Companies Can Borrow From the Fed Now

Mar 24, 2020

First Read

Hits & Takes
By John Lothian and JLN Staff

How about a good news story to start the newsletter? John Mormando is an RJ O’Brien broker in New York who contracted the coronavirus on March 1. The 53-year old was just released from Valley Hospital in Ridgewood on Wednesday. He is the first person to recover from the virus in New Jersey.

Now for the stupid news. An Arizona man died after self-medicating with ingested chloroquine phosphate, which is used to clean fish tanks. His wife is in critical care. Chloroquine has been touted by the U.S. President and stable genius Donald Trump as a cure for coronavirus.

The President is reportedly concerned about the impact of social distancing on the economy and rethinking his approach. He appears to be starting to go through withdrawal of his rallies and having difficulty being a crisis president

Global coronavirus cases have climbed to over 380,000 to date, with more than 16,000 deaths.

Fears are mounting of coronavirus causing a depression. If we can’t get the fiscal stimulus right, it becomes more of a sure thing. There is continued chatter about shutting down the markets.

The lack of junk mail is threatening the future of the U.S. Postal service.

Senator Richard Burr is being sued by a hotel company for securities fraud for his dumping shares after getting an intelligence briefing about the impact of the coronavirus on the economy.

UK Prime Minister Boris Johnson gave a speech yesterday and told people to stay home and that police would fine them if they broke social distancing rules. He wants people to only come out for exercise, food and medicine shopping and medical appointments.


The Futures Industry Association is offering a webinar on “Trends in market structure and industry concerns: insights from the Greenwich Associates FIA 2020 derivatives study” on Thursday, March 26, from 11:00 a.m. – 12.00 p.m. ET. The presenters will be Will Acworth of the FIA and Kevin McPartland and Ken Monahan of Greenwich Associates. You can go here to register.~SR

Climate Risk Review has a curious story about the CFTC temporarily suspending major swaps participant rules for a “mystery bank.” The CFTC said this temporary relief is warranted because of the “unprecedented nature” of the oil price shock. Strange, unprecedented times.~SR

The Tokyo Olympics, which were supposed to take place in July, have been postponed until 2021. This is the first time the Olympics have been postponed since World War II. Japan also cancelled its spring high school baseball tournament this year, also for the first time since World War II.~MR

House Democrats are circulating a bill that would have the U.S. Federal Reserve create a digital U.S. dollar as part of its emergency measures to combat the economic crisis. The digital dollar being discussed doesn’t fit the mold of your bog standard “cryptocurrency;” it wouldn’t be managed by a privately-held and developed “wallet” the way bitcoin is. The proposed U.S. stablecoin would be managed by the Federal Reserve. You can read about it in our ‘Crypto’ section.~MR


Federal Reserve Board announces technical change to support the U.S. economy and allow banks to continue lending to creditworthy households and businesses
Federal Reserve
The Federal Reserve Board on Monday announced a technical change to support the U.S. economy and allow banks to continue lending to creditworthy households and businesses. The interim final rule will phase in gradually, as intended, the automatic restrictions associated with a firm’s “total loss absorbing capacity,” or TLAC, buffer requirements, if the levels decline. TLAC is an additional cushion of capital and long-term debt that could be used to recapitalize a bank if it is in distress. The change will facilitate the use of firms’ buffers to promote lending activity to households and businesses.

***** Money for everything under the sun.~JJL


Will Chicago’s trading floors ever reopen? Cboe insists this is “not a test case for permanent closure,” but it and CME left details for reopening them up in the air.
Lynne Marek – Crain’s Chicago Business
The coronavirus forced closure of Chicago’s trading floors. Now the question is: Will they ever reopen? Chicago exchange operators CME Group and Cboe Global Markets shut down the South Loop pits March 13 as a precaution because shoulder-to-shoulder trading was perfect terrain for virus-hopping. While Cboe insists in a statement that this is “not a test case for permanent closure,” the companies have left details for reopening them up in the air.

*****We missed this Lynne Marek piece from Friday. The answer to the question is tied to the customers who get used to trading electronically, the data tied to the quality of the executions and the innovations made to make it more efficient and valuable to not trade on the floor.~JJL


The Fastest Quants Are Making Money From the Wall Street Mayhem
Justina Lee – Bloomberg
Short-term trend followers set for best quarter in four years; Wild swings exacerbated by poor liquidity create opportunities
In the fastest stock-market correction in history, it helps to be among the fastest hedge funds around. Short-term trend followers are poised for their best quarter since 2016, riding wild swings across equities, bonds and commodities as volatility notches records and liquidity collapses.

*****Someone has to make money during this. It makes sense it would be them.


Coronavirus monitoring poses dangers for civil liberties; Temporary’ restrictions on freedom can become dangerously permanent
John Thornhill
The monitoring bracelets the Hong Kong authorities hand out to everyone arriving from abroad to ensure they observe a 14-day quarantine highlight the inventive measures some governments are adopting to tackle the coronavirus pandemic.

*****Times of war, famine and disease can be that way. Afterwards, we need to make sure we get our freedoms back.~JJL


Kudlow says US will have to make ‘difficult tradeoffs’ on coronavirus: ‘Cure can’t be worse than disease’
Justin Wise – The Hill
White House economic adviser Larry Kudlow on Monday warned against an extended shutdown of the U.S. economy in response to the coronavirus outbreak, arguing that the economic cost would be just “too great.”
Kudlow made the remarks just a day after President Trump suggested that he might lift social distancing restrictions designed to slow the spread of the disease if the economic burden became too high.

**** In keeping with this, Texas Lt. Gov. Dan Patrick says grandparents are willing to die to save the economy for their grandkids. ~JB


This online toilet paper calculator will tell you just how long your supply will last
Leah Asmelash – CNN
As households continue to stock up on toilet paper — emptying shelves across the country — a new website is attempting to answer the question: How much TP do we really need? is a website created by student software developer Ben Sassoon and artist Sam Harris, both based in London, in response to the coronavirus pandemic. The tool calculates just how long your stash of TP will last you during a quarantine.

***** Toilet paper limit up is enough to scare the @#^&*() out of you.~JJL


Monday’s Top Three
Our most read story Monday was Thom Thompson’s JLN piece, Trouble at Ronin? about the collapse of the Chicago prop firm Ronin Capital. We now have a podcast of Thom reading the piece as well (at the same link), for those of you who prefer to listen to it – and Thom has a great radio voice. Second was Bloomberg’s Margin Calls Hit Wall Street Like ’30 LTCMs Out There’ at Once. Yikes! Do we have any good news? Nope – our third most-read story was The Worst of the Global Selloff Isn’t Here Yet, Banks and Investors Warn, from The Wall Street Journal.


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Lead Stories

Companies Can Borrow From the Fed Now; Also subprime mortgages, BBB bonds, NYSE trading, insider trading and Petro.
Matt Levine – Bloomberg
There’s a lot going on here, but one thing that is going on here is that now if you are a big investment-grade company you can borrow unsecured from the Federal Reserve for up to four years. That is new! Traditionally the way that central banking’s lender-of-last-resort function works is that the central bank lends money to banks, secured by the banks’ assets, which most traditionally would be those banks’ business loans.

Turmoil means delicate dance between hedge funds and brokers; Banks are asking for more collateral or to pay more for loans
Henny Sender – FT
Last week markets were on edge, buffeted by rumours of hedge fund losses and job cuts. The value of the shares investors held plunged and positions that were meant to be net neutral went deeply in the red, as assets that were supposed to move in opposite directions and offset each other all moved the same way.

Mortgage investment funds become ‘epicentre’ of crisis; Real estate investment trusts dump bonds to stay afloat as Fed seeks to calm investors
Robert Armstrong – FT
Real estate investments trusts that specialise in buying mortgage-backed securities are playing a prominent role in the current market turmoil, dumping their holdings in response to margin calls by their banks.

European traders press for looser rules to ease options trading; Industry body warns of ‘severe dislocation’ in derivatives if requirements do not change
Philip Stafford – FT
Market makers in Europe are urging regulators to bring forward new rules that could relax regulations on the capital banks must allocate to derivatives trades, amid concerns that current standards are intensifying the volatility caused by the coronavirus crisis.

Gasoline Futures Plummet to 20-Year Low On Flatlining Demand
Michael Jeffers and Jacqueline Davalos – Bloomberg
Nymex prices have fallen more than 70% since start of year; Some U.S. pump prices already sinking below $1 a gallon
U.S. gasoline futures settled at the lowest in more than two decades as the coronavirus pandemic crushed demand and forced local governments across the country to issue shelter-in-place orders.

We’re Looking at a System-Wide Margin Call; The worst scramble for cash is happening in an opaque corner of the market that the Fed can’t control.
Shuli Ren – Bloomberg
The Federal Reserve ushered out a second wave of quantitative easing Monday. But the worst scramble for cash is happening in an opaque corner of the market, where Chairman Jerome Powell has little control. What we’re witnessing is a system-wide margin call.

The Federal Reserve has gone well past the point of ‘QE infinity’; New measures extend a post-Lehman crisis legacy of distorted risk premia in markets
Michael Mackenzie – FT
The vast and currently dysfunctional markets for US Treasuries, mortgages and corporate credit now have the ultimate buyer of last resort — the Federal Reserve.

U.S. Workers, Businesses Lack Funds to Tide Them Over Until Help Comes; In a matter of a few weeks, many employees and small business alike will be plain out of money
Justin Lahart – Bloomberg
The American economy is in a race against time. With measures to halt the spread of the novel coronavirus intensifying, the U.S. is embarking on its sharpest downturn since at least the end of World War II. The states where nonessential businesses are shut down, including California, New York and Ohio, account for more than 40% of U.S. gross domestic product.

‘Small guys should get the bailouts’; Small and medium-sized businesses are fast running out of cash
Darren Dodd – FT
‘Small guys should get the bailouts’ As governments around the world survey the damage inflicted on business by the coronavirus, attention is turning to which sectors are most deserving of bailouts.

Oil industry faces biggest crisis in 100 years; Producers are facing up to the crash in oil demand as coronavirus forces economies into hibernation
David Sheppard – FT
It is no exaggeration to say the oil industry faces its gravest crisis of the past 100 years. As western economies go into hibernation, hoping to snuff out the first wave of coronavirus through lockdowns and isolation, the industry is facing up to the fact that fuel demand is going to fall faster than ever before.

SEC delays CAT deadline so firms can focus on business continuity
Brian Croce- Pensions & Investments
Broker-dealers that have spent months preparing to report data to the SEC’s consolidated audit trail next month now have a reprieve of sorts, with the SEC allowing firms to focus more of their time and energy on the COVID-19-induced market mayhem.

Markets need to brace for ‘full-on credit crisis’, warns Waxman; Sixth Street Partners head says investors are too complacent about looming risks
Robin Wigglesworth – FT
Investors underestimate how an “unprecedented revenue destruction” caused by coronavirus will damage even the biggest, highly rated companies, culminating in a “full-on credit and liquidity crisis”, according to the head of an US investment group.

‘Great liquidity crisis’ grips system as banks step back; Traders blame volatility on measures put in place after the last financial collapse
Joe Rennison and Philip Stafford, Colby Smith and Robin Wigglesworth – FT
Two weeks ago, traders at TwentyFour Asset Management came into the office after a weekend in which a global oil price war had erupted. The ensuing crash in crude made investors who were in the early stages of fretting about the coronavirus outbreak even more alarmed.

Coronavirus: can the ECB’s ‘bazooka’ avert a eurozone crisis? Much may depend on whether Germany is willing to bail out Italy
Ben Hall, Martin Arnold and Sam Fleming – FT
As the Italian death toll from the Covid-19 pandemic reached grim new heights last Sunday, Pope Francis broke strict quarantine rules to visit the church of San Marcello in central Rome. The pontiff went to pray for a miracle before a crucifix which the pious believe helped save the city from plague in 1522.

Force global banks to suspend bonuses and payouts; This simple step would free up trillions of dollars of additional lending capacity
Sheila Bair – FT
As the coronavirus pandemic shuts down international commerce, central banks must act decisively to prevent it from triggering a global financial crisis. So far, they have cut interest rates, expanded asset purchases and pumped trillions of dollars into short-term debt markets. But flooding the financial system with liquidity, while important, is not enough. They also need to shore up the capital base of the banking system. To help do that, they should require that all global systemically important banks suspend discretionary bonuses, dividends, and share buybacks, as recommended by the Systemic Risk Council of former regulators.

We’re about to find out how smart the big banks have been; Fears over coronavirus effects have battered share prices, especially for card lenders
Robert Armstrong – FT
“This is a huge opportunity for the banks.” This comment, from a fund manager, is the most surprising comment I have heard since the start of the Covid-19 outbreak. What was shocking was not the callousness — investors are paid to be callous. What was surprising was his explanation.

The death of the US equity premium
Jamie Powell – FT
What adjectives do you normally associate with the US government?
Ask that question across the political spectrum, and you might find the answers pretty paradoxical. However we’d wager most would agree that the US government is, by-and-large, pro-business. Particularly compared with other affluent nations.

Gold Investors Are Betting That It’s 2008 All Over Again
Elena Mazneva and Ranjeetha Pakiam – Bloomberg
Parallels with global financial crisis signal room for rebound; Price may fall further before it’s ready to bounce, Citi says
Gold’s haven reputation took a serious beating, with prices tumbling as investors sought to free up cash amid a broad and devastating market rout. Sound familiar?

Fed’s Bullard Calls for Declaration of Three-Month Work Break
By Steve Matthews – Bloomberg
Says National Pandemic Adjustment Period could be adjusted; Goal is to prevent destruction of American livelihoods
Federal Reserve Bank of St. Louis President James Bullard said that the U.S. should declare the equivalent of a three-month break for nonessential businesses to fight the spread of the coronavirus.

Exchanges, OTC and Clearing

BOX Exchange Market Wide Circuit Breaker Halt Methodology
In the event of a Market Wide Circuit Breaker Halt, BOX Exchange LLC (“BOX”) will determine obvious error submissions based on the time BOX’s system completed the processing of the Market Wide Circuit Breaker Halt as the official halt time. The BOX is not amending its process with respect to obvious error reviews.

Nasdaq Statement On Nordic And Baltic Operations – All Nasdaq Nordic And Baltic Markets Remain Fully Operational – Maintains Strong Commitment To Protect Health And Safety Of Employees, Clients, Partners
Nasdaq (Nasdaq: NDAQ) today issued the following statement regarding its Nordic and Baltic market operations as part of the company’s continuity plan in response to the COVID-19 coronavirus:

Athens Exchange Group Coronavirus (Covid-19) Update
During this critical period, the impact of the pandemic on the global economy and the upheaval in financial markets across the world, have brought on significant changes in our everyday and professional life.

Toronto Stock Exchange and TSX Venture Exchange announce relief measures for listed issuers in response to COVID-19
TMX Group exchanges Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) today announced temporary blanket relief measures for TSX and TSXV listed issuers during the Coronavirus (COVID-19) pandemic. Effective immediately, these measures are designed to lessen the administrative burden on public companies during the current crisis and provide greater flexibility in dealing with market volatility.

Nasdaq to Hold First Quarter 2020 Investor Conference Call
Nasdaq (Nasdaq: NDAQ) has scheduled its First Quarter 2020 financial results announcement.


Eventus Systems Establishes Presence in Europe with First Key Hire in London: Roger Chandler as Senior Sales Engineer
Firm Continues Growth in EMEA with Trade Surveillance, Market Risk Tools Addressing European Market Rules, Regulations
Press Release
Eventus Systems, Inc., a multi-award winning global trade surveillance and market risk software platform provider, announced today that Roger Chandler has joined the firm in London as Senior Sales Engineer, Europe. The move builds on the company’s already successful position helping firms address UK and European exchange rules and regulatory requirements.

Societe Generale global cash equities execution head joins big xyt; Richard Hills has departed Societe Generale after 18 years to head up client engagement at TCA provider big xyt.
Kiays Khalil – The Trade
Data and transaction cost analysis (TCA) provider big xyt has confirmed Societe Generale veteran Richard Hills has joined its executive team as head of client engagement.

Bank of China unveils AI currency price prediction app on Eikon; At a time of unprecedented market volatility, Bank of China said its DeepFX app will provide traders with key insights on major currency pairs.
Hayley McDowell – The Trade
Bank of China has launched an artificial intelligence-based forex trading signal prediction application through the Refinitiv Eikon desktop.

Buy-side bond trading desks lead on increased technology spend; Report from Greenwich Associates found that technology spending on buy-side trading desks increased slightly by 4% year-on-year.
Kiays Khalil – The Trade
Buy-side firms boosted spending on technology last year, with fixed income trading desks devoting the largest chunk of budget to technology compared to equity and foreign exchange desks.

Electronic trading executive co-founds coronavirus charity for NHS support; Nej D’jelal has co-founded HEROES, which aims to provide real-world support to NHS workers on the front-line of the coronavirus pandemic in the UK.
Hayley McDowell – The Trade
A veteran investment bank electronic trading executive has co-founded a new charitable organisation aimed at aiding NHS workers that are on the front-line battling coronavirus in the UK.


Bain Fund, BitMEX Owner Among Funders of India Crypto Bourse
Saritha Rai – Bloomberg
One of India’s largest cryptocurrency exchanges, CoinDCX, has raised $3 million from backers including Bain Capital Ventures, signaling that global investors are drawn to the space after a favorable Supreme Court decision.

A draft of the coronavirus stimulus bill written by House Democrats would create a ‘digital dollar’
Michael McSweeney – The Block
A draft stimulus bill penned by House Democrats and circulating ahead of a formal published version includes a provision that would, if instituted, create a “digital dollar.” To be sure, House Democrats aren’t trying to create a cryptocurrency or deploy distributed ledger technology to make it happen. But according to the draft text, the digital dollar is defined as “a balance expressed as a dollar value consisting of digital ledger entries that are recorded as liabilities in the accounts of any Federal [R]eserve bank; or an electronic unit of value, redeemable by an eligible financial institution (as determined by the Board of Governors of the Federal Reserve System).”

Coronavirus & Crypto Lending: Could the Crisis Bring New Clients?
Rachel McIntosh – Finance Magnates
The crisis brought on by the coronavirus has been a shock to the entirety of the global economy. All around the world, every industry is scrambling to find ways to adjust to the new paradigm that was thrust into reality several weeks ago. One of the most visible points of damage has been global financial markets. In just about every corner of the financial world, markets have cliff-dived, sending investors into a frenzy and forcing companies to build new strategies and contingency plans.

China’s central bank is one step closer to issuing its digital currency – report
Yogita Khatri – The Block
The People’s Bank of China (PBoC), the country’s central bank, is said to have moved one step closer to issuing its national digital currency. A Global Times report on Tuesday, citing “industry insiders,” said the PBoC appears to have completed the development of digital currency’s basic function in collaboration with private companies.

Kik seeks pre-trial judgment to end prolonged ICO battle with the SEC
Yilun Cheng – The Block
Canadian software company Kik is seeking pre-trial judgment amid the SEC’s claim that it has failed to provide sufficient evidence in defense of its $100 million unregistered tokens sale in 2017. The company previously signaled its intention to fight the SEC’s allegation in a jury trial. Besides raising a $225 million legal defense fund for the lawsuit, Kik CEO Ted Livingston also publicly declared that the firm would fight the SEC until “[they] don’t have a dollar left.”

Yale Researchers Turn to Hyperledger to Track Carbon Emissions
Ian Allison – Coindesk
In our current state of lockdown, it may sound facile to say technologies like blockchain, IoT and AI can protect us. But it’s a combination of those tools that software architects think will help mitigate the largest known existential threat we face today: climate change. A team from Yale University’s Open Innovation Lab (OpenLab) has been exploring how distributed ledgers, Internet of Things (IoT) sensors and other data-science tools can be used to measure and track carbon emissions.

Bybit Enables Two-Way Margin Trading With Perpetual Contracts Quoted in Tether
Sebastian Sinclair – Coindesk
Singapore-based cryptocurrency exchange Bybit is adding tether (USDT) perpetual contracts to its suite of derivative products. The contracts, going live Wednesday, will use the world’s largest stablecoin by market cap as both the quote and settlement currency for two-way trades, enabling traders to hold both long and short positions at the same time and with different levels of leverage. All profits, losses and account balances will be denominated in USDT, making it clearer and easier for traders to make investment decisions using USDT, the firm says. Using a stablecoin also removes the volatility brought by non-pegged cryptocurrencies.

Crypto Trading Volume Plummets Over 60% on South Korean Exchanges
Arnab Shome – Finance Magnates
Two top South Korean crypto exchanges – Bithumb and Upbit – recorded sales drop by 70 percent and 63 percent respectively since 2018. First reported by Coindesk Korea, the numbers were revealed by the parent companies of both the exchanges with the regulatory filings. The significant decrease in the revenue of both giants is a result of decreasing demand in digital currency trading in the local market. Notably, South Korea was one of the largest crypto markets with a massive Bitcoin demand, however, the long-reigning bear in the market forced the people to pull out from the volatile market.

Paxful Becomes First P2P Exchange to Partner With Chainalysis
Danny Nelson – Coindesk
Peer-to-peer exchange Paxful has deployed Chainalysis’ cryptocurrency investigations and transaction intelligence software tools, the companies announced Monday in a joint press release. The deal represents an about-face for Chainalysis, one of the industry’s most prominent crypto surveillance developers and regular partner of exchanges, governments and private companies. It had never signed on a peer-to-peer client because these firms were seen as too risky to conduct business with, said John Dempsey, Chainalysis’ VP of Product.

Winklevoss twins, Coinbase’s Armstrong back crypto-focused PAC, but funds will flow based on community votes
Frank Chaparro and Aislinn Keely – The Block
A cadre of well-known cryptocurrency investors has backed a newly-created political action committee (PAC) aimed at supporting campaigns of politicians who advocate for the technology. Announced Monday, HODLpac has registered with the Federal Election Commission (FEC) as a hybrid PAC. To date, it has more than $20,000 in contributions from the likes of Coinbase CEO Brian Armstrong and Gemini’s Cameron and Tyler Winklevoss. HODLpac also boasts veterans of the intersection of the political and crypto spheres on its board, including Kristin Smith of the Blockchain Association.

Emin Gun Sirer’s AVA Labs Seeks Wall Street Business After Open-Sourcing ‘Avalanche’ Protocol
Danny Nelson – Coindesk
AVA Labs, the first project building on the “Avalanche protocol” blockchain network, is looking to modernize financial infrastructure. As first envisioned in a 2018 white paper by the pseudonymous “Team Rocket,” Avalanche protocol uses random network sampling to reach consensus. But it is AVA Labs’ ambition in building new infrastructure for the financial markets which now drives the firm forward.


Pelosi’s $2.5 Trillion Virus Bill Delays Mortgage, Car Payments
Erik Wasson and Laura Davison – Bloomberg
House Democrats try to influence Senate stimulus talks; Bill would extend $1,500 payments to retirees, unemployed
House Speaker Nancy Pelosi unveiled a $2.5 trillion virus economic stimulus plan in a bid to shape negotiations on a Senate measure that stalled on Monday, triggering a sell-off in U.S. equities markets.

Mike Bloomberg Lays Off Staffers After Telling Them They’ve Been Exposed to Coronavirus; Health Insurance Runs Out March 31
Jeffery Martin – Newsweek
After being told via email on Thursday that they had potentially been exposed to coronavirus, New York-area staffers for billionaire Mike Bloomberg’s presidential campaign were laid off Friday. The staffers are expected to lose their health insurance at the end of March.
In the email sent to staffers advising them of their possible coronavirus exposure, Bloomberg campaign human resources said the infected individual had not been present in the offices since Monday.

Virus Skeptic Musk Donates Ventilators in ‘Heroic Effort’
Sophie Alexander and Blake Schmidt – Bloomberg
Billionaire had said on Twitter that virus panic is ‘dumb’; Tesla idled California plant only after dueling with officials
Elon Musk, the chief executive officer of Tesla Inc. and an outspoken skeptic of the severity of the coronavirus outbreak, donated more than 1,000 ventilators to officials in Los Angeles to meet demand as the pandemic becomes more severe.

Johnson finally succumbs to calls for harsher action; Tougher restrictions imposed on public movement to try to halt spread of coronavirus
George Parker, Sebastian Payne, Laura Hughes and Jim Pickard – FT
Boris Johnson had agonised for days, but finally on Monday he went against all of his political instincts and ordered the effective closure of large parts of Britain, telling the police to intervene if necessary to halt the spread of coronavirus.


IOSCO Report Examines How Existing Regulatory Principles Could Apply To Stablecoins
The Board of the International Organization of Securities Commissions today published a report identifying the possible implications of global stablecoin initiatives for securities markets regulators.

SEC Awards Over $1.6 Million to Whistleblower
The Securities and Exchange Commission today announced an award of more than $1.6 million to a whistleblower whose information tipped the agency to securities law violations and helped form part of the basis for charges brought in a successful enforcement action. In addition to the tip, the whistleblower provided helpful assistance early in the investigation, preserving Commission time and resources.

SEC Provides Temporary Additional Flexibility to Registered Investment Companies Affected by Coronavirus; Permits Funds to Use Additional Funding and Other Tools to Manage their Portfolios for the Benefit of Investors
The Securities and Exchange Commission today announced temporary flexibility for registered funds affected by recent market events to borrow funds from certain affiliates and to enter into certain other lending arrangements. Today’s relief is designed to provide funds with additional tools to manage their portfolios for the benefit of all shareholders as investors may seek to rebalance their investments.

Statement from Stephanie Avakian and Steven Peikin, Co-Directors of the SEC’s Division of Enforcement, Regarding Market Integrity
The 2019 coronavirus disease (COVID-19) has impacted the securities markets in unprecedented ways. The SEC, other governmental authorities, and market participants have worked to ensure that our markets have continued to function, as many have transitioned to telework and instituted business continuity plans. The Commission has provided relief to facilitate these transitions.

Coronavirus (COVID-19) Update—Regulatory Relief for CPOs and CTAs
On March 20, 2020, the CFTC issued a no-action letter to commodity pool operators (CPO) in response to the COVID-19 pandemic. As discussed below, NFA is issuing similar relief from rules for CPO Members. Additionally, NFA is providing commodity trading advisor (CTA) Members with similar relief for NFA Form PR filings.

Statement on UK markets
The FCA is working with international counterparts in the US, EU and elsewhere so that markets can remain open and orderly, and so they can continue to perform their essential role in supporting businesses, governments, jobs and the broader economy.

Carbon carve-outs: CFTC shields oil bank from swap rules; A mystery bank escapes post-crisis regulations with watchdog’s blessing
Louie Woodall –
First, it came for the US shale producers. Now, the oilpocalypse is blitzing the fossil fuel banks that finance them. One big energy bank saw its commodity swaps exposure to the sector blow up so fast in recent weeks that it was on the verge of being labelled a threat to financial stability. That is, until it begged regulators for mercy.

U.S. SEC warns against illegal trading during coronavirus disruption
Chris Prentice – Reuters
The U.S. securities regulator on Monday warned corporate executives against insider trading during disruption caused by the coronavirus, in an unusual statement that underscores the chaos coursing through financial markets.

Investing and Trading

North American millers, bakers scramble to satisfy bread-buying binge
Julie Ingwersen, Rod Nickel – Reuters
North American flour mills and bakeries are rushing to boost production as the spread of the new coronavirus leads to stockpiling of staples like bread and pasta.

Federal Reserve System publishes annual financial statements
Federal Reserve
The Federal Reserve System on Monday released the 2019 combined annual audited financial statements for the Federal Reserve Banks, as well as statements for the 12 individual Federal Reserve Banks and the Board of Governors. An independent public accounting firm engaged by the Board has issued unqualified opinions on the financial statements and on the Board’s and each Bank’s internal controls over financial reporting. The audited financial statements provide information about the assets, liabilities, and earnings of the Reserve Banks and the Board as of December 31, 2019.

Federal Reserve’s full firepower fails to arrest slide in markets; Historic pledge to buy corporate debt and securities backed by consumer loans
James Politi and Brendan Greeley – FT
Global stocks fell on Monday despite the US Federal Reserve unleashing its full firepower to support the economy through the coronavirus outbreak when it pledged to buy government bonds in unlimited amounts.

Coronavirus lay-offs split corporate America; Some employers feel retaining employees will be important to their long-term prospects
Andrew Edgecliffe-Johnson – FT
The US is bracing for a historic wave of unemployment claims as businesses shed staff in an effort to ride out a pandemic that has caused demand for their products to collapse and cut entire industries off from their customers.

Life insurers braced for hit as bond market buckles; Rising death toll is not biggest issue facing sector as coronavirus outbreak worsens
Oliver Ralph and Robert Armstrong – FT
Shares in some life insurance companies have more than halved over the past few weeks as fears grow that the sector faces a double hit from coronavirus.

US subprime mortgage specialist seeks buyers for $1bn of assets; Fund manager AlphaCentric suffers heavy outflows on coronavirus fears
Joe Rennison and Robert Smith and Eric Platt – FT
A $2.3bn mutual fund sought buyers for more than $1bn of US mortgage bonds on Sunday to cover investor withdrawals after booking heavy losses in the current market turmoil.

Mortgage Bonds Rattle Wall Street Anew With Rush of Urgent Sales
Shahien Nasiripour
Funds raced over the weekend to offer billions in assets; Unlike 2008, the problem isn’t loans to subprime borrowers
The $16 trillion U.S. mortgage market — epicenter of the last global financial crisis — is suddenly experiencing its worst turmoil in more than a decade, setting off alarms across the financial industry and prompting the Federal Reserve to intervene.

Why Virus Woes Have Put Bond ETFs Under a Microscope
Claire Ballentine and Katherine Greifeld – Bloomberg
Exchange-traded funds were invented for small investors. Like index funds, which they resemble, ETFs weren’t meant to produce world-beating returns but provide a low-fee, tax-efficient way for small investors to reduce risk by diversifying portfolios. Another selling point is that they’re generally more liquid — easier to buy or sell quickly — than mutual funds or index funds. As the sector boomed to as much as $4.6 trillion in the U.S., some worries were raised about whether the fund’s structures would mean that was true in a crunch. Those concerns are top of mind again, now that we’re in a crunch and then some.


Goldman Sachs spends $1.9bn to shore up two money market funds; Coronavirus crisis triggers rush of selling by institutional investors
Laura Noonan – FT
Goldman Sachs spent nearly $1.9bn to shore up liquidity in two of its “prime” money market funds after a rush of outflows, in the second case of a big bank seizing on new Fed measures to stave off a liquidity crunch in its funds.

JPMorgan Plans Firm-Wide Hiring Freeze Amid Virus Uncertainty
Michelle F Davis – Bloomberg
Investment bank, much of consumer unit will be affected; Mortgage operation is one group exempted from the move
JPMorgan Chase & Co. froze hiring across most of the firm as millions of people stay at home to help stem the spread of the coronavirus, according to people familiar with the matter.

DE Shaw quant fund takes hit from markets gone haywire; ‘Statistical arbitrage’ fund was the group’s original strategy when founded in 1988
Robin Wigglesworth – FT
DE Shaw’s priciest, most exclusive hedge fund has lost more than 9 per cent this month, a rare stumble from the New York investment group as the market turmoil disturbed many of the signals the computer-powered vehicle depends on.

Daniel Loeb’s Third Point faces worst start to a year; Activist joins peer Sachem Head among hedge funds hit by virus-driven market rout
Ortenca Aliaj and Laurence Fletcher – FT
Activist investor Daniel Loeb is facing his worst start to the year and a former protégé of Bill Ackman has suffered significant losses as the coronavirus-driven market rout hits some of the activist hedge fund sector’s biggest names.

Bank of America allows trading from home after staff backlash; Lender forced to overturn ban and join US rivals in permitting remote execution of trades
Laura Noonan- FT
Bank of America has told traders they can execute orders from home after an employee backlash over the number of people still working at the bank’s One Bryant Park head office during New York’s escalating coronavirus crisis.

The Oil Crash Is Hitting This Investment Hard; Energy closed-end funds fall sharply; Goldman, Kayne and Tortoise products slide
Sarah Toy – WSJ
The plunge in crude-oil prices is sending shock waves through closed-end funds tracking the energy sector, highlighting how the market turmoil is hitting products popular with ordinary investors seeking to boost returns during the long bull market.

Citi Could Be Stuck With Troubled Casino Loan as Mortgage Market Seizes Up; Some of the biggest names on Wall Street are saddled with billions of dollars of loans that are rapidly deteriorating in value
Peter Grant and Katherine Sayre – WSJ
The market for issuing securities backed by commercial mortgages has frozen up, leaving some of the biggest names on Wall Street stuck with billions of dollars of loans that are rapidly deteriorating in value.


Coronavirus Less Deadly in Germany Because of Youthful Patients
Naomi Kresge and Tim Loh – Bloomberg
Despite high infection total, Germany’s death toll is low; Virus epicenter Italy suffers from broader outbreak in elderly
As the coronavirus death toll surges across much of Europe, one country remains an anomaly. Despite more than 25,000 infections, the fifth-most in the world, Germany’s mortality rate is only 0.4%, according to data compiled by Bloomberg from state health authorities. At the virus’s epicenter in Italy, by contrast, some 9.5% of people confirmed to have the infection have died.

Covid-19’s Economic Pain Is Universal. But Relief? Depends on Where You Live;
In some countries, workers will have 90 percent of lost wages covered. In others, residents fear eviction. Nation to nation, rescue plans reflect conflicting ideas of government’s role in a crisis.
Matt Apuzzo and Monika Pronczuk – NY Times
In a Queens apartment, a laid-off busboy has no idea if he will make next month’s rent or feed his family. An out-of-work waitress in Amsterdam, though, can count on the government to cover 90 percent of her wages. As a Malaysian florist anxiously burns through her savings, cafe owners in Brussels receive about $4,300 to make up for lost revenue.

Spain Sees Worst Day of Outbreak With 514 More People Dead
Rodrigo Orihuela – Bloomberg
Spain recorded 514 deaths from the coronavirus on Tuesday, the highest daily increase so far, as the country struggles to contain the outbreak despite strict rules that are keeping people from leaving their homes.

Coronavirus Pushes British Companies Into a Record Slump
Paul Gordon – Bloomberg
U.K. businesses are being dragged into the biggest slump in modern memory by the shutdown to contain the coronavirus. IHS Markit’s monthly measure of manufacturing and services activity dropped to the lowest since the series began in 1998, it said Tuesday. Euro-zone figures reported earlier painted a similarly bleak picture.

Europe’s Aversion to Hiring-and-Firing Suddenly Seems Smart Idea
Jeannette Neumann and Carolynn Look – Bloomberg
U.S. may see spike in jobless that Europe will avoid; Virus pandemic has led to lockdowns across the continent
Continental Europe’s labor-market model is experiencing rare praise from economists because it may help prevent massive job losses during the coronavirus pandemic.

There’s No Way 267 Million People Had Zero Cases; Indonesia, the region’s newest Covid-19 hotspot, faces an economic crisis. It has a poor history of weathering instability.
Daniel Moss – Bloomberg
In a matter of weeks, the world’s fourth-most populous nation went from reporting zero coronavirus cases to having the highest death toll in Southeast Asia. Now its currency is tumbling, growth forecasts are buckling, the capital is under a state of emergency, and an archipelago of 18,000 islands has effectively sealed its borders.

Krone Soars Most Ever as Market Digests Norway Intervention Risk
Love Liman – Bloomberg
Norway’s krone had its best day against the dollar on record, after a pledge to intervene in currency markets by the central bank seemed to spook some market participants.

Nigeria Naira Remains Under Strain After Devaluation
Tope Alake and Alonso Soto – Bloomberg
Forward rates spike to new high, signaling strain on the naira; Currency weakness limits central bank’s ability to cut rates
Nigeria will probably need to weaken the naira further following its devaluation last week, while the pressure the currency’s under will restrict how much the central bank can cut interest rates on Tuesday, according to analysts.

Australia Pension Funds Line Up to Cut Unlisted Asset Values
Matthew Burgess – Bloomberg
Australia’s pension funds have made out-of-cycle cuts to the value of their direct holdings in assets such as airports and toll roads as the spreading coronavirus roils both public and private markets.

Egyptian Billionaire Sawiris Boosting Exposure to Gold
Manus Cranny and Farah Elbahrawy – Bloomberg
Egyptian billionaire Naguib Sawiris said he is increasing his exposure to gold as the traditional haven struggles amid the market turmoil. “I believe that when there is crisis, when people are done covering their margin cost, it’s gonna go up,” Sawiris told Bloomberg TV on Monday. “I’m still a buyer and I’m still increasing my position.”


Johnson finally succumbs to calls for harsher action
George Parker, Sebastian Payne, Laura Hughes and Jim Pickard – Financial Times
Boris Johnson had agonised for days, but finally on Monday he went against all of his political instincts and ordered the effective closure of large parts of Britain, telling the police to intervene if necessary to halt the spread of coronavirus. The prime minister concluded that simply urging Britons to avoid social interaction in order to halt the spread of the virus was not working. Now there will be an edict for people to stay at home most of the time, and mass closures of shops.

Surveys show coronavirus pandemic savaging global economy
Leigh Thomas, Marius Zaharia – Reuters
Business activity collapsed from Australia and Japan to Western Europe at a record pace in March, as measures to contain the coronavirus hammer the world economy, with data for the United States later on Tuesday expected to be just as dire. “The coronavirus outbreak represents a major external shock to the macro outlook, akin to a large-scale natural disaster,” analysts at BlackRock Investment Institute said in a note.

Boris Johnson unveils the lockdown that isn’t quite a lockdown
John Crace – The Guardian
This time there was no daily Downing Street press conference. Not even an ersatz People’s PMQs with spoon fed set ups from Classic “Let the old and the vulnerable die” Dom. Because in the last few days it’s become clear Boris Johnson can’t even prepare properly for a scheduled presser. Only the day before he was telling everyone to keep 2 metres away from other people when he was standing about a yard from the government’s deputy chief medical officer. There was a time when he could just about manage two pages of A4 as a briefing paper. Now his concentration span can’t even manage that.

Battered sterling wins a respite for time being
Dhara Ranasinghe – Reuters
Britain’s pound rallied more than 1.5% against the dollar and found firmer ground against the euro on Tuesday, winning a respite from a battering in recent days. Sterling, along with most currencies, has seen a massive wave of selling against the U.S. dollar, the world’s most liquid currency and the safe haven of choice when confidence evaporates from financial markets. It has also been hurt by concerns over Britain’s approach to dealing with the coronavirus outbreak, which has seen a more staggered disruption to economic and everyday life than in other countries.


Harvard Forecasts Decline in Revenue, Slowdown in Philanthropy
Janet Lorin – Bloomberg
School is reducing all discretionary, non-essential spending; CFO says school in much better position than in 2008 crisis
Harvard University forecast a decline in revenue and a slowdown in philanthropy due to the economic impact of the coronavirus outbreak. The school, with an endowment of $40.9 billion, has already begun reducing all discretionary, non-essential spending and may need to consider slowing the pace of capital projects in the future, Thomas Hollister, Harvard’s chief financial officer and vice president of finance, said Monday.

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