The inside story of how ETFs weathered the March 2020 storm

Dec 29, 2021

First Read

Hits & Takes
John Lothian & JLN Staff

Former Security Traders Association CEO John Tognino has passed away and will be laid to rest today, current STA President and CEO Jim Toes shared in a heartfelt LinkedIn post yesterday. Tognino had a half-century career in financial services with stops at Merrill Lynch, Charles Schwab, Nasdaq and a stint as president and CEO of the STA. Condolences to his family and friends.

Besides Tognino, yesterday we lost a former Wall Street CEO, a former Senate Majority Leader, and a former NFL coach and legendary television broadcaster and advertising pitchman. James Cayne, the former CEO of Bear Stearns who led the firm “from record profits to the brink of collapse” died at the age of 87 yesterday. Also, Harry Reid, the former U.S. Senator from Utah who became the majority leader of the Senate for the Democrats, died at the age of 82. And finally, the man who may be the first person to live on in the metaverse due to the popularity of the football video game that shares his name, John Madden, has died at the age of 85. Madden became the coach of the Oakland Raiders at the age of 32 and retired from coaching at 42. He went on to a long and fabled career as an NFL broadcaster, redefining the analyst position. He was also a popular advertising spokesman for everything from Lite beer to Ace Hardware.

According to LinkedIn, former OneChicago Chief Regulatory Officer and Chief Operating Officer Tom McCabe is now a Jack of all trades at Vision Financial Markets LLC. If I were him, I would put “Ombudsman” on his business card as his title, assuming there are such things as business cards anymore.

Here is more fun with books, this from the New York Times. The Times polled readers about what was the best book of the past 125 years. What do you think it was? Don’t mind me mocking you if you guess wrong.

I know I said opening a bottle of champagne might be wrong for your investment portfolio, but the NY Times has a list of 12 bottles of champagnes and sparkling wines to consider to bring in the new year.

I bought each of those top three books I mentioned yesterday from the list of “12 Books to Start a Smart New Year” from the Wall Street Journal, though I bought the Amazon Audible version of them so I can listen to them rather than have to spend more time staring at a screen or a page.

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


Registration is now open for the Security Traders Association of Chicago’s (STAC’s) 96th Annual Mid-Winter Meeting, taking place January 12-13, 2022 at the Hilton Chicago at 720 S Michigan Ave. Featured speakers and panelists include Cboe’s Arianne Criqui and Adam Inzirillo, Citadel’s Mike Harrington, Broadway Technologies’ Michael Chin, TD Ameritrade’s JJ Kinahan, Tastytrade’s Tom Sosnoff, and many more. You can go here to register. ~SR


For a Happier Financial Life in 2022, Face Your Money Fears; Research suggests that seeking more insight on complex money issues could positively affect a person’s overall happiness
J.J. McCorvey – WSJ
Improving your financial life can sometimes feel like a Catch-22: The same money issue you need to unsnarl creates so much anxiety that you end up turning away from it altogether. Seeking more insight on money issues such as debt management, building emergency savings and risk diversification could increase overall happiness. A study published earlier this year by Finra and the Global Financial Literacy Excellence Center found that even before the pandemic, a low level of financial literacy was a top contributor to financial stress and anxiety. The report analyzed the survey responses of 19,000 Americans.

***** My father told me there was one thing that could never be taken away from you and that was your education. So educate yourself about your finances and evidently you will be happier.~JJL


Stolen property must be reported as income on taxes: IRS
Bailey Aldridge – McClatchy Washington Bureau
Yes, you’re supposed to report anything you stole this year as income on your tax returns — unless you return it.
An image circulating on social media of guidance from the Internal Revenue Service telling taxpayers to do so has some people confused and others wondering whether it’s fake.
But the rule is real. It’s included in the IRS’s 2021 federal income tax guide.

**** Is there a line on your tax form for ill-gotten gains? ~JB


A decent boss can make the world of difference at work; Job satisfaction takes many forms but beware the demoralising effects of impersonal systems for evaluating employees
Sarah O’Connor – FT
The best job I ever had (apart from this one) was in a labyrinthine second-hand bookshop. The old house had books crammed into every room from the cellar to the attic. My job as a teenager was to shelve books, organise the ever-unruly sections and run the coffee shop. The house was so big I clipped a baby monitor to my jeans so I would know when someone rang the bell for service. There was a lot of running up and down stairs, but there was always time for tea and conversation with my elderly boss, who was clever, funny and kind.

***** I try to be the best boss I can. I have never been a big fan of formal job evaluation processes. Mentoring should be an ongoing process. I also try to use something I learned from Scouting, the EDGE method, which stands for Explain, Demonstrate, Guide and Empower. If that process is happening, the evaluation process is happening in real time.~JJL


François Pinault’s Bourse de Commerce stakes his claim at the heart of Paris; Tadao Ando’s EUR160m renovation of the former stock exchange for the Pinault Collection is bold and counterintuitive
Edwin Heathcote – FT
Capitalism, apparently, thrives through competition, and the cultural world is not exempt as an arena. Now Paris, seat of the two figureheads of luxury capitalism, LVMH’s Bernard Arnault and François Pinault of Kering, is witnessing a contest measured through museums.

***** Great idea. The CBOT trading floor would make a fine art museum.~JJL


Tuesday’s Top Three
Our top story Tuesday was The Wall Street Journal’s Reading Resolutions: 12 Books to Start a Smart New Year. Second was Here are 10 of the most surprising little-known facts we learned about the 29-year-old crypto billionaire Sam Bankman-Fried after months speaking to his closest friends, family, and colleagues, from Insider. Third was Record Beef Prices, but Ranchers Aren’t Cashing In, from The New York Times.


MarketsWiki Stats
26,680 pages; 236,636 edits
MarketsWiki Statistics


Lead Stories

The inside story of how ETFs weathered the March 2020 storm; As markets went into meltdown the people who worked in the industry stepped into overdrive
Emma Boyde – FT
As markets went into Covid-19 shock in March 2020 everyone familiar with how exchange traded funds work braced themselves for bad news — but it never came. There were alarming signs of stress — the prices of many corporate bond ETFs dropped significantly below the net asset value of their holdings sparking fears that investors would lose faith in the fund structure altogether and dump their holdings. But even when liquidity had dried up in their underlying constituents, ETFs, with the notable exception of US Oil Fund (USO) and some leveraged products kept trading.

Financial Stability Report Reads Like a Bad Hollywood Script; Warning about climate change, pandemics and cyberattacks is unhelpful because they’re too big, uncertain and ill-defined for useful analysis.
Aaron Brown – Bloomberg Opinion
Hollywood likes to serve up big-budget disaster movies in early summer or the last few weeks of the year. The year the Financial Stability Oversight Council has joined the fun with its 2021 Annual Report to Congress. This report leads with huge, dramatic, eye-catching dangers: climate change, pandemics and cyberattacks. Each has spawned disaster movies, television shows and novels. Each is of intense political interest, which can be handy when asking for bigger budgets and more power. But planning for Hollywood disaster movies leads to poor risk management.

Deutsche Bank fined EUR8.7m over rate-rigging safeguards; BaFin issues penalty seven years after German lender paid record $2.5bn settlement over Libor
Joe Miller and Olaf Storbeck – FT
Deutsche Bank has been fined by the German financial regulator for failing to implement measures designed to prevent rate-rigging, a blow to the country’s largest lender, which is trying to move on from the Libor scandal. BaFin said that Deutsche Bank did not always have “effective preventive systems, controls and policies” in place to ensure the “integrity and reliability” of data relating to Euribor, the euro rate-setting mechanism comparable to Libor. The regulator imposed an EUR8.7m fine.

London Stock Exchange raises most IPO funding since 2007, marking a strong year for LSEG Capital Markets
London Stock Exchange
The London Stock Exchange is the number one exchange in Europe, raising more equity capital than the Amsterdam and Paris exchanges combined, and the most equity capital raised outside of the US and Greater China; Tech & consumer internet businesses led primary market issuance in 2021 with 39% of IPO capital raised; Hambro Perks Acquisition Co became the first SPAC to list in London in November 2021, after the FCA announced new SPAC listing rules in July 2021
122 companies listed on the London Stock Exchange (LSE) this year raising over £16.8bn. LSE has raised more capital for IPOs than any year since 2007 and is by a significant margin the number one exchange in Europe, raising more equity capital than the Amsterdam and Paris exchanges combined, and the most equity capital raised outside of the US and Greater China.

James Cayne, CEO for Bear Stearns Rise and Fall, Dies at 87
Laurence Arnold – Bloomberg
James Cayne, the cigar-puffing college dropout who parlayed a stint as a professional bridge player into a job as a bond broker on Wall Street, where he led Bear Stearns Cos. to record profits, then to the brink of collapse, has died. He was 87.

**** FT Version

IPOs Had a Record 2021. Now They Are Selling Off Like Crazy; Threats of higher rates are driving down prices of high-growth stocks; two-thirds of 2021 IPOs now sit below their offer prices
Corrie Driebusch – WSJ
Looming behind a record-breaking run for IPOs in 2021 is a darker truth: After a selloff in high-growth stocks during the waning days of the year, two-thirds of the companies that went public in the U.S. this year are now trading below their IPO prices. Traditional initial public offerings raised more money than ever before in 2021, as startup founders and early investors tried to cash in on sky-high valuations. In the first eight months of the year, IPO shares rose. In November, 2021’s class of IPOs were trading up 12% on average, according to Dealogic. By late December, they traded 9% below their IPO prices.

Mizuho’s F&O clearing unit boosts client margin by $1.05bn; In contrast, Morgan Stanley reports largest drop over same period
Alessandro Aimone –
Required client margin held by Mizuho’s futures and options (F&O) clearing unit rose by $1.05 billion in October – the biggest nominal increase of the 47 reporting futures commission merchants (FCMs).

Ponzi scam victim revives complaint against Interactive Brokers
Maria Nikolova – FX Newsgroup
Ponzi scam victim revives complaint against Interactive Brokers
About a month after the Court sided with Interactive Brokers in a lawsuit alleging the electronic trading major aided the Ponzi scam orchestrated by Haena Park, the plaintiff has filed an amended complaint. The document, submitted at the the California Northern District Court and seen by FX News Group, provides more detailed allegations about Interactive Brokers’ alleged knowledge of the fraudulent activities of Haena Park. This is important as the Judge had nixed the previous complaint by noting that it did not sufficiently plead IBKR’s knowledge of Park’s scheme.

Why TikTok Should Worry Economists; The most popular website in the world features a lot of videos that take a pretty dim view of economics.
Tyler Cowen – Bloomberg
TikTok is now the most popular website in the world, by one measure, and as such its influence on how young people see and think about themselves is attracting ever more attention. I am an economist, so I would like to focus on a considerably more narrow subject: what TikTok’s videos say about how young people see and think about economics. The news — for my profession, not necessarily for TikTok — is not good.

Don’t Mistake the Gas Meltdown for End to Europe’s Energy Crisis
Isis Almeida and Vanessa Dezem – Bloomberg
LNG cargoes have provided relief to spot markets in Europe; But forward prices signal the crunch will last into 2023
Don’t let the recent meltdown in European natural gas prices fool you. The energy crunch of 2021 will last for years. That’s what futures traders are betting on, with spot prices dropping a lot more than forward contracts over the past week. The scale of the moves signal the flotilla of liquefied natural gas cargoes heading to Europe will only provide short-term relief, and prices will still be expensive all the way to March 2023.

Deutsche Bank Fined $9.8 Million by BaFin for Control Lapses
Nicholas Comfort and Steven Arons – Bloomberg
Penalty relates to controls related to Euribor reference rate; Germany’s largest lender has faced numerous legal issues
Germany’s finance watchdog fined Deutsche Bank AG 8.66 million euros ($9.8 million) over its handling of submissions for Euribor, a reference rate at the heart of a scandal that rocked the industry.

ProShares Plans New Metaverse ETF as Demand for Funds Surges
Emily Graffeo – Bloomberg
Metaverse Theme ETF could track index with Apple, Nvidia; Fund application follows success of ProShares’s bitcoin ETF
ProShares is planning to launch an exchange-traded fund focused on the metaverse, according to a Tuesday filing with the U.S. Securities and Exchange Commission. If approved, the ProShares Metaverse Theme ETF will track the performance of the Solactive Metaverse Theme Index.

Iran Orders Crypto-Mining Ban to Save Power During Winter Crunch
Yasna Haghdoost and Arsalan Shahla – Bloomberg
Move follows temporary halt earlier in year amid blackouts; Other fuel-saving moves include turning off some street lights
Iran for the second time this year ordered a shutdown of authorized cryptocurrency mining centers as part of efforts to ease the strain on the country’s power plants and avoid blackouts, according to Mostafa Rajabi Mashhadi, director of the state-run Iran Grid Management Co. and a spokesman for Iran’s power industry.


CDC drastically drops estimate of US Omicron cases
Edward Helmore – The Guardian
The Centers for Disease Control and Prevention has revised down its estimates for US infection by the Omicron variant, stating it accounts for approximately 59% of all Covid cases in the US, not 73% as it previously said. Nevertheless, the figures issued Tuesday indicates that Omicron is spreading rapidly in the US, growing from a revised estimate of 23% of cases as of 18 December. The correction shows that until the week before Christmas, the Delta variant remained dominant.

Omicron Variant Might Help Defend Against Delta, Lab Study Suggests; In the lab, antibodies produced during an Omicron infection protected against Delta. If Omicron dominates in the real world, that could lead to a less dire future.
Carl Zimmer – NY Times
People who have recovered from an infection with the new Omicron coronavirus variant may be able to fend off later infections from the Delta variant, according to a new laboratory study carried out by South African scientists.

Will Shortened Isolation Periods Spread the Virus? Without rapid testing, some experts fear new U.S. guidelines may mean infected people leave isolation while still contagious. The C.D.C. director said masking was a better option.
Benjamin Mueller – NY Times
The decision by federal health officials to shorten isolation periods for Americans infected with the coronavirus drew both tempered support and intense opposition from scientists on Tuesday, particularly over the absence of a testing requirement and fears that the omission could hasten the spread of the highly contagious Omicron variant.

The C.D.C.’s decision to halve isolation will ease staffing woes for airlines, but concerns linger; The C.D.C. decision to cut the confinement period was welcomed by many business representatives, but a union leader warned that workers may feel pressure to return to their jobs too soon.
Lauren Hirsch – NY Times
New federal guidance shortening the recommended isolation periods for many infected Americans will provide relief to airlines and other companies struggling with staffing shortages, businesses said on Tuesday, but labor representatives warned that the move could push some employees back to work too soon.

Small-business owners express confusion over the C.D.C.’s changed guidelines on isolation.
Emma Goldberg – NY Times
Jesus Caicedo-Diaz climbs into bed most nights by 9. He eats raw garlic and onions to give his dulled taste buds a jolt. Four months after getting Covid-19, he is still wading through an interminable recovery. So when he thinks of his five employees at Skål, his restaurant in the Bedford-Stuyvesant neighborhood of Brooklyn, he can’t imagine offering just five days off work when they get sick.

Illinois sets another grim COVID-19 record: Highest average daily case count since start of pandemic – Chicago Tribune
Omicron makes people sick faster. Here’s what else you need to know for New Year’s weekend – USA Today
Thailand warns of spike in COVID-19 cases after “super-spreader” event
Case Records Across U.S. and Europe Are Broken as Omicron Wave Grows – NY Times

Exchanges, OTC and Clearing

Singapore to establish ETF link with Shenzhen, joining Hong Kong, London in tie-ups with Chinese exchanges
South China Morning Post
The bourse operators of Singapore and Shenzhen have agreed to establish an exchange-traded fund (ETF) link, making the Lion City the third major market with a cross-border trading scheme with mainland stock exchanges after Hong Kong and London.

Hong Kong bourse counts on listing reforms to boost market in coming year after decline in IPO fundraising in 2021
South China Morning Post
With three new listing policies coming into effect this week, bourse operator Hong Kong Exchanges and Clearing (HKEX) is confident of a stronger outlook in the next year, even after 2021 saw a decline in initial public offerings, according to analysts. Effective January 1, Asia’s third largest stock market will allow listings of so-called blank cheque companies, widen the pool of overseas companies that qualify for listing, and increase profit thresholds for new listings.

Shenzhen Stock Exchange Inked MOU With Singapore Exchange On SZSE-SGX ETF Product Link China – Singapore Capital Market Cooperation Further Deepened
Recently, the Shenzhen Stock Exchange (SZSE) and the Singapore Exchange (SGX) remotely signed the Memorandum of Understanding (MOU) on SZSE-SGX exchange-traded fund (ETF) Product Link. Ms. Sha Yan, President & CEO of SZSE, and Mr. Loh Boon Chye, Chief Executive Officer of SGX, signed the memorandum on behalf of the two exchanges.

Borsa Istanbul Announces Constituent Changes To The BIST-KYD Fund Indices For The First Quarter Of 2022
Referring to article 3.3. of the BIST-KYD Indices Ground Rules, constituent changes to the BIST-KYD Fixed Income Fund Index and BIST-KYD Equity Fund Index for the first quarter of 2022 are determined.

Opdenergy registers its first Green Commercial Paper Programme with MARF for 100 million euros
BME’s Fixed Income Market, MARF, today admitted the first Green Commercial Paper (CP) Programme to trading from Opdenergy Holding. This new programme will allow the company to access qualified investors over the next year to diversify its sources of financing via the issuance of CPs with a maximum outstanding balance of 100 million euros.

Block Trade Eligibility for all Options on E-mini Nasdaq-100 Index® Futures Contracts – CME
Amendments to Convert Floating Rate from LIBOR to SOFR for all Treasury Invoice Swap Spreads – CME
Availability of a Bitcoin Futures and Micro Bitcoin Futures Intercommodity Spread on CME Globex – CME
Holiday Processing for Large Trader Files 2022 – CME


China’s Ant Group to close world’s largest mutual aid platform next month amid regulatory scrutiny
South China Morning Post
Ant Group, the fintech company affiliated with e-commerce giant Alibaba Group Holding, said it will close its Xianghubao mutual aid platform next month, amid Beijing’s ongoing regulatory crackdown on financial services in the technology sector. Xianghubao – which means “protect each other” in Chinese – will cease on January 28 next year, according to an Ant Group notice sent to users on Tuesday.

The Metaverse Isn’t Quite Ready for You, but Your Investment Is Welcome; It could pay off, much like the purchase of land in Manhattan 250 years ago
Laura Forman – WSJ
In a 24-hour experiment with a virtual reality headset, Wall Street Journal personal tech columnist Joanna Stern described the metaverse last month as fractured, freaky, sometimes frightening, but also kind of fun. All in a (virtual) day’s work, she traveled, exercised and played games. As a “legless torso that glides as a ghost,” she even met with her editor. In real life, she nursed a headache.

Zoom Snaps up Luminal’s Assets to Advance Virtual Events
Video-conferencing platform Zoom is snapping up assets from event production platform Liminal, a startup that was largely developed on Zoom’s software development toolkit (SDK). The announcement came in a company blog post on Tuesday (Dec. 28) which also notes that Andy Carluccio and Jonathan Kokotajlo, two of Liminal’s co-founders, will be moving over to Zoom.

Interview with Elena, Head of R&D
As the new Head of R&D at Devexperts, Elena Alshevskaya is eager to lead a new direction for the department. In this issue of dxSpotlight, Elena will be sharing with us her professional journey, her take on the remote working revolution, and why she describes herself as someone who creates order out of chaos.

The TRADE predictions series 2022: technology; This year has brought with it a wave of technological developments while the ongoing pandemic has stressed the need for interoperability and desktop consolidation, these participants don’t see this trend going away any time soon.
The Trade
Over the last decade, several trends in the global financial services industry have spurred firms to work together with FinTech providers in order to modernise their operations and optimise their front-, middle-, and back-office functions. The pandemic has been a catalyst for this mutualisation and shone a new light on the benefits it can bring, especially for critical functions, such as post-trade processing.


Biden Signs NDAA Relying on Voluntary Private-Sector Cybersecurity Collaboration
Mariam Baksh – Nextgov
President Joe Biden on Monday signed into law the National Defense Authorization Act of 2022 which codifies an approach to cybersecurity that depends on the decisions of private-sector entities to protect the bulk of the nation’s critical infrastructure.
The NDAA has become the go-to legislative vehicle for efforts to manage the federal government at large, and to regulate the private sector on cybersecurity issues.

Hillicon Valley — Cybersecurity’s breakout year
Maggie Miller, Chris Mills Rodrigo and Rebecca Klar – The Hill
Lawmakers zeroed in on cybersecurity like never before in 2021, responding to a variety of incidents including ransomware attacks on Colonial Pipeline and major nation state-backed attacks like the SolarWinds hack.
And in breaking news on Tuesday, the gaming development group behind League of Legends agreed to pay $100 million to settle a harassment suit brought against the company by thousands of female employees.

2021 in Review, Part 1: 5 Cybersecurity Topics that Made News
Bruce Lynch – Security Boulevard
It’s been another chaotic year in cybersecurity, as protecting web applications and stopping sensitive data breaches remain top-of-mind issues and continue to generate headline news.
As 2021 comes to a close, cybersecurity and all the industries it serves is dealing with an unprecedented zero-day vulnerability in the form of CVE-2021-44228 – just 12 months after the Sunburst attack that made global news. While there were many topics that garnered attention this year, here are five that you should follow into 2022.


Elon Musk reveals who bitcoin’s mysterious creator Satoshi Nakamoto might be
Shalini Nagarajan – Business Insider
Elon Musk seems to agree with many that hyper-secretive cryptocurrency expert Nick Szabo might be Satoshi Nakamoto, the mysterious creator of digital currency bitcoin “You can look at the evolution of ideas before the launch of bitcoin and see who wrote about those ideas,” Musk told artificial-intelligence researcher Lex Fridman in a podcast published Tuesday, when asked what he thinks about Nakamoto’s real identity.


Harris Quietly Taps Wall Street, Tech CEOs for Advice on Policy
Justin Sink – Bloomberg
Vice President Kamala Harris has increasingly turned to corporate executives from Wall Street and Silicon Valley to serve as informal advisers, policy allies and political boosters as she grapples with a sprawling and at times intractable policy portfolio.

Biden Eyes Raskin as Top Fed Banking Regulator; White House slate of Fed picks could also include two academic economists
Andrew Ackerman and Nick Timiraos – WSJ
President Biden is considering Sarah Bloom Raskin for a top role at the Federal Reserve as part of a slate of three nominees for central bank board seats, according to people familiar with the matter. The administration is eyeing Ms. Raskin, a former Fed governor and onetime Treasury Department official, to become the central bank’s vice chairwoman of supervision, the government’s most influential overseer of the U.S. banking system, the people said.

Crypto Won’t Solve Financial Inequality, Senator Warren Says
Vincent Lee – Bloomberg
Cryptocurrencies are not a real path toward financial equality, Democratic Senator Elizabeth Warren said on Tuesday, criticizing the industry for the fact that Bitcoin is even more closely held by the wealthy than dollars. “We need real solutions to make the financial system work for everyone, not just the wealthy,” Warren, who represents Massachusetts, said in a tweet.


CFTC Charges New Jersey-Based Entities and Individuals With Multi-Million Dollar Forex Fraud
The Commodity Futures Trading Commission announced today that it has filed a civil enforcement action in the U.S. District Court for the District of New Jersey against WorldWideMarkets, Ltd., TAB Networks, Inc., Thomas Plaut of Saddle River, N.J., and Arthur Dembro of New York, N.Y., charging them with fraud and other violations.

Deutsche Bank AG : BaFin sets fine
The Federal Financial Supervisory Authority ( BaFin ) imposed a fine of EUR 8.66 million on Deutsche Bank AG on December 28, 2021 . As a supervised contributor to EURIBOR, the bank temporarily did not have effective preventive systems, controls and strategies within the meaning of Article 16 (2) a) of the European Reference Values Regulation (Regulation ( EU ) 2016/1011).

BaFin publishes circulars on requirements for its own estimates of the loss rate in the event of default
The BaFin has on December 29, 2021 Circular 16/2021 published, the more demands on their own estimates of loss given default ( loss given default – LGD as part of) IRB includes approach. With the IRB approach, institutions use internal ratings (Internal Ratings Based Approach) to determine the capital requirements for their credit risk.

Post-trade transparency: BaFin continues to allow the later publication of transactions
Transactions in financial instruments may be published later still than the European financial market regulation ( Markets in Financial Instruments Regulation – MiFIR ) prescribes principle. The BaFin extended its corresponding regulations by six months to July 3 2,022th

Hargreaves Lansdown data push raises regulatory questions; Investment platform presses regulator to review definitions of guidance and advice
Joshua Oliver – FT
Hargreaves Lansdown is pushing UK regulators for a freer hand to use big data to target customers with personalised messages as the investment platform steps up efforts to guide clients in their investing decisions. The UK’s largest investment platform said the “rigid boundary” that defines regulated financial advice is making it harder to deploy newly-developed data tools to help its 1.6m customers with more general guidance, which doesn’t qualify as formal advice.

SEC Charges Financial Company and Its President with Engaging in Fraudulent Schemes to Boost Stock Price
The Securities and Exchange Commission today charged Medallion Financial Corp., a Delaware company headquartered in New York, NY, and its President and Chief Operating Officer, Andrew Murstein of New York, NY, with illegally engaging in two schemes in an effort to reverse the company’s plummeting stock price.

FINRA Announces Update of the Interpretations of Financial and Operational Rules
FINRA is updating the imbedded text of Securities Exchange Act (SEA) financial responsibility rules in the Interpretations of Financial and Operational Rules to reflect the effectiveness of amendments the Securities and Exchange Commission (SEC) adopted1. The updated imbedded text relates to SEA Rules 15c3-1, 15c3-1a, 15c3-1b, 15c3-1d, 15c3-1e, 15c3-3, 15Fi-1 through 15Fi-5, 17a-3, 17a-4, 17a-5, 17a-11 and 18a-3. FINRA is also making available related updates of the Interpretations of Financial and Operational Rules that have been communicated to FINRA by the staff of the SEC’s Division of Trading and Markets (SEC staff). The updated interpretations relate to SEA Rules 15c3-1, 17a-3, 17a-4 and 17a-5.

Update for firms on PRIIPs RTS Article 18 and related rules
As part of the Financial Services Act 2021, Parliament legislated to extend the Undertakings for the Collective Investment in Transferable Securities (UCITS) exemption in The Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation (as enacted in retained EU law) by 5 years – from 31 December 2021 to 31 December 2026. This extension means that UCITS funds offered to UK retail investors can continue to supply either a PRIIPs key information document or a UCITS key investor information document.

Anita Angelovska Bezhoska: Payments in the digital era – inside out
Speech by Ms Anita Angelovska Bezhoska, Governor of the National Bank of the Republic of North Macedonia, at the 13th Conference on Payments and Market Infrastructures, jointly organised by the National Bank of North Macedonia and the Netherlands Bank, Ohrid (digitally), 9 December 2021.

Michael Debabrata Patra: Financial inclusion empowers monetary policy
Keynote address by Dr Michael Debabrata Patra, Deputy Governor of the Reserve Bank of India, in the project on Financial Inclusion, a joint initiative by the Indian Institute of Management Ahmedabad (IIMA), Institute of Rural Management Anand (IRMA) and Centre for Innovation, Incubation and Entrepreneurship (CIIE), organised by the Indian Institute of Management, Ahmedabad, 24 December 2021.

Investing and Trading

A Lavish Tax Dodge for the Ultrawealthy Is Easily Multiplied; Once aimed at small businesses, a 1990s-era tax break has become a popular way for Silicon Valley founders and investors to avoid taxes on their investment profits.
Jesse Drucker and Maureen Farrell – NY Times
This is the story of the incredible cloning tax break. In 2004, David Baszucki, fresh off a stint as a radio host in Santa Cruz, Calif., started a tiny video-game company. It was eligible for a tax break that lets investors in small businesses avoid millions of dollars in capital gains taxes if the start-ups hit it big.

Cash Floods Municipal-Bond Market; Tax breaks and stimulus help investors leave behind worries about Covid-19-related defaults
Heather Gillers – WSJ
Investors have poured more money into municipal bond funds so far this year than they have in decades, driving borrowing to fund new bridges, sewers and other state and local projects to a second-straight 10-year high.

Hong Kong Stocks on Track for Worst Year in a Decade; Pummeled by China’s regulatory crackdowns, the Hang Seng Index is among the world’s worst-performing major markets in 2021
Elaine Yu – WSJ
Stocks in Hong Kong have taken a battering in 2021, with China’s regulatory crackdowns helping to put the city’s flagship equity index on course for its biggest loss in a decade. Hong Kong is among the worst-performing major markets in the world this year, thanks partly to official pressure on sectors such as e-commerce, videogames, property, gambling and after-school tutoring. Some other market stalwarts, such as big insurers, Chinese banks and Hong Kong-focused real-estate firms, have also retreated this year.

CalPERS tops $500 billion in assets for the first time
Randy Diamond –
CalPERS’ market value has reached $500 billion for the first time, a new landmark for the nation’s largest pension fund. Pension plan statistics show the retirement plan reached $501.63 billion as of Monday night, following a 1.4% increase in the S&P 500 stock index and another 1.4% increase by the Nasdaq. The S&P increase took the stock index to its highest level ever.

British companies look to muscle in on US retail investing boom; The number of UK companies finding ways for their shares to be traded in America has risen sharply
Joshua Oliver – FT
A growing number of smaller UK companies are seeking to tap demand from US retail investors prepared to back fast-growing and sometimes riskier businesses. Almost 30 companies with either a headquarters or stock market listing in the UK have signed up to two major “over the counter” markets run by OTC Markets Group, a move that allows US investors to buy their shares.

Environmental, Social and Corporate Governance

Today’s widely adopted ESG ratings and net-zero pledges are mostly worthless, two pioneers of sustainable investing say
Debbie Carlson – MarketWatch
Scores of new funds are claiming to practice environmental, social and governance investing, but their managers are failing to put in the work of determining whether companies they own adhere to those standards. And that’s leading to style over substance, two long-time ESG portfolio managers said in an interview.n “The majority of investment managers that are applying ESG are simply paying money to data providers to tell them what is good ESG,” said Tony Tursich of the Calamos Global Sustainable Equities Fund (ticker: CGSIX).

Peak Carbon in China Could Come Two Years Earlier Than Planned
Bloomberg News
Carbon emissions in China could peak two years earlier than planned as the economy slows and Beijing prioritizes renewable energy, according to a leading government think tank.

Signe Krogstrup: Denmark’s first green government bonds; Introduction by Ms Signe Krogstrup, Governor of the National Bank of Denmark, to the presentation of Denmark’s first green government bonds, virtual, 16 December 2021.
Signe Krogstrup – BIS
Hello, and welcome to this investor meeting. It’s great to see so many of you. What a pity that we cannot hold the meeting in physical form. Today, we are going to talk about green bonds and the net-zero transition. I’ll start from a Danmarks Nationalbank perspective. I will then turn to the excellent cooperation with the Ministry of Finance on government debt management.


China’s Top Quant Hedge Fund High-Flyer Apologizes for Loss
Bloomberg News
China’s top quant hedge fund apologized to investors after a record slump in performance, highlighting challenges facing the industry following a period of breakneck growth.

Morgan Stanley to boost stake in China brokerage to 94%
Selena Li – Reuters
Morgan Stanley is set to increase its stake in its brokerage joint venture in China by 4.06% to 94%, an exchange filing showed on Wednesday, putting it on track to take full ownership of the business.

A 91% Asset Plunge Hits a BlackRock Fund of Sustainable EM Stocks
Sydney Maki – Bloomberg
What was once the second biggest exchange-traded fund investing in sustainable emerging-market companies just became a shadow of its former shelf. In the two days leading up to Christmas Eve, the iShares ESG MSCI EM Leaders ETF (LDEM) lost 91% of its investments, leaving its total assets depleted at just $69 million, compared to $803 million on Dec. 21. That’s the biggest two-day outflow for a developing-nation ETF this year, according to data compiled by Bloomberg.


India financial system well cushioned amidst pandemic -central bank
Swati Bhat – Reuters
Financial institutions in India have remained resilient amidst the pandemic and stability prevails in the financial markets, cushioned by policy and regulatory support, according a central bank financial stability report.

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First Read Hits & Takes John Lothian & JLN Staff Congratulations to Larry Tabb. STA announced Larry as the 2022 Dictum Meum Pactum (DMP) Award recipient. Here is a success story for you. The Greenwood Project placed four interns at Goldman Sachs this summer...

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