CFTC warns on return to negative oil prices; The dangers of a US-China financial war

May 14, 2020

First Read

FIA Negative Price Webinar Emphasizes Proactive Communications
John J. Lothian, Publisher – JLN

During the webinar put on yesterday (Wednesday, May 13, 2020) by the FIA about negative prices and their impact, panelists emphasized the importance of proactive communications with the trading community in mitigating their potential risk.

Near the end of the discussion, CME Group’s Derek Sammann went so far as to say the Bachelier options model was “well known” to the industry and its customers.

I am not sure that is the case, especially with the retail traders who participate in their markets. I would point out that while the CFTC website’s glossary mentions the Black-Scholes options model, it makes no mention of Bachelier.

The CME Group website’s glossary makes no mention of either Black-Scholes or Bachelier. The Nasdaq website glossary mentions Black-Scholes, but not Bachelier. A search for the term “Bachelier” on TheICE.com website comes up with 0 replies.

There is also no mention of negative prices on these glossaries.

For the rest of the commentary, CLICK HERE

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Reality Check
Thom Thompson – John Lothian News

You could be forgiven for being surprised that global futures markets opened up this morning, or any recent morning, because, at least since trading went electronic and exchanges went for profit, the world has been nearing the end-of-days, lights-out apocalypse for clearing firms. Capital requirements, margin regulations, prudential regulators butting in, reporting, compliance and so on. No clearing, no trading. And yet more than 11.4 billion contracts were traded and CLEARED in the first quarter of this year alone.

So what is going on?

I guess I wasn’t the only one wondering about this. An intriguing report from Acuiti dropped on Wednesday. It takes a close look at what has been happening among clearing firms. Using publicly available information reported by the CFTC – the only source of data like this – Acuiti models the industrial organization of global “general clearing members” (GCMs). These are clearing firms that carry customer business.

To read the rest of this commentary, click here.

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Hits & Takes
By John Lothian

Want some more live entertainment on the web? Brett Ashley McKenzie, the daughter of Ray McKenzie, is part of a fundraiser, “COVIDSLAM: Open Mic Night” for Helping Hands for COVID19 on Sunday, May 17. The money is being raised for COVID19 first responders and essential workers, as well as those recently unemployed and unable to afford rent during furloughs. Here are more details.

And don’t forget about the Matt Scharpf online concert and fundraiser tonight at 7 PM Chicago time on Facebook Live at @matthewscharpfmusic. Matt has raised more than $24,000 for charity since late March.

If you want to attend today’s virtual panel discussion by JLN about the Bachelier options model, email me before noon and I can still add you. Email me at johnlothian@johnlothian.com. There are a few spots left.

Stay safe!~JJL

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If the President Tests Positive for the Virus, What Happens? There’s precedent for a temporary handoff of power to the vice president—but also potential for constitutional chaos.
Joshua Green, Jennifer Jacobs – Bloomberg
The news last week that President Trump’s valet and Vice President Pence’s press secretary had both contracted the coronavirus sent a scare through the White House. While officials said both leaders subsequently tested negative, the episode raised a worrisome possibility: What happens if Trump or Pence is stricken—or, worse, if both became ill at the same time?
/bloom.bg/2WsXjLP

*****There are laws, protocols and the like, but there is always chaos.~JJL

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The Last Hour of the Day Hasn’t Been Good for U.S. Stocks Lately
Joanna Ossinger – Bloomberg
U.S. stocks have been dropping toward the end of their regular session in the past couple of weeks. “Yesterday, a late day S&P sell-off continued a trend over the last two weeks of weakness in the last hour of the day,” Susquehanna Financial Group LLP’s Chris Murphy wrote in a note Wednesday. The gauge was negative over the 3 p.m. to 4 p.m. time period in New York in eight of the 11 days through Tuesday, with a daily average performance of minus 0.34%, he said, compared with a 0.07% average gain from 9:30 a.m. to 3 p.m.
/bloom.bg/2Ww86Vv

****Cocktail hour starts early when you are trading from home.~JJL

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FBI Seizes Senator’s Phone in Insider-Trading Case, Report Says
John Harney – Bloomberg
Los Angeles Times reports warrant was served at Burr’s home; Intelligence panel chairman sold stock after virus briefing
FBI agents seized the mobile phone of Senator Richard Burr, the chairman of the Senate Intelligence Committee, as part of an investigation into stock sales, according to a published report. Burr, a North Carolina Republican, and three other senators sold holdings after receiving closed-door briefings on Capitol Hill early this year about the emerging threat of the coronavirus.
/bloom.bg/2LuoXlr

*****Collateral damage is a risk.~JJL

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ECB Aims for Half of New Hires Under Lagarde’s Watch to be Women
Carolynn Look – Bloomberg
Central bank sets new targets affecting hiring and promotions; ECB missed 2019 gender target for managers across institution
The European Central Bank is revamping gender targets to raise women’s presence at the monetary authority. Its new objective is to fill “at least half of new and open positions with women on all levels,” the ECB said Thursday, with a strategy that covers the period until 2026 so as to fall within the mandate of President Christine Lagarde. The targets aim to raise the share of women at the bank to between 40% and 51% by that point.
/bloom.bg/2WwiP2w

*****Initiatives like this sound great, but they also discriminate against people who are transgender or otherwise identify as “other.”~JJL

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Wednesday’s Top Three
Our top story Wednesday was Bloomberg’s HSBC Lost About $200 Million in One Day on Gold Market Turmoil. Second was The Work-From-Home Trader Who Shook Global Markets, also from Bloomberg, another article about a new book on Navinder Singh Sarao, who was blamed for the “Flash Crash” of 2010. And Bloomberg wins the triple crown today, as our third most-read piece was Saudi Aramco’s Stock Trades on a Different Planet, from Bloomberg Opinion.

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Lead Stories

CFTC warns on return to negative oil prices; US regulator urges market infrastructure providers to brace for future sub-zero drops
Gregory Meyer – FT
The US commodities regulator has issued a rare warning to brokers, exchanges and clearing houses, urging them to be ready for the risk that oil prices could again drop below zero. The Commodity Futures Trading Commission advised exchanges to monitor their markets and remind them to “maintain rules to provide for the exercise of emergency authority”, including the power to “suspend or curtail trading in any contract” if markets become disorderly, according to an advisory notice released on Wednesday.
/on.ft.com/2YV1Msq

The dangers of a US-China financial war; There are reasons for investors to shun some Chinese stocks. Coronavirus is not one.
The editorial board – FT
The global economy is reeling from the coronavirus pandemic. The last thing it needs now is for the smouldering trade war between the world’s two largest economies to escalate. Yet the US administration seems prepared to take that risk. The White House this week fired what could become the first shot in a new financial fight.
/on.ft.com/2xYfZcS

Wall Street Heavyweights Are Sounding Alarm About Stock Prices
Katherine Burton, Melissa Karsh, and Sophie Alexander – Bloomberg
Tepper says the stock market is most overvalued since 1999; Trump tries to bat down billionaire investors with a tweet
The biggest names in finance are coming around to a view that seemed unlikely a few weeks ago: Stocks are vastly overvalued. Legendary investors Stan Druckenmiller and David Tepper were the latest to weigh in after a historic market rebound, saying the risk-reward of holding shares is the worst they’ve encountered in years. Druckenmiller on Tuesday called a V-shaped recovery — the idea the economy will quickly snap back as the coronavirus pandemic eases — a “fantasy.” Tepper said Wednesday that next to 1999, equities are overvalued the most he’s ever seen.
/bloom.bg/3crSSXc

FBI serves warrant on senator in investigation of stock sales linked to coronavirus
Richard Burr
Del Quentin Wilber, Jennifer Haberkorn – LA Times
Federal agents seized a cellphone belonging to a prominent Republican senator on Wednesday night as part of the Justice Department’s investigation into controversial stock trades he made as the novel coronavirus first struck the U.S., a law enforcement official said.
/lat.ms/2T1FvFG

MIAX PEARL Equities Announces Upcoming Testing Dates Exchange Reaffirms September 2020 Launch Date
MIAX
Miami International Holdings, Inc. (MIH), the parent holding company of the MIAX®, MIAX PEARL™ and MIAX Emerald™ options exchanges, today announced that the launch of MIAX PEARL Equities, MIH’s first equities exchange, is scheduled to occur on September 25, 2020, pending approval by the U.S. Securities and Exchange Commission (SEC). To meet this launch date, MIAX PEARL recently announced its connectivity and testing schedule (MIAX PEARL Connectivity and Testing Schedule).
/bit.ly/3fONJdW

Investment Giants Want Exchanges to Enforce Labeling System for ETFs; BlackRock, State Street and Invesco among those seeking strict definition of what can be called an exchange-traded fund
Dawn Lim – WSJ
BlackRock Inc., BLK 6.90% State Street Global Advisors and some other large money managers are asking exchanges to enforce a more narrow definition of exchange-traded funds. These firms want a new naming system reflected in exchange data feeds that go out to traders and investors. A proposal, shared with exchanges this week, would shut out leveraged and inverse funds that seek to amplify returns or losses from the definition of an ETF. It would also distinguish ETFs from debt notes and some funds that rely on leverage and commodity bets.
/on.wsj.com/2LtDcHa

Chinese companies under fire as side bets on stocks turn sour; Listed groups lost a combined $1.6bn from stock investments in first quarter
Don Weinland and Sherry Fei Ju – FT
During the most intense phase of China’s coronavirus outbreak, Anhui Huamao’s cotton spinning and garments business held up, reporting a small loss of Rmb25.6m ($3.6m) over the first three months of the year. But it was another part of the textiles company — a non-core unit making bets on stocks and other financial products — that really hit trouble. Losses from Huamao’s financial investments were more than six times greater, hitting Rmb168m in the first quarter.
/on.ft.com/2LET0ah

Bond ETFs Survived Their First Big Crisis; Some funds bore the brunt of March’s debt market selloff, but central bank support helped restore the balance.
Claire Ballentine and Katherine Greifeld – Bloomberg
Sam Huszczo had long been a skeptic. Exchange-traded funds, already wildly popular among equity investors, were emerging as a cheaper, easier way to build a fixed-income portfolio than investing in a mutual fund. But after a decade-long bull market, no one could be sure how the new products would perform in a downturn. Would they exacerbate turmoil in their underlying markets?
/bloom.bg/362ungP

JPMorgan Clocks Busiest Ever Month Managing Europe Bond Deluge
Anchalee Worrachate – Bloomberg
Firm managed 65 billion euros of sales in month to April 21; Italy, Spain and Portugal among nations borrowing via banks
The government bond underwriting team at JPMorgan Chase & Co. just saw a record month handling a flood of European issuance as the region seeks to borrow its way out of the pandemic.
/bloom.bg/2y1Mfff

Wall Street bonuses set to fall by as much as 30% in 2020: report
Elizabeth Dilts Marshall – Reuters
Wall Street bonuses for 2020 could fall by as much as 25%-30% due to the deep cuts to revenues recorded by banks and hedge funds earlier this year as a result of the novel coronavirus, according to a report published Wednesday by compensation consulting firm Johnson Associates Inc.
/reut.rs/3fQTk3h

Best Time to Reopen? Economists Are Just Guessing; They claim precision for their models, but toss out the dicey assumptions and things get squishy.
Noah Smith – Bloomberg
The U.S. is being roiled by the debate over how long to keep stay-at-home orders — commonly known as lockdowns — in place. Epidemiological experts tend to believe that although some activities can resume, most shutdowns should remain in place until the coronavirus epidemic has been brought under control and suppression regimes — testing, contact tracing and other preventive measures — can be put in place. Based on current trajectories, that could take many places another month and even longer for a few. Conservatives, meanwhile, have mostly begun to agitate for immediate reopening.
/bloom.bg/2T5nupL

Food Price Spike Raises Questions Over ECB Inflation Gauge
Catherine Bosley – Bloomberg
A sharp increase in food prices in European supermarkets since the coronavirus outbreak has researchers wondering whether central bankers are looking at the right inflation measure when setting monetary policy.
/bloom.bg/2yVs7vQ

Banks Are Only as Sound as Their Models; The unprecedented nature of today’s economic shutdowns make it hard for lenders to update the complex models at the core of their business
Rochelle Toplensk – WSJ
Unprecedented is an overused word of late, but it does precisely capture a key challenge for banks: How to update the models at the heart of their businesses, given widespread economic uncertainty and a dearth of relevant historical data.
/on.wsj.com/35Z0Mot

OSTC Announces Participation In Stonewall Diversity Champions Programme
Mondovisione
Derivatives trading and education firm OSTC has today announced its participation in Stonewall’s Diversity Champions programme, to improve LGBT inclusion across its UK business.
/bit.ly/3cxuweM

Miscellaneous

Russia Outbreak Spreads to Neighbor as Mongolian Cases Jump
Terrence Edwards – Bloomberg
Infections in Mongolia rose by the most ever on Thursday; China has tightened curbs after importing cases from Russia
Mongolia recorded its biggest one-day increase in coronavirus cases, with most of the infections in students returning home from emerging virus hotspot Russia.
/bloom.bg/2WzpEAp

Russians Struggling to Survive Add Pressure to End Lockdown
Aine Quinn and Natasha Doff – Bloomberg
Putin announced end of national stay-at-home period on Monday; Almost half of Russians only have enough to survive a month
Grigory Sverdlin has been doling out free meals from a night bus in Russia’s second-biggest city for the best part of the past two decades. Rarely has he seen so much demand as in the past few weeks.
/bloom.bg/3bvDsjt

The Swedish Model Trades More Disease for Less Economic Damage; While the rest of the world has sheltered at home, Swedes have continued eating in restaurants, shopping, and going to work.
Peter Coy and Charles Daly – Bloomberg
On May 8, Swedish state epidemiologist Anders Tegnell gave an interview via Zoom from a parked car. The hot pink cord of the earbuds plugged into his phone flapped distractingly in the foreground. Before this year, it would’ve been hard to scare up 10 journalists to listen to him or any other epidemiologist, but Tegnell drew 450 reporters and other curious people from 60 countries. An additional 10,000 have since listened to the recording of the colloquy with Joyce Barnathan, president of the International Center for Journalists.
/bloom.bg/35ZHZcO

Rich Nations May Face a World Without Cheap Migrant Labor; Thanks to the coronavirus, workers are headed home or stranded abroad. Will they return when the pandemic is over?
Scott Lanman and Stephanie Flanders – Bloomberg
Romanian home-care workers in Italy. Indian construction crews in Dubai. Filipino maids and cooks in Singapore. The world’s wealthy economies depend on a steady flow of cheap labor from lower-income nations. And people in those nations often rely on remittances from family members working abroad.
/bloom.bg/2xYd43U

Thousands of Covid-19 ‘Heroes’ Are About to Get a Pay Cut; Companies are getting rid of hazard pay for essential workers, even as the dangers of working on the front lines remain.
Anders Melin and Ben Steverman – Bloomberg
The hazard pay is disappearing. The hazard is not. Some essential employees across the U.S. have received bonuses or pay bumps to compensate for the risk that comes with clocking in at supermarkets, hospitals and other crowded workplaces during a pandemic.
/bloom.bg/2An62Xf

Virus Hotspots Grow in Meat Plants From Germany to Brazil
Megan Durisin, Tatiana Freitas, Anatoly Medetsky, and Ainslie Chandler – Bloomberg
Smaller-scale abattoirs have damped market impact outside U.S.; Plants have been shut but supply less disrupted than in U.S.
The coronavirus outbreaks that shuttered U.S. meat plants are spreading to other industry powerhouses from Europe to Brazil.
/bloom.bg/2WZ6wdO

Paris Starts a Strange New Coronavirus Life; The superstar city is stirring once again as restrictions ease. But a wave of economic pain looms.
Lionel Laurent – Bloomberg
With face masks at the ready and their hands slathered in gel, patient Parisians lined up on Monday at a safe distance from one another for a first taste of real-life shopping after almost two months of draconian lockdown. After weeks of not being allowed to leave the house without an authorization form, or to go jogging during the daytime, freedom meant being able to browse in a bookstore, visit a barber or stroll along the Seine.
/bloom.bg/3cx4NDf

DC extends stay-at-home order to June 8
Peter Sullivan – The Hill
Washington, D.C., is extending its stay-at-home order through June 8, Mayor Muriel Bowser (D) announced on Wednesday. The mayor said that the city has not yet met all the required benchmarks to reopen. “We’re not there yet and not quite ready to begin that phased new opening,” Bowser said at a news briefing.
/bit.ly/3fJOtRw

Simply talking in confined environments could lead to coronavirus transmission, researchers say
Jessica Flores, USA TODAY
The droplets from simply talking can be enough to spread the coronavirus, according to researchers. By using lasers, scientists found that one minute of talking loudly can produce more than 1,000 virus-containing droplets that could linger in the air for over 8 minutes, according to a new study published in the Proceedings of the National Academy of Sciences of the United States of America.
/yhoo.it/2WSxiol

Coronavirus may never go away: WHO
Robin Millard – AFP
The new coronavirus may never go away and populations around the world will have to learn to live with it, the World Health Organization warned Wednesday. As some countries around the world begin gradually easing lockdown restrictions imposed in a bid to stop the novel coronavirus from spreading, the WHO said it may never be wiped out entirely.
/yhoo.it/2T29UmY

Meat Plant Closures Mean Pigs Are Gassed or Shot Instead
Michael Corkery and David Yaffe-Bellany -NY Times
One Minnesota hog farmer sealed the cracks in his barn and piped carbon dioxide through the ventilation system. Another farmer has considered gassing his animals after loading them into a truck. And a third shot his pigs in the head with a gun. It took him all day.
/nyti.ms/35XxqHf

Japan lifts emergency in most areas but not in Tokyo, Osaka
Linda Sieg, Kaori Kaneko – Reuters
Japanese Prime Minister Shinzo Abe lifted a state of emergency in large parts of the country on Thursday but said it would remain in place in Tokyo until the novel coronavirus is contained.
/reut.rs/3bpYuju

Soaring Prices, Rotting Crops: Coronavirus Triggers Global Food Crisis; Processing and transportation breakdowns, panic buying threaten vulnerable nations; ‘a food crisis with lots of food’
Yaroslav Trofimov in Dubai and Lucy Craymer in Hong Kong – WSJ
The coronavirus pandemic hit the world at a time of plentiful harvests and ample food reserves. Yet a cascade of protectionist restrictions, transport disruptions and processing breakdowns has dislocated the global food supply and put the planet’s most vulnerable regions in particular peril.
/on.wsj.com/2YYSEmF

Exchanges, OTC and Clearing

CEO CHAT: Philip Brittan, Crux Informatics
John D’Antona Jr. – Traders Magazine
Data. It has, according to some pundits, replaced research as the main driver of trading these days. And as traders and others increasingly depend on data and subsequently the flow of data, exchanges have gotten into the data delivery business and engaged in a quiet battle to become number one in this area.
/bit.ly/2Ar1Rdd

SGX to host Commodities Unplugged, a month-long webinar series for international participants to share insights into a post-pandemic view of commodity markets, and the macro opportunities offered from an increasingly financialised market
SGX
Singapore Exchange (SGX) will be hosting Commodities Unplugged, a month-long webinar series from 18 May to 12 June, featuring commodities industry specialists and subject matter experts who will share independent and actionable insights on the current state of the global economy, what the post-pandemic world may look like and its impact and linkages between commodities and FX markets.
/bit.ly/2zF9X1b

Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange and Montréal Exchange Closed for Victoria Day
TMX
Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange and Montréal Exchange will be closed on Monday, May 18, 2020 for the Victoria Day holiday.
/bit.ly/2y220D5

TMX Group Announces Election of Directors
TMX
TMX Group today announced that the nominees listed in the management proxy circular for the 2020 Annual and Special Meeting of Shareholders were elected as directors of TMX Group Limited. Detailed results of the vote for the election of directors held at the Virtual Annual and Special Meeting on Tuesday, May 12, 2020 are set out below.
/bit.ly/3cIiX4g

Euronext publishes Q1 2020 results ; STRONG FIRST QUARTER OF 2020 DRIVEN BY HIGH TRADING VOLUMES IN ALL ASSET CLASSES AND CONTINUED DIVERSIFICATION
Euronext
Euronext, the leading pan-European market infrastructure, today announced its results for the first quarter of 2020.
/bit.ly/365N7fC

CME S&P 500 Option Blocks Have You Covered
Tim McCourt – LinkedIn
In my role as global head of our equity index and alternative investment products at CME Group, I have the privilege of speaking with our clients about their risk management and trading needs on a daily basis. As a result of elevated levels of volatility and uncertainty over the last several weeks, many market users shared that they are incorporating different methods of trading and innovative hedging tools into their risk strategies. In response to their evolving needs during this time, we’ve recently made some changes to one of those tools that has been gaining in popularity of late as an alternative to over-the-counter (OTC) and floor-based trades – CME S&P 500 option blocks.
/bit.ly/2yO1fOq

Do You Know What Nasdaq Stands For?
Bloomberg
Nasdaq Inc. Chief Executive Officer Adena Friedman talks about the history of the exchange and how it works. She appears on the latest episode of “Leadership Live With David Rubenstein.”
/bloom.bg/3fLOg09

SIFMA Fixed Income Market Close Recommendations In The U.S., The U.K. And Japan For The U.S. Memorial Day & U.K. Spring Bank Holidays
Mondovisione
SIFMA confirmed its previous recommendations for the U.S., the U.K., and Japan in observance of the U.S. Memorial Day and the U.K. Spring Bank Holidays.
/bit.ly/2zyu7u2

Fintech

THE TECHNANCIAL COMPANY to implement JANUS Risk Manager at INTL FCStone Inc.
EIN Presswire
INTL FCStone Inc., a large independent brokerage and clearing firm in the US, chooses TTC’s JANUS Risk Manager for the US, UK & Singapore FCM operations.
/bit.ly/3bvXrhO

An Ode to Joy- Congressional Research Service’s report on FinTech Innovation and Policy
Polsinelli – JDSupra
On April 28, 2020, the Congressional Research Service (CRS) published an in depth report related to Fintech, titled Fintech: Overview of Innovative Financial Technology and Selected Policy Issues. This report focuses on providing an overview of all types of FinTech, including blockchain and initial coin offerings (ICOs) and provides some discussions of potential legal and policy ramifications.[1]
/bit.ly/2Luoy2u

Venture Capital Has A Lot To Learn From Fintech: Data-Driven, New Products, And More Access To A Broader Set Of Companies
Alex Lazarow – Forbes
Investment in the financial technology space has skyrocketed globally over the last decade. Fintech has transformed nearly every aspect of the traditional bank. It has also gone mainstream: 75% of people have used a money transfer or fintech product. Fintech innovation has also driven broad-based access to financial products and services to the unbanked and underbanked.
/bit.ly/2y0jz6k

Fintech, Regtech And The Role Of Compliance In 2019 Part 4: Industry Opinion, Challenges For Firms, Cyber Resilience, Closing Thoughts
Thomson Reuters Regulatory Intelligence and Compliance Learning – JDSupra
The list of financial technology challenges for firms continues to grow. This year the greatest challenges are expected to be the need to keep up with technology advancements; perceived budgetary limitations, lack of investment and cost, and then data security.
Thomson Reuters Regulatory Intelligence has undertaken its fourth global survey to assess the impact of developments in regtech and fintech on the role, remit, and expectations of the compliance function in the financial services sector. The research represents compliance and risk practitioners around the world from almost 400 financial services firms.
/bit.ly/2WuLpAZ

Almost £2 billion of UK fintech funding swallowed up by Covid back hole
Finextra
Almost £2 billion of UK fintech investment could be lost because of Covid-19, according to a survey of fintech founders conducted by blockchain firm Qadre and techUK.
Approximately 68% of the 59 fintech founders interviewed for the research have reported missing out on important funding because of the ongoing pandemic. The average amount lost by each fintech business to date runs to approximately £1.2m.
/bit.ly/2Wt77p7

Cryptocurrencies

Cryptocurrency Market Is Becoming Even More Concentrated
Olga Kharif – Bloomberg
Bitcoin, Tether and Ether account for 90% of trading volume; Market share of the coins up from 75% a year ago, Messari says
While Bitcoin has dominated the headlines in the cryptocurrency market since its introduction more than a decade ago, the sector is becoming even more concentrated among it and two rivals. Bitcoin, Tether and Ethereum accounted for about 90% of trading volume on digital-asset exchanges this year among top-10 cryptocurrencies, up from 75% a year ago, according to researcher Messari.
/bloom.bg/2WwkFjW

Bitcoin’s Price Has Bounced But Miners May Still Be Switching Off Post-Halving
Omkar Godbole – Coindesk
While bitcoin is fast reversing its pre-halving price drop, some miners still look to be leaving the network. At time of writing, the top cryptocurrency by market value is changing hands at $9,730, representing a 20% gain on the low of $8,100 observed Sunday – the day before Bitcoin underwent its third mining reward halving. The bounce has erased more than 75% of the drop from $10,500 to $8,100 seen in the three days to May 10.
/bit.ly/2T2SVBh

ETH 2.0’s ‘multi-client’ approach is contributing to delays, says project lead
Yilun Cheng – The Block
Ethereum 2.0’s multi-client paradigm – while crucial for security reasons – is one of the main reasons the launch process is taking so long, according to project lead Danny Ryan. The ETH 2.0 team has repeatedly pushed back the launch schedule for Phase 0, the first step in the network’s multi-stage rollout. While developers initially set the launch date for Jan. 13, they had to postpone at the last minute in order to change to the network’s technical design. Since then, members of the team have given varying estimates.
/bit.ly/3dKQWtb

Overstock Files to Dismiss ‘Meritless’ Fraud Lawsuit Over Its Digital Dividend
Daniel Palmer – Coindesk
U.S.-based e-commerce firm Overstock is hoping to persuade a judge in the Utah District Court to throw out a class-action securities fraud lawsuit relating to the firm’s digital dividend and its effect on short sellers.
/bit.ly/35X5u68

Reddit to launch Ethereum-based tokens for cryptocurrency and Fortnite subreddits
Celia Wan – The Block
Reddit, the popular online forum, is beta testing two Ethereum-based tokens for users to earn rewards for contributing content, The Block has learned. The two tokens, one named $MOONS and other $BRICKS, will be issued to members of the subreddits /r/Cryptocurrency and /r/FortniteBR, respectively, as part of Reddit’s new initiative called “Community Points.”
/bit.ly/2WTYHpP

Binance Quashes Upbit Hackers’ Attempt to Launder Stolen Funds
Paddy Baker – Coindesk
Binance has frozen funds linked to the $49 million breach of the Upbit crypto exchange, as hackers tried to liquidate some of their ill-gotten gains. Most of the action around the news took place on Twitter. At just after 16:00 UTC Wednesday, bot Twitter account Whale Alert warned Binance – which has previously committed to freezing any funds stemming from the hack – that roughly 137 ether (worth around $27,000 at press time) had moved from an address linked to the Upbit hacker group to its wallets.
/bit.ly/2T3RqCB

The IRS Is Hiring Consultants To Crack Down On Cryptocurrency Tax Evasion
Shehan Chandrasekera – Forbes
On May 12, 2020, the IRS sent out a statement of work (SOW) requesting help from independent consultants to crack down on cryptocurrency tax non-compliance. According to the SOW, the IRS is seeking help from technology companies in the crypto tax software space in reconciling taxpayers’ reported cryptocurrency gains and losses on the tax returns. The process includes using software to systematically obtain cryptocurrency transactions data through exchanges, wallets, API keys, blockchain data, and other sources and creating a detailed tax report for the taxpayers under consideration.
/bit.ly/3bzghEO

Fund Manager Got NY BitLicense 11 Months After Hiring Its Architect
Danny Nelson – Coindesk
Benjamin Lawsky, the former financial regulator who created New York’s BitLicense in 2015, joined New York Digital Investment Group Asset Advisory LLC (NYDIG) nearly a year before the bitcoin fund manager applied for, and received, that license.
/bit.ly/2Z3DGfc

Coinbase and the future of IPOs
Jeff John Roberts and David Z. Morris – Fortune (subscription required)
JPMorgan Chase CEO Jamie Dimon might be Bitcoin’s most famous foe. Over the years, he’s decried it as “a fraud,” “worse than tulip bulbs” and more. That’s why it was remarkable to read this week that Dimon’s bank is taking on two big cryptocurrency companies, Coinbase and Gemini, as customers.
/bit.ly/2T2qd3g

Did Venezuela just secretly hard fork its petro cryptocurrency?
Jose Antonio Lanz – Decrypt
The government of Venezuela shut down the petro blockchain for “maintenance” on May 5. When Venezuela spun its crypto back up, a new “genesis block” was created the day it went offline. But another official petro block explorer shows the petro’s genesis block as created in 2018, meaning we may now have two petros on our hands.
/bit.ly/2T4gFVI

First Mover: As Fed Swats Down Negative Rates, Bitcoiners Wonder What If
Bradley Keoun and Omkar Godbole – Coindesk
After bitcoin’s much-hyped halving failed to generate a price rally, crypto traders are already turning to a new bullish investment thesis: the possibility the Federal Reserve might cut its benchmark interest rate below zero.
/bit.ly/3cInDXS

Politics

Georgia election: Trump and Biden level in presidential poll, while Kelly Loeffler in close race for Senate seat
Griffin Connolly – The Independent
Georgia is rearing to be an epic battleground for control of the federal government this November, with Donald Trump and Joe Biden in a dead heat for president and Senator Kelly Loeffler virtually tied with two of her opponents in the all-party special election for Senate, according to a new internal GOP poll obtained by The Independent.
/yhoo.it/3bxIpZ9

Two Months Into Pandemic, Millions of Workers Continue Filing Unemployment Claims; Economists expect another 3 million Americans sought jobless benefits last week; many who filed weeks ago are still awaiting payments
Sarah Chaney and Gwynn Guilford – WSJ
Two months into disruptions from the coronavirus pandemic, millions of U.S. workers continue to apply for unemployment benefits each week. More than 33 million Americans have filed unemployment claims in the seven weeks since the coronavirus led to widespread business closures in mid-March, and economists expect another 3 million filed last week.
/on.wsj.com/2Ww3jUg

Trump threats to China over coronavirus pile pressure on renminbi; Weakness in Chinese currency could ripple across other emerging economies
Hudson Lockett and Anna Gross – FT
When Donald Trump began lashing out at Beijing over its handling of the coronavirus pandemic, global currency traders’ attention snapped back to the exchange rate that last year aggravated tensions between the world’s two most powerful economies.
/on.ft.com/3bxECLp

Inside Trump’s coronavirus meltdown; What went wrong in the president’s first real crisis — and what does it mean for the US?
Edward Luce – FT
When the history is written of how America handled the global era’s first real pandemic, March 6 will leap out of the timeline. That was the day Donald Trump visited the US Centers for Disease Control and Prevention in Atlanta. His foray to the world’s best disease research body was meant to showcase that America had everything under control. It came midway between the time he was still denying the coronavirus posed a threat and the moment he said he had always known it could ravage America.
/on.ft.com/2LxQiTz

How Disinformation Has Morphed for the 2020 Election
Alyza Sebenius – Bloomberg
Despite years of added familiarity, social media giants have found no magic bullet to fight disinformation, or “fake news,” since the 2016 U.S. elections. If anything, America’s adversaries, including Russia and China, have become “more adept at using social media to alter how we think, behave and decide,” according to the U.S. intelligence community’s threat assessment, and have branched beyond politics to other hot-button issues including the coronavirus pandemic. Even more alarming, perhaps, the appeal of such tactics appears to be growing among elements of both major parties.
/bloom.bg/3cIfaE4

Oil Price Crash Could Hurt Trump in Texas, Help in Pennsylvania; Rock-bottom prices compound the larger economic misery and may reshape the electoral map.
Gregory Korte – Bloomberg
Gasoline prices of less than $2 a gallon ought to be good news for a U.S. president with an eye on reelection: It’s a truism that American voters are hypersensitive to the price of gas and factor it into their decisions in the voting booth. But with the U.S. now the world’s top energy producer, rock-bottom oil prices are inflicting major economic damage and pose a problem for Donald Trump.
/bloom.bg/2WvZmPq

Trump Says U.S. Is ‘Looking at’ Chinese Companies on Exchanges
Mario Parker – Bloomberg
Those not following U.S. accounting rules to be scrutinized; President continues targeting China over coronavirus pandemic
President Donald Trump said he is “looking at” Chinese companies that trade on ?the NYSE and Nasdaq exchanges but do not follow U.S. accounting rules. “We are looking at that very strongly,” Trump told Fox Business host Maria Bartiromo in an interview that aired Thursday morning.
/bloom.bg/2y1WwZ1

Get Ready for a Vaccine Information War; Social media is already filling up with misinformation about a Covid-19 vaccine, months or years before one even exists.
Kevin Roose – NY Times
The other night, midway through watching a clip from “Plandemic” — a documentary that went viral on social media last week, spreading baseless lies and debunked nonsense about the coronavirus to millions of Americans overnight — I had a terrifying thought:
/nyti.ms/2zE2zTM

Republican Deficit Hawking Is About to Backfire; Budget balance isn’t what the GOP looks for when it critiques the cost of government programs. That’s a political problem now.
Jonathan Bernstein – Bloomberg
House Democrats have put their bid on the table for the next coronavirus-pandemic relief bill: A $3 trillion effort to bail out state and local governments, send more money directly to citizens, and more. The main Republican response was par for the course: more talk about the perils of deficits. Which means that it’s time to revisit what Republicans actually mean when they warn about deficits — or, what I call the Republican war on budgeting.
/bloom.bg/3cxrMy2

Regulation

FCA confirms measures to help insurance customers who may be suffering financial difficulties as a result of coronavirus
UK FCA
The FCA is today confirming a series of temporary measures to help customers who hold insurance and premium finance products and who may be in financial difficulty because of coronavirus (Covid-19).
/bit.ly/35WJWH3

Increase in Fraudulent Phishing Emails Warrants Member Vigilance
NFA
Recently, a number of institutions including those in the financial industry have reported an increase in fraudulent phishing emails which purport to be from the institution or the institution’s employees. Often these emails include domain names that are almost identical to the institution’s domain. These often urgent emails may include:
/bit.ly/2zynasW

ESMA highlights challenges for rating Collateralised Loan Obligations
ESMA
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has today published a Thematic Report on Collateralised Loan Obligations (CLOs) credit ratings in the European Union (EU). The report provides an overview of CLO rating practices and identifies the main supervisory concerns, and medium-term risks, in this asset class which include credit rating agencies’ (CRAs) internal organisation, their interactions with CLO issuers, operational risks, commercial influence on the rating process and the need for proper analysis of CLOs.
/bit.ly/2y22xVB

Former Swedbank Employees Charged With Laundering ‘Large’ Sums
Aaron Eglitis – Bloomberg
Several former employees of Swedbank AB were charged by authorities in Latvia with money laundering after its branch there reported suspicious transactions involving large sums of cash as recently as 2017. Latvian prosecutors filed allegations against 11 people, including ex-employees of Swedbank’s local unit, earlier this year, Laura Majevska, spokeswoman for prosecutor’s office, said by phone. She declined to specify how many of the 11 had worked at Stockholm-based Swedbank.
/bloom.bg/35XOpJr

Investing and Trading

The Stock Market Is Crazy Expensive—And That’s OK; Our columnist says Wall Street’s favorite valuation metric, the price-to-earnings ratio, has been broken by the coronavirus disruption
James Mackintosh – WSJ
Stocks are at their most expensive since the dot-com crash two decades ago, according to Wall Street’s standard valuation metric. But the forward price-to-earnings ratio is broken, and alternatives show the market is cheaper, even if it’s still no bargain.
/on.wsj.com/35XknWc

Federal Reserve attacked for failing to halt US bank dividends; Ex-FDIC chief says central bank was ‘wrong’ to allow payouts to continue during pandemic
Robert Armstrong – FT
The Federal Reserve is facing growing criticism for not intervening to stop banks from paying dividends, as regulators in the UK and the EU have done. “I think the Fed is wrong” to allow the payouts to continue, one-time US regulator Sheila Bair said on Tuesday, speaking at a digital conference organised by the Financial Times. “We don’t know how bad this [crisis] is going to get,” she said.
/on.ft.com/2LtQyTS

Fall in oil demand set to be less severe than predicted; Decline in consumption will not be as sharp as forecast last month as lockdowns ease, IEA says
Anjli Raval – FT
The International Energy Agency said the drop in oil demand this year will not be as severe as initially thought as governments ease coronavirus lockdown measures, but the body warned that a resurgence of outbreaks are a risk to a “gradual-but-fragile” recovery.
/on.ft.com/35ZKzzw

Investors should prepare for a U.S. ‘economic depression,’ warns Kyle Bass, but China’s fate could be even worse
Chris Matthews – MarketWatch
Kyle Bass made his name betting against the U.S. housing market more than a decade ago, and today he is predicting an economic contraction that could be more than three times as severe as that suffered during the Great Financial Crisis.
/on.mktw.net/2yMcG9l

Why the U.S. Has Shunned Negative Interest Rates
Simon Kennedy – Bloomberg
Investors have speculated that the U.S. Federal Reserve may push its benchmark overnight interest rate into negative territory to help offset the economic devastation of the coronavirus pandemic. President Donald Trump has said doing so would be a “Gift” to the U.S. economy. Fed officials led by Chairman Jerome Powell have consistently opposed it.
/bloom.bg/2T1Ggyw

JPMorgan’s U.S. credit card holders spent 40% less due to coronavirus
Elizabeth Dilts Marshall – Reuters
tCredit card spending among some of JP Morgan Chase & Co’s U.S. customers fell 40% during March and early April compared to last year, as Americans stayed home to protect against the novel coronavirus, according to a new report on Thursday.
/reut.rs/2y6gt0Q

Institutions

Societe Generale completes integration of Commerzbank equity and commodities business; Commerzbank agreed to sell its equity markets and commodities business to Societe Generale in July 2018, including its ETF products and asset management business.
Hayley McDowell – The Trade
Societe Generale has finalised the acquisition and integration of the equity markets and commodities (EMC) business from Commerzbank, almost two years after announcing the major deal.
/bit.ly/3cwXUBT

Deutsche Bank’s US operations criticised by New York Fed; Lender remains at second-worst grade on regulator’s rating scale for failing to address weaknesses
Laura Noonan – FT
The Federal Reserve Bank of New York has sharply rebuked Deutsche Bank for failing to address a litany of concerns at its US operations, casting doubt on the German lender’s ability to rehabilitate its business in the world’s largest and most profitable banking market.
/on.ft.com/2zyknz

Fidelity, Vanguard and JPMorgan accused of ignoring human rights; Big asset managers fail to stop modern slavery at companies they back, report claims
Attracta Mooney – FT
Fidelity Investments, Vanguard and JPMorgan Asset Management have been accused of paying lip service to human rights in a damning report that claims few of the world’s biggest fund houses are taking action to mitigate abuses such as modern slavery at the companies they invest in.
/on.ft.com/2LtCqde

Zurich Insurance May Take Up to $750 Million Hit
Patrick Winters and Marion Halftermeyer – Bloomberg
Insurer sees $280 million claims at P&C unit in first quarter; Gross written at premiums for P&C rise 5% from year earlier
Zurich Insurance Group AG may have to pay out as much as $750 million this year due to the coronavirus as it grapples with rising claims and volatile markets that have already triggered profit warnings at rivals. Europe’s second-largest insurer by market value said the claims will hit its property & casualty unit, with $280 million recognized in the first quarter. The estimate is subject to significant uncertainty, Zurich said in a statement on Thursday.
/bloom.bg/2WtbwbK

Regions

China’s record Brazil soyabean imports impede US trade target; Beijing faces ‘Herculean’ effort to meet phase one trade goals with Washington
Emiko Terazono and Sun Yu – FT
Brazil’s soyabean shipments to China hit a monthly record of more than 9m tonnes in April, casting doubt on whether Beijing can meet the first-year targets of its trade deal with Washington.
/on.ft.com/3bt7Vyx

Danny Meyer Expects His Dining Rooms to Remain Closed Until a Vaccine; In the meantime, Union Square Hospitality Group will start exploring takeout at Daily Provisions and Marta.
Kate Krader – Bloomberg
On March 13, Danny Meyer shut all of his 19 New York restaurants, including Gramercy Tavern and Union Square Café, because of coronavirus safety concerns. A few days later, the chief executive officer of Union Square Hospitality Group laid off 2,000 employees.
/bloom.bg/2WsZe2Z

Transport for London About to Run Out of Cash, Mayor Khan Warns
Jess Shankleman – Bloomberg
Mayor tells LBC that talks with government unsuccessful; Most TfL funding comes from fares and environmental charges
Mayor of London Sadiq Khan warned that the city’s transit operator could run out of cash by the end of Thursday, as negotiations with the government have so far failed to secure financial support.
/bloom.bg/2WsCSPc

Australian Financial Markets Association Welcomes Revocation Of Trade Caps
Mondovisione
The Australian Financial Markets Association (AFMA) has welcomed ASIC’s guidance issued today to equity market participants in relation to the volume of share trading, setting out its expectations for all market participants to act appropriately to ensure Australia’s equity market remains resilient.
/bit.ly/364Z599

Brexit

Why Brexit divorce deal still hangs over EU-UK future-relationship talks
Peter Foster in Brighton and Jim Brunsden – FT
Even as the UK and EU hold intensive talks on their future relationship, the two sides are only beginning to grapple with the complexity of implementing the first part of Brexit: Prime Minister Boris Johnson’s withdrawal agreement signed in Brussels last October. The “divorce deal”, which ran to more than 500 pages, enabled the UK’s orderly exit from the bloc by settling Britain’s exit bill, guaranteeing citizens’ rights and preventing the return of a hard border in Ireland.
/on.ft.com/2yVqVsm

What’s at stake in Britain’s post-Brexit trade talks?
Seán Clarke – The Guardian
British trade negotiators have been exceptionally busy this week. They are in formal talks with both the EU and the US, and on Wednesday the trade secretary, Liz Truss, announced negotiating objectives for talks with Japan. But what deals does Britain already have, and what will happen if it does not conclude an agreement with the EU by the end of the year?
/bit.ly/2WVNcy7

Miscellaneous

If You Love Whisky, There’s One Trip You Need to Take; Hikes, sailing, and distillery tours on the magical Hebridean isle of Islay is how this author is going to toast the end of Covid-19.
Brad Japhe – Bloomberg
At the moment, all of our plans are on hold. But that doesn’t mean we here at Bloomberg Pursuits aren’t planning the experiences we’ll rush out to enjoy when it’s safe to do so. We’re sharing our ideas with you in the hopes that they will help inspire you—and we’d love to hear what you are daydreaming about, too. Send us your ideas at daydreams@bloomberg.net, and we’ll flesh some of them out for this column.
/bloom.bg/2zBXons

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Brokers shun oil ETF providers over regulatory risks

Brokers shun oil ETF providers over regulatory risks

First Read Cboe's Tilly Outlines Exchange Growth Amid Market Disruption Suzanne Cosgrove - John Lothian News In a webinar interview Thursday, Cboe Global Markets' CEO Ed Tilly said the exchange is contemplating reopening the trading floor next month but will not pull...

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