January 15, 2021
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Top Stories
Major clearinghouses are reviewing whether to shift trillions of dollars in interest-rate derivatives out of Libor and into alternative benchmarks weeks before Libor's official end. LCH and CME Group are talking with clients about Libor exit strategies.
Full Story: Bloomberg (1/14) 
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Wall Street is bracing for tough regulation as expectations grow that President-elect Joe Biden will nominate Gary Gensler to lead the Securities and Exchange Commission. As chair of the Commodity Futures Trading Commission, Gensler sought to rein in derivatives trading with aggressive rulemaking and enforcement actions.
Full Story: Bloomberg (1/14),  The New York Times (1/13),  The Wall Street Journal (1/12) 
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Industry Developments
LCH reported the largest variation margin call on record during Q3 2020 when a single clearing member triggered a €6.2 billion VM call. LCH has revised its worst-case same-day payment obligation estimate due to a participant's collapse to €26.3 billion, up 39% year on year.
Full Story: Risk (subscription required) (1/13) 
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Some 30 million equity options contracts on average traded on US exchanges each day in 2020, up more than 50% from the year before, and that figure has risen to beyond 40 million per day in recent weeks. With technology making it easier for retail investors to purchase options, the flood of trading shows no signs of abating.
Full Story: The Economist (tiered subscription model) (1/16) 
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On Jan. 11 CME Group delisted its CSX Coal and Powder River Basin Coal futures and options, the last contracts available for trading US thermal coal. According to S&P Global Platts data the last time any of the contracts had any open interest was December 2018.
Full Story: S&P Global Platts (free registration) (1/13) 
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Trading of the first centrally cleared bitcoin exchange-traded product, the BTCetc Bitcoin Exchange Traded Crypto, has surged almost as high as that of leading mainstream ETFs amid the cryptocurrency's recent rally.
Full Story: Financial Times (subscription required) (1/14) 
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Derivatives and education firm OSTC plans to open a Hong Kong office in order to expand into China during 2021, according to OSTC chief executive Lee Hodgkinson. "Greater China represents a significant opportunity for OSTC, particularly as the futures market is maturing and barriers are being lowered for overseas investors," Hodgkinson said in a statement.
Full Story: Futures & Options World (subscription required) (1/14) 
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Regulation and Enforcement
The UK faces a struggle to secure full access to the EU, despite ongoing discussions, City of London leaders have told lawmakers. They cite the UK's indication it will diverge from EU financial rules, while the EU wants assurances it will not.
Full Story: Reuters (1/14) 
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Federal Reserve Chairman Jerome Powell told a webinar that the Fed's regulatory work on stablecoins is a "very high priority" because they "could become systemically important overnight." Regarding the establishment of a central bank digital currency, Powell said the Fed is "determined to do this right rather than quickly, and it will take some time -- measured in years rather than months."
Full Story: The Block (1/14),  Finance Magnates (1/15) 
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The Office of the Comptroller of the Currency has formalized a rule that prohibits banks from refusing to offer loans or other services to firms in potentially controversial industries. The banking industry largely opposes the rule, finalized shortly before Brian Brooks' departure as acting comptroller of the currency.
Full Story: The Wall Street Journal (1/14),  CNBC (1/14),  American Banker online (subscription required) (1/14) 
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FIA News
Take advantage of online courses from FIA Training to build a culture of compliance at your organization. Market Conduct Fundamentals provides an introduction to the social and commercial importance of high standards of market conduct and the fundamentals of exchange rules. Exchange Trading & Regulatory Fundamentals for Electronic Traders covers how the central limit order book works, trader IDs, order types and exchange rules related to pre-execution communications, position limits, test trades, self-match trades, EFRPs and block trades. Get started with these courses and then build your knowledge with our exchange-specific courses. Learn more and request a demo at FIA.org/Training.
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Editor's Note
SmartBrief will not publish Monday
In observance of Martin Luther King Jr. Day in the US, SmartBrief will not publish Monday. Publication will resume Tuesday.
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