Cboe to buy Virtu’s MATCHNow dark pool to expand into Canada

May 20, 2020

First Read

John Lothian Productions Offers FREE Online Video Production Mini-Course
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Everything old is new again
Thom Thompson – John Lothian News

Today, the U.S. Department of the Treasury is picking up where it left off in 1986 with regular issuances of bonds with nominal 20-year maturities. (“Nominal” because the bond will be issued on June 1 and pay out 19+ years later on May 15.) The bonds will pay semi-annual interest. The yield and coupon will be determined through the auction process today.

Treasury hopes to raise $20 billion by selling 20-year bonds. As we all know, the government is doing this because it needs the money. And it needs more money now than it thought even in early February when Treasury, with the support of the private-sector Treasury Borrowing Advisory Committee, first officially included the 20-year instrument in its financing plans.

Back then – back when we were still stumbling over “Novel Coronavirus” and “SARS-CoV-2” – the committee recommended a mere $10 to $13 billion auction. According to a Wall Street Journal article on February 5 regarding the industry’s support, “The initial sizing is smaller than what some investors and research analysts were expecting—with estimates as high as $35 billion—but analysts say the Treasury doesn’t have the financing needs this year to justify a larger size.”

To read the rest of this commentary, go here.


Hits & Takes
By John Lothian & JLN Staff

NYMEX member David Greenberg sat down for an interview with JLN yesterday for the Open Outcry Traders History Project. Greenberg is the second non-Chicago trader we have interviewed for the project, though our first, Ricard Friesen, did also trade in Chicago. Greenberg had his own video team shoot the video, while I interviewed him over the phone. He had a lot to say. It will probably be published in multiple pieces.

Today we have our first interview with a woman, Maureen Obermeier, for the Open Outcry Traders History Project.

If you are a former open outcry trader who would like to participate in our video series, you should check out our mini-course on shooting video for information on how you can shoot the interview yourself remotely. Not everyone needs to use a video team like David Greenberg, though it is certainly nice to have. But we can help you. Watch the videos. Contact us about setting up an interview.

Stay Safe! ~JJL


Eventus Systems has a blog post, “What’s up with Reg NMS II and market data? Thoughts from the Compliance Quick Cuts webinar,” which details a few of the takeaways from the webinar Eventus held along with Titan Regulation & Advisory on May 12. You can read the post here.~SR


Maureen Obermeier: Open Outcry Traders History Project

Maureen Obermeier started on the CBOE floor the summer after her freshman year of college and never left. She helped some friends get jobs that summer, and some, like her, stayed and built careers in the markets. She became a CBOE member when she turned 21 and filled orders. She sat for an interview with John Lothian News for the MarketsWiki Education Open Outcry Traders History Project to tell her story, which includes meeting her husband on the trading floor and building a business with him. Chess and Maureen Obermeier knew they were in the right place at the right time, on the floor of the brand new Chicago Board Options Exchange as the exchange traded options business developed. Here is her story.

Watch the video »


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A Market Relying on Fax and Phone Shaken by Work-at-Home Traders
Anna Shiryaevskaya and Stephen Stapczynski – Bloomberg
Plunging spot prices force need for faster decisions; More conversations with clients now done on chat platforms
Companies seeking to get a slice of trading in the world’s fastest-growing fossil fuel appear to be getting a much needed push from the coronavirus. Liquefied natural gas is one of the few main commodity markets left where traders still rely heavily on a hodgepodge of meetings, phone calls, emails or even the old fax machine to thrash out deals worth millions of dollars. But a breed of innovators seeking to profit from making the industry more transparent and inclusive could be getting a boost from the new work-from-home world order.

*****Fire up the fax, we need to make a trade!~JJL


NEW COURSE – Key Regulatory & Trading Requirements for Eurex
FIA and Eurex are pleased to announce a new FIA Training course that provides an overview of select rules and regulations that govern the daily activities of Eurex market participants from brokerage firms, fund managers, commercial hedgers and trading firms. This course covers off-book trading (T7 Entry Services), German regulatory landscape, trader admission process, reporting obligations and position limits. Learners can take all sections or be assigned certain sections depending on their responsibilities within their organization. The course includes interactive exercises for each of the topics discussed.

***** I prefer the Old Course, from a golfing perspective.~JJL


Extreme Behavior Is on Display Everywhere in the Stock Market
Sarah Ponczek – Bloomberg
Rare readings emerge in options trading, valuations, volume; After 32% S&P 500 rally, investors contemplate what comes next
It took 33 days for stocks to drop 34%, and three weeks to gain half of it back. Whiplashed investors have been thankful for a dose of calm, but signs are emerging the lull may not last. The clues are evident across options markets, in surging share volume and in widening daily price swings, among other places. Frantic positioning and extreme readings in market internals show that while the S&P 500 has been nestled in a trading range for four weeks, investors remain anything but settled.

******Extreme is the new normal.~JJL


Frustrated sports punters turn to US stock market; Three of the top online brokerages see almost 800,000 sign-ups in March and April
Richard Henderson – FT
Gamblers who cannot bet on professional sport because fixtures have been scrapped are flocking instead to the US stock market, creating a new class of customer for online brokerages and adding fuel to the market rally.

*****Desperate times call for desperate measures.~JJL


It Will Take Years for Beer Drinking in Europe to Return to Normal; Socially distanced pubs are a big threat to brewers’ profits.
Thomas Buckley – Bloomberg
On a typical Friday evening in May, the White Horse pub in London’s Brixton neighborhood might go through 20 or more kegs of lagers and ales as hundreds of revelers stand four and five deep at the bar and spill out onto the terrace into the wee hours. But with London in lockdown, the pub has been shuttered since March 20, when owner Matt Ward—knowing he had to empty the taps—offered happy-hour discounts and at the end of the evening started pouring pints for free. And he was one of the lucky ones: Some pub owners who couldn’t sell their beer had to dump it down the drain. Ward now worries that when he reopens this summer, social distancing guidelines will force him to cut occupancy by about 90%, to just 30 patrons. “I try to keep positive,” he says. “But to go anywhere back to anything like it was before, with social distancing, you just can’t do it in a pub like mine.”

******Go to the pub and drink alone – that sounds like a great combination.~JJL



Tuesday’s Top Three
Our top story Tuesday was Futures exchange wins new partner for June 1 launch; The Small Exchange, which is targeting retail traders, has landed Interactive Brokers as a partner, from Crain’s Chicago Business. Second was JLN’s video interview Chess Obermeier – Marketswiki Education Open Outcry Traders History Project. Third was Foreign STEM Graduates Are Being Shut Out of the U.S. Job Market, from Bloomberg Businessweek.


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Lead Stories

Cboe to buy Virtu’s MATCHNow dark pool to expand into Canada
John McCrank – Reuters
Exchange operator Cboe Global Markets (CBOE.Z) said on Tuesday it is buying Canada’s largest “dark pool” stock trading platform, MATCHNow, from Virtu Financial (VIRT.O) for an undisclosed amount to expand its geographical footprint.

Cboe Global Markets Agrees to Acquire Leading Canadian ATS MATCHNow
Cboe Global Markets
Planned acquisition provides Cboe expansion opportunity into one of the largest global equities markets; Ownership of leading Canadian ATS would broaden Cboe’s North American equities business; Deal expected to be accretive and close in the third quarter of 2020, pending regulatory approval
Cboe Global Markets, Inc.
Cboe Global Markets, Inc. (Cboe: CBOE), one of the world’s largest exchange holding companies, today announced it has entered into a definitive agreement to acquire MATCHNow, the largest equities alternative trading system (ATS) in Canada, from Virtu Financial, Inc. Upon successful completion of this acquisition, Cboe will gain a foothold in a key capital market new to the company, while expanding the geographic presence and diversifying the product capabilities of its North American equities business. Ownership of MATCHNow is also expected to provide Cboe with a strategic pathway to build towards a comprehensive equities platform for the Canadian markets and potentially establish a significant presence in the region.

For Creators of Giant Oil ETF, Troubles in Market Began a Decade Ago; Did the United States Oil Fund help break the oil market? Worries about the ETF’s size and complexity were years in the making.
Catherine Ngai and Katherine Greifeld – Bloomberg
For ordinary investors, it was perhaps the most spectacular demonstration of the unique perils of trying to wager on the price of oil. Last month, the mighty United States Oil Fund, a popular ETF tracking crude, became unmoored as prices fell to unthinkable levels. Leading up the crash, the fund, known by its ticker USO, alone held a quarter of all the soon-to-expire oil contracts in the futures market, alarming regulators and sparking accusations it exacerbated oil’s plunge below zero.

Risk Is Misunderstood by Many Investors, Says VIX Pioneer; Dan Galai has spent his career trying to measure and manage uncertainty.
Yakob Peterseil – Bloomberg
Volatility has always been a feature of markets. In a 1989 research paper, Dan Galai, along with Menachem Brenner, proposed creating an index—which they called Sigma—to track the volatility of stocks. That research eventually helped inspire Chicago Board Options Exchange (now Cboe Global Markets Inc.) to create the VIX, known as Wall Street’s “fear gauge.” (There remains disagreement over how much credit their research deserves for the index.) Born in Jerusalem, Galai earned his Ph.D. at the University of Chicago before embarking on a career that included serving as dean of the Hebrew University of Jerusalem’s business school and founding Sigma Investment House. In April he spoke to Bloomberg about his career, the research around volatility, and what interests him today.

Biggest Power Demand Plunge Since Great Depression Is Reshaping Markets; Slowdown is squeezing coal, buoying renewables and foreshadowing “grid of the future”
Mark Chediak, Chris Martin, and Rachel Morison – Bloomberg
The global plunge in electricity demand will drag on long after nations lift stay-at-home orders, leading to the biggest annual drop since the Great Depression and fundamentally reshaping power markets.

Humans Top Bots in Covid Crisis Test of Electronic Bond Trading
Molly Smith and Matthew Leising – Bloomberg
Algorithms failed in volatile markets, then people stepped in; Market knowledge still needed despite push for coding skills
It turns out the corporate bond market still needs traders. The algorithms that dealers use to buy and sell bonds with their customers failed in March at the height of extreme volatility from the coronavirus pandemic, according to investors and price data. The nimble analysis of flesh-and-blood traders was suddenly needed to price bonds, edging out machines that normally can trade large portions of the market without any human input.

Cambridge University Moves All Lectures Online Until 2021
Viren Vaghela – Bloomberg
One of the U.K.’s top universities is moving all face-to-face lectures online for the coming academic year because social distancing measures will probably remain in place for the foreseeable future. Cambridge University, which traces its history back more than 800 years, said that it may be possible to host smaller groups in person, as long as they conform to requirements around social distancing.

Reforming the current dislocation of financial markets
Ken Chapman – Head of Strategic Delivery, Capital Markets, Grant Lovett – Head of Government Relations for the Australian Securities Exchange
Mark Twain once famously quipped “history doesn’t repeat itself, but it often rhymes”. The current dislocation in financial markets as a result of the COVID-19 pandemic looks on the surface unique, but there are echoes of the past in the present.

Volatility Traders Abandon VIX Bets as Stock Conviction Vanishes
Yakob Peterseil – Bloomberg
Long, short VIX futures wagers slump to near multi-year lows; ‘Understandable lack of conviction’ on virus fallout: Purves
Some of the most speculative stock players are jettisoning bets on whether the U.S. market will be driven by fear or greed in the coming months. As Wall Street frets a rally defying economic gravity, long and short exposures among non-commercial investors on the Cboe Volatility Index have sunk to near multi-year lows, according to the latest CFTC futures data.

Banking Regulator Who Overhauled Low-Income Lending Rules to Step Down; Comptroller of the Currency Joseph Otting considers overhaul his signature achievement
Andrew Ackerman – WSJ
A top U.S. bank regulator is expected to step down this week after completing an overhaul of rules governing billions of dollars of lending in low-income neighborhoods, according to people familiar with the matter.

Nasdaq changes unlikely to stop next Luckin scandal, say analysts; Credit Suisse, Morgan Stanley and Citi have led lacklustre IPOs of Chinese groups
Hudson Lockett – FT
When the Nasdaq stock exchange filed this week to tighten its listing rules with the US Securities and Exchange Commission, there was barely a mention of China. But the real target of the restrictions was hard to miss.

MTS expands access to Mexican bond markets through BondsPro
London Stock Exchange Group
Pioneering electronic order book access for Mexican peso-denominated corporate and treasury bonds; At time of heightened global market volatility, traders gain improved access to Mexican bonds and other markets with global BondsPro offering; Another step in MMI’s strategy to expand electronic access to fixed income tools for the global emerging market trading community
New York – MTS Markets International (MMI), part of London Stock Exchange Group (LSEG), through its marketing agreement with Marco Polo Securities (MPS), has expanded its client reach in Mexico. MPS will introduce the MTS BondsPro electronic trading platform to new and existing Mexican institutional clients in Latin America.

ICE’s global Natural Gas markets attract record open interest as participants navigate volatile energy markets
Intercontinental Exchange
Dynamic US shale production stimulates activity in ICE’s North American gas complex; Total Natural Gas Futures hit open interest record of 18.5 million contracts this quarter; US Basis contracts open interest hit new record of 10.1 million contracts
As the importance of pricing global gas markets continues to grow amid the liberalization of natural gas, Intercontinental Exchange (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, is registering record levels of open interest across its North American, European and Asian gas benchmarks. Open interest in Total Natural Gas Futures at ICE hit a new record of more than 18.5 million contracts during the second quarter of 2020.


The Worst Is Yet to Come; The coronavirus and our disastrous national response to it has smashed optimists like me in the head.
Farhad Manjoo – NY Times
For as long as I can remember, I have identified as an optimist. Like a seedling reaching toward the golden sun, I’m innately tuned to seek out the bright side. Of course, in recent years this confidence has grown tougher to maintain. The industry I’ve long covered, technology, has lost its rebel edge, and grown monopolistic and power hungry. The economy at large echoed these trends, leaving all but the wealthiest out in the cold. All the while the entire planet veered toward uninhabitability.

One Crisis Too Many: How the Coronavirus Pushed Germany to Shift Course; Some may not like it back home, but in the twilight of her career, Angela Merkel joined with France to try to save the European Union.
Steven Erlanger – NY Times
In her time as chancellor of Germany, Angela Merkel has seen the European Union put to the test by Brexit, a wave of migration, the Greek debt crisis and populism, and still she held to a largely steadfast course.

Schools and Camps Weigh Coronavirus Risks to Kids When Deciding to Reopen; A very rare syndrome in some children infected with Covid-19 has parents worried and could influence officials’ calls on reopening gathering places
Sumathi Reddy – WSJ
When the pandemic started, health experts noted one saving grace of the virus that causes Covid-19: Its effect on children seemed minor, even undetectable, in most cases. Now there is evidence that the virus can cause serious illness in children. Though such cases are very rare, they have parents worried and might influence decisions to reopen summer camps, day-care centers and schools.

Emerging countries lift lockdowns despite Covid-19 cases surge; Brazil, India, Indonesia, Mexico, Russia under pressure to ease measures as Europe, US reopen
FT reporters
Brazil, India and Indonesia are leading a group of middle and low-income economies that have begun to ease lockdowns despite rising coronavirus infection numbers, as pressure grows to reopen businesses and curb rising poverty.

Rolls-Royce to cut 9,000 jobs to prepare for years of disruption; UK aero engine maker to axe a fifth of workforce in biggest single reduction in headcount in 3 decades
Peggy Hollinger and Philip Georgiadis – FT
Rolls-Royce is to cut nearly a fifth of its workforce in a bid to survive the collapse in global aircraft demand caused by the coronavirus pandemic, which is expected to last for several years.

Sweden in ‘Very Deep Economic Crisis’ Despite Soft Lockdown
Niclas Rolander, Rafaela Lindeberg, and Love Liman – Bloomberg
Sweden’s highly contested response to Covid-19 left much of the economy open. Even so, the country is now headed for its worst recession since World War II. Scandinavia’s biggest economy will shrink 7% this year, Finance Minister Magdalena Andersson said on Tuesday. Shortly after she spoke, the debt office revealed an historic 30-fold spike in borrowing to cover emergency spending amid record job losses. A separate survey showed 40% of businesses in Sweden’s service sector now fear bankruptcy.

China’s New Outbreak Shows Signs the Virus Could Be Changing
Bloomberg News
Patients in new cluster take longer to show symptoms, recover; Uncertainty over virus mutation is hindering control efforts
Chinese doctors are seeing the coronavirus manifest differently among patients in its new cluster of cases in the northeast region compared to the original outbreak in Wuhan, suggesting that the pathogen may be changing in unknown ways and complicating efforts to stamp it out.

It’s time to dismantle factory farms and get used to eating less meat
Gene Baur – The Guardian
Slaughterhouses are a breeding ground for disease and hotspots for coronavirus, and dozens closed after thousands of workers became ill. President Trump ordered these operations open, and shielded them from legal liability for exposing disempowered workers to intolerable risks. At the same time, the government is spending $200m per month to support the meat and dairy industries, while agribusiness lobbies for more stimulus money to return to killing as normal. Industrial animal agriculture harms people, animals and the earth, and it should not receive government bailouts. It should be dismantled and replaced. To put it bluntly: it’s time to get used to eating less, or no, meat.

Virus will push up to 60m into extreme poverty, World Bank warns; President David Malpass calls for more help to alleviate impact on ‘millions of livelihoods’
Jonathan Wheatley – FT
Up to 60m people will be pushed into extreme poverty by the economic consequences of the coronavirus crisis, and current recovery efforts are not enough, David Malpass, president of the World Bank, has warned.

States accused of fudging or bungling COVID-19 testing data
Michell R. Smith, Colleen Long, Jeff Amy – AP
Public health officials in some states are accused of bungling coronavirus infection statistics or even using a little sleight of hand to deliberately make things look better than they are.

Pandemic will alter Communion rituals for many US Christians
David Crary – AP
Holy Communion will have a different look when in-person worship services resume at the end of May in the Catholic Diocese of Knoxville, Tennessee: The wafers signifying the body of Christ will be placed in the hands of parishioners by priests and deacons wearing face masks and safety glasses.

Europe’s Coronavirus Spread in Check as Lockdowns Loosened
Geraldine Amiel, Tommaso Ebhardt, and Rodrigo Orihuela – Bloomberg
Officials in continental Europe’s major economies are closely monitoring coronavirus data for signs of a resurgence in infections as restrictions on daily life are phased out. Countries must focus on more than daily case numbers and death tolls because they are lagging indicators. A better guide might come from the length of the lines outside the doctor’s office or surveys conducted at random.

Exchanges, OTC and Clearing

Cboe to acquire Canadian dark pool MATCHNow from Virtu Financial; MATCHNow acquisition will provide Cboe with means to build a comprehensive equities platform for Canadian markets.
Hayley McDowell – The Trade
US exchange group Cboe Global Markets is set to acquire the MATCHNow dark pool for Canadian equities from Virtu Financial for an undisclosed sum, both institutions have confirmed.

Intercontinental Exchange Announces Results from 2020 Annual Meeting of Stockholders
Intercontinental Exchange, Inc.
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced the results of the company’s 2020 Annual Meeting of Stockholders, which was held Friday, May 15. A replay of the meeting will be available at http://ir.theice.com.

NMS II: A Strange Way to Fix a Two-Tiered Market; We’ve said it before: The U.S. consolidated quote is the envy of the fragmented world. But based on the level of industry complaints it seems we may take for granted the benefits it provides.
Phil Mackintosh – Nasdaq
We’ve said it before: The U.S. consolidated quote is the envy of the fragmented world. But based on the level of industry complaints it seems we may take for granted the benefits it provides. To the surprise of many, even the SEC has been spurred into action.

The World Federation of Exchanges Responds to Europe’s MiFID II Consultation
The World Federation of Exchanges
The World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, has responded to the European Commission consultation on the review of the MiFID II/MiFIR regulatory framework, representing the global industry’s position on proposals for a consolidated tape in Europe, the Share Trading Obligation’s impact on Third Countries and the regime governing Systematic Internalisers.

Delivery Margin and Payment Procedures
CME Group

Amendments to CBOT Rule 703.C. (“Load Out”) of Chapter 7 (“Delivery Rules and Procedures”)
CME Group

Nasdaq Announces Results from 2020 Annual Meeting of Shareholders
Nasdaq, Inc. (Nasdaq: NDAQ) shareholders today elected all nominated directors at the company’s Annual Meeting of Shareholders. All directors will serve one-year terms. The elected board members are:

Nasdaq Scheduled Resumption in Luckin Coffee Inc.
The Nasdaq Stock Market® (Nasdaq: NDAQ) announced that trading in Luckin Coffee Inc. (Nasdaq: LK) is scheduled to resume on Wednesday, May 20, 2020, at 7:00 a.m. Eastern Time. Trading in the company’s stock was halted on April 7, 2020 at 9:15:25 Eastern Time.


Citi launches project to digitalise electronic trading platforms; Sandeep Arora, global head of FinTech and innovation for the markets division at Citi, will head up the digital project at the institutional clients group business.
Hayley McDowell – The Trade
Citi has launched a new project aimed at bolstering the digital experience across its electronic trading platforms for clients within its institutional business division.

BT Radianz to Add Chinese Alt Datafeeds; Initially, BT Radianz is looking for datasets that could help forecast consumer demand, such as sentiment, consumption, and transactional data.
Wei-Shen Wong – Waters Technology
BT Radianz plans to add new Chinese alternative datafeeds that its clients can access. To do this, the private cloud provider is looking to expand its partnerships with the local fintech community.

Google says it won’t build AI tools for oil and gas drillers
Matt O’Brien – AP
Google says it will no longer build custom artificial intelligence tools for speeding up oil and gas extraction, separating itself from cloud computing rivals Microsoft and Amazon.


Sudden ‘Major’ Outage Sparks Serious Bitcoin Exchange Warning
Billy Bambrough – Forbes
Bitcoin and cryptocurrency exchange BitMEX, once branded a “bitcoin casino,” has lurched from crisis to crisis over recent years.
The Seychelles-based bitcoin and crypto exchange, specialising in bitcoin derivatives, was last week hit with a lawsuit accusing it of market manipulation, among other illegal activities.

Bitcoin Suisse Targets Institutional Clients With Secure Custody, Staking for Tezos
Marie Huillet – CoinTelegraph
Major Swiss cryptocurrency broker Bitcoin Suisse has added high-security custodial support and staking services for Tezos (XTZ), with an eye to its institutional clients.
In an announcement on May 19, Bitcoin Suisse — which custodies over $1 billion in assets — revealed it was going live with XTZ delegation and custody support using its Bitcoin Suisse Vault, which completed an ISAE 3402 audit by PwC last fall.

This Metric Shows Bitcoin Is Undervalued Even After 150% Price Rally
Omkar Godbole – CoinDesk
Bitcoin has witnessed triple-digit percentage gains over the past two months. Yet, one metric has turned quite bullish after the recent halving event, showing signs the cryptocurrency remains undervalued and still has room to run.

Smoke and Mirrors as Mainstream Banks Discourage Clients From Crypto
Kyle White – CoinTelegraph
The crypto space and market cap is a small percentage of the trillions invested through the global equities market or the amount that the United States Federal Reserve is able to print. While the promise of blockchain technology and the future of Bitcoin (BTC) has been realized through major traditional players unveiling their own versions of the technology, their hesitant investment advice does not seem to match their actions.

Cryptocurrency company closes Montana data center operation
The San Francisco Chronicle
A digital currency company announced the closure of its Montana data center and the initiation of bankruptcy proceedings.
Toronto-based HyperBlock Inc. announced that its 20-megawatt data center has closed and the company’s cryptocurrency mining operations have ceased, The Missoulian reported Monday.

Visa CEO Says Payments Giant Supports Bitcoin (BTC) and Cryptocurrency Exchange Coinbase As Digital Currencies Take Root
The Daily Hodl
Visa CEO Says Payments Giant Supports Bitcoin (BTC) and Cryptocurrency Exchange Coinbase As Digital Currencies Take Root

Libra Association names former FinCEN director as its general counsel
Aislinn Keely – The Block
The Libra Association has hired Robert Werner, a former director of the Financial Crimes Enforcement Network (FinCEN), as its first general counsel.

Bitcoin Dark Web Activity Up 340% Since 2017: Report
Colin Harper – Forbes
The total value of bitcoin transacted on the dark web is up 65% over the year, and 340% over three years, according to a report from Bitcoin technology company Bitfury.

R3: Digital Asset Exchanges Will Expand Range of Traded Assets; The development of digital asset exchanges could disrupt capital markets by introducing new asset types and extending trading hours.
Hamad Ali – Waters Technology
Enterprise blockchain provider R3 says the development of digital asset exchanges by exchange groups like Nasdaq and SIX could help introduce new types of asset classes to the market, and extend trading hours.

New ‘Open Initiative’ Is Global Call To Action For Blockchain During COVID-19
Jason Brett – Forbes
Lykke Corp, the Swiss fintech company and builder of marketplaces for digital financial assets, today launched ‘The Open Initiative’, a project dedicated to helping governments envision the ways digital technology can transform the global supply chain and financial system in a post-COVID-19 economy.The Open Initiative aims to provide a minimum of CHF 50,000.00 (USD 51,300.00) for each selected proposal by individuals, teams and companies that are working to create solutions that address the crisis, while offering direct access and support for governments to benefit from newly developed solutions.


Deutsche Bank’s ties to Donald Trump; The US president defends his biggest creditor, but the relationship is under fresh scrutiny
Tom Braithwaite – FT
Donald Trump’s relationship with Deutsche Bank has lasted longer than any of his marriages and is cloaked in more secrecy. Now the US Supreme Court is considering whether to shed light on the links between the American president and Germany’s largest bank. Manhattan prosecutors and Washington lawmakers want tax and financial records related to Mr Trump, his family and businesses. Mr Trump has sued to block them.

Would Republicans be better off if Kelly Loeffler stepped aside?
Chris Cillizza, CNN
Almost from the moment that Republican Georgia Gov. Brian Kemp appointed business executive Kelly Loeffler to the Senate seat vacated by Johnny Isakson earlier this year, she’s struggled to put a foot right. Less than a month after Loeffler was appointed, she engaged in a ham-handed attempt to align herself with the Trump wing of the Georgia Republican Party by accusing Utah Sen. Mitt Romney of seeking to “appease the left by calling witnesses who will slander the @realDonaldTrump during their 15 minutes of fame” during the impeachment trial.

*****Her answer is no.~JJL

Trump, GOP Leaders Bet on Reopening Over Stimulus for Recovery
Laura Litvan, Erik Wasson, and Billy House – Bloomberg
Republicans standing firm against quick action on new stimulus; Election-year stalemate with Democrats shows no sign of easing
President Donald Trump and Republican congressional leaders are counting on state lockdowns lifting to propel an economic rebound that will ease pressure for another round of stimulus.


ESMA calls for transparency on COVID-19 effects in half-yearly financial reports
The European Securities and Markets Authority (ESMA), the EU Securities Markets regulator, today publishes a Public Statement addressing the implications of the COVID-19 pandemic on the half-yearly financial reports of listed issuers.

How to Protect Yourself and Your Firm From Cyberattacks When Working From Home During COVID-19
As we navigate the challenges posed by COVID-19 and the need to halt the spread of this pandemic, many of us are settling into a routine of working from home. Cybercriminals are alert to the work from home trend and they are using this to their advantage to infiltrate our organizations. Join FINRA staff and industry panelists as they provide examples of effective controls and tools their firms have put into place to monitor and address cybersecurity risks.

Opening Statement of Commissioner Brian Quintenz before the CFTC Global Markets Advisory CFTC
Thank you Commissioner Stump for convening today’s meeting of the Global Markets Advisory Committee (GMAC). I am looking forward to hearing presentations from Suyash Paliwal, the Director of the CFTC’s Office of International Affairs, on recent international coordination efforts in the time of COVID-19, as well as from the GMAC Subcommittee on Margin Requirements for Non-Cleared Swaps regarding its report and recommendations on the implementation of initial margin requirements for uncleared swaps. I would like to thank all of the presenters and Committee and Subcommittee members for their participation and engagement.

Introductory Statement of Commissioner Dawn Stump before the Global Markets Advisory Committee Meeting
Good morning and welcome to the first Global Markets Advisory Committee (GMAC) meeting of 2020. I would like to begin by acknowledging that this meeting looks much different than I envisioned even a few short months ago. While we are not in the same room today, I’m grateful that we can hold this meeting and move forward with the GMAC’s priorities in a format that ensures the health and safety of GMAC members, Commission staff and the public.

Investing and Trading

BofA Warns of Volatility-Shock Risk as Markets Get More Fragile
Joanna Ossinger – Bloomberg
Markets won’t escape economic reality’ Saksena et al. say; Strategists suggest a Russell 2000/S&P 500 volatility trade
Investors need to guard against violent price swings as markets become increasingly fragile, according to Bank of America Corp. Fragility has increased due to high-frequency traders shutting down machines as stress rises, which hurts liquidity, as well as by trend-chasing among investors reaching for better returns “against their better judgment in a world addicted to the central bank put,” BofA strategists led by Nitin Saksena wrote in a note May 19. That’s also created “a massive log-jam for liquidity” when things go sour, as players with little conviction rush for the exits, they said.

Behind Bond Market’s Stall, Investors See Hard Times Ahead; Treasury yields that are reliably this low have wide-ranging implications for markets and economy
Sam Goldfarb – WSJ
Yields on U.S. government bonds have stalled near all-time lows, a sign that investors are anticipating a difficult economic recovery and years of aggressive monetary stimulus. For much of the past month and a half, the yield on the benchmark 10-year U.S. Treasury note has hovered around two-thirds of a percentage point—a shade above its all-time low of around 0.5% set in March.

Let Me Tell You a Story About Why Stocks Went Down; The Moderna vaccine debacle exemplifies our need for narratives in an uncertain world.
John Authers – Bloomberg
Getting the Story Straight
Markets run on narratives. That is because trading in them is ultimately determined by humans, who find it far easier to think in terms of stories than anything else. Express the case for a stock as a series of numbers and it won’t connect; knit them together into a story and you have a chance of making the sale.

Renewable Power Heads for Its First Decline in Two Decades
Will Mathis – Bloomberg
New renewable installations seen falling 13%, the IEA says; Biggest decline in small-scale solar as investors retreat
New power from wind and solar is set to fall this year for the first time in two decades. Construction of new wind and solar farms is being delayed by factory closures, workers’ needs for social distancing and developers’ financial concerns as they emerge from the coronavirus crisis, according to research from the International Energy Agency.

How Private Equity Is Ruining American Health Care; Investors have been buying up doctor’s offices, cutting costs, and, critics say, putting pressure on physicians in ways that hurt patients. The pandemic could make things even worse.
Heather Perlberg – Bloomberg
Not long after Gavin Newsom, the governor of California, ordered the state’s 40 million residents to stay home to stop the spread of the new coronavirus, Dr. Greg Morganroth called his team of doctors and said their dermatology group was staying open.

Moderna Falls From Record as Euphoria of Vaccine Data Wears Off
Drew Armstrong – Bloomberg
Biotech’s stock closes down 10% after Monday’s 20% gain; Company offered $1.3 billion in shares after market Monday
Moderna Inc. shares fell from an all-time high as investors digested early data from a small trial of the company’s coronavirus vaccine, and a $1.3 billion stock sale announced late Monday.

U.S. Financial Conditions Are Easing at Fastest Pace in History
Todd White – Bloomberg
Measure of market health has bounced back to early March level; Strong second wave of virus ‘could change all this’: Gkionakis
American financial conditions have loosened at the fastest pace since at least 1990, belying mounting investor skepticism that a V-shaped economic recovery will follow the pandemic-induced crash.

ESG Funds Are Ready For Your Retirement Plan
Emily Chasan – Bloomberg
Not many ESG fund managers set out to protect investors from a global pandemic. But their funds have nevertheless proven resilient during the subsequent market collapse.

Bankruptcy Is Tough and Costly And Might Be Your Only Option; What to consider if winding down your business seems like the only way you can go.
Robb Mandelbaum – Bloomberg
Nearly three months in, it’s apparent the novel coronavirus will leave many victims in its wake — including thousands of small companies, despite decisions in many states to open up for business. Health officials warn that these efforts will lead to a surge in new illnesses that in fact will only prolong the shutdown, and polls show that most Americans oppose the abrupt return to normal. In the end, it is consumer sentiment, as much as government decrees, that will restart the economy. Acting and thinking strategically—cutting cash payments and also gaming out future expenses and options for generating the sales to cover them—will certainly help you beat the odds, but even that might not be enough.

A Month After Oil Plunged Into the Abyss, Prices Are Surging
James Herron, Grant Smith, Debjit Chakraborty, and Sheela Tobben – Bloomberg
Crude market enjoys turnaround after shock of negative prices; Higher-cost energy is welcomed from Washington to Moscow
For the world’s most important commodity, there’s never been a month like it. Just a few weeks ago, crude oil was akin to industrial waste in some parts of the world, something you had to pay people to take away. Now prices are surging, up about 70% in New York since the start of May.


Standard Chartered clears first SORA swaps at LCH; LCH launches SORA swaps clearing amid ongoing shift to alternative interest rate benchmarks.
Kiays Khalil – The Trade
LCH has launched clearing in Singapore dollar swaps referencing the Singapore Overnight Rate Average (SORA), with Standard Chartered the first to clear the products for clients.

TORA expands outsourced trading desk with two new hires; Mark Mazor and Joe Zonenshine join the outsourced trading desk at TORA with a combined 30 years of trading experience.
Kiays Khalil – The Trade
Investment management technology provider TORA has expanded its outsourced trading desk with the addition of two veteran traders.

BlackRock trounces ETF rivals after Fed appointment; Strong inflows follow controversial hire of world’s biggest fund manager to run bond-buying programme
Chris Flood – FT
BlackRock has won significant amounts of new business after the US Federal Reserve controversially hired the world’s biggest fund manager to run its coronavirus-induced bond-buying programme.

JPMorgan Shareholders Bat Down Attempts to Remove Directors
Michelle F Davis – Bloomberg
Shareholders overwhelmingly approve all nominated directors; Proposal on climate change narrowly falls short of approval
JPMorgan Chase & Co. shareholders elected all 10 directors nominated to the board even after several large pensions urged them to withhold votes from members including Lee Raymond, the former Exxon Mobil Corp. boss.

JPMorgan Says IBM Executive Chairman Rometty Elected to Board
Michael Dabaie – WSJ
JPMorgan Chase & Co. said IBM Executive Chairman Ginni Rometty was elected as a director of the company, effective immediately. Ms. Rometty serves as executive chairman of IBM and previously was IBM chairman, president and chief executive.

Citi Adds Investment-Banking Division Focused on Sustainability
Jennifer Surane – Bloomberg
Citigroup Inc. said it will create a division within its investment-banking unit after the coronavirus pandemic increased the importance of sustainability plans for corporations around the world.

Building Out Goldman Sachs’s Private-Equity Business; The firm wanted to expand in Asia. Henry Cornell got the call.
Barry Ritholtz – Bloomberg
How does one build out the merchant-banking arm of a firm such as Goldman Sachs? If you are Henry Cornell, this week’s guest on Masters in Business, you start in Asia. In the late 1980s, Japan was the hottest country in the world and Cornell went there to expand the firm’s local footprint. He hired hundreds of employees and helped establish Goldman’s reputation in the market as a savvy private-equity investor. From there, he moved to Hong Kong in the early 1990s, just as China was beginning to become a more market-based economy.

JPMorgan Joins Goldman Saying More QE Needed to Cap Bond Yields
Adam Haigh – Bloomberg
Central bank quantitative easing programs may need to be ramped up to stave off a rise in bond yields, according to a JPMorgan Chase & Co. analysis that echoes a conclusion from Goldman Sachs Group Inc strategists.


Fidelity International applies to launch China retail funds; Latest move by global investment group to stake claim in high-growth market
Chris Flood – FT
Fidelity International has stepped up its drive to expand in mainland China after applying for regulatory permission to establish a public mutual fund business in the country that will allow it to sell investment products and services to retail investors and institutional clients.

Court case threatens to shake up $100bn in Chinese dollar bonds; Investors closely watching fate of $1.7bn in debt issued by bankrupt state-backed group
Don Weinland – FT
The bankruptcy of a powerful state conglomerate has threatened to shake up about $100bn of debt issued by Chinese companies in a development that is being closely watched by investors in the country’s dollar bond markets.

Turkey expands currency swap deal with Qatar; Agreement will bolster Ankara’s depleted currency reserves in a boost to its ailing economy
Laura Pitel – FT
Qatar has tendered a lifeline to the Turkish economy, offering to bolster the country’s depleted foreign currency reserves by as much as $10bn.

UK sells negative-yielding government bonds for first time; ‘Symbolic hurdle’ coincides with debate into whether BoE should move to negative rates
Adam Samson – FT
The UK has sold bonds with a negative yield for the first time as a drop in inflation has highlighted how the Bank of England may need to take further steps to revive price growth back to its 2 per cent target.

In Argentina, They Are Betting the Farm on a Weaker Currency
Jonathan Gilbert – Bloomberg
Growers who sold last year are now stockpiling on peso doubts; Supplies tighten for crushing giants already facing Covid-19
Decades of political and financial turmoil have turned Argentine soybean growers into shrewd currency traders. Right now, they’re betting the farm on a weaker peso. Farmer sales have slowed to a crawl because growers think the currency is overvalued. That’s unnerving their buyers such as Glencore Plc and Bunge Ltd. that crush the beans and ship out meal and oil for livestock feed and cooking. It also means the government will have to wait for exports just as it battles to reach a $65 billion debt restructuring deal.

Negative Interest Rates Are Last on BOE List, Barclays Says
Lucy Meakin – Bloomberg
Cutting interest rates below zero is the last policy option that Bank of England officials would currently choose, according to Barclays. Renewed asset purchases, potentially with a tilt toward riskier assets, are likely to be the central bank’s first choice, Barclays economists wrote in a report published Tuesday. They expect a further 100 billion pounds ($120 billion) of quantitative easing in June.

ECB Hands Banks $931 Million in First Round of New Funding
Carolynn Look – Bloomberg
Central bank announces details of first PELTRO allotment; New refinancing operations effectively pay banks to take cash
The European Central Bank doled out 851 million euros ($931 million) to euro-area banks in the first round of a new liquidity program launched last month, according to a statement.

Australia Goes Back to the 1980s With Its Economy Closed to World
Michael Heath – Bloomberg
Australia’s success in curbing Covid-19 infections is allowing it to slowly ease some restrictions even as it remains largely closed off from the rest of the world, taking its economy back to the pre-globalization era.

100-Year Drought Hits Poor EU Region Already Reeling from Virus
Irina Vilcu and Andra Timu – Bloomberg
EU’s eastern countries suffering from record dry spell; Agriculture becomes political issue again as EU talks budget
First the virus lockdown shuttered the two dairies where farmer Gavrila Tuchilus sells the milk from his 1,500 cows. Then his fields dried up, forcing him to abandon his barley crop for the first time in 39 years.


Boris Johnson’s Brexit Problem: An Army of Workers Off Work
Joe Mayes – Bloomberg
Many company staff handling preparations are on furlough; Businesses are ill-prepared for break with EU at end of year
Britain’s flagship job support program may have dulled the economic pain of the coronavirus crisis, but it is storing up a future problem for Prime Minister Boris Johnson: with many employees furloughed, businesses haven’t got enough staff to prepare for Brexit.

Where’s Brexit at: EU and UK fight over trade deal
Silvia Amaro – CNBC
The U.K. and the EU have many differences yet to overcome as they try to get a new trade deal by the end of the year — a political hot potato that could bring additional economic uncertainty, for both.

Brexit talks: Britain accuses EU of treating UK as ‘unworthy’ partner
Daniel Boffey – The Guardian
Britain’s chief negotiator, David Frost, has accused Brussels of treating the UK as an “unworthy” partner by offering a low-quality trade agreement that he says would force the country to “bend to EU norms”.
In an extraordinary letter to the EU’s chief negotiator, Michel Barnier, the prime minister’s envoy says Brussels’ proposal that EU state aid rules be part of British law is “egregious” and “simply not a provision any democratic country could sign”.


Generational clash on gaming shakes sleepy Japanese prefecture; Screen time limits are challenged as an unconscionable over-reach of constitutional rights
Leo Lewis – FT
The great charm of Kagawa prefecture is that nothing much happens there. It has, glacially, perfected the udon noodle; its Ritsurin landscaped gardens have been stunning — but immobile — for nearly 400 years; in 2013 a Boeing 787 safely made an emergency landing at the main airport.

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Market Narratives Have Pushed Aside Fundamentals

Market Narratives Have Pushed Aside Fundamentals

First Read $46,041/$300,000 (15.3%) ++++ Hits & Takes John Lothian & JLN Staff We have a new and improved version of The Spread today. We have overhauled our approach to this video series and have the whole JLN team contributing to it. Suzanne Cosgrove has...

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