Review of 2021: Default, revolt, reform

A secretive family office triggers one of the biggest trading losses in history. An army of retail investors single-mindedly hunts down short sellers in the stock market. The world’s most important financial benchmark marches inexorably towards death. While the last of these seismic events was stage-managed – to the extent possible – the others were not. The rise of Reddit’s retail army was anticipated by some, as home-workers ploughed their savings into a Bolshie new form of stock trading, but the explosion it set off in January came as a shock to most. And the failure of Archegos Capital Management was a five-alarm fire. Against the backdrop of a mutating virus and rising global temperatures, this was a precarious, disorderly year. It was also a story of adaptation and survival. Despite taking huge losses, banks managed the Archegos collapse without systemic tremors. Robinhood Markets, the online discount broker at the centre of the meme-stock frenzy, narrowly avoided defaulting on its clearing obligations. Trillions of dollars of derivatives successfully strapped on their contractual parachutes ahead of Libor’s demise. None of these stories end with the calendar year, of course. The Archegos debacle has transformed the prime brokerage landscape and could lead to new leverage and risk-taking curbs for hedge funds. The retail trading boom has changed the structure and dynamics of equity markets. And a host of alternative benchmarks – some eyed with contempt by regulators – are vying to fill the void left by US dollar Libor. Meanwhile, pressure continues to build on financial firms to do their part in the fight against global warming. Read more:

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