They’re still not grasping markets, are they?

Brussels has extended London’s lucrative clearing rights until 2025 in a significant backdown by the European Union and a post-Brexit boost for the City of London.

Mairead McGuinness, the financial services commissioner, said the European Commission will allow banks and money managers based in the EU to clear trades in London until June 2025.

Folks do stuff where it’s convenient to do stuff. So why would you demand that they do it somewhere else?

Calling detail focused folks

Several companies have faced criticism for not buying energy in advance, putting their business at risk through exposure to volatile costs on the spot market.

Well, yes, OK. Shoulda hedged, we get it.

Now, the task is. There will be those who insist upon this point and they’ll be right too. Or at least that you can’t complain if you go bust having not hedged.

Great, But what we’re looking for is a commentator, or NGO, or general idiot, who makes this argument and who has also been vocally in favour of the Robin Hood Tax, or FTT. Because of course the aim of the FTT is to kill that idle speculation which allows folks to hedge. So, we’re on the look out for someone shameless enough – or stupid enough – to try to make both arguments.

The P³ is edging toward it but that’s too easy. We need someone it’s worth making fun of for doing it.

Penny ante pissery

The omicron variant of Covid has triggered a wave of bets against the pound amid fears that the Bank of England will move slowly to tackle soaring inflation fuelled by the energy crisis.

Wagers on a slide in sterling reached a net total of £3.6bn in the run-up to Christmas, the highest level since October 2019 when Parliament was wracked by a series of crunch votes on Brexit and £4.5bn was positioned against the currency.

The London FX markets trade some £2 trillion a day. Sure, not even a majority of that concerns sterling at all but still. £3.5 billion is penny ante pissery stuff.

That’s before we get to the truth that absolutely every position is bear – because there are two sides to every position so there must be a bull and bear each time.

Efficient banking

Maybe too efficient:

Santander is racing to reclaim £130m after tens of thousands of customers woke up to a surprise bonus in their accounts on Christmas Day.

The bank is hoping to recover the cash from rivals after about 75,000 people and businesses wrongly received their wages or supplier payments for a second time on December 25.

Well, that batch of payments went through easily enough. Let’s do it again!

As to racing etc. Well, they do actually know where it’s gone, don’t they?


Energy suppliers are seeking to tie customers to fixed deals costing as much as £4,000 a year, as ministers face growing warnings over “untenable” proposed rises to the price cap this spring.

A 12-month fixed deal for a typical household now costs an average of almost £2,500, according to data from comparison website uSwitch.

That is £500 more per year than the £2,000 level that Ofgem, the energy regulator, is expected to increase the cap on variable tariffs to in April.

Ovo Energy, the UK’s second-biggest supplier, is offering a fixed-rate deal worth just under £4,200, according to the data.

Certainty – a cap on costs even – costs money.

Someone, somewhere, has to take that risk after all. And they’ll want to be paid for doing so.

As it happens we’ve got such a system. Futures and options. Not entirely worthwhile for the single retail consumer but a firm can do it. Thing is, you need lots of liquidity, lots of speculators, so that you can transfer that risk.

Fun how the standard lefty shout is that we must tax liquidity in speculative markets so as to make risk transference more expensive, isn’t it?

Echoes, echoes

The publisher of the Daily Mirror faces an intervention by the Pensions Regulator after refusing demands from its retirement scheme to make larger contributions to address a substantial funding deficit.

That this should happen at the same time as the Ghislaine trial, eh? Still, at least time they seem to have noticed…..

Who worked this out?

The Bank of England is the second-largest keeper of gold in the world, with enough to cover the entire country in gold leaf.

This is about Venezuela getting, or not getting, – or even which Venezuelan gets – the gold from the BoE.

Now think a little differently. Imagine that we had our own Maduro or Chavez. Red Ken, Corby or the Lord High Tax Denouncer. Who thinks that other peoples’ gold might still be in the BoE to be allocated?

Imagine not being able to finance an online food company in the current climate

Christmas deliveries for thousands of customers are at risk after Farmdrop, the upmarket grocery website, stopped trading.

The company has told its reported 10,000 customers on Thursday that it is closing permanently.

Deliveries have now stopped. Farmdrop’s closure risks disrupting festivities as many customers are likely to have ordered their Christmas dinners through the website.

The business has logged a notice of intention to appoint administrators at the High Court, typically a precursor to an insolvency process, after it failed to raise emergency cash.

Given current investing fancies you’ve really, really, got to have a dog on your hands to not gain finance:

Founded in 2012 by Ben Pugh, a former stockbroker at Morgan Stanley, Farmdrop had been backed by high-profile investors including Atomico, the London VC fund founded by Skype co-founder Niklas Zennström, and Zoopla founder Alex Chesterman.

Seriously, should be able to gain cash if you’ve got that roster.

It posted sales of £11.8m in its most recent set of accounts, up from £5.4 in 2019, and narrowed its lossed from £11m to £9m.

Ah, it was a right dog. The problem with having investors who know what they’re doing is that your investors know what they’re doing….

If inflation is treated as permanent then it will be temporary

Interest rates are expected to quadruple within months after the Bank of England put up borrowing costs for the first time since Covid hit in a scramble to stave off runaway inflation.

Threadneedle Street’s surprise decision to lift the Bank rate from 0.1pc to 0.25pc came as it warned that Consumer Prices Index inflation could hit 6pc next year, the highest level since February 1992, in a major blow to the living standards of millions of people.

Financial markets and economists are now predicting three more rate rises in 2022, the first of them within weeks, with rates potentially rising to 1pc – their highest since 2009 – as early as next August.

1% interest rates are hardly a horror. And with inflation at 6% they’re, in real terms, at minus 5%. So not even effective at reducing inflation really.

But inflation management is all about expectations. What do folks think is going to happen? That the BoE seems to be taking the risk seriously means we can all assume that BoE will take it seriously. Therefore less of it will happen – expectations won’t become so anchored.

Showing willingness to try to deal with inflation will reduce the amount of inflation that happens. Or, if BoE starts to say this is permanent, then does something, then it won’t be permanent.

Which is good.

What’s better is that it will enrage the P³. Who can’t allow the connection between QE, money supply and inflation to be made. For if it is then MMT becomes a hugely less useful theory, there are more real constraints on what Govt can do. So, he’s going to keep insisting that the inflation is temporary, is only supply chain stuff, is nothing to do with money supply. Probably carry on with the current claims that BoE are fascists wanting to kill people in support of neoliberalism in fact.

Not because they are, of inflation doesn’t have anything to do with money supply, but because it’s not convenient to the narrative. MMT is perfect and lovely and free cash. Because this is so anything to contradict is wrong and anathema.


Well, yes, this is all well and good:

Both Bulb and Octopus brought fresh entrepreneurship into a creaking sector, as two of the challenger suppliers founded over the last decade to take on the legacy Big Six suppliers – with better customer service and cheaper deals.

But their divergence in fortunes is down to Octopus’s better hedging strategy

But how far forward does that hedging book go? And will the price cap move before it runs out – or prices return to some normality before the price cap doesn’t go?

Hedging’s great but as with Keynes and liquidity, the market can be against your book longer than your hedge lasts.

Calling financial market pros with Bloomberg access

Quick thing. Lloyds ADRs seem to be up 35 and 45% this morning. Tickers are: LLD2, LLD5, LLD6

ADRs. Representing preference shares (6.75% and so on). Can’t find an acual quote for them tho’.

Why are they up 40%-ish? My assumption is they’re cumulative preference shares and that the payments have just resumed after some period of time. They cumulative part coming into play as they do so.

But would love to know the actual here. Someone might even pay me a quick $50 for writing it up if I can properly understand what has happened.

An amusement

There might well be whining about this sort of thing:

However, Santander later decided not to proceed with the appointment due to the “unacceptable” costs of compensating him for past remuneration from UBS following months of talks with the Swiss bank.

Mr Orcel, who is now the chief executive of Italian bank UniCredit, claimed tens of millions in lost pay and has now walked off almost £60m richer after winning his battle.

According to a ruling seen by Bloomberg, Mr Orcel’s contract was valid and the bank broke it by u-turning on the appointment.

Santander’s decision not to hire Mr Orcel in 2019 raised eyebrows across the finance industry as banks routinely buy new hires out of their long-term compensation schemes and should be adept at determining the cost.

60 million golden hello? Pah!

Except. If we do agree that we want bankers to be paid over time, not in a cash sum right after an orgy of deal making – you know, long term incentives, not short – then it’s going to mean that folks build up rewards from those long term incentives. Which they will lose if they leave the organisation, that’s what they’re for. So, if someone wants that individual then they’re going to have to cover what they lose by moving.

It’s exactly because bankers do get long term, not short, incentives that means bankers are expensive to entice.

They’re really, really, missing the point

A unified pricing mechanism. Integrated trading. Shared information, and standardised rules. The European Union this week pushed forward with plans for what it calls a “capital market union”. It is attempting to build a common rule book and a single market in money that will, in theory anyway, make it cheaper for companies to raise capital, and strengthen the continent’s key financial centres.

A threat to the City? That would be the knee-jerk reaction. In fact, it should be a gift to London. Why? Because, in the real world, the more Brussels harmonises its rule books the worse its performance gets. And because the common rules will undoubtedly be far more cumbersome than the national ones they replace. If London plays it right, it should emerge from this process in a much stronger position.

There is no questioning the ambitions of the commissioners in Brussels to create a single market in finance to serve the whole bloc.

On Thursday, it unveiled the latest round of proposals to bring national capital markets under a single umbrella. There will be a single tape for pricing, as in the US, shared rules on transparency and settlement, and common standards on disclosure.

The reason London – and New York – wins is because it is flexible.

You can have an idea during the Morning George, be selling it by lunchtime and counting the money by tea. The rules are that any such idea conform to certain general rules about fraud, ripping off and so on, something that we’ll sort out later after we’ve seen how it all does.

The EU version of regulation demands that everything be approved before it can be done. In a static world that might not be all that bad an idea. But our whole point here is that the financial centre which can innovate will win. It’s not even which rules the EU will install. It’s the very fact that there will be one set of detailed rules to govern all which will kill the project over time.

Now isn’t this fun

Bitcoin exchanges have been dragged into the Treasury’s tech tax after HMRC said they would not qualify for an exemption granted to financial services companies.

The tax office has informed online cryptocurrency exchanges that they are subject to the levy, which is designed to ensure tech firms such as Google, Facebook and Amazon pay more to the Exchequer.

HMRC said crypto assets “are not financial instruments” and do not qualify as commodities or money, meaning online exchanges that sell cryptocurrencies such as Bitcoin and ethereum are not able to claim an exemption for financial marketplaces.

Crypto’s not money nor a commodity. Doesn’t that rather drive a coach and horses through the demands for know your customer rules and all that?

Or have we reached the sort of dystopia where the bureaucrats are allowed to use different definitions when they feel like it?

Economic nationalism Ahoy!

Some things feel like they go on forever: a series of Strictly Come Dancing; the morning commute; Cop26; but surely nothing has dragged on as long as the protracted takeover of British chip champion Arm.

Still, after something like 15 months of trying, a possible end to the saga is in sight, though not the one that Arm’s dogged American suitor Nvidia envisaged.

This was a transatlantic merger that we were promised would deliver “tremendous benefits for both companies, customers, and the industry”.

However, the decision of the Culture Secretary, Nadine Dorries, to launch a full-blown competition and national security investigation into the deal may deliver something else entirely: the fatal blow to Nvidia’s ambitions, and rightly so.

Regression to that white hot heat of technology plus a little Englander nationalism isn’t an advance in economic thinking.

The other way of putting this is that a Japanese company selling an asset to an American one has fuck all to do with the British government. Or at least should….

Despite, not because

The pound has climbed to a one-week high versus the US dollar and a 21-month high against the euro after data showed UK inflation is running at its highest rate for a decade.

Figures showing that inflation surged to 4.2pc in the year to October are stoking expectations of an interest rates rise as early as next month.

It sent sterling 0.4pc higher against the euro to €1.19. Against the dollar, it edged 0.3pc higher to $1.3480, its highest level since November 10.

I usually do these things as because, not despite. This seems to be reversed here. Higher inflation will reduce a currency value – over time at least. And interest rates are going to have to change hugely to cover that gap. Looks to me more like one of those random changes that folk are attaching a story to.

Quite so, let us continue with the Minford Plan

The essence – the true distillation – of the Patrick Minford Plan for Brexit is that we should simply do what is best for us here. All those things about trade and conforming to international standards and all that well, when they work for us here domestically then we’ll do them, sure. When those international structures impact upon our ability to do what’s right for us domestically then they can fuck off.

The Good Professor doesn’t quite use that language but then that’s because I’m a potty mouth.

So, our attitude to trade barriers. They’re – obviously and simply – a tax upon consumers. We don’t particularly desire to tax consumers in this manner so we won’t. Unilateral free trade it is then. How Johnny Foreigner decides to tax Johnny Foreign consumers is up to Mr. J. Foreigner.

Brussels-era laws governing the financial system are to be repealed and City watchdogs will be given the freedom to set their own rules in a sweeping post-Brexit shake-up intended to make the Square Mile more competitive.

Ministers have also vowed to expand the role of the Financial Conduct Authority (FCA), giving it a greater focus on growth and international competitiveness to help London rival the likes of New York and Hong Kong.

The Treasury is seeking to ditch the legalistic approach taken when Britain was in the European Union, where rules were set by Brussels and Whitehall through legislation and only enforced by regulators.

A raft of financial services law from before 2016 will be gradually scrapped in coming years under the proposals, which are subject to consultation.

It will be replaced with regulations drawn up by the watchdogs themselves.

Of course, we should never underestimate the ability of our own leech class to screw things up on their own. But this is indeed the Minford Plan. We’ll do things here to benefit us. How they interact with what those folks over there are doing is a secondary consideration. Even, it’s one that everyone just has to adapt to as we set policy for that 80% of the UK economy that is inside the UK and ruled by the UK.

This is sensible, just, appropriate and good. The only real question is whether we should call it Little Englandism or Great Britishism.

No it isn’t

Brussels is poised to extend Britain’s right to control the €660 trillion (£563 trillion) euro clearing market at the start of next year in a significant post-Brexit boost for the City, the boss of the London Stock Exchange has said.

Britain doesn’t control it and won’t control it. Britain no more controls this than Boris controls the amount of booze that teenager had at the party last night.

This is activity which takes place within Britain, not activity done or controlled by Britain.

No, you really shouldn’t be doing that

Wizz Air has fired an executive after an investigation by regulators revealed he had breached rules governing trading by company insiders.

András Sebők, the budget airline’s chief supply officer, bought and sold shares on 114 different occasions without notifying the Financial Conduct Authority (FCA).

Thousands of the company’s shares were traded in Mr Sebők’s name between April 2019 and November 2020. Some £2.3m of shares were bought and £1.8m sold, according to analysis by The Telegraph of a stock market filing that was published on Thursday night.

Not just not informing, 114 transactions is not on for an exec.

Sounds very sensible indeed

It comes after activist investor Third Point launched a shock attack on Shell, calling for the company to be broken up after taking a stake worth around $750m

Dan Loeb’s fund said Shell had “too many competing stakeholders pushing it in too many different directions” and should spin off its oil and refining operations, allowing it to invest more in renewables.

I’ve long muttered that for Big Oil the most profitable thing for shareholders might simply be that the companies stop investing in anything at all. Just go into run off with current fields etc. Return all profits to shareholders and have a capital budget – after maintenance – of nothing.

Further rumination leading to the idea that a raider – if one could raise the sums necessary – might well profit from a takeover and the installation of that plan.