Treasury Calls for Large Position Reports

Jul 16, 2021

First Read

$51,556/$300,000 (17.2%)
Cliff Histed


Hits & Takes
John Lothian & JLN Staff

FIA reported its June 2021 exchange traded derivatives volume report, saying:

“Worldwide volume of exchange-traded derivatives was 5.04 billion contracts in the month of June, making it the second highest level recorded after March 2021. The June total was up 10.8% from the previous month and up 26.8% from June 2020. On a year-to-date basis, volume in the first half of the year was 28.91 billion contracts, up 32.1% from the first half of 2020. Total open interest at the end of June was 1.08 billion contracts, down 1.1% from the previous month but up 11.6% from a year ago.”

The law firm Jones Day has a webinar coming up on Tuesday, August 3, from 12 p.m. to 1:30 p.m. EDT titled “Spoofing and Disruptive Trading in the Derivatives Markets; Investigation and Trial Perspectives.” The webinar is hosted by Jones Day, Cornerstone Research, and Intercontinental Exchange and will discuss spoofing and disruptive trading in the financial markets. The program will focus on the following: How spoofing and disruptive trading practices in the markets are identified; How the Department of Justice and the Commodity Futures Trading Commission pursue spoofing and disruptive trading investigations; and How “big data” is used to prosecute and defend spoofing and other disruptive trading cases. Click HERE for more details.

The NFA is not the only regulator issuing warnings about phishing emails. Canadian regulators also issued a notice about the issue. — Mondovisione

Canadian securities regulators also published final amendments to enhance protection of older and vulnerable clients. — Mondovisione

Cliff Histed made a donation to the JLN MarketsWiki Education GoFundMe campaign yesterday, for the second time. Thank you to Cliff and all who have given and all who have yet to give. Your donations are matched by Trading Technologies. They pledged to match $20,0000 of donations and have been doing so every week. Support our efforts to preserve industry history by giving to our GoFundMe campaign.

Speaking of Trading Technologies, they have renewed their sponsorship of John Lothian News and MarketsWiki. We have added an escape clause for them in case they are acquired. Thank you to TT for your continued support. They have been a sponsor of MarketsWiki since before we launched it in 2008.

Today we have the video interview with Meaghan Dugan of ICE/NYSE for The Path to Electronic Trading video series. She wanted to be a chef, but she found a job at the Pacific Stock Exchange and never looked back. Lots of options market structure issues impacted her career.

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


After nearly a yearlong delay, Illinois Gov. J.B. Pritzker signed HB 1443 into law on Thursday, creating two state lotteries for a total of 110 additional adult-use cannabis dispensary licenses. According to a release from the governor’s office, applicants who received at least 85% of the available points in the state’s earlier application process and qualify as a social equity applicant are eligible to participate. In addition, the Illinois Department of Agriculture notified applicants who are eligible to receive one of 213 total licenses: 40 craft grow, 32 infuser, and 141 transporter. The release stated that 100% of the applicants eligible to receive licenses for craft grow, infuser and transportation are qualified social equity applicants. More details are here. ~SC


Meaghan Dugan Cooks Up a Stellar Path to Electronic Trading

NYSE executive Meaghan Dugan always worked in kitchens as a youth and had dreams of becoming a famous chef. She even earned a degree in culinary science. However, instead of donning a poofy cap for a career as a chef, she pursued a career in the markets at the Pacific Stock Exchange and wore a colorful jacket.

Watch the video »


My wild ride into the cryptosphere; How I bought a virtual horse, raced him, and got a first-hand look at the delights and dangers of NFTs
Frank Partnoy – FT
A few weeks ago, I went off to the races. Not the ones you might know, at Ascot or Churchill Downs. Instead, I signed up at Zed Run, an online horseracing platform, where I discovered just how easy it is to buy cryptocurrencies and crypto assets — and just how hard it is to get out.

***** Frank Partnoy is such a toad. Mr. Toad, but a toad.~JJL


Dogecoin creator likens cryptocurrencies to a scam run by “powerful cartel” to benefit the rich
Rachel Layne – CBS News
Dogecoin co-founder Jackson Palmer created the digital currency in 2013 as a meme-inspired joke. Five years later, its market value had soared into the billions, leading him to write at the time that cryptocurrencies had attracted “shark-like scammers and opportunists.” But the laugh now appears to be on millions of ordinary investors, the Australian entrepreneur suggested this week in a series of blistering tweets denouncing bitcoin, ethereum and other cryptocurrencies as a something resembling a mass Ponzi scheme to “extract new money from the financially desperate and naive.”

***** Oh, there is a cartel. Don’t worry about that.~JJL


The collapse of Archegos Capital Management; As the fallout of the collapse of Archegos Capital sent shockwaves across the global community, Hayley McDowell examines this tale of winners and losers as questions about the future of prime brokerage are brought to the fore.
Hayley McDowell – The Trade
In March, a drop in the share price of US media group Viacom CBS following a stock sale sparked chaos on Wall Street and one of the most dramatic collapses in the finance world. It’s an intense tale of winners and losers featuring several of the largest investment banks including Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, MUFG, Nomura, UBS and Wells Fargo that acted as prime brokers for an ill-fated client.

*****I recently commented to Hayley McDowell that it was nice to see her name on a byline. She said she had been very busy with her editing duties. Since then I have noticed more and more that her byline is showing up again, reminding us what an enterprising and prolific journalist she is.~JJL


Thursday’s Top Three
Our top story Thursday was Tim Brennan Took the Leap to a New Frontier of Trading, a John Lothian video interview in The Path to Electronic Trading series from JLN. Second was Bloomberg’s Why Wall Street Is Afraid of a Digital Dollar, about U.S. banks’ fear of a government-backed virtual currency. Third was Can Chicago thrive in a work-from-home world?, an opinion piece in the Financial Times written by a Chicagoan.


MarketsWiki Stats
26,465 pages; 234,535 edits
MarketsWiki Statistics


Lead Stories

Treasury Calls for Large Position Reports
U.S. Department of the Treasury
The U.S. Department of the Treasury is calling for Large Position Reports from those entities whose positions in the 0-7/8% Treasury Notes of November 2030 equaled or exceeded $4.1 billion as of Monday, November 16, 2020 or Monday, December 14, 2020. Entities must submit separate reports for each reporting date on which their positions equaled or exceeded the reporting threshold. Entities with positions in these notes below $4.1 billion are not required to submit Large Position Reports.

Regulators Feel Torn About Cryptocurrencies; Officials at the Federal Reserve and elsewhere debate the merits, or lack thereof, of digital assets.
Andrew Ross Sorkin, Jason Karaian, Sarah Kessler, Stephen Gandel, Michael J. de la Merced, Lauren Hirsch and Ephrat Livni – NY Times
Even crypto enthusiasts have mixed feelings about their culture and markets. So it’s no wonder that lawmakers and regulators are torn over digital assets, as developments this week made clear. Cryptocurrencies have “completely failed” to become a legitimate payment system, the Fed chair, Jay Powell, said yesterday at a Senate hearing. He added that so-called stablecoins — cryptocurrencies whose value is pegged to the dollar or another asset like gold, with the idea of making them a predictable means of exchange — are dangerously unregulated. Central banks could step in and develop digital versions of their currencies, but Powell is “legitimately undecided” about the benefits of doing so, he told senators.

Treasury Wants Large Holders of 2020 Note to Identify Themselves
Liz McCormick – Bloomberg
The U.S. Treasury Department asked holders of large positions in a 10-year note it issued last year to identify themselves, tapping rules used sporadically since the 1990s to guard against market manipulation. Anyone whose position in the 0.875% Treasury maturing in November 2030 amounted to $4.1 billion or more on Nov. 16 or Dec. 14 needs to report back to the government by July 22, according to a statement released Thursday. That was the benchmark 10-year Treasury at that point in the fourth quarter.

Wall Street Moves to Close Markets for Juneteenth in 2022; Trade association recommends that bond markets close for the full day on June 20 of next year
Alexander Osipovich – WSJ
Stock and bond markets are moving toward shutting down in honor of Juneteenth next year. The Securities Industry and Financial Markets Association recommended this week that bond markets close for the full day on Monday, June 20, 2022, in observance of the new federal holiday that falls on a Sunday next year. Juneteenth commemorates the end of slavery in the U.S.

Trade associations demand SDR delay following recent EC communication; AFME, ISDA and ISLA among trade bodies to deliver the concise message of delay the settlement discipline regime.
Jon Watkins – The Trade
Sixteen trade associations have stepped up their calls to European regulators once again to delay the February 2022 go-live of the incoming Settlement Discipline Regime (SDR), which contains the controversial mandatory buy-in rules. The latest letter to the European Securities and Markets Association (ESMA) continues a relentless string of communications demanding amendments and delays to aspects of SDR, a key part of the Central Securities Depositories Regulation (CSDR).

Jack Dorsey says Square will launch bitcoin DeFi platform; Payments company dives into hot new area of innovation in financial services
Hannah Murphy – FT
Jack Dorsey on Thursday put his mobile payments company Square at the centre of one the most talked-about areas of innovation in finance, announcing that it would launch a platform for developers to create “decentralised finance” projects built on bitcoin.

Cleaning dirty assets needs fair regulations and a ‘bad bank’ model; Public and private companies must face the same degree of scrutiny if we are to cut down on toxic holdings
Gillian Tett – FT
A dozen years ago, the phrase “bad bank” was all the rage among investors. The 2008 financial crisis had left the balance sheets of Western financial groups poisoned by subprime assets — but it was unclear how to identify or manage this. So entities such as UBS, Citi, RBS and West LB used various techniques to ringfence these toxic assets in “bad banks”. The aim was to clarify the problem, prevent the infection of the entire balance sheet — and then wind those assets down.

The LIBOR End Game
There can be no mistaking the regulatory message on LIBOR transition in recent weeks. A succession of letters, statements and reports, including those from the Financial Stability Board, the Commodity Futures Trading Commission (CFTC) and regulators at a recent Financial Stability Oversight Council meeting, all broadly made the same point: hurry up…

Benchmarking the green bond market; FTSE Russell Launch Green Impact Bond Index Series Using Refinitiv Data
FTSE Russell
The transition to a sustainable global economy requires scaling up financing of projects that deliver positive impact for the environment and society. It is estimated, for example, that $5 trillion USD to $7 trillion USD is required every year between now and 2030 to achieve the Sustainable Development Goals (SDGs). The bond market, through Green, Social, Sustainability Bonds and Sustainability-Linked Bonds, can play a crucial role in attracting and directing private capital to finance improved social and environmental outcomes.

Pimco Must Face Female Workers’ ‘Fraternity Culture’ Lawsuit
Joel Rosenblatt – Bloomberg
Allianz SE’s Pacific Investment Management Co. must face a lawsuit filed by female workers alleging the money manager operates as a fraternity that favors white males, a California judge ruled. Orange County Superior Court Judge Stephanie George rejected Pimco’s request to throw out most claims in a lawsuit filed last year by two employees at the firm’s Newport Beach office alleging the company culture marginalizes, demeans and undervalues women and that male leaders overtly favor other men regardless of their qualifications.

Morgan Stanley CEO doubles down against working from home
Lydia Moynihan – NY Post
Morgan Stanley boss James Gorman doubled down on his stance against working from home, saying there’s no substitute for schlepping into the office and toiling with colleagues in person. “I fundamentally believe the way you and I develop our career is by being mentored and by watching and experiencing the professional skills of those who came before us,” the Wall Street mogul told analysts on a Thursday earnings call.

PJ Solomon Raises Banker Salaries in Wall Street Bidding War
Gillian Tan and Daniel Taub – Bloomberg
PJ Solomon is the latest financial firm to raise salaries for bankers amid a bidding war for employees on Wall Street. The new salaries range from $100,000 for first-year analysts to $225,000 for third-year associates, Chief Executive Officer Marc Cooper said in a memo to PJ Solomon employees Thursday. A company representative confirmed the contents of the memo. The new compensation is retroactive to July 1, and will appear in staffers’ next paychecks, on July 21, according to the memo.

The Meme Stocks Can’t Fail; Also a SPAC, private credit, venture-capital matchmaking and dark web insider trading.
Matt Levine – Bloombereg
I wrote last month that “‘if you buy AMC stock it comes with popcorn’ is the greatest capital-markets innovation of the century so far,” and I meant it. AMC Entertainment Holdings Inc. needed money, to deal with debt maturities and to expand its business. It has not had a particularly great few years due to, you know, pandemic etc. Traditionally if you are a company that needs money to deal with debt maturities, and you have not had a great few years, you will have a hard time raising that money. Your cost of capital will be high. The investors who are willing to finance you will be tough, mean investors who ask for a lot in exchange for the money you desperately need.

The city with the most high-paying jobs isn’t a city — it’s remote work. Here are 6 steps to landing a WFH role you love.
Rebecca Knight – Insider
It used to be that the cardinal rule of real estate — location, location, location — was equally pertinent to job searches. Unless a big move was in the cards, candidates limited themselves to job openings within a certain radius of their homes.


U.K. Warns Covid Curbs May Return If Cases Get Out of Control
Alex Morales – Bloomberg
NHS Covid-19 app tells a record 520,000 people to self-isolate; Frazer: U.K. will look at restrictions if cases ‘unacceptable’
The U.K. held out the prospect of restoring some Covid-19 restrictions amid a surge in new cases, just three days before it plans to drop all remaining social distancing rules.

BioNTech Shot Produces 10 Times More Antibodies Than Sinovac, Study Finds
Bloomberg News
There is a substantial gap in the amount of antibodies that mRNA and inactivated vaccines can generate against the virus that causes Covid-19, according to a Hong Kong study, in the latest finding on what may have contributed to the varied outcomes following mass vaccination using different types of shots.

MRNA Vaccine Access Carves Up World Into Haves and Have-Nots
Bruce Einhorn – Bloomberg
A few facilities have a lock on world’s mRNA shot production; Nations from China to Korea, South Africa trying to catch up
The latest surge in Covid-19 cases is widening one of the biggest inequities of the pandemic era: The gap between nations that have messenger RNA vaccines and those that don’t.

Indonesia Passes Brazil With Most New Covid Cases in World
Jinshan Hong – Bloomberg
Southeast Asian nation is struggling to contain delta variant; Country reported record high of 56,757 cases on Thursday alone
Indonesia’s daily Covid-19 case count has passed Brazil’s to become the worst in the world, hitting a record 56,757 on Thursday as the highly-contagious delta variant rampages through the nation.

Long Covid defies understanding as sufferers despair; Doctors fear ‘tens of thousands’ of people could be afflicted by multiple symptoms
Sarah Neville and Clive Cookson, Nikou Asgari and Amy Kazmin – FT
Days before Britain’s first lockdown in March 2020, Claire Hastie fell ill with Covid-19. Sixteen months later she is still suffering the after effects of the disease which, at her lowest, she feared would kill her.

Covid-19 School Mandates for Masks, Vaccines Are Blocked in More States; As new cases surge and schools prepare to reopen, supporters of bans say families should be allowed to make their own choices
Lee Hawkins and Aydali Campa – WSJ
More states are blocking K-12 schools and college campuses from requiring vaccines and masking, bucking recent federal recommendations that eligible students should be vaccinated and that unvaccinated students should wear masks when in-person learning resumes in coming weeks.

Africa’s Covid Crisis Deepens, but Vaccines Are Still Far Off
Abdi Latif Dahir and Josh Holder – NY Times
Africa is now in the deadliest stage of its pandemic, and there is little prospect of relief in sight. The Delta variant is sweeping across the continent. Namibia and Tunisia are reporting more deaths per capita than any other country. Hospitals across the continent are filling up, oxygen supplies and medical workers are stretched thin and recorded deaths jumped 40 percent last week alone.

Fully vaccinated Americans may enter Canada as of mid-August
Associated Press
Prime Minister Justin Trudeau said on Thursday Canada could start allowing fully vaccinated Americans into Canada as of mid-August for non-essential travel and should be in a position to welcome fully vaccinated travelers from all countries by early September.

Exchanges, OTC and Clearing

Settlement efficiency: failure is not an option
Eurex is committed to transparent and efficient markets. Consequently, we are glad to observe the additional focus that market participants are placing on settlement efficiency in their efforts to prepare for the Settlement Discipline Regime (SDR). Settlement inefficiency can have financial impacts and other undesirable effects. But how to increase settlement efficiency? Michael Jahn, Head of Sales & Business Development at Eurex STS, answers this question in an op-ed for Securities Finance Times (issue 281).

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

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

EBS Market Integration Notice: New/Update Content
CME Group
Subject to applicable regulatory approvals, EBS Market’s Central Limit Order Book and eFix Matching Service will launch on CME Globex. You will receive subsequent notices with additional details and actions required to support the EBS Market integration onto CME Globex.

CME STP Notices: July 15, 2021
CME Group
Effective Sunday, September 19 (trade date Monday, September 20) to provide a unique binary trade number across all markets, CME Globex will add a MarketSegment specific prefix to tag 1797-OrderEventExecID on the iLink 3 Execution Report.

CME Globex Notices: July 12, 2021
CME Group
Critical System Updates
CME Globex Performance Enhancements- July 25
Petrol Index on Benchmark Administration Premium – July 25
CVOL Index on Benchmark Administration Premium – July 25
New – iLink 3 FIXP Messaging Enhancements – September 26 NEW

Opening remarks by Loh Boon Chye, SGX CEO, at the UBS Sustainable Finance Conference 2021
Thank you to UBS for inviting me to be a part of this flagship conference, and to share my thoughts on a very apt topic on corporate stewardship. As a CEO and director of several boards, I believe that board directors and senior management should see themselves as company stewards who are responsible not just for the company’s financial performance, but also its sustainable, long term future.

MaterialsXchange names new chief technology officer
John Mancine is a tech veteran of Dell Software and Peapod Digital Labs.
Andrew Carlo – HBS Dealer
MaterialsXchange (MX), the digital marketplace for lumber and construction wood products, continues to expand its leadership.
Adding to its executive team again, John Mancine is now MX’s Chief Technology Officer. Mancine began his professional software development career in the video game industry with a focus on artificial intelligence and real-time systems.


How Revolut, Wise and DarkTrace must take on WhatsApp and TikTok; UK tech firms must focus on true product differentiation and a path to profitability, writes Rupak Ghose
Rupak Ghose – Evening Standard
The lack of technology companies has been a major contributor (with Brexit uncertainty) to the FTSE100’s huge underperformance versus the US stock market. In recent days there are signs that finally, the UK technology sector is getting in on the party. There were nerves around the direct listing of Wise but that went off without a hitch.

Paytm Parent Plans $2.2 Billion IPO in India; One97 Communications boasts more than 330 million customers
Shefali Anand – WSJ
The company behind Indian mobile-payment app Paytm plans to raise up to $2.2 billion through one of India’s largest-ever initial public offerings, capitalizing on a boom in the country’s stock market.

DMA Prime partners with TORA on outsourced trading and OEMS; DMA Prime selects TORA to supplement its global market reach as part of the expansion of its outsourced dealing services.
Wesley Bray – The Trade
South African execution and prime brokerage provider, DMA Prime, has partnered with TORA to use its order and execution management system (OEMS) and outsourced trading services. The partnership follows an expansion of DMA Prime’s outsourced dealing services, which increased the need for a scalable multi-asset global execution system to meet the growth.

What Ever Happened to IBM’s Watson? IBM’s artificial intelligence was supposed to transform industries and generate riches for the company. Neither has panned out. Now, IBM has settled on a humbler vision for Watson.
Steve Lohr – NY Times
A decade ago, IBM’s public confidence was unmistakable. Its Watson supercomputer had just trounced Ken Jennings, the best human “Jeopardy!” player ever, showcasing the power of artificial intelligence. This was only the beginning of a technological revolution about to sweep through society, the company pledged.

Zoom has acquired a startup that can create real-time translations on video calls
Sandra Viñas and Qayyah Moynihan – Business Insider
Zoom has announced its decision to acquire Karlsruhe Information Technology. The German startup specializes in simultaneous translation using machine learning, according to Engadget. Karlsruhe Information Technology, also known as Kites, is made up of roughly a dozen researchers from the Karlsruhe Institute of Technology.

Nordic Capital invests in no-code data automation leader Duco; Nordic Capital invests in no-code data automation leader Duco
Investment made in partnership with the CEO and Founder with the aim to accelerate Duco’s growth and expansion
Nordic Capital today announced an agreement to invest in Duco Technology Limited (“Duco”) and acquire a majority shareholding from current investors, CME Ventures, Insight Partners and Eight Roads Ventures. Founder Christian Nentwich will remain as a shareholder and Chief Executive Officer.

Trading Platform BaFin Prohibits Unauthorised Proprietary Trading
In a notice dated 1 July 2021, BaFin ordered FXTime financial services, UK, which operates the trading platform, to immediately cease its unauthorised proprietary trading activities.


China Plans to Exempt H.K. IPOs From Cybersecurity Reviews
Cathy Chan, Zheng Li, Evelyn Yu, Yuan Gao and Ishika Mookerjee – Bloomberg
China plans to exempt companies going public in Hong Kong from first seeking the approval of the country’s cybersecurity regulator, removing one hurdle for businesses that list in the Asian financial hub instead of the U.S., according to people familiar with the matter. The exemption was outlined by officials in recent meetings with bankers, after a government statement on Saturday announcing a new review process for foreign listings prompted questions over whether it would apply to Hong Kong, the people said, asking not to be identified as the discussions are private. The Cyberspace Administration of China will vet companies to ensure they comply with local laws, but only those headed to other countries such as the U.S. will undergo a formal review, the people said.

National Cyber Security Alliance Announces Leadership Transition
Global News Wire
The National Cyber Security Alliance, the leading non-profit organization that focuses on driving cybersecurity behavior change, today announced that following nearly a three year stint as Executive Director Kelvin Coleman is stepping down from the position and will leave his post as of July 18th. The National Cyber Security Alliance board has named Lisa Plaggemier Interim Executive Director and will begin a search for internal and external candidates to fill the position on a permanent basis.

U.S. Government Launches First One-Stop Ransomware Resource at
US Justice Department Office of Public Affairs
As part of the ongoing response, agencies across the U.S. government announced new resources and initiatives to protect American businesses and communities from ransomware attacks. The U.S. Department of Justice (DOJ) and the U.S. Department of Homeland Security (DHS), together with federal partners, have launched a new website to combat the threat of ransomware. establishes a one-stop hub for ransomware resources for individuals, businesses and other organizations. The new is a collaborative effort across the federal government and is the first joint website created to help private and public organizations mitigate their ransomware risk.

The Cybersecurity 202: Another spyware company is helping authoritarian regimes snoop on their critics
Joseph Marks with Aaron Schaffer – The Washington Post
Nations that want to spy on their citizens and adversaries increasingly don’t need to develop their own hacking tools to do it. There’s a burgeoning and largely unregulated market in that technology, known as spyware. And the shadowy companies in the field have repeatedly shown they’re willing to sell to authoritarian regimes interested in tracking their critics. Microsoft and the research group Citizen Lab are pulling back the veil on one industry leader that goes by the name Candiru, as I reported. That Israeli firm helped government clients hack devices from Microsoft and other major firms to track more than 100 journalists, dissidents and human rights activists ranging from Israel, the Palestinian territories and Lebanon to Turkey, Spain and the United Kingdom.


Crypto SafeMoon’s Rules to Tamp Down Selling Raise Red Flags
Kamaron Leach – Bloomberg
Entry, exit fees of 10% designed to keep investors holding on; Manual coin burns suggest ‘manipulation risk’: London Capital
To investors hunting for the next Dogecoin, the more than 19,000% price gain that cryptocurrency SafeMoon posted in its early weeks was like catnip. Though the price of the four-month-old token has dropped since then, more than 2.4 million investors have bought it, according to its developers.

Crypto Insiders Posit Bitcoin Price Floor Around $30,000 Level
Joanna Ossinger – Bloomberg
Delta Exchange says options activity backs that support point; Bitcoin has been sliding lower in a narrow range after rout
Bitcoin has been grinding lower in a trading range just above $30,000, prompting cryptocurrency insiders to flag the round number as a potential floor for the virtual coin.

China’s Digital Yuan Trial Reaches $5.3 Billion in Transactions
Bloomberg News
Near 21 million individuals have virtual wallets, PBOC says; The central bank won’t set a timetable for official rollout
China’s digital yuan trial has reached 34.5 billion yuan ($5.3 billion) in transaction value as the central bank continues to outpace global peers in developing a virtual currency.

Ripple Labs Can Question Former SEC Official in Suit Over XRP
Chris Dolmetsch – Bloomberg
Cryptocurrency company to depose William Hinman over policy; Hinman gave speech saying Bitcoin and Ether aren’t securities
Ripple Labs Inc. can question a former Securities and Exchange Commission official about the agency’s policy decisions as the company fights a lawsuit accusing it of misleading investors about its XRP cryptocurrency, a federal judge ruled.

Crypto world faces a fateful choice; Libertarian vision of operating outside mainstream is giving way to the need to comply with regulators
Adam Samson – FT
Crypto asset companies face a stark choice: learn to live with regulators or endure their wrath. One of the main draws for hardcore advocates of digital assets is that many theoretically sit outside the reach of government and monetary authorities that oversee activities in conventional markets.

Cryptocurrency exchange Binance not licensed to sell stock tokens in Hong Kong, says markets regulator SFC
No entity in the Binance group is licensed or registered to conduct ‘regulated activity’ in Hong Kong, says Securities and Futures Commission; Hong Kong plans to bring in legislation requiring all cryptocurrency exchanges in the city to be licensed and only to offer services to professional investors
Reuters via South China Morning Post
Hong Kong’s markets watchdog on Friday said Binance, one of the world’s largest cryptocurrency exchanges, was not licensed to sell “stock tokens” in the city, products it said the exchange had offered in other markets.

Bitcoin Found a Happy Match in the Traditional 60/40 Portfolio
Michael Read – Bloomberg
Outsized gains and volatility can transform portfolio; Sharpe ratio improved by using crypto in a balanced asset mix
Bitcoin’s spectacular rallies and crashes have investors scratching their heads about whether it fits in a balanced portfolio. History shows a 60/40 allocation to stocks and bonds could be improved by some exposure to the digital asset, despite the risks. So what happens when investors take the plunge?


U.S. Warns Investors on Hong Kong, Citing China’s Pressure
Nick Wadhams – Bloomberg
Advisory reflects U.S. concern over changed landscape; World’s biggest economies in confrontation on multiple fronts
The Biden administration warned investors about the risks of doing business in Hong Kong, issuing an advisory that said China’s push to exert more control over the financial hub threatens the rule of law and endangers employees and data. A senior administration official said developments over the last year in Hong Kong present operational, financial, legal, and reputational risks for multinational firms that necessitated the advisory, issued Friday by the State and Treasury, Homeland Security and Commerce departments.

U.S. to Send 3.5 Million Doses of Moderna Vaccine to Argentina
Jorgelina Do Rosario – Bloomberg
It’s the largest donation so far to a Latin American country; Only one out of 10 Argentines is fully vaccinated amid delays
The U.S. will send 3.5 million Moderna Inc. vaccines to Argentina on Friday as part of growing donations from President Joe Biden’s administration to developing nations across Latin America, Asia and Africa.

Senate Confirms Nellie Liang to Top Treasury Post for Managing U.S. Debt; The former Federal Reserve economist will oversee U.S. fiscal policy
Kate Davidson – WSJ
The Senate confirmed former Federal Reserve economist Nellie Liang as the Treasury Department’s undersecretary for domestic finance, putting her at the forefront of efforts to manage the soaring federal debt.


Commissioner Berkovitz to Participate on the ESG Panel at the ABA Business Law Section’s Derivatives & Futures Law Committee Mid-Year Program

Why Is SEBI Reluctant to Regulate Retail Algos?
Sucheta Dalal – Moneylife
Is history repeating itself, with retail investors starting to trade algos without a regulatory structure in place? Until recently, we believed that there were two markets operating within our stock exchanges. One is what Michael Lewis described as the Flash Boys who have their servers co-located in the server farms inside stock exchanges to get the fastest access to stock quotes so that their algorithms can find the tiniest profit opportunities and execute giant trades within milliseconds based on pre-defined parameters. Then there is the other market comprising retail investors and other institutional traders who don’t need to get in and out of stocks as fast and soon as possible.

U.S. Banking Regulators Seek Comment on Third-Party Relationships Guidance; The guidance highlights the risks banks face as they increasingly rely on third parties for products and services, observers said
Mengqi Sun – WSJ
The interagency guidance on third-party relationships proposed by three banking regulators highlights the risks financial institutions face as banks increasingly rely on outside vendors and financial-technology companies for products and services, industry observers said.

ASIC finalises investigation into AMP Financial Planning ‘fees for no service’ criminal conduct
ASIC has finalised its investigation into the alleged fees-for-no-service conduct by AMP Financial Planning Pty Limited (AMP Financial Planning) arising from its Buyer of Last Resort Policy (BOLR Policy). This conduct was the subject of inquiry and evidence at the Financial Services Royal Commission.

SEC Charges Executives of Network Infrastructure Company With Accounting Fraud
The Securities and Exchange Commission today charged the former CEO and CFO of FTE Networks Inc., a network infrastructure company formerly based in Naples, Florida, with conducting a multi-year accounting fraud. This alleged scheme involved inflating the company’s revenues for certain periods by as much as 108 percent, the misappropriation of millions of dollars of company funds for personal use, and concealing the then-NYSE listed publicly traded company’s issuance of almost $23 million in convertible notes.

SEC Awards More Than $1 Million to Whistleblower
The Securities and Exchange Commission today announced an award of more than $1 million to a whistleblower whose information and assistance led to an SEC enforcement action. The whistleblower provided SEC staff with valuable information and ongoing assistance, which included participating in an interview with the staff and providing documents and additional information, saving the SEC time and resources.

ESMA publishes its third report on CSDR implementation
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has today published its CSDR Report on the provision of banking-type ancillary services by central securities depositories (CSDs).

FINRA Amends Rules 5122 and 5123 Filing Requirements to Include Retail Communications That Promote or Recommend Private Placements
FINRA has adopted changes to FINRA Rules 5122 (Private Placements of Securities Issued by Members) and 5123 (Private Placements of Securities) to require members to file retail communications that promote or recommend private placement offerings that are subject to those rules’ filing requirements.1 The new filing requirements become effective on October 1, 2021.

Workstreams updates
In response to the coronavirus (Covid-19) pandemic, we reviewed our work plans to delay or postpone activity not critical to protecting consumers and market integrity in the short term.

FCA publishes Annual Report and Accounts 2020/21
We have published our Annual Report and Accounts, which looks back on our key pieces of work throughout 2020/21.

International Online Trading Platforms Pay More Than $4 Million Following Settlement With The Ontario Securities Commission
A Panel of the Ontario Securities Commission (OSC) today approved a settlement agreement with Vantage Global Prime Pty Ltd (VGP) and Vantage International Group Ltd (VIG) for improperly selling contracts for difference (CFDs) to Ontario investors.

Investing and Trading

‘The Market Is Insane’: Cars Are Sold Even Before They Hit the Lot; A shortage of computer chips is keeping automakers from producing enough cars to meet rising demand. Used cars are scarce, too.
Neal E. Boudette – NY Times
Rick Ricart is expecting nearly 40 Kia Telluride sport utility vehicles to arrive at his family’s dealership near Columbus, Ohio, over the next three weeks. Most will be on his lot for just a few hours. “They’re all sold,” Mr. Ricart said. “Customers have either signed the papers or have a deposit on them. The market is insane right now.”

Environmental, Social and Corporate Governance

Greenland Scraps All Future Oil Exploration on Climate Concerns
Morten Buttler – Bloomberg
Decision is made for the ‘sake of our nature,’ government says; Ban may further stymie efforts to gain economic independence
Greenland dropped all plans for future oil exploration on environmental grounds, saying the price of extraction was “too high.” The island’s socialist-led government, in office since April, has made climate concerns central to its legislative program. While the decision to scrap planned exploration is a win for environmental groups, it cuts off potential investments that could have aided efforts to gain economic independence from Denmark.

Top Carbon Market Launch Won’t Help China Tame Emissions Yet
Bloomberg News
Oil, coal giants among initial traders in new national system; China’s carbon price is a fraction of rates in Europe’s market
China’s national carbon market opened with a flurry of trades that sent prices surging, yet it’ll be years before the system helps the top polluting nation curb its emissions.

BoJ offers zero-interest loans to banks that invest in emissions reduction; Lenders can reduce amount of deposits with central bank that are subject to negative interest rate
Robin Harding – FT
The Bank of Japan will offer zero-interest loans to lenders that finance climate change projects as it becomes the latest central bank to act on carbon emissions. Under the new scheme, expected to launch before the end of the year, banks will also be able to reduce the amount of deposits with the BoJ that are subject to a negative interest rate.

China’s carbon market scheme too limited, say analysts; Only the energy sector is included in trading this year, with other industries expected to be added in future
Christian Shepherd – FT
China has launched the world’s largest carbon market in what analysts say is a cautious and limited attempt by the planet’s biggest polluter to cut carbon dioxide emissions.

Exxon and Shell join Scottish carbon capture project; Large-scale CCS initiative Acorn now involves most of the big oil and gas groups in the North Sea
David Sheppard – FT
The Acorn carbon capture and storage project in north-east Scotland has signed provisional deals with customers including ExxonMobil, Royal Dutch Shell and a company backed by Kuwait’s sovereign wealth fund, bringing together some of the largest operators in the UK North Sea.

The activist antidote to ESG guff; A new hedge fund is more effective than PwC’s 100,000-strong army
Tom Braithwaite – FT
PwC made a splashy announcement last month. The accountancy firm said it would invest $12bn and hire 100,000 staff to help companies “create a virtuous circle between earning trust and delivering sustained outcomes”.


iShares ETFs Surpass $3 Trillion in Assets
Shanny Basar – MarketsMedia
BlackRock’s exchange-traded fund franchise, iShares, has reached more than $3 (EUR3.5bn) trillion in assets under management and growth is expected to accelerate over the coming decades.

Demand for loan ETFs ‘skyrockets’ as inflation worries intensify; Niche sector’s assets almost double in six months
Steve Johnson – FT
Demand for exchange traded funds investing in senior loans has rocketed this year as investors hunt for respite from rising inflation. A net $7.3bn has been pumped into the sector so far this year, according to CFRA Research, almost doubling its asset base to $16bn.

Deutsche Bank’s Spanish mis-selling scandal widens; Internal investigation is examining as many as 100 cases tied to the sale of currency derivatives
Olaf Storbeck, Stephen Morris and Daniel Dombey – FT
Deutsche Bank may have mis-sold foreign exchange derivatives to more than 50 companies in Spain, suggesting the scope of a scandal that has already led to the exit of two senior bankers is wider than previously thought, according to people familiar with the matter.

Goldman Sachs launches its first actively managed ETF; Wall Street bank will invest its own capital in climate-friendly exchange traded fund
Chris Flood – FT
Goldman Sachs has launched its first actively managed exchange traded fund, which will target climate-friendly companies as part of a push by the Wall Street bank to strengthen its presence in the rapidly expanding $9tn ETF industry.

Hedge Funds Short ESG Market Darling Credito Real; Payroll lender won over foreign
investors by promising to lend to Mexico’s underbanked poor, but some now question its financial reporting.
Matt Wirz – WSJ
Mexico’s largest payroll lender has had a tough year. Wall Street short sellers are betting it’s going to get worse. Credito Real SA CREAL 4.55% B de CV raised money from bond funds and the U.S. government in recent years, using its status as a lender to Mexico’s poor to tap into the booming trend of socially conscious investing. Hedge funds including Millennium Management LLC and Bybrook Capital LLP have questioned the company’s accounting and wagered that prices of its roughly $2 billion of bonds will tumble, according to people familiar with the matter. Millennium and Bybrook declined to comment

Goldman Sachs, JP Morgan forge ahead with hedge funds units after record balances; The two US banks have been relatively unscathed by the blow-up of hedge fund Archegos Capital in March, which resulted in losses of over $10 billion for Wall Street.
Joe Parsons – The Trade
The prime brokerage units of Goldman Sachs and JP Morgan are gathering momentum through increased market share after posting record balances with their hedge fund clients. Goldman Sachs reported revenues of £815 million from equities financing in the second quarter, as a result of record average hedge fund balances in the prime brokerage business.

Goldman Sachs launches an ESG ETF with a go-anywhere, any-size approach
Debbie Carlson – MarketWatch
A new ETF aims to stand out in a crowded field. There are “global problems that are being addressed by all companies around the world,” fund manager Alexis Deladerrière says.


BIS Seizes Gold Jewellery Bearing Spurious Hallmark from Classic Karat Assay in Andheri
Bureau of Indian Standards (BIS) officials have seized 714 grams of gold jewellery bearing spurious BIS Hallmark during its search and seizure operation at Andheri in Mumbai.

African Swine Fever Spreads From Wild Boar to German Farm Pigs for First Time
Stefan Nicola and Megan Durisin – Bloomberg
Disease had previously been confined to wild boar near Poland; Discovery may be blow in bid to reopen pork export markets
Germany confirmed cases of African swine fever at two pig farms, the first time the disease has spread from wild boars in the country and a potential further blow to exports from Europe’s top producer. ASF — which is deadly to pigs — was found in Brandenburg near the Polish border. About 200 animals will be culled at two locations after a laboratory confirmed the cases, Brandenburg’s consumer protection ministry said. Veterinary authorities are on site to try to contain the outbreak.

How Defaults in China Are Reshaping Its Credit Market
Bloomberg News
After three record years of bond defaults, Chinese policy makers rushed when the pandemic hit to prevent another wave of missed payments. Now they are taking advantage of a strengthening economy and stable financial markets to take a tougher stance with indebted giants such as China Huarong Asset Management Co. and China Evergrande Group — firms that had been considered “too big to fail.” The result has been a repricing of risk in China’s credit markets that should discourage the kind of debt-fueled expansion that not only threatens the financial system but could also weaken President Xi Jinping’s grip on power.

Hundreds still missing after floods devastate western Germany; Death toll rises to 93 in one of country’s worst natural disasters for years
Guy Chazan and Erika Solomon – FT
German emergency services stepped up their search for hundreds of people who are still missing after the worst flooding in the country’s postwar history caused 93 deaths and left a trail of devastation in its wake.

Chinese regulators swoop on Didi offices to conduct security probe; State spy ministry and 6 other agencies place investigators inside ride-hailing group’s offices
Yuan Yang – FT
China’s powerful state spy agency and six other government departments have taken the unusual step of stationing investigators in the offices of Didi Chuxing to conduct a security probe of the ride-hailing group.

State Street, First Abu Dhabi Bank partner to offer custody options
Christine Williamson – Pensions & Investments
State Street Corp. and First Abu Dhabi Bank will share custody duties for institutional investors in the Middle East and North Africa, the two firms said in a joint news release Monday.

John Lothian Newsletter

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Past JLN Newsletters

The Spread – July 30, 2021

The Spread – July 30, 2021

Earnings season in full bloom; Options lead year-to-date derivatives volume; Robinhood’s IPO; John gets real with Get Real VR: Conflicting factors underpin volatility; Cboe cleared for fall European competition; and the Cboe Options Institute’s Kevin Davitt talks about vega in this week’s “Term of the Week.”

The Four Biggest Ways That Robinhood Changed Investing

The Four Biggest Ways That Robinhood Changed Investing

First Read $51,906/$300,000 (17.3%) ++++ Options Continue to Lead Derivatives Volume Uptrend, but Q2 Lags, FIA Data Show Suzanne Cosgrove - John Lothian News Global futures and options volumes continued to trend higher in the first half of 2021 compared to both 2020...

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