The John Lothian Daily Update is a podcast turning the daily JLN hits and takes comments, our original content and the stories and quips in the top box of First Read into a daily podcast.
Hits & Takes
The new CME Group micro Treasury futures contracts are not the basis point futures I have suggested, but they are very close and maybe better. Certainly the micro name will enhance their popularity. More importantly, they will give traders and hedgers a more precise way of managing their interest rate risk. That is a key element of the micro contracts. One reason micros work so well is because commission rates have crashed to near zero in the last 40 years. This type of hedging would have been difficult during the years when commissions were fixed. When I started in the business in the early 1980s, some commissions were as high as $125 per round turn. That would negate much of the value of the micros. However, exchange fees are now the big issue where the battle is being fought with the recent disruptive fee schedule from newly announced Fair Exchange, or FairX
The other Eris, the CME Group Eris, saw its swap futures trade over 100K contracts in a day, trading 105,925 on June 8. That is $10 billion in notional value and sets a new volume record. Also, front-month open interest has more than tripled since early September 2020.
The LME will reopen the Ring on September 6, 2021. This date has been chosen to provide certainty and allow forward planning, on the basis that the London Metal Exchange’s existing vaccine criteria is expected to have been met, with adequate time allowed to ensure vaccine efficacy.
Cryptocurrency mining may not be green, but some is brown. Farmers are now using manure to power crypto mining operations, according to a MarketWatch report. — MarketWatch
BIS also thinks bitcoin assets are the equivalent of manure. A proposal put forward on Thursday by the Basel Committee on Banking Supervision would require banks to hold regulatory capital at a rate of 1,250% of the norm, or 100% of the value of the bitcoin held on their books. — MarketWatch
My LinkedIn news feed has shown several interns at industry firms and institutions give a shout out to starting their internship. It is nice to see these young people so excited to come into the industry, even if just for an internship.
The Hoff wants you to get vaccinated. David Hasselhoff, the popular Baywatch actor, has been recruited by health authorities to encourage citizens to get vaccinated. — https://on.mktw.net/2RGAAwd|MarketWatch]]
There were no new donations to the JLN MarketsWiki Education GoFundMe campaign. Yesterday I interviewed Doug Harris for The History of Financial Futures and The Path to Electronic Trading series. Harris, who was recently inducted into the FIA Futures Hall of Fame, was the general counsel for JP Morgan Futures when it was first set up. He later worked for the OCC, the Office of the Comptroller of the Currency, and helped advance the cause of exchange traded derivatives there on behalf of banks. And he was the general counsel for BrokerTec Futures Exchange, a defunct organization that Harris says accomplished its goals of lowering fees, engendering cross margining and moving markets to an electronic trading format.
Have a great day and stay safe and treat people the same way you want to be treated: with respect, equality and justice.~JJL
ISDA plans to hold the second of its virtual Derivatives Trading Forum series on Tuesday, June 29. The session will focus on changes to the derivatives market structure, regulation and trading practices, including responses to recent market events like Brexit and the pandemic. CFTC Commissioner Dawn D. Stump will be among the speakers. Information on registration is here. ~SC
Bitcoin Put in Highest Risk Category in Bank Capital Proposal
Silla Brush – Bloomberg
Global regulators consulting on 1,250% risk weight for crypto; Financial firms are starting to build crypto trading business
Banks will face the toughest capital requirements for holdings in Bitcoin and other cryptoassets under global regulators’ plans to ward off threats to financial stability from the volatile market. The Basel Committee on Banking Supervision said on Thursday that the banking industry faces increased risks from cryptoassets because of the potential for money laundering, reputational challenges and wild swings in prices that could lead to defaults. The panel proposed that a 1,250% risk weight be applied to a bank’s exposure to Bitcoin and certain other cryptocurrencies. In practice, that means a bank may need to hold a dollar in capital for each dollar worth of Bitcoin, based on an 8% minimum capital requirement.
****** If this is what banks are going to have to do, what should clearinghouses have to do?~JJL
Marex cancels London listing; Broker’s move sparks concern investors may be increasingly cautious over companies coming to market
Philip Stafford – FT
Broker Marex has pulled its planned listing, raising concerns that investors may be growing more cautious on new companies coming to the stock market. The London-based broker, controlled by two former Lehman Brothers investment bankers following a private equity buyout in 2010, disclosed its decision late on Tuesday evening.
***** The suspense is killing me.~JJL
France is sending a second Statue of Liberty to the US
Xiaofei Xu and Lorraine Poupon – CNN
New Yorkers have a surprise gift to look forward to for this Independence Day: a second Statue of Liberty sent by France. This new bronze statue, nicknamed the “little sister,” is one-sixteenth the size of the world-famous one that stands on Liberty Island. On Monday, during a special ceremony, the smaller sibling was lifted and loaded into a special container at the National Museum of Arts and Crafts (CNAM) in central Paris, where it has been installed since 2011 in the museum’s garden. It will be erected on Ellis Island, just across the water from the original, from July 1 to July 5. The statue, over 450 kilograms (992 pounds) in weight and just shy of 10 feet tall, was first made in 2009. It is an exact replica of the original 1878 plaster model preserved by CNAM.
*****You can buy as many Statues of Liberties as you want in shops near Times Square in New York.~JJL
If COVID-19 trends continue, it could be years before virus is controlled: PAHO
Julia Symmes Cobb – Reuters
If the spread of COVID-19 continues at current rates it will be years before the virus is controlled in the Americas, the Pan American Health Organization (PAHO) said on Wednesday, as it called for countries to share excess vaccine doses.
*****Guess what? The Covid-19 pandemic is as bad as it has been in some countries in Pan-America. And guess what else? If we don’t stop it everywhere, it won’t go away. ~JJL
Wednesday’s Top Three
Our most clicked story on Wednesday was Bloomberg’s The Fed Is Paying 0.00%. Such a Deal! Depositors Are Flocking. Second was, for the fourth or fifth time in the top three, A former head of macro strategy at legendary investment firm Citadel lays out the 5 key qualities he believes makes a great trader — and provides a rare outlook on the future of hedge funds, from Business Insider. Third was Chuck Mackie’s Crypto Connection 2021 – Day One: Three takeaways from Tabb Forum’s crypto conference, at Medium.