CME rebuts accusations of pro-cyclical margining

Jun 7, 2021

First Read

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Hits & Takes
John Lothian & JLN Staff

For those of you in Chicago, the Union League Club of Chicago is fully open. This ULCC is a home to many industry events, including FIA Washington updates when they are held in person. Back in the day, many members of the CBOT were members of the Union League Club because of its proximity to the CBOT Building and its role in Chicago’s business community. I am also a member of the ULCC.

The firms involved in the Greenwood Project are having a big impact. Since the Greenwood Project started, they have worked with more than 350 students. Not only have 100% of their alumni graduated from both high school and college, but over 75% have attained careers in financial services. Keep up this important work.

DRW reports on LinkedIn that team members are slowly returning to the office and notes that the remote environment is not going away anytime soon. Also, a product manager based in Chicago wrote a piece about “her experience of interviewing and onboarding remotely.” — DRW

Congratulations to Kate Maehr, the CEO of the Greater Chicago Food Depository, who just celebrated her 25th work anniversary fighting hunger in Chicago and Cook County.

The Chicago Federal Reserve has a new podcast out, “Clearing: Perspectives on Industry Developments and Learnings From the Covid Crisis,” by Ketan B. Patel. — Federal Reserve Bank of Chicago

We are in a dry spell of donations to our JLN MarketsWiki Education GoFundMe campaign. We had no new donations to it over the weekend. Your support is essential to allow us to produce the Open Outcry Traders History Project, The Path to Electronic Trading and The History of Financial Futures video series.

This is the week FIA IDX would have occurred had it been held in person. My Facebook account was full of reminders of past IDX activities over the weekend. I look forward to meeting in person again soon.

Have a great day and stay safe and treat people the same way you want to be treated: with respect, equality and justice.~JJL

***** offers an interesting example of how movement in a so-called “meme” stock can impact an ETF, even though ETFs by definition are supposed to be fairly diversified. They note that the SoFi Social 50 ETF (SFYF) is “currently as close to a meme stock ETF as you can get,” with AMC moving up to 23.5% of the ETF’s portfolio last week and shares of GameStop making up 6.1%. More details are here. ~SC


Robin Trott – The Path to Electronic Trading Part Two

In Part Two of Robin Trott – The Path to Electronic Trading, Trott talked about how block trade and call-around markets developed in Europe. Platforms were rushing to write to all of the individual European markets. There were a large number of them back then.

Watch the video »


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Clearing: Perspectives on Industry Developments and Learnings From the Covid Crisis
Ketan B. Patel – Federal Reserve Bank of Chicago
LaSalle Street hosts a discussion with executives representing exchanges, swap dealers, clearinghouses and asset managers on the impact of the Covid crisis and what to watch for as the pandemic eases. Ketan Patel, Policy Advisor and Head of Financial Markets Risk Analysis in the Chicago Fed’s Financial Markets Group, hosts this episode. Alessandro Cocco, Vice President of the Financial Markets Group at the Chicago Fed, provides an introduction.

****** The Chicago Fed’s Financial Markets Group is always worth a listen.~JJL


NFTs Shift Power to Artists as the Music Business Evolves; The $1 million musician/producer RAC has made so far is nice, but the bigger mission is to “rebuild the music industry.”
Matthew Leising – Bloomberg
The Grammy-award winning musician and producer André Anjos goes by the stage name RAC, although as a bellwether in the radical ways the music industry is evolving, he might consider changing that to NFT.

****** I want an NFT of a picture of Matt Leising signing a copy of his book on Ethereum to me. ~JJL


Options Traders Bet on Return of $100 Oil; Investors have scooped up call options tied to crude prices hitting milestone for first time since gush of U.S. oil in 2014
Joe Wallace – WSJ
Traders have alighted on what some believe to be a one-way bet in the world’s most important commodity market: oil prices going to $100 a barrel. They have scooped up call options tied to Brent and West Texas Intermediate crude-oil prices reaching $100 by the end of next year. Oil prices haven’t topped that milestone since 2014, when a gush of U.S. crude depressed energy markets.

***** You can’t get to the moon unless you buy a ticket.~JJL


What to expect when interviewing and onboarding 100% remotely
It’s been a year since our teams shifted to a remote environment as a result of the COVID-19 pandemic, and we caught up with some team members who have joined the firm over the past year. Hear from Nicole, Product Manager based in Chicago, on her interview and onboarding experience since joining the firm.

****** Nicole, I am listening.~JJL


Musk tweet with broken-heart emoji and Linkin Park meme is latest to hit Bitcoin
Eric Lam and Bloomberg – Fortune
Bitcoin slid after a cryptic tweet from Elon Musk hinting at a potential split with the largest cryptocurrency, the latest post from the billionaire to buffet the token’s price. The coin dropped as much as 3.4% and was trading at about $37,790 as of 10:50 a.m. in Hong Kong. The decline dented this week’s stabilization in the crypto sector after a rout in May. The Bloomberg Galaxy Crypto Index retreated as much as 3.9%.

****** Elon Musk also blinked in a nonsynchronous manner and no one can tell what it means.~JJL


Bezos going to space on company’s rocket ship
Mychael Schnell – The Hill
Jeff Bezos will launch into space next month on the first human flight for New Shepard, the rocket created by his space flight company Blue Origin.
Bezos, the richest person in the world, announced in an Instagram post on Monday that he will fly to space on July 20 with his brother Mark.

****** Bezos must be after Elon Musk’s Tesla out in space.~JJL


Friday’s Top Three
Our top clicked story on Friday was A former head of macro strategy at legendary investment firm Citadel lays out the 5 key qualities he believes makes a great trader — and provides a rare outlook on the future of hedge funds, from Business Insider (subscription required to read). Second was a repeat from the previous top three, Pit Closures = Corn, Soybean Market Instability, Trader Says, from Successful Farming. Third was Sheldon Cohen – Open Outcry Traders History Project – Part One a video interview from John Lothian News.


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Lead Stories

CME rebuts accusations of pro-cyclical margining; Merc issues white paper touting strong portfolio-level coverage during pandemic, rebuffs calls for higher MPOR
Costas Mourselas –
CME Clearing has sought to rebut complaints that its margins were too low in the advent of the coronavirus pandemic last year, and that demands subsequently rose too rapidly as Covid-19’s spread caused a sustained spike in market volatility. In a soon-to-be-released white paper seen by, CME analyses its own performance during the Covid-19 pandemic, offering evidence to support its long-standing argument that its existing anti-procyclicality mechanisms are enough to help dampen margin

CME Group Launches FTSE 100 Adjusted Interest Rate Total Return Futures
CME Group
CME Group, the world’s leading and most diverse derivatives marketplace, today launched FTSE 100 Adjusted Interest Rate (AIR) Total Return futures. “Building on the success of our expanding suite of Total Return contracts, our new FTSE 100 AIR Total Return futures are an ideal addition that will provide a capital-efficient, exchange-traded alternative to total return swaps,” said Tim McCourt, Global Head of Equity Index and Alternative Investment Products, CME Group. “Going forward, this new risk management instrument will support clients in hedging Euro equity benchmark exposure.”

G-7 Nations Agree on New Rules for Taxing Global Companies; Deal marks step toward adopting a 15% global minimum corporate-tax rate sought by the Biden administration
Paul Hannon, Richard Rubin and Sam Schechner – WSJ
The Group of Seven leading rich countries agreed to back new rules for taxing businesses that operate internationally in a significant step toward a global agreement that would deliver the 15% floor that the Biden administration said it could accept.

Commodities hedge funds back in vogue after years of outflows
Jeff Lewis, Maiya Keidan – Reuters
Hedge funds focused on commodities have generated strong returns in 2021 and investors long wary of such funds are now putting money into them, betting the recovery from the pandemic will charge demand for oil, gas and raw materials from metals to grains to sugar and coffee.

A G-7 Deal on a Global Minimum Tax for Companies Faces Hurdles; Many governments are likely to wait and see what others, especially a divided U.S. Congress, will do to put the deal into effect
Richard Rubin, Paul Hannon and Sam Schechner – WSJ
An agreement by wealthy countries to impose minimum taxes on multinational companies faces a rocky path to implementation, with many governments likely to wait and see what others, especially a divided U.S. Congress, will do.

SEC Announces Removal of William D. Duhnke III from the Public Company Accounting Oversight Board; Duane M. DesParte to Serve as Acting Chair; Commission to Seek Candidates for all Five Board Positions
The Securities and Exchange Commission today announced that it has removed William D. Duhnke III from the Public Company Accounting Oversight Board (PCAOB). The Commission designated Duane M. DesParte to serve as Acting Chairperson, effective today. The PCAOB was established by the Sarbanes-Oxley Act of 2002 and oversees the audits of the financial statements of public companies and brokers and dealers through registration, standard setting, inspection, and disciplinary programs. Under the Act, the Commission selects members and the Chairperson of the Board.

Chairman’s Firing Is Latest Jolt at Troubled Financial Watchdog; The U.S.’s top accounting regulator—hobbled by a blackmail plot, a complaint over a thrown soda can, and more—is supposed to make sure auditors don’t let companies cook their books.
Robert Schmidt, Benjamin Bain – Bloomberg
For a Washington regulator that pretty much nobody has heard of, the Public Company Accounting Oversight Board is suddenly getting a lot of attention—and for all the wrong reasons. On Friday, the U.S. Securities and Exchange Commission, which oversees the board, fired chairman William Duhnke III. This came after several weeks of progressive activists, investor advocates, and Senators Elizabeth Warren and Bernie Sanders calling for a change of leadership. Despite its obscurity, the PCAOB has a vital role: policing the auditing firms that sign off on companies’ books. Ultimately, its job is to stop frauds like Enron and WorldCom.

Watchdog criticised over plans to combat dominance of big banks; Industry lobby group asked by CMA to design body to oversee critical banking reforms
Nicholas Megaw – FT
The UK’s competition regulator has been accused of “putting foxes in charge of the henhouse” after asking the banking industry’s own lobby group to design a supervisory body to combat the dominance of big banks.

Tiger Cubs: How Julian Robertson built a hedge fund dynasty; Psychoanalysis, a ‘hyper-competitive’ environment and vigorous debate shaped a generation of top investors
Laurence Fletcher and Harriet Agnew – FT
When the implosion of Archegos Capital blew a hole worth more than $10bn out of a clutch of banks, one line in the biography of founder Bill Hwang stood out: Tiger Management. Prior to the private investment firm’s collapse in March, Hwang was an obscure figure better known for his guilty plea to wire fraud charges in 2012. Fellow investors were stunned he could have emerged from that to secure $50bn in borrowing from heavy-hitting banks to supercharge what proved to be ill-fated bets.

Crypto Frauds Target Investors Hoping to Cash In on Bitcoin Boom; FTC says consumers have reported losing more than $80 million to crypto-investment scams since October
Alexander Osipovich – WSJ
Scams are running rampant in the cryptocurrency markets as a huge rally in bitcoin, a lack of regulation and the anonymity of digital money have created a ripe environment for fraudsters. Consumers reported losing nearly $82 million to crypto scams during the fourth quarter of 2020 and first quarter of 2021, more than 10 times the amount from the same six-month period a year earlier, according to the Federal Trade Commission.

SIX to consolidate Swiss and Spanish exchange trading platforms; Following the acquisition of Spain’s BME, SIX has outlined plans to integrate the Spanish market onto its existing trading platform.
Hayley McDowell – The Trade
SIX has outlined plans to integrate the Bolsas y Mercados Españoles (BME) trading platform with its existing trading platform to form a full-integrated system, following its EUR2.8 billion acquisition of the Spanish stock exchange.

Covid Outbreak at Taiwan Factory May Worsen Chip Shortage
Samson Ellis and Cindy Wang – Bloomberg
King Yuan is one of the world’s largest chip-testing companies; Customers have been struggling to get enough chips this year
A cluster of Covid-19 infections at a factory in central Taiwan temporarily stopped operations at one of the world’s largest chip-testing companies, the latest sign of potential disruption to a technology supply chain already struggling from component shortages.

Chip shortage to last until at least mid-2022, warns manufacturer; Forecast from Singapore-based Flex comes as scarcity forces carmakers to scale back production
Harry Dempsey – FT
The global chip shortage disrupting the car industry and threatening the supply of consumer technology products will last for at least another year, one of the world’s largest electronics contract manufacturers has warned.

Financial groups dash to raise short-term funding in US on the cheap; Commercial paper market has boomed this year as borrowers are lured by ‘wall of cash’
Joe Rennison – FT
Financial companies have raced to issue cheap, short-dated debt in the US this year, sending the total amount outstanding to a decade high, as they take advantage of a “wall of cash” that is looking for a home.

A new era of corporate transparency is dawning; G7 tax deal and EU breakthrough on disclosure highlights shift in the openness democratic societies expect
Martin Sandbu – FT
The G7 finance ministers’ tax deal is a step on the road to a better global tax system. If we have got this far, it is because of pressure from citizens who have realised how broken the current system is. That is why this week’s move by the EU to force big corporations publicly to break down their profits on a country-by-country basis is as important as the G7 deal.

Active ETF format helps fuel surge of new entrants to the market; Data suggest, with 22 new issuers so far, that this year could equal 2020’s record of 51 new providers
Steve Johnson – FT
The number of new entrants to the global exchange traded fund market is on track to match last year’s record tally as active managers seek to join an industry boom that shows no signs of slowing.

How much money lawyers for Madoff’s Ponzi scheme victims have recovered so far; Madoff, one-time chairman of NASDAQ, died April 14
Fox Business
Epic Ponzi scheme mastermind Bernard Madoff is dead. But the effort to untangle his web of deceit lives on. More than 12 years after Madoff confessed to running one of the biggest financial fraud in Wall Street history, a team of lawyers is still at work on a sprawling effort to recover money for the thousands of victims of his scam.


Covid ‘is over’ in Norway, health chief declares; Lowest hospital admissions rate since last summer but caution urged while local outbreaks remain
Richard Milne – FT
The Covid-19 pandemic is over in Norway, according to one of the doctors leading the response against coronavirus in the rich Scandinavian country. Preben Aavitsland, chief physician in the infection control division at the Norwegian Institute of Public Health, tweeted on Sunday a graph showing Norway with its lowest level of hospital admissions since the end of last summer and wrote: “That is the pandemic over with.”

US gives Covid vaccines to Taiwan after China accused of interference; Taipei alleges Beijing blocked efforts to secure jabs directly as island fights its first large-scale virus outbreak
Kathrin Hille – FT
The US will donate 750,000 Covid-19 vaccines to Taiwan, signalling its support for the country after Taipei accused Beijing of interfering in its efforts to secure jabs.

Vaccine Lag in U.S. South May Lead to Summer Wave; In 15 states, including Arkansas, the Carolinas, Georgia and Louisiana, about half of adults or fewer have received a vaccine dose.
NY Times
Experts are concerned that states across the South, where vaccination rates are lagging, could face a surge in coronavirus cases over the summer. A dozen states — many of them in the Northeast, including Maine, Massachusetts and Connecticut — have already reached a benchmark of at least 70 percent of adults with at least one vaccine dose, a goal President Biden has set for the nation to make by July 4. But in the South, that marker is nowhere in sight for several states.

UK plans to offer Covid vaccines to teens later this year; Health secretary says he is taking advice on how and when to roll out jabs for those over the age of 12
Jim Pickard – FT
The UK is drawing up plans to offer coronavirus vaccines to children over the age of 12 later this summer, the health secretary Matt Hancock signalled on Sunday.

Exchanges, OTC and Clearing

Open Positions in CME-Based Bitcoin Futures Slump to 5 1/2-Month Low
Omkar Godbole – Coindesk
The total amount of funds allocated in “standard” bitcoin futures contracts on the Chicago Mercantile Exchange (CME) slid to an almost six-month low Wednesday, indicating a decline in institutional activity.

Euronext streamlines Oslo Børs with sale of market data and trading solutions business; The sale of Oslo Market Solutions to Infront by Euronext comes as it streamlines Oslo Børs to focus on its core offerings following a recent Optiq migration.
Annabel Smith – The Trade
Euronext has completed the sale of the market data, investor relations and portfolio and trading solutions division from Norwegian exchange Oslo Børs, which it acquired in 2019. The European exchange operator sold the Oslo Market Solutions segment to trading solutions provider Infront following the integration and migration of Oslo Børs onto its Optiq platform.

Forfeiture of Unclaimed Final Dividend for 2014

Required Load-Out Rate for Hard Red Winter Wheat
CME Group
Pursuant to Rule 703.C.b., ADM Grain Company’s Hutchinson, KS (Elevator J) facility is now required to load out 40 In-Hopper Cars per day or 200 In-Hopper Cars per week. Their load-out designation can be found in the chart below from the CBOT Chapter 7, Rule 703.C.b. as follows:

Regularity Approval for Live Cattle
CME Group
Notice is hereby given that the Exchange has approved the application for Lonestar Stockyards, LLC for regularity in Live Cattle as an approved livestock yard:

Polish WIGtechTR ETF Is Newly Listed
The WIGtechTR ETF is now available on GPW; WIGtechTR is an index covering 49 companies in the biotech, gamedev, IT, telecom, and high-tech sectors; It is the seventh ETF introduced on GPW by Agiofunds in partnership with Beta Securities Poland and the third ETF newly listed on GPW in 2021.
The Beta ETF WIGtechTR Polski Fundusz Inwestycyjny Zamkniety has been newly listed on the GPW Main Market today. AgioFunds TFI is the issuer, Dom Maklerski BOS is the offering agent and market maker, and Beta Securities Poland is the co-ordinator of the initiative.

21Shares to launch UK Bitcoin ETP on Aquis Exchange with GHCO; UK launch to follow recent successful debut on Euronext Paris and Amsterdam
21Shares, the Swiss pioneering Crypto ETP issuer, today announced that one of the first cryptocurrency exchange traded products (‘ETPs’) will become available to institutional investors in the UK to trade on Aquis Exchange. This arrangement is in partnership with GHCO, a leading market-maker and liquidity provider specialising in ETFs.


Symphony Appoints Michael Lynch as Chief Product Officer
Symphony Communication Services
Symphony Communication Services has appointed Michael Lynch as Chief Product Officer, effective 1 June 2021. He will be a strategic member of the firm’s leadership team and will lead initiatives across the entire product lifecycle.

IBM’s ‘Cloud Satellite’ targets banks convinced of decentralized trading model; The tech giant believes a hub-and-spoke model is the future of trading. In part, it is using its new cloud offering to lure financial services firms that are looking to open remote offices to find new talent.
Jim Hatch, Anthony Malakian – Waters Technology
Trading has largely been a centralized function—there are skyscrapers in major cities around the globe branded with a bank’s name to prove as much. It’s because of this that some wondered whether banks, large asset managers, exchanges, and infrastructure providers could handle such a rapid—and strictly enforced—work-remotely setup after the spread of Covid-19 caused global shutdowns.

Two Fintech Deals Add to Startup Funding Rush in Pakistan
Faseeh Mangi – Bloomberg
KTrade raises $4.5m and early wage access Abhi gets $2.1m; Pakistan startups raised record amount from foreigners in 2020
A flood of overseas capital into Pakistan’s fintech startups that began during the coronavirus pandemic is continuing unabated, with two new fundraising deals announced on Monday.

MIT Bitcoin Experiment Nets 13,000% Windfall for Students Who Held On; Those who cashed out are left with an expensive lesson in regret.
Sophie Alexander – Bloomberg
Mary Spanjers has a winning lottery ticket, tucked away in a drawer, uncashed. It’s an artifact of her freshman year of college seven years ago at the Massachusetts Institute of Technology. She took advantage of a free offer of something strange and new: cryptocurrency. One-third of a Bitcoin, to be exact. It was worth $100.

Singapore Fintech Firm Nium Expands in U.K. Before Pursuing IPO
Yoolim Lee – Bloomberg
Temasek-backed payments company buying London-based Ixaris; Other deals in pipeline ahead of stock market debut, CEO says
Nium, a Singapore-based fintech startup backed by state-owned investor Temasek Holdings Pte, agreed to buy payments firm Ixaris for an undisclosed amount to expand in Europe before pursuing an initial public offering in the U.S.

Bond data network Glimpse gains ground with buy-side as it revamps model; Glimpse Markets will now pay the buy-side for data they contribute with a ‘data dividend’ as asset managers continue to support the start-up ahead of launch this year.
Hayley McDowell – The Trade
Corporate bond data pooling network Glimpse Markets will now pay the buy-side for data in a revamp of its operating model as 15 asset managers confirm their support for the start-up.


Hackers Stole $650,000 From Nonprofit and Got Away, Showing Limits to Law Enforcement’s Reach; When criminals swindled One Treasure Island, the San Francisco organization turned to the cops. Getting no help, its director decided to launch her own investigation.
James Rundle – WSJ
Just before Christmas 2020, hackers began to steal from One Treasure Island, a nonprofit that is redeveloping its namesake island in San Francisco Bay as a haven for low-income and formerly homeless people. Over the next month, criminals siphoned $650,000 from the community organization. The money was earmarked as a loan to one of its member organizations for affordable housing projects on Treasure Island, a man-made strip of land smaller than a square mile that was built in the 1930s and served as a Navy facility until 1997.

Goldman Sachs’ savings brand Marcus being impersonated by scammers using it to dupe victims; A website operating as ‘Marcus by Goldman Sachs’ popped up in recent weeks, virtually indistinguishable from the genuine site
Lucy White – Daily Mail
Goldman Sachs’ savings brand Marcus is being impersonated by scammers using it to dupe victims. A website operating as ‘Marcus by Goldman Sachs’ popped up in recent weeks, virtually indistinguishable from the genuine site, which launched in the UK less than three years ago.

Cyber-Crime ETFs Sputter as Meme Stocks Absorb Market’s ‘Oxygen’
Claire Ballentine – Bloomberg
Cybersecurity-focused ETFs are struggling to capitalize on a slew of high-profile hacks that have prompted the White House to urge every U.S. company to beef up security measures.
The $2.2 billion ETFMG Prime Cyber Security exchange-traded fund (HACK) and the Global X’s Cybersecurity ETF (BUG) have seen little in the way of inflows. The former notched just $13 million in May after two straight months of outflows, according to data compiled by Bloomberg.


There’s a New Vision for Crypto, and It’s Wildly Different From Bitcoin; The market is still treating the space as a monolith. It’s time for that to change.
Joe Weisenthal – Bloomberg
It’s kind of weird to say this, but after more than a decade of Bitcoin’s existence, there’s finally some consensus about what it is. Hardcore Bitcoiners liken it to “digital gold” — a safe-haven asset whose primary use case is holding. And even people who aren’t so into it more or less accept that narrative. Barely a day goes by where we don’t hear from some legendary investor opining on TV, saying something like, “We believe Bitcoin is an emerging store of value, which, like gold, can play an important role in a diversified portfolio.”

What 16th-Century Venice Teaches Us About Crypto; As usage grows more widespread, so too does the potential for negative public consequences. The state may eventually have to step in.
David Fickling – Bloomberg
On Feb. 18, 1522, a secondhand clothing merchant named Geronimo Bambarara in the crowded Rialto district of Venice came up with a new way of clearing out stock. Instead of selling his goods directly for money, he decided to enter customers in a draw. In exchange for a 1 lira ticket, they might win more than 1,000 times that amount in cash or take home prizes of carpets, cloth of gold, fabric, amber or animals. The promotion was a success. Within a week, the numbers chancing their odds resembled the crowds at the Ascension Day religious festival, according to one contemporary diarist: “At present, in this Rialto district, nothing is done except put money on the lottery.”

China Could Use Digital Yuan to Promote Capital Convertibility
Bloomberg News
China could use the digital yuan in a cross-border “regulatory sandbox” program to test capital account convertibility between Shenzhen and Hong Kong, according to a proposal by a senior central bank official.

Digital Yuan May Prove the Hong Kong Dollar’s Cousin; What if the e-CNY is issued by commercial banks and backed up by the state’s coercive power?
Andy Mukherjee – Bloomberg
The stronger the interest in China’s coming digital currency, the less we seem to know about it. Sifting through comments by officials thought to be the brains behind the project, Capital Economics’ chief Asia economist Mark Williams has raised an interesting question: What if the e-CNY, as some are beginning to call the new electronic cash, is not at all a central bank digital currency?

Indian tech leader urges embrace of cryptocurrency as an asset class; Nandan Nilekani says treating crypto as a commodity could add wealth to country’s economy
Benjamin Parkin – FT
Nandan Nilekani has called on India to embrace cryptocurrencies as an asset class as authorities around the world grapple with how to accommodate the technology.

Jack Dorsey tweets Square’s eyeing creation of bitcoin hardware wallet
Payments firm Square is considering creating a non-custodial hardware wallet for bitcoin, the company’s chief executive officer, Jack Dorsey, said Friday. Bitcoin wallets can be stored offline or online at cryptocurrency exchanges, venues where bitcoin can be bought and sold for traditional currencies or other virtual coins.

CryptoCompare May Exchange Review: Derivatives And Spot Volumes Soared As CME’s ETH Futures Volume Reached $18.7bn In May (Up 208%)
Following a relatively stable month in April, volatility returned to the cryptocurrency market in May. Bitcoin’s price pulled back to $29,925 (down 44.2% from May open), and closed at $37,291, 35.4% lower than the previous month – Ethereum and many other cryptocurrencies followed a similar trend.

CoinShares Lists Physically-Backed Crypto ETPs on Börse Xetra; Europe’s largest digital asset investment firm brings new physically-backed crypto ETP platform to Germany’s main market
CoinShares (“the Company”) (Nasdaq First North Growth Market: CS), Europe’s largest digital asset investment firm, today announced that three of the Company’s recently launched physically-backed exchange traded products (ETPs) have cross-listed on Germany’s Börse Xetra exchange.


If Covid Did Escape From a Wuhan Lab, Brace Yourself; The world’s anger will be terrible to behold.
Stephen L. Carter – Bloomberg
Ever since President Joe Biden ordered U.S. intelligence agencies to investigate reports that the Covid-19 virus might have escaped from a laboratory in Wuhan, commentators have argued over what difference it makes if the theory turns out to be right. Here’s why the answer matters: The discovery that the virus had a human origin would give the coronavirus saga what it’s lacked: a villain. And that’s a problem.

G7 tax deal is ‘starting point’ on road to global reform; Agreement must now be sought at G20 and among 139 countries involved in OECD talks
Chris Giles and Delphine Strauss – FT
The tax deal agreed by the world’s leading advanced nations this weekend is the first substantive proof of revived international co-operation since President Joe Biden brought the US back to the negotiating table. Yet there is still a long road ahead before it can be implemented.

Big Oil’s political clout wanes as governments embrace green energy; Transition from fossil fuels will create new geopolitical relationships and tensions, say analysts
David Sheppard – FT
The handshake between then UK prime minister Tony Blair and Muammer Gaddafi in the desert in 2007 was not just the moment the Libyan leader cemented ties with an old foe. It was also a stark symbol of the role “Big Oil” played in foreign policy.


Proposed Framework Aims to Guide Regulators in Decisions to Charge Chief Compliance Officers; Proposal comes amid growing concerns over the individual liability of compliance professionals
Mengqi Sun – WSJ
A proposed framework guiding decisions to bring enforcement actions against financial sector chief compliance officers aims to address growing concern over the individual liability of compliance professionals.

SEC Removes Chairman of Audit Watchdog; The U.S. securities regulator said it would seek candidates for all PCAOB board positions
Mark Maurer – WSJ
The Securities and Exchange Commission on Friday removed the chairman of the U.S. audit watchdog and took steps to replace its entire board, as the SEC’s new Democratic leader begins to shape the regulator. The SEC, which oversees the Public Company Accounting Oversight Board, said the departure of William Duhnke was effective immediately and that it appointed board member Duane DesParte to serve as acting chair. It didn’t provide a reason for the changes. Mr. Duhnke couldn’t be reached for comment.

SEC appoints new trading and markets acting director; New regulatory appointment will replace Christian Sabella, who served at the agency for the past 10 years.
Wesley Bray – The Trade
The US trading watchdog has confirmed the appointment of a new acting director of the division of trading and markets. David Saltiel takes on the new role at the Securities and Exchange Commission (SEC), replacing Christian Sabella, who concluded his tenure at the agency on 2 June.

Statement on The Commission’s Actions Regarding the PCAOB
Commissioner Hester Peirce, Commissioner Elad L. Roisman – SEC
Today, the Commission removed William D. Duhnke III from the Public Company Accounting Oversight Board (PCAOB) and announced that it will seek candidates to fill all five seats on the PCAOB, including those that are currently occupied by members whose terms have not ended. We have serious concerns about the hasty and truncated decision-making process underlying this action.

ESMA launches 2021 Central Counterparties Stress Test
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has today published the framework for its fourth Stress Test for Central Counterparties (CCPs). ESMA, as required by the European Markets Infrastructure Regulation (EMIR), initiates and coordinates this exercise to assess the resilience and safety of recognised European Union (EU) and Tier 2 Third Country CCPs (TC-CCPs) to adverse market developments and to identify any potential shortcomings.

Nominees for Upcoming FINRA Board of Governors Election; Petitions for Candidacy Due: Monday, July 19, 2021
The annual meeting of FINRA firms will take place on or about Wednesday, September 1, 2021, to elect one Large Firm Governor, one Mid-Size Firm Governor, and one Small Firm Governor to the FINRA Board of Governors (FINRA Board). A formal notice of the meeting, including the precise date, time and location, will be mailed to executive representatives on or about Monday, August 2, 2021.

FINRA Requests Comment on Short Interest Position Reporting Enhancements and Other Changes Related to Short Sale Reporting; Comment Period Expires: August 4, 2021
FINRA is requesting comment on potential enhancements to its short sale reporting program. FINRA is considering: (1) modifications to its short interest reporting requirements (Rule 4560); (2) a new rule to require that participants of a registered clearing agency report to FINRA information on allocations to correspondent firms of fail-to-deliver positions; and (3) other potential enhancements related to short sale activity. FINRA believes that these potential changes could improve the usefulness of short sale-related information to FINRA, other regulators, investors and other market participants.

Investing and Trading

Yellen Says Higher Interest Rates Would Be ‘Plus’ for U.S., Fed
Saleha Mohsin – Bloomberg
Treasury secretary speaks in interview Sunday after G-7 summit; Yellen ‘will not give up on’ Biden’s $4 trillion spending plan
Treasury Secretary Janet Yellen said President Joe Biden should push forward with his $4 trillion spending plans even if they trigger inflation that persists into next year and higher interest rates. “If we ended up with a slightly higher interest rate environment it would actually be a plus for society’s point of view and the Fed’s point of view,” Yellen said Sunday in an interview with Bloomberg News during her return from the Group of Seven finance ministers’ meeting in London.

FTSE FTSE Russell begins 33rd annual Russell US Indexes Reconstitution
Total US equity market capitalization increased 52% reaching $47.7 trillion as of May 2021;
Market cap breakpoint separating small-caps (Russell 2000 Index) and large-caps (Russell 1000 Index) increased by 73%; Four companies exceeded $1 trillion in total market cap, with Alphabet joining Microsoft, Apple & Amazon, which reached this milestone in 2020; Tesla and JP Morgan Chase & Co. join the top ten companies in the Russell US Indexes.
FTSE Russell
FTSE Russell, a leading global index provider, today posted its preliminary lists of companies set to enter or leave the US broad-market Russell 3000 Index and the Russell Microcap Index, marking the start of its 33rd annual Russell US Indexes Reconstitution. Changes will take place after US equity markets close Friday, June 25. The lists of projected additions and projected deletions for the Russell US Indexes and other information are available on the FTSE Russell website.

A $4,749 Bike Hints at Inflation Peril Looming for U.S. Economy; The hobby is enjoying a new wave of pandemic popularity — but customers heading to the stores are finding that stocks are depleted and prices have surged.
Justin Blum – Bloomberg
Customers crowding into U.S. bike shops are often walking out empty-handed — or if they’re lucky, with a bike whose price has repeatedly gone up since last year. Looking for a Santa Cruz Hightower C R, a full-suspension carbon mountain bike? It’ll cost $4,749, up 10% from earlier this year. But with stocks depleted, buyers probably will be told to wait for the next model, due out this summer, at a higher price.

The ECB Has Far Worse Troubles Than Inflation; Europe is still more worried about chronic long-term deflationary pressure, and the strength of the euro versus the dollar.
Marcus Ashworth – Bloomberg
Break out the ticker tape — it’s happened at last. It took an unprecedented pandemic stimulus package to do it, but euro-area inflation has reached the European Central Bank’s eternally out of reach 2% target. What should the ECB do next? Precisely nothing.

An Unexpected Food Fight Breaks Out in the M&A Market; Commercial restaurant equipment maker Welbilt finds itself at the center of an industry bidding war.
Brooke Sutherland – Bloomberg
Welbilt Inc. isn’t a household name, but most Americans have likely eaten a meal produced with its equipment at some point in their lifetime. The company makes griddles, soda dispensers, cold-brew taps, ice machines, and the technology that keeps salad bars chilled and buffets warm. Its customers include convenience stores, fast-food chains, hotels, and restaurants. And now Welbilt, based in New Port Richey, Fla., is at the center of a bidding war.

AMC Became the People’s Stock by Not Being a GameStop Remake; On its way to the moon, the movie theater chain raised cash—something the video game company didn’t. But meme-driven retail investors are still taking a big risk.
Katherine Doherty, Brandon Kochkodin – Bloomberg
In a TikTok video with nearly a million likes, a cocky young guy walks into an AMC theater wearing a white, backwards ball cap. An attendant asks him if he needs anything. “I’m just making sure the theaters are running smoothly,” says ball cap guy. The cashier does a double take. “Do you work here?”

How the U.S. Ran Out of Homes for Sale; Housing economist Ali Wolf explains why so many people are frustrated by this market
Joe Weisenthal and Tracy Alloway – Bloomberg
Joe Weisenthal and Tracy Alloway analyze the weird patterns, the complex issues and the newest market crazes. Join the conversation every Monday and Thursday for interviews with the most interesting minds in finance, economics and markets.

Benign Payrolls Reaction Points to Lower Cross-Asset Volatility
Joanna Ossinger – Bloomberg
The slump in volatility across asset classes after Friday’s U.S. jobs report is suggestive of a benign environment where risk assets can push higher, according to some strategists.

Don’t dismiss market bubbles — some leave lasting progress behind; For every few dozen flops, there can be companies that provide long-term innovation
Ruchir Sharma – FT
Amid much loose talk of “bubbles” popping all over the financial markets, it’s worth pausing to consider if these upheavals really qualify as bubbles. If so, what does history tell us about how far they might deflate from here? It turns out the answers are quite a few, and quite far.

Environmental, Social and Corporate Governance

Bankers Face a Dirty New Temptation; Keeping derivatives out of “green asset ratio” calculations may just encourage lenders to use more of them on climate-unfriendly financing deals.
Elisa Martinuzzi – Bloomberg
The many rules, metrics and disclosure requirements imposed on banks after the global financial crisis largely succeeded in their principal goal: making lenders safer. But a new gauge that aims to encourage lenders to do more good — by fighting climate change — may just inspire a renewed fascination with derivatives, one of the raciest parts of finance.

Bankers Demand Clarity as Sweden Watchdog Balks at ESG Rules
Rafaela Lindeberg – Bloomberg
In Sweden, where green bonds were pioneered, a warning from the financial regulator that it may not have the necessary tools to enforce new European Union sustainability rules has members of the financial industry voicing frustration and dismay.

Anglo American coal spin-off may be worthless, says short seller; Thungela Resources has much higher clean-up costs than forecast, claims Boatman Capital Research
Neil Hume – FT
Mining company Anglo American has “massively underestimated” the environmental liabilities associated with a South African coal business that it is spinning off, according to short seller Boatman Capital Research.

Chinese central bank governor backs push for climate risk disclosure; People’s Bank of China flags move after starting stress tests of financial sector
Camilla Hodgson and Billy Nauman – FT
The Chinese central bank indicated it would throw its weight behind the development of a standardised international climate reporting framework on Friday, after starting “stress testing” of its financial sector in relation to the risks posed by global warming.

Sustainable investing boom and net zero pledges drive ESG talent war; Surging demand for expertise as companies across sectors pledge to reduce their carbon footprint
Michael O’Dwyer – FT
The push for businesses to be run more sustainably is driving a surge in demand for professionals with environmental, social and governance expertise, according to consultants and recruiters.

Central banks’ action on climate change raises mission creep concerns; A focus on the transition to net zero could distract them from their core objectives
John Plender – FT
The humbling of ExxonMobil by activist investors who voted outside directors on to the board to accelerate the oil company’s response to climate change raised activism to new, unexpected heights last month. Around the world institutional investors have been ramping up stewardship efforts across their portfolios, with an increasing focus on the transition to net zero greenhouse gas emissions by 2050.


Gold Is Good But Bitcoin Better for $7.5 Billion Hedge Fund
Ranjeetha Pakiam – Bloomberg
Both assets well-placed to withstand Fed taper, SkyBridge says; Bullion still expected to hit record amid debt-level concerns
Gold will surge to fresh highs in the next year, but investors seeking currency alternatives as global debt balloons should look to Bitcoin, according to a $7.5 billion hedge fund.

The SPAC Is Dead. Meet Bill Ackman’s SPARC; The hedge fund billionaire is using his SPAC funds to acquire a 10% stake in Universal Music Group. Why?
Alex Webb – Bloomberg
What do you do when enthusiasm for blank-check companies is waning, but you still have $4 billion burning a hole in your pocket? For hedge fund billionaire Bill Ackman, the answer is to use most of the money for a different kind of deal. He’s also proposing another twist on special purpose acquisition companies, or SPACs, where investors give a shell corporation funds to buy an unidentified target.

Former UBS Banker Wins Right to Appeal Work Ban in Hong Kong
Cathy Chan – Bloomberg
Henry Cai was banned from industry for 5 years after IPO fraud; Appeal tribunal sees insufficient evidence Cai was principal
Henry Cai, a former managing director at UBS Group AG, won the right to appeal a 2019 decision by Hong Kong’s market watchdog that banned him from working in the industry for five years. The appeals tribunal at the Securities and Futures Commission said it will allow Cai to appeal its decision after concluding that there’s insufficient evidence to show that Cai was the leader of a transaction team related to an initial public offering of China Metal Recycling Holdings Ltd., according to a June 4 statement.

JPMorgan Hires From Goldman, Wells for New Growth-Equity Effort
Gillian Tan – Bloomberg
JPMorgan Private Capital will also feature direct lending; Goal is to allow clients to invest in pre-IPO companies
JPMorgan Chase & Co. hired executives from Goldman Sachs Group Inc. and Wells Fargo & Co. to run a new arm focused on growth-equity investing and direct lending, as it seeks to give clients exposure to companies before they go public.

HSBC Replaces Top Executive in Asia; Bank names David Liao and Surendra Rosha as Asia-Pacific co-CEOs
Elaine Yu – WSJ
HSBC Holdings HSBC -0.13% PLC on Monday said its Asia-Pacific CEO Peter Wong is retiring and it has appointed two veteran bankers to take over the running of its business in the region. The London-headquartered banking giant named David Liao and Surendra Rosha as Asia-Pacific co-CEOs with immediate effect, giving them oversight of a business that is HSBC’s HSBC -0.13% biggest profit generator.


London’s insurance market calls for post-Brexit rules to be refreshed; The London Market Group trade body wants lighter regulation and an end to quarterly reporting
Ian Smith – FT
A trade body representing more than 350 underwriters and brokers in London’s specialist insurance market has called on UK policymakers to use Brexit to boost the sector’s competitiveness and bring in foreign investment.

Kremlin may restrict more food exports to shield it from high prices; Economy minister calls for further ‘shock absorber’ restrictions as global food costs soar
Max Seddon and Henry Foy – FT
Russia has warned that it is prepared to continue with its export curbs on key food products after recent price rises prompted the Kremlin to cap the domestic cost of staple goods such as sugar and flour, the country’s economy minister said.

Abdulaziz bin Salman, the prince in charge of Saudi oil; The kingdom’s mercurial energy minister has had to deal with a series of daunting challenges
Anjli Raval and David Sheppard – FT
Prince Abdulaziz bin Salman of Saudi Arabia spent most of his adult life as energy-minister-in-waiting. But just six days after becoming the first royal to take on the role, the kingdom’s oil production was cut in half by a series of drone and missile attacks that set the world’s largest crude processing facility ablaze.

China’s import appetite raises prospects in US farm belt; Record shipments and high crop prices boost incomes as subsidies wane
Aime Williams – FT
Donald Trump’s trade war with China left American farmers dependent on government handouts to survive. But China is now at the heart of a reversal in farmers’ fortunes, as booming exports and soaring food prices fuel a recovery in the US agricultural economy

Cotton prices surge most in 11 years amid thin trade
KARACHI: Local cotton prices during the outgoing week increased to 11-year high of Rs14,000 per maund (40kg) amid thin trade, primarily owing to shortage of the natural fibre, traders said. Cotton arrival from the new crop has started in the market. First lots were sold at Rs12,500 per maund. Later, cotton from Sindh received a price of Rs12,000 to Rs12,200 per maund. The prices suddenly rose to Rs13,000 to Rs13,000 per maund by the mid of the week, while one lot of 200 bales from Burewala was sold for Rs14,000 per maund on Saturday, the highest in 11 years.


Here’s how this hedge fund will make money owning Tribune Publishing; “I don’t see how you can make a profit on . . . selling a business that you’ve wrecked,” says one observer. With that in mind, here’s what the endgame looks like.
Ally Marotti – Crain’s Chicago Business
With full control of Tribune Publishing, Alden Global Capital is scrambling to squeeze out a return on its $600 million investment in the struggling Chicago-based newspaper company. Alden’s formula for profiting from a distressed newspaper industry is widely known: cut millions in costs by slashing newsroom staff. It’s a strategy that appears to leave little hope of a good outcome for Tribune Publishing’s 11 daily newspapers.

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