Of The Futures.


MarketsWiki Stats
26,680 pages; 236,593 edits
MarketsWiki Statistics


Lead Stories

How Meme Stocks Impact Options Trading
Equities trading activity among retail investors has increased significantly in the past two years, primarily due to the introduction of zero commission trading and the debut of innovative new retail trading platforms. Cboe’s Equities Execution Consulting team examined this trend, along with the retail meme stock trading phenomenon, with a series of analyses including, A Deep Dive into US Equities Trading Venues, The Lasting Results of an Unprecedented Market Environment and Interlisted Trading Trends and Opportunities. These analyses showed how the influx of retail participant order flow and meme stock trading impacted the U.S. and Canadian equities markets but left us wondering about the impact on options markets. To find out, we examined meme stock retail trading activity on the U.S. equities and options markets in our latest analysis.

SEC Proposes Crackdown on Executives’ Well-Timed Stock Sales
Matt Robinson and Ben Bain – Bloomberg
Corporate chieftains have long been suspected of skirting rules that are meant to prevent top executives from trading on inside information. Now, the Securities and Exchange Commission is cracking down. The regulator is addressing a controversial question: When should corporate insiders, who may have access to material non-public information, be allowed to sell stock? Currently, executives can set up sales just days before dumping shares, which Senator Elizabeth Warren and other lawmakers say enables them to front run corporate announcements that can move share prices.

Bankers quietly mould crypto innovations for their own use; Conservative corporate treasurers are being offered blockchain solutions to legacy problems
Gillian Tett – FT
When Elon Musk revealed this year that he had invested $1.5bn of Tesla’s corporate cash in bitcoin, many grown-up financiers winced. No wonder. The world of corporate treasury management is supposed to be a deadly dull place, where safety rules. No one expects treasurers to dance with the crypto kids.

EU financial watchdog says banks can continue to use UK clearing houses; Risks of shifting business to bloc outweigh benefits, Esma concludes
Philip Stafford – FT
EU markets regulators have ruled that banks and asset managers can continue to use UK derivates clearing houses to handle their trades, saying the risks of shifting the business to the bloc outweighed its benefits. The European Securities and Markets Authority said on Friday that the UK’s two biggest clearing houses, LCH and ICE Clear Europe, were “of substantial systemic importance” to the EU’s financial stability and created risks that may not be fully covered by its existing rules.

FIA statement on ESMA’s conclusions from its assessment of Tier 2 CCPs
FIA President and CEO Walt Lukken today issued the following statement after ESMA published its conclusions from its assessment of the systemic importance of Tier 2 CCPs established in the UK. “FIA welcomes ESMA’s conclusions that it will not recommend to the European Commission to derecognise the clearing services provided by LCH Ltd and ICE Clear Europe Ltd or their services at this time following

The liquidity threat looming over markets in 2022; A higher debt burden in the financial system has institutionalised instability
Michael Howell – FT
After nearly two years of solid gains across stock markets, will the feared roller-coaster return? The answer is yes, due to higher debt levels, the tapering of central banks’ liquidity support for markets and the growth of indexation. Only two things really matter in investment: how much money there is in the system and how it is deployed. Recently surging equity prices once again confirm that both are highly elastic concepts.

JPMorgan Admits Widespread Record-Keeping Breakdown in SEC Settlement; J.P. Morgan Securities paying $125 million fine over employees’ use of forbidden messaging apps
Dave Michaels – WSJ
The brokerage arm of JPMorgan Chase & Co. agreed to pay a $125 million fine and admit that it failed to keep track of employees’ use of personal messaging apps that circumvented record-keeping requirements. The Securities and Exchange Commission said the fine is the largest ever for a breach of rules requiring brokerages to retain most communications so the data can be monitored internally and made available to regulators. The SEC said the breakdown was widespread and hindered some enforcement investigations, which often make use of what individuals write in emails and other messaging channels.

JPMorgan Admits to Widespread Record-Keeping Failures and Agrees to Pay $125 Million Penalty to Resolve SEC Charges; Firm also agrees to implement significant improvements to its compliance controls
The Securities and Exchange Commission today announced charges against J.P. Morgan Securities LLC (JPMS), a broker-dealer subsidiary of JPMorgan Chase & Co., for widespread and longstanding failures by the firm and its employees to maintain and preserve written communications. JPMS admitted the facts set forth in the SEC’s order and acknowledged that its conduct violated the federal securities laws, and agreed to pay a $125 million penalty and implement robust improvements to its compliance policies and procedures to settle the matter.

Interim CFTC chairman Behnam takes on role permanently; The US senate has welcomed interim chairman Behnam on a permanent basis after he assumed the role replacing Heath Tarbert in January.
Annabel Smith – The Trade
The interim chairman of the Commodity Futures Trading Commission (CFTC), Rostin (Russ) Behnam, has been selected by the US Senate to take on the role permanently. Behnam took on the role on an interim basis in January earlier this year, replacing former chairman Heath Tarbert who stepped down following Joe Biden’s inauguration.

FIA statement on the confirmation of Russ Behnam
FIA President and CEO Walt Lukken made the following statement on the US Senate confirmation of Rostin (Russ) Behnam to serve as chairman of the Commodity Futures Trading Commission (CFTC): “FIA congratulates Russ Behnam on his confirmation to chair the CFTC. Chairman Behnam brings a depth of experience to the office that will serve the public well. He has been a principled advocate for safe, open and transparent markets, and FIA looks forward to working wi

NFA statement regarding confirmation of Russ Behnam as CFTC Chairman
NFA congratulates Rostin (Russ) Behnam on his confirmation as Chairman of the Commodity Futures Trading Commission. His deep knowledge and experience are integral to advancing our common mission of protecting investors and ensuring market integrity. We look forward to working with Chairman Behnam and the Commission on our industry’s important regulatory matters.
– Thomas W. Sexton, III, NFA President and CEO

Nasdaq Welcomed 743 IPOs and 35 Exchange Transfers in 2021
Leading U.S. exchange by number of IPOs and proceeds raised for the third consecutive year; Featured the largest IPO, switch, SPAC combo switch, spin, SPAC and direct listing; 9 of the 10 largest U.S. based IPOs by proceeds raised listed on Nasdaq; 7 of the 10 largest global IPOs by proceeds raised listed on Nasdaq; 63% of all proceeds raised through IPOs listed on Nasdaq; $360.4 billion in market value switched to Nasdaq
Nasdaq (Nasdaq: NDAQ) announced today that in 2021 it welcomed 743 initial public offerings (IPOs), raising a total of $180 billion, extending its leadership to 32 consecutive quarters. A total of 318 operating companies listed on Nasdaq in 2021, representing a 76% win rate in the U.S. market. In addition to the IPOs, 35 companies transferred their corporate listing to Nasdaq, including Dow 30 company Honeywell, Palo Alto Networks and Xerox.

Data spotlight – Growing number of regulated markets for crypto derivatives; CME is the clear leader for now but faces new challengers
Jeff Reeves and Will Acworth – FIA MarketVoice
Since 2018, CME Group has been the leader in offering a fully regulated marketplace for bitcoin futures. Its dominant position is now being challenged, however, with two large market operators stepping into the space through acquisitions. As a result, fund managers and other institutional investors who want exposure to crypto currencies—but only in a regulated environment—now have a growing range of choices.

Trayport Announces Successful Pilot Trade Of Voluntary Carbon Offsets Through Joule
Trayport Limited
Trayport Limited (Trayport), a wholly-owned subsidiary of TMX Group, today announced the successful pilot trade of voluntary carbon offsets through Trayport’s Joule™ platform as part of the pilot phase. TMX Group, through its subsidiary, TSX Inc., and ClimeCo, a leader in the development and management of environmental market-based solutions, were the counterparties in this trade. This is a significant milestone towards digitising the trading of voluntary carbon offsets.

Exclusive-China to ban online brokers from offering offshore trading to mainland clients -sources
Julie Zhu and Xie Yu – Reuters
Chinese regulators are planning to ban online brokerages such as Futu Holdings Ltd and UP Fintech Holding Ltd from offering offshore trading services to mainland clients due to concern about data security and capital outflows, people with knowledge of the matter said.

Death of Ex-Banker Behind $9 Billion Fortune Puts Heirs in Focus
Benjamin Stupples – Bloomberg
August von Finck Jr. built a real estate, manufacturing empire; His death last month raises questions about who will inherit
August von Finck Jr. built an empire that included real estate, manufacturing and fine dining after selling his family’s private-banking business to Barclays Plc more than two decades ago. The German billionaire’s recent death at age 91 is now drawing attention to who’ll inherit his wealth.

HSBC fined £64m for failures on anti-money laundering; Bank’s monitoring systems were ‘not effective for a prolonged period’, says UK regulator
Laura Noonan and Owen Walker – FT
HSBC has been hit with a £64m fine and sharply criticised by UK regulators for “serious weaknesses” in its anti-money laundering controls over an eight-year period. The Financial Conduct Authority said that between March 2010 and March 2018, HSBC had a string of AML failures. These included not properly considering the scenarios it was using to pick up the risk of suspicious activity, not testing and updating its systems that flagged suspicious activity, and not checking the accuracy and completeness of the data it was gathering for AML checks.


Omicron Presents a Major Challenge for China; Countries that used so-called killed-virus vaccines may have an even greater need for booster shots.
Therese Raphael and Sam Fazeli – Bloomberg
From the moment it became clear we’d have multiple vaccines for SARS-Cov-2, questions about pecking order arose. Which vaccines provided the best protection? The longest lasting? What were the best combinations? What about time between doses?

‘No evidence’ that Omicron is less severe than Delta, say Imperial researchers; UK study warns of elevated reinfection risk but notes ‘very limited’ data on hospitalisations
Oliver Barnes and John Burn-Murdoch – FT
There is at present “no evidence” that the Omicron coronavirus variant is any less severe than the Delta strain, according to early findings from researchers at Imperial College London, which also highlighted the elevated risk of reinfection posed by Omicron and the need for booster shots to combat it.

Omicron Seen Doubling Every 1½ Days in Parts of U.K.; Hospitalization rates stay low in South Africa as evidence mounts that variant is causing less severe disease there
Aaisha Dadi Patel – WSJ
The Omicron variant continued its rapid spread in the U.K. with cases in parts of the country estimated to be doubling every 1½ days as health officials in South Africa reported significantly lower Covid-19 hospital admission rates than earlier in the pandemic despite a surge of infections.

Scientists Are Racing to Gauge the Threat of Omicron; The variant will spread quickly through the United States, experts say. What happens after that is less certain.
Emily Anthes – NY Times
Even as scientists race to understand more about the Omicron variant and the threat it poses, one fact is abundantly clear: It spreads quickly everywhere it lands. In South Africa, Omicron spread twice as fast as the highly infectious Delta variant. In Britain, officials have estimated that 200,000 people are becoming infected with Omicron every day. In Denmark, Omicron cases are doubling roughly every two days.

Omicron Threatens Red America; In many communities, most adults remain unvaccinated.
David Leonhardt – NY Times
Tucker Carlson could do it. So could Laura Ingraham, Mark Levin or Donald Trump himself. One of these conservative figures could go on the air and explain that the Omicron variant has placed much of their audience in grave danger. They could remind people that they have been skeptical of vaccines at times — but that Omicron is different. It is so contagious that it may quickly sweep the country.

When the Show Doesn’t Go On: Broadway Is Rattled by Covid Cancellations; Broadway, where cancellations were once vanishingly rare, has seen a raft of them as positive coronavirus tests among cast and crew members have upended productions.
Michael Paulson – NY Times
Theater actors have long prided themselves on performing despite infections and injuries — singing through strain and dancing through pain. No more. The coronavirus pandemic has upended the theater industry’s longstanding “show must go on” philosophy, supplanting it with a safety-first strategy. The result: a raft of cancellations unlike any in history.

Pfizer seeks full approval of COVID-19 vaccine for 12- to 15-year-olds
Lydia Moynihan – NY Post
Pfizer and its German partner BioNTech are asking the US Food and Drug Administration for full approval of their COVID-19 vaccine for adolescents. The vaccine has been authorized for emergency use among 5- to 15-year-olds since May, 2021. In August, US regulators granted the Pfizer vaccine full authorization for adults.

Exchanges, OTC and Clearing

American Financial Exchange® Reaches Record Volume Levels on AMERIBOR® Benchmark,
Trading More Than $1.5 Trillion Dollars in Value since Inception
The American Financial Exchange (AFX), an electronic exchange for direct lending and borrowing for American banks and financial institutions, announced a record volume milestone on December 9, reaching $1.5 trillion transacted since its inception in 2015, surpassing the $1 trillion level reached in June 2020. “This milestone is a testament to the service we provide to banks and corporations across the U.S.,” said AFX Chairman and CEO Richard L. Sandor. “By using the AMERIBOR Benchmark to price their loans, banks and corporations can more efficiently serve their customers.”

Hong Kong to Host SPACs From Early 2022; City’s stock exchange sets rules for listings of blank-check companies following public consultation
Quentin Webb – WSJ
Hong Kong’s stock exchange will allow special-purpose acquisition companies to list from early 2022, after tweaking its proposed framework for handling listings of blank-check companies. The exchange published its SPAC rules on Friday, following a public consultation that began in September, and said the listing regime would take effect on Jan. 1. SPACs are shell companies that raise money from investors and go public on stock exchanges before finding businesses with which to combine.

UK-based LCH and ICE Clear Europe should keep EU recognition status, says ESMA report; European securities regulator found that the risks associated with derecognising the Tier 2 central counterparties did not outweigh the benefits of keeping them in place.
Annabel Smith – The Trade
The European Securities Markets Authority (ESMA) has recommended specific clearing services provided by LSEG’s LCH and ICE Clear Europe continue to be recognised as of systematic importance in the European Union post-Brexit. In a report assessing the role of UK-established central counterparties (CCPs) in Europe, the regulator found that LCH’s SwapClear interest rate derivatives clearing service and the credit default swaps (CDS) and short-term interest rate derivatives services provided by ICE Clear Europe should maintain a recognised status in Europe.

Nasdaq continues cloud migration with expanded Equinix partnership; Through the multi-year partnership Equinix will scale its NY11 data centre in New Jersey to support the build out of Nasdaq’s infrastructure on the cloud.
Annabel Smith – The Trade
Nasdaq has extended its partnership with digital infrastructure provider Equinix to support the ongoing building out of its infrastructure on the cloud. Through the new multi-year partnership, the pair will scale Equinix’s NY11 data centre in New Jersey to support the exchange’s migration.

Glacier Bancorp, Inc. Completes Listing Transfer to the New York Stock Exchange
Intercontinental Exchange, Inc.
The New York Stock Exchange, part of Intercontinental Exchange, Inc. (NYSE: ICE), a leading global provider of data, technology and market infrastructure, announced that Glacier Bancorp, Inc. (NYSE: GBCI) has completed its listing transfer and will begin trading today as an NYSE-listed company.

ICE Announces Quarterly Rebalance Changes in the NYSE FANG+™ Index
Intercontinental Exchange, Inc.
Intercontinental Exchange, Inc. (NYSE: ICE), a leading global provider of data, technology and market infrastructure, today announced the quarterly rebalance of the NYSE® FANG+™ Index, which is effective before the open of trading on Monday, December 20, 2021. The NYSE FANG+™ Index is an equal-dollar weighted index with the objective of tracking the performance of highly traded growth stocks of technology and tech-enabled companies in the technology, media & communications and consumer discretionary sectors. It has historically included the key FAANG stocks — Facebook (Meta Platforms), Apple, Amazon, Netflix and Google (Alphabet) — as well as other related companies, including Alibaba, Baidu, NVIDIA, Tesla and Twitter.

ICE Announces Annual Reconstitution Changes in the ICE Biotechnology Index
Intercontinental Exchange, Inc.
Intercontinental Exchange, Inc. (NYSE: ICE), a leading global provider of data, technology and market infrastructure, today announced the annual reconstitution of the ICE Biotechnology Index (ICEBIO), which is effective before the open of trading on Monday, December 20, 2021.

Details of Proof of Concept Testing for HTML Disclosure of Earnings Reports (Kessan Tanshin)
As previously announced, Tokyo Stock Exchange, Inc. (TSE) will start Proof of Concept (PoC) testing in conjunction with the upcoming replacement of TDnet scheduled for December 18, 2021, to enable disclosure in HTML format of listed companies* annual and quarterly earnings reports and listed REITs’ annual and interim earnings reports (listed companies and listed REITs are hereinafter collectively referred to as “Listed Companies, etc.”) with the cooperation of PRONEXUS Inc. and TAKARA PRINTING CO., LTD. (in alphabetical order; hereinafter, the “Printing Companies.”)

Notice of Selection of Prime Market as New Market Segment

— 2021 December Holiday Arrangements for Energy Products Referencing Price Reporting Agency Data and Related Suspension of Trading of Certain Daily and BALMO Contracts — CME
— Notice Of Disciplinary Action; MEMBER: Robert Leeds, COMEX RULE: Rule 575. Disruptive Practices Prohibited (in part), All orders must be entered for the purpose of executing bona fide transactions. Additionally, all non-actionable messages must be entered in good faith for legitimate purposes, A. No person shall enter or cause to be entered an order with the intent, at the time of order entry, to cancel the order before execution or to modify the order to avoid execution. B. No person shall enter or cause to be entered an actionable or non-actionable message(s) with intent to mislead other market participants. — CME
— Notice Of Disciplinary Action; MEMBER: Robert Leeds, NYMEX RULE: Rule 575. Disruptive Practices Prohibited (in part) All orders must be entered for the purpose of executing bona fide transactions. Additionally, all non-actionable messages must be entered in good faith for legitimate purposes. A. No person shall enter or cause to be entered an order with the intent, at the time of order entry, to cancel the order before execution or to modify the order to avoid execution. B. No person shall enter or cause to be entered an actionable or non-actionable message(s) with intent to mislead other market participants. — CME
— Notice Of Disciplinary Action; NON-MEMBER: JOEL ALMEIDA SANTOS, NYMEX RULE: Rule 432 General Offenses, It shall be an offense: G. To prearrange the execution of transactions in Exchange products for the purpose of transferring equity between accounts. — CME
— Notice Of Disciplinary Action; NON-MEMBER: KUNAL BANSAL, COMEX RULE VIOLATION: 534. WASH TRADES PROHIBITED, No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means. — CME
— Notice Of Disciplinary Action; NON-MEMBER: VINIT AGARWAL, COMEX RULE VIOLATION: 534. WASH TRADES PROHIBITED, No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means. — CME
— Performance Bond Requirements: Agriculture, Energy, Equity, FX, and Metals Margins – Effective December 17, 2021 — CME
— Notice Of Disciplinary Action; NON-MEMBER: Christopher Fleming, EXCHANGE RULE VIOLATION: RULE 534. WASH TRADES PROHIBITED, No person shall place or accept buy and sell orders in the same product and expiration month, and, for a put or call option, the same strike price, where the person knows or reasonably should know that the purpose of the orders is to avoid taking a bona fide market position exposed to market risk (transactions commonly known or referred to as wash sales). Buy and sell orders for different accounts with common beneficial ownership that are entered with the intent to negate market risk or price competition shall also be deemed to violate the prohibition on wash trades. Additionally, no person shall knowingly execute or accommodate the execution of such orders by direct or indirect means. — CME


Fintechs and ‘neobanks’ aim to plug continent’s banking gap; Traditional operators are fighting to retain their leadership role amid cross-border race for market share
David Pilling – FT
Like banks everywhere, those in Africa have had to weather the worst economic crisis in living memory as the Covid pandemic spread globally. The continent, as a whole, has suffered its deepest recession in at least half a century, though the picture varies widely from economy to economy.

HSBC and IBM successfully test multi-ledger CBDC, bond and FX settlement capability; Cross-border, cross-CBDC and digital currency, cross-asset, cross ledger, end-to-end securities and foreign exchange transactions successfully executed.
Jon Watkins – The Trade
HSBC and IBM have successfully tested an advanced token and digital wallet settlement capability encompassing direct transactions between two central bank digital currencies (CBDC) in a hybrid cloud environment. The experiment, designed and implemented within a four-month period, was successfully executed across ledgers in support of such a complex multi-asset transactional scenario.


Chinese Spies Accused of Using Huawei in Secret Australia Telecom Hack; Software update loaded with malicious code is key evidence in years-long push to block Huawei, officials say
Jordan Robertson and Jamie Tarabay – Bloomberg
The U.S. government has warned for years that products from China’s Huawei Technologies Co., the world’s biggest maker of telecommunications equipment, pose a national security risk for any countries that use them. As Washington has waged a global campaign to block the company from supplying state-of-the-art 5G wireless networks, Huawei and its supporters have dismissed the claims as lacking evidence.

Log4j flaw: This new threat is going to affect cybersecurity for a long time
Danny Palmer – ZDNet
If there ever was any doubt over the severity of the Log4j vulnerability, director of US cybersecurity and infrastructure agency CISA, Jen Easterly, immediately quashed those doubts when she described it as “one of the most serious that I’ve seen in my entire career, if not the most serious”.

What Is Log4j? The Security Flaw That’s Freaking Out the Internet
Rank Bajak – Time
Security pros say it’s one of the worst computer vulnerabilities they’ve ever seen. They say state-backed Chinese and Iranian hackers and rogue cryptocurrency miners have already seized on it.
The Department of Homeland Security is sounding a dire alarm, ordering federal agencies to urgently eliminate the bug because it’s so easily exploitable — and telling those with public-facing networks to put up firewalls if they can’t be sure. The affected software is small and often undocumented.

Hackers Backed by China Seen Exploiting Security Flaw in Internet Software
Robert McMillan and Dustin Volz – WSJ
Hackers linked to China and other governments are among a growing assortment of cyberattackers seeking to exploit a widespread and severe vulnerability in computer server software, according to cybersecurity firms and Microsoft Corp.
The involvement of hackers whom analysts have linked to nation-states underscored the increasing gravity of the flaw in Log4j software, a free bit of code that logs activity in computer networks and applications.

The Five Biggest Cyber Security Trends In 2022
Bernard Marr – Forbes
The changed world we’ve found ourselves living in since the global pandemic struck in 2020 has been particularly helpful to cybercriminals. Nothing illustrates this so well as the SolarWinds hack, described by Microsoft president Brad Smith as the most sophisticated cyberattack of all time, the reverberations of which have been felt throughout 2021.

Why the Cybersecurity of the .1% Is Relevant to You – BRINK – Conversations and Insights on Global Business
Paul Mee, Kevin Kelly and Alec Harris – Brink
The 0.1% are particularly rich targets for cybercriminals and hackers, but their strategies for deterring hackers hold lessons for all of us.
Tech moguls, private equity barons, corporate CEOs, celebrities, sports stars and other elites enjoy notable wealth and prominence. Yet in today’s digital world, they can’t rely solely on the defenses of gated manors, private islands or security details. The wealthy and their staff need to sharpen their cybersecurity capabilities to protect themselves, their families and their entourages from data breaches, ransomware, scams, extortion and other digital harms.


Bitcoin is so 2021. Here’s why some institutions are set to bypass the No. 1 crypto and invest in Ethereum, other blockchains next year
Frances Yue – MarketWatch
Happy Thursday! Welcome to Distributed Ledger, our weekly crypto newsletter. I’m Frances Yue, crypto reporter at MarketWatch, and I’ll walk you through the latest and greatest in digital assets this week so far. Find me on Twitter at @FrancesYue_ to send feedback or chat about crypto.

Crypto exchanges keep getting hacked, and there’s little anyone can do
Kevin Collier – NBC News
It’s not just lucky investors getting rich from crypto. Hackers have made off with billions of dollars in virtual assets in the past year by compromising some of the cryptocurrency exchanges that have emerged during the bitcoin boom.

French Central Bank Completes First Stage of Its CBDC Experiments
Jamie Crawley – Coindesk
The Banque de France said it completed the first stage of its experiments into a wholesale central bank digital currency (CBDC) and plans to move on to the next phase, focusing on cross-border payments.

Bitcoin Suisse Founder to Step Down as 2021 Profit Set to Double
Leonard Kehnscherper – Bloomberg
Nikolajsen resigning as chairman effective from Jan. 1; Dane says began buying Bitcoin when it was worth less than $1
Niklas Nikolajsen, the veteran founder of Bitcoin Suisse, is stepping down as chairman of the board as of Jan. 1. Nikolajsen, who founded the broker in 2013, said on Friday that it’s the right time to hand over to a new chairman to “further guide the strategic direction of our company.” The 46-year-old expat from Denmark, who said he started buying Bitcoin when it was worth less than $1, will now dedicate more attention to his “private affairs, not least my family,” he said.

Binance Among Firms Stymied by Singapore Money-Launder Rules
Chanyaporn Chanjaroen – Bloomberg
Binance Asia this week withdrew crypto-services application; Some 100 applicants withdrew after failing to meet AML rules
Binance Asia Services Ltd., which recently withdrew an application to offer cryptocurrency services in Singapore, didn’t meet the central bank’s criteria for safeguarding against money laundering and terrorism financing, a person with knowledge of the matter said.

Binance in Talks With Dubai, Abu Dhabi on Headquarters Plan
Ben Bartenstein and Yueqi Yang – Bloomberg
Largest crypto exchange has faced global regulatory pressure; Announcements on headquarters plan could come in new year
Binance Holdings Ltd., which has claimed to be a virtual company, has held discussions with regulators in the United Arab Emirates about a potential headquarters in the Gulf Arab nation, according to people with direct knowledge of the matter.

Binance.US Hires First Chief Risk Officer
Yueqi Yang – Bloomberg
Majalya has also worked at Uber, Oracle and Justice Department; Exchange has stated its goal to go public in next few years
Binance.US, the American affiliate of the largest global cryptocurrency exchange, hired Sidney Majalya from Intel Corp. to serve as deputy general counsel and the firm’s first chief risk officer. Majalya was vice president, legal and chief compliance officer at the largest U.S. semiconductor maker. Prior to Intel, he helped build out Uber Technologies Inc.’s legal compliance department before the ride-hailing company went public in 2019.

The Bored Ape Yacht Club is more than an NFT joke; The astonishing prices being paid for limited edition digital cartoons is a clue to the internet’s future
John Gapper – FT
Receiving $3,000 for an asset that was worth a tenth of that last April would normally qualify as a fine profit. But when the owner of a Bored Ape Yacht Club non-fungible token (NFT) sold his digital cartoon last weekend, he made a costly error.

Tether’s CEO: from IT sales to calling the shots in crypto land; Jean-Louis van der Velde’s career offered few clues that he would become a key figure in fast-growing industry
Kadhim Shubber, Ryan McMorrow and Siddharth Venkataramakrishnan – FT
The chief executive of Tether ran a company that faced a string of lawsuits in China over unpaid bills and fines for late tax payments before he helped launch the contentious stablecoin now at the heart of the crypto industry.


What U.K. Travelers Can and Can’t Do in France After Travel Ban
Alan Katz – Bloomberg
Skiing trips and other vacations in France are halted; EU citizens can still transit through France to go home
The ban on leisure and business travel announced by France this week is forcing the cancellation of vacations U.K.-based travelers may have planned for the year-end holidays. Below are answers to some of the most common questions linked to the restrictions.

US bill threatens ‘double taxation for American expats in UK’; Carry back provision would be scrapped under measures considered by the Senate
Emma Agyemang – FT
UK-based Americans face cash flow headaches and possible double taxation due to a expatriate tax change proposed by the Biden administration. Tax experts warned that the plan could eliminate the ability to offset tax paid in the UK against US liabilities on the same income.

Hong Kong Holds First Election Without Opposition. But Will People Vote? With opposition candidates behind bars, many voters are expected to shun Sunday’s one-sided legislative poll
Elaine Yu, Dan Strumpf – WSJ
Hong Kong is preparing to hold its first election since China’s national security crackdown, offering voters a slate of only Beijing-approved candidates, while dozens of would-be opposition contenders are languishing in prison and others effectively barred from running. There is little question about the outcome—only about how many people will turn out to vote.


FMA warns Squirrel P2P Trustee Limited for historic custodian breaches
The Financial Markets Authority (FMA) – Te Mana Tatai Hokohoko has formally warned Squirrel P2P Trustee Limited for failing to carry out certain obligations as a custodian. The entity provides a custodial service for the peer-to-peer lending service of Squirrel Money Limited.

CFTC Orders JPMorgan to Pay $75 Million for Widespread Use by Employees of Unapproved Communication Methods and Related Recordkeeping and Supervision Failures
JPMorgan Admits Employees Used Texts and WhatsApp on Personal Devices to Conduct Business
he Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, and J.P. Morgan Securities plc (collectively, JPMorgan), for failing to maintain, preserve, and produce records that were required to be kept under CFTC recordkeeping requirements, and failing to diligently supervise matters related to its businesses as CFTC registrants. JPMorgan admits the facts in the order and acknowledges that the conduct violated the Commodity Exchange Act (CEA) and regulations.

CFTC’s Interest Rate Benchmark Reform Subcommittee Issues User Guide for the Transition of Exchange-Traded Derivatives Activity to SOFR
The Interest Rate Benchmark Reform Subcommittee, a subcommittee of the Commodity Futures Trading Commission’s Market Risk Advisory Committee (MRAC), today issued a user guide for the transition of newly-executed exchange-traded derivatives from LIBOR to the Secured Overnight Financing Rate (SOFR) pursuant to the MRAC’s approval of the SOFR First Initiative at its July 13, 2021 meeting. Acting Chairman Rostin Behnam is the sponsor of MRAC.

Statement on Jury’s Verdict in Trial of Michael C. Furman
Gurbir Grewal – SEC
After an 8-day trial, a jury in the Southern District of Florida found Michael C. Furman liable for securities fraud and illegally selling unregistered securities. Statement of SEC Division of Enforcement Director Gurbir S. Grewal: “We are pleased with today’s jury verdict holding sales agent Michael C. Furman liable for securities fraud and illegally selling unregistered securities in connection with Complete Business Solutions Group Inc., d/b/a Par Funding’s half-a-billion dollar securities offering fraud. Furman, through entities he controlled, fraudulently raised over $10 million from numerous individuals including elderly and retired investors. Today’s verdict underscores that the Commission will continue to pursue those who violate the federal securities laws and victimize investors.”

ESMA Calls To Deprioritise Buy-in Supervision
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, today published a Statement to clarify the practical implementation of the EU CSDR settlement discipline regime.

ESMA reports on derivatives and securities markets in 2020
The European Securities and Markets Authority (ESMA), the EU’s securities regulator, today publishes two Annual Statistical Reports (Reports) analysing the European Union’s (EU) derivatives and securities markets. The Reports, based on data submitted under the European Markets and Infrastructure Regulation (EMIR) and the Markets in Financial Instruments Directive (MiFID), provide an overview of EU/EEA markets in 2020.

ESMA publishes results of its assessment of systemically important UK Central Counterparties
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, today published a Statement and Report (part 1 and part 2) on the conclusions from its assessment of Tier 2 Central Counterparties (CCPs) established in the United Kingdom (UK).

FCA fines HSBC Bank plc £63.9 million for deficient transaction monitoring controls
The FCA has fined HSBC Bank plc (HSBC) £63,946,800 for failings in its anti-money laundering processes. HSBC used automated processes to monitor hundreds of millions of transactions a month to identify possible financial crime. However, the FCA found that three key parts of HSBC’s transaction monitoring systems showed serious weaknesses over a period of eight years from 31 March 2010 to 31 March 2018.

FCA’s new rules on climate-related disclosures to help investors, clients and consumers
The FCA has published two Policy Statements confirming final rules and guidance to promote better climate-related financial disclosures.

Investing and Trading

Tech Traders Unwind Hedges and Get Back to Pummeling Risky Names
Lu Wang and Vildana Hajric – Bloomberg
Nasdaq 100 tumbles 2.6% as Fed’s signaled rate hikes sink in; Comes one day before ‘triple witching’ options expirations
The hazard of getting wedded to knee-jerk reactions following Federal Reserve news was on display again Thursday, as a two-week bout of turbulence in speculative companies resumed on the eve of a giant options expiration.

US software bosses cash in hundreds of millions of dollars of stock; Chief of high-flying Snowflake sells $344m this week, capping a spate of insiders selling software shares
Richard Waters and Miles Kruppa – FT
The chief of US software company Snowflake cashed in $344m worth of shares in the company this week, taking his total sales in 2021 to more than $600m and capping a spate of selling by leaders of high-flying software companies.

Bond ETF inflows slump to lowest level since start of pandemic; Fixed income ETFs attracted global net inflows of just $14bn in November on inflation fears
Steve Johnson – FT
Investors are turning their backs on bond exchange traded funds amid worries over inflation, with inflows slumping to their lowest level since the start of the Covid-19 pandemic. Bond ETFs saw global net inflows of just $14bn in November, according to data from BlackRock’s iShares arm, the weakest reading since March 2020, when markets were upended by the emergence of the novel coronavirus.

The Risk of Avoiding Emerging Markets; The Omicron outbreak, inflation and monetary tightening are shaking emerging markets. Yet our columnist says it’s risky for long-term investors to shun them.
Jeff Sommer – NY Times
Putting money into emerging markets can be a tough decision for people worried about human rights and climate change, and it has always been risky. Yet not investing in them may be riskier still. They comprise an extraordinarily fuzzy and vast category, including seven of the world’s 10 most populous countries: China, India, Russia, Indonesia, Pakistan, Brazil and Mexico, plus a host of other economically and geopolitically crucial places, like South Africa, Taiwan, Turkey and Poland. For investors, avoiding them means missing out on the possibility of greater growth and the certainty of greater diversification.

Environmental, Social and Corporate Governance

The World Is Burning the Most Coal Ever to Keep The Lights On
Todd Gillespie – Bloomberg
The world likely will generate more electricity from the dirtiest source this year than ever before, indicating just how far the energy transition still needs to run in the fight against climate change.

ESG Ratings Scores ‘Very Rarely’ Help, Norway Wealth Fund Says
Lars Erik Taraldsen – Bloomberg
$1.4 trillion fund uses underyling data, not ratings scores; ESG raters have faced questions around their methodology
The biggest owner of stocks in the world tends not to look at the headline numbers provided by ESG ratings firms, and says only by digging into the underlying data does it find the information needed to guide portfolio decisions.

Global Coal Power Expected to Hit Record Despite Climate Fight; Main drivers of the growth are China and India, which together account for roughly two thirds of global coal use
Sha Hua – WSJ
Despite global efforts to slash carbon emissions, global coal-fired power generation is expected to rise 9% and hit a record by the end of 2021 as electricity demand from the economic recovery outstrips a shift to cleaner energy sources, the International Energy Agency said Friday.


Sale speculation swirls as Liberum squeezes out small investors; City broker’s clean-up strategy raises hackles; Nick Train on the defensive; and bedtime reading in the van Beurden household
Bryce Elder – FT
Goodwill has been in short supply at Liberum, the employee-owned boutique broker, which is ringing in the festive season with a forcible squeeze on its own shareholders. In July, Liberum’s board began a programme to simplify its capital structure by buying back so-called growth shares held by existing and former staff. Holders were advised to sell on the company’s internal marketplace to avoid a mandatory buy-in. The G shares, which carry equal voting and dividend rights to the ordinaries but add a redemption clause in the event of a listing, accounted for about a quarter of the total in issue at the start of the year.


Venture capital cash flows to Japan following China crackdown
Gerard Reidy – Bloomberg via Japan Times
Japan’s startups are attracting increasing interest from overseas investors as the country starts to shake off a reputation as a unicorn-free venture backwater. More than $3 billion (¥342.5 billion) was raised in the first six months of 2021 alone, triple the amount in the same period five years earlier, according to local data tracker Initial. That’s being driven by growing interest from foreign investors with deep pockets, including Sequoia, Soros Capital and Peter Thiel’s Founders Fund — as well as Masayoshi Son, whose Vision Fund this year took stakes in Japanese startups for the first time.

What Quarantine Is Like Inside Hong Kong’s Bleak, High-Security Camp
Jinshan Hong and Stephanie Chung – Bloomberg
Omicron means more travelers, including those from the U.S., must isolate at the government-run facility
In an isolated corner of Hong Kong’s Lantau Island sits a vast expanse of shipping container-style buildings, ringed by concrete, flood lights and a tall wire fence. While most places have relied on hotels to quarantine travelers amid the pandemic, Hong Kong has gone a step further, building a spartan government camp to isolate out a growing number of inbound visitors or anyone exposed locally to Covid-19.

Oil price shocks test mettle of Nigerian banks; Exposure to fossil fuels and regulatory shifts hold back top lenders
Neil Munshi – FT
When the coronavirus pandemic crashed global oil prices and sent Nigeria’s currency, the naira, reeling last year, many feared the worst for country’s biggest banks. Nigeria is Africa’s biggest oil producer. It depends on crude for nearly all of its foreign exchange earnings and roughly half its government revenues. As a result, when oil prices last collapsed in 2015, Nigeria sank into a recession and years of slow growth from which it has never fully recovered.

How South Africa’s banks rode out the first Covid storm; Before the Omicron variant hit, leading players were bouncing back from bad debt and payment holidays
Rob Rose – FT
“Had our banks been limping, I don’t think they’d have been able to withstand the need for massive provisions after Covid arrived,” says Alan Pullinger, chief executive of the Johannesburg-based FirstRand, Africa’s largest bank by market capitalisation.

Moroccan banks target francophone west Africa; Linguistic ties and a shared currency in some sub-Saharan countries have aided expansion
Alexis Akwagyiram – FT
A drive by Morocco’s top banks to expand into west Africa in the past decade has helped the country’s lenders shore up their profits in the pandemic — and has set them up to profit further from the rising use of mobile money.


Forget IRL Bling. What About Rolex, Hermes and Gucci NFTs? The biggest luxury houses see billions in the metaverse economy, thanks to avatars and NFTs.
Andrea Felsted – Bloomberg
Time to get ready for the party. You put on your Balenciaga cap, fasten your Rolex Daytona and don your Louis Vuitton cross-body bag. But this isn’t In-Real-Life bling. It’s all virtual gear, worn by your digital self, who’s about to be teleported into the metaverse.

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