‘Dumb money’ is fueling one of the biggest lies on Wall Street, researcher says

Sep 28, 2020

First Read

DOJ Obtains Mixed Verdicts in Spoofing Case
Thom Thompson – John Lothian News

A COVID-19 depleted jury returned unanimous verdicts for each of the 17 counts in the criminal spoofing case brought against two former Deutsche Bank traders, James Vorley and Cedric Chanu. The decisions by the eleven jurors were announced late on Friday afternoon at the Dirksen Courthouse on South Dearborn Street in Chicago.

The charges stemmed from illicit trading activities that occurred between 2008 and 2013. The two traders worked together on the precious metals futures desk in London until Chanu moved to the Singapore office, where he served in the same role before leaving the bank in 2013.

Vorley was found guilty on three of nine charges against him. Chanu was found guilty on seven of eleven charges. They were charged with wire fraud and conspiracy to commit wire fraud. Deutsche Bank earlier agreed to $30 million to settle related charges with the CFTC.

To read the rest of this commentary, go HERE.


Hits & Takes
John Lothian & JLN Staff

The New York Times dropped a bombshell of a story about President Donald Trump’s financial and tax-paying history on Sunday. One can only guess the impact this news will have on the upcoming Presidential election, but one can now see why President Trump so desperately wanted to keep his taxes private.

From a reader: “Exchange traded derivatives educator to thousands of people, Kevin Baldwin passed away yesterday after complications of a long illness. Kevin had taught and traveled the world for over 20 years at Refco, the NFA, IFM and OCC. He also peppered his career as an MD of an innovative IB in NYC.”

A long time reader with a history of working for banks reached out to me about our new video series, The Path to Electronic Trading. He helped deploy several of the leading platforms for electronic trading. This will be a great addition to the series. If you have a story of how you played a part in the path to electronic trading, please contact me.

Brigitte Trafford has joined LSEG as chief communications and marketing officer.

My camping trip with my wife Cheryl has been extended by a day, and we are still in Southern Illinois in the Shawnee National Forest. She has enjoyed the camping experience, which is good news. She has the advantage of having a former Scoutmaster as a husband who has been on more than 100 Scout camping trips.

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


FIA President and CEO Walt Lukken made the following statement in reaction to the EC and ESMA decisions to formally grant temporary equivalence and recognition for clearinghouses based in the UK, which allow them to continue to provide clearing services in the EU at the end of the transition period between the EU and the UK:
“Today’s decision by ESMA on the recognition of UK CCPs, combined with the European Commission’s adoption of time-limited equivalence, ensures financial stability, operational continuity and market access for customers. During these uncertain times, it is imperative that businesses have access to clearinghouses and the risk mitigating services they provide. FIA thanks the leadership shown by EC Executive Vice-President Valdis Dombrovskis and ESMA Chairman Steven Maijoor in making these important determinations.”~SR

The STA’s 2020 Market Structure Virtual Conference kicks off a busy fall conference season next week on October 7 and 8. Speakers include Rep. Bill Huizenga of Michigan, Dan Gallagher, chief legal officer at Robinhood, Ed Tilly, chairman and CEO of Cboe Global Markets, and others. More details are here. ~SC

The Bank of England and ESMA have agreed on an information-sharing deal, which was needed to allow some European banks to keep using London clearing houses until June 2022.~MR

Cryptocurrency DeFi trading platforms are getting big, especially Uniswap, which now has more than $2 billion worth of digital assets locked in its protocol – the first DeFi platform to reach this milestone. Here is an explanation of how the platform works.~MR


The Spread: This Is How It’s Done

This week on The Spread: record high $1 billion worth of bitcoin options expire, the OCC publishes best practices and a plan for the future, and more.

Watch the video »


Wall Street is shunning Trump. Campaign donations to Biden are five times larger
Matt Egan – CNN
President Trump is promising four more years of low taxes, light regulation and a laser-focus on the stock market. Yet professionals on Wall Street are shunning Trump and funneling staggering amounts of money to his opponent.
The securities and investment industry donated just $10.5 million to Trump’s presidential campaign and outside groups aligned with it, according to a new tally by OpenSecrets. It has sent nearly five times as much cash, $51.1 million, to Democratic presidential nominee Joe Biden.

*****Follow the money.~JJL


Time to lay a LaSalle tax to rest (opinion)
Crain’s Editorial Board
New Jersey’s proposed tax on financial exchange transactions would likely send New York-based Nasdaq’s massive data center business packing from the Garden State. There are lessons for us here. We can only hope that Chicago aldermen have the week of Oct. 26 circled on their calendars. They might even want to be on hand that week to welcome part of the Nasdaq exchange business that is expected to come to town from the East Coast. That is, if they can find any outward sign of it.

*****As long as there are elections to run in, there will be proposals to tax the markets. There is too much campaign cash to extort by legal means.~JJL


Every Day-Trader Dollar Is Worth Five in a New Theory on Stocks
Sam Potter – Bloomberg
Day traders claiming bragging rights for this year’s $9 trillion U.S. equity rebound can find some supporting evidence in the latest research.
Even as retail trading has grown to represent 20% of daily volume, Wall Street has struggled to figure out how much this modest-sized contingent actually influences prices. After all, the market is teeming with algorithmic funds, long-only managers and more. But a fresh way to understand stock fluctuations via academics at Harvard University and the University of Chicago makes the effort a little easier.

*****Dumb money can be worth a lot.~JJL


In Isolating Times, Can Robo-Pets Provide Comfort?
Paula Span – NY Times
When Linda Spangler asked her mother, in a video chat, what she would like as gift for her 92nd birthday, the response came promptly.
“I’d like a dog,” Charlene Spangler said. “Is Wolfgang dead?” Wolfgang, a family dachshund, had indeed died long ago; so had all his successors. Ms. Spangler, who lives in a dementia care facility in Oakland, Calif., has trouble recalling such history.

*****You still have to walk it or it will leave little batteries on the floor. ~JB


Friday’s Top Three
Our top story Friday was Crain’s Chicago Business’s CME changes rules to smooth out trading. Second was Matt Gaetz accuses GOP’s Kelly Loeffler of bribing Trump with $50 million to push out her rival, from Slate via Yahoo News. Third was the Financial Times’s The prop trading that got away.


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Lead Stories

‘Dumb money’ is fueling one of the biggest lies on Wall Street, researcher says
Lizzy Gurdus – CNBC
How investors should navigate a day traders’ market, according to one researcher
“Nobody likes to be average.”
That idea is reinforcing “one of the big lies from Wall Street” as retail investors turn to platforms such as Robinhood to try their hands at stock-picking, Larry Swedroe, chief research officer at Buckingham Wealth Partners and co-author of “The Incredible Shrinking Alpha,” told CNBC’s “ETF Edge” on Monday.

IPO Market Parties Like It’s 1999
Corrie Driebusch – WSJ
Many businesses are struggling. Millions of Americans are out of work. But the IPO market is the hottest it’s been in years—and 2020 could be its biggest year ever.
With three months left on the calendar, U.S.-listed initial public offerings have raised nearly $95 billion through Wednesday, according to data provider Dealogic. That already surpasses the totals of every year except 2014 since the tech bubble in 2000. It’s nipping at the heels of 2014, when IPOs raised $96 billion, more than a quarter of it by Alibaba Group Holding Ltd.

Inside the JPMorgan Trading Desk the U.S. Called a Crime Ring
Tom Schoenberg – Bloomberg
The U.S. says the precious metals desk at JPMorgan was a racketeering operation. Now the bank is poised to pay a record penalty for spoofing. Here’s a look behind eight years of alleged conspiracy.
Billionaires have Davos. For filmmakers, there’s Sundance. For the people who mine and trade and ship everything from iron ore to platinum, there’s London Metal Exchange Week.

S&P 500’s Fourth Week of Losses Sounds Alarm on Economic Growth
Lu Wang and Vildana Hajric – Bloomberg
The September stock-market selloff that started as comeuppance for overheated tech shares evolved this week into a more troubling sign for the U.S. economy.
While stocks advanced Friday after lawmakers revived hopes for a fresh spending bill, the S&P 500 notched a fourth straight weekly drop. This time, it wasn’t Apple or Tesla that bore the brunt of selling. Companies with profits most closely tied to economic growth, like commodity producers and banks, led the drop. The recovery trade faltered, with airlines sinking the most since June and small-caps dipping below their average price for the past 200 days.

Inflation Is Already Here—For the Stuff You Actually Want to Buy
James Mackintosh – WSJ
If it feels like the price of everything you buy has been soaring, that’s because it has—even as central bankers everywhere worry about the danger of deflation.
The gap between everyday experience and the yearly inflation rate of 1.3% in August is massive. The price of the stuff we’re buying is rising much faster, while the stuff we’re no longer buying has been falling, but still counts for the figures.

Fed Shot Its Own ‘Elephant Gun’ Before Buffett Got the Chance
Michael P. Regan and Sarah Ponczek – Bloomberg
Warren Buffett has referred to the massive cash pile at his company Berkshire Hathaway Inc. as his “elephant gun,” meaning he’s always on the prowl for an opportunity to shoot large sums of money at a big acquisition or investment. While he made a few deals this year as the Covid-19 pandemic roiled markets, he hasn’t been quite as active as he was during the global financial crisis more than a decade ago.

Capital Spending Plays Catch-Up—For Now
Justin Lahart – WSJ
The rebound in the U.S. economy is providing companies with a good reason to increase capital spending. But it is also giving them reason to be cautious about splurging on new equipment.

Pandemic forces steel industry to confront its Achilles heel
The crisis may prove the catalyst that the EUR170bn European sector needs to cut overcapacity
Michael Pooler in London and Joe Miller in Frankfurt – The Financial Times
At the Fos-sur-Mer steelworks near the French city of Marseille, molten iron is flowing again from blast furnace no. 1 for the first time in six months.
The restart of the facility at the ArcelorMittal plant on the Mediterranean coast offers rare relief for the EUR170bn European steel industry that was struggling long before coronavirus.

Saving NYC’s transit system means saving the US economy, experts say
Tim Levin – Business Insider
New York’s transit system is in a financial crisis, and to anyone outside of the New York metropolitan area, that probably sounds like someone else’s problem.
But experts disagree. Dependable, robust mass transit is vital to New York’s economic health and recovery, and if the agency is left high and dry, many say the entire country’s economy will suffer.

Everybody vs. the App Store: Why Companies Are Taking Issue With Apple’s Growing Revenue Engine
Stephanie Stamm and Sarah E. Needleman – WSJ
A host of companies, including Facebook Inc., Spotify Technology SA and “Fortnite” maker Epic Games Inc., are challenging the way Apple Inc. AAPL 3.75% runs its App Store.
The App Store generates at least $15 billion in annual sales for the tech giant, according to analysts’ estimates. Critics say Apple takes too big a cut of app makers’ sales and wields monopoly power over the gateway that connects hundreds of millions of users to mobile apps.

Airline industry facing worst job losses in history
Ian Duncan, Lori Aratani and Michael Laris – The Washington Post
For Jennie Ballesteros, having the wings of a United Airlines flight attendant ceremonially pinned to her chest was the fulfillment of a dream she’d held onto for years — ever since some crew members she served as a waitress told her she might have what it takes.
“I’m going to make it,” Ballesteros recalls thinking. “I’m going to have some security. A retirement. A 401(k). This is an amazing job. I was just so happy.”
It was Jan. 2.
“I said, ‘2020 is going to be my year.’?”

US tech firm PEAK6 to create 160 NI jobs at new Belfast base
Richard Morgan – BBC
A US-headquartered technology and investment firm is to establish a centre of excellence in Belfast with a plan to create 160 new jobs.
Invest Northern Ireland has offered more than £1m of support for PEAK6, which aims to have the roles in place over the next four years.
The company has already started to recruit software engineers.

Straits Financial LLC Names Gene Orr Chief Executive Officer
Straits Financial Group announces the appointment of Gene Orr to President and CEO of Straits Financial LLC, USA effective immediately.
Mr. Orr brings with him over 27 years of diverse financial industry experiences not limited to the futures industry but also in asset management and the banking industry. He has held senior positions at leading global financial institutions such as Citigroup Global Markets, HSBC, Cargill Investor Services and Refco Inc.


Covid Death Toll Nears 1 Million, But Real Number May Be Double
The world will officially record 1 million deaths from Covid-19 in the next few days, but the real tally might be almost double that.
Actual fatalities from the worst pandemic in a century may be closer to 1.8 million — a toll that could grow to as high as 3 million by the end of the year, according to Alan Lopez, a laureate professor and director of the University of Melbourne’s global burden of disease group. The coronavirus’s rapid spread and ability to transmit in people who show no signs of the disease have enabled it to outrun measures to accurately quantify cases through widespread diagnostic testing.

Is It Insane to Start a Business During Coronavirus? Millions of Americans Don’t Think So.
Gwynn Guilford and Charity Scott – WSJ
The pandemic forced hundreds of thousands of small businesses to close. For Madison Schneider, it was a good time to start a new one.
The 22-year-old in Haviland, Kan., opened Lela’s Bakery and Coffeehouse on Sept. 12, naming it after her grandmother. It has been busy every day since, she said. “It just felt like the right thing to do,” Ms. Schneider said.

Johnson & Johnson’s Covid-19 Vaccine Produced Immune Response in Earlier-Stage Study
Peter Loftus – WSJ
Johnson & Johnson’s experimental Covid-19 vaccine induced immune responses in most people who received the shot in a small early-stage trial, and also displayed an acceptable safety profile, according to a study posted online Friday.
The findings added more detail to J&J’s announcement earlier this week that the results from the Phase 1/2 trial were positive, and mean the vaccine, one of the leading candidates in development, has taken another step toward proving whether it works safely.

An element of risk-taking has been part of her career, Toni Reid of Amazon says she would tell other women in tech.
Sebastian Herrera – WSJ
When Toni Reid, Amazon.com Inc.’s vice president of Alexa experience and Echo devices, sent hundreds of staffers home in early March to work remotely, she had her husband buy a standing desk for their house the next day.
“I knew we were in this for the long run,” she said.

Already facing its worst crisis since 9/11, airline industry set to cut more than 35,000 jobs this week
Ian Duncan, Lori Aratani and Michael Laris – The Washington Post
For Jennie Ballesteros, having the wings of a United Airlines flight attendant ceremonially pinned to her chest was the fulfillment of a dream she’d held onto for years — ever since some crew members she served as a waitress told her she might have what it takes.
“I’m going to make it,” Ballesteros recalls thinking. “I’m going to have some security. A retirement. A 401(k). This is an amazing job. I was just so happy.”
It was Jan. 2.

COVID-19 Daily Cases On The Rise In Nearly Half Of U.S. States
Jason Slotkin – NPR
New coronavirus infections are on the rise in the U.S., with cases surpassing 7 million this week. Some two dozen states reported increases in new infections, with a handful of states marking new daily records.
The number of new daily coronavirus infections in the U.S. continued to rise this past week, driven by upward trends in nearly half the states that have pushed total cases in the country past 7 million. At the same time, a recent study suggests the vast majority of Americans haven’t been exposed, far below what’s required to quell the virus’s spread through “herd immunity.”

Coronavirus Pandemic Increases Need to File FAFSA Form Early
Ann Carrns – NY Times
It’s especially important to apply early for financial aid this year, college experts say, because many families have suffered economically during the coronavirus pandemic and may have to take extra steps to qualify for maximum help.
That means families should complete the Free Application for Federal Student Aid — the form known as FAFSA — as soon as they can. The form is a major gateway for financial help from the federal government, as well as from many states and colleges. The FAFSA for the 2021-22 academic year is available starting Thursday.

One Pandemic Later, Direct Listings See Some Blue Sky: QuickTake
Hot technology startups have traditionally raised the cash they needed to break into the big time through initial public offerings. IPOs became synonymous with instant wealth for company founders and those lucky enough to buy those shiny new shares. Then music-streaming service Spotify Technology SA went a different route, going public through a method called direct listing. Why a direct listing? While Spotify didn’t need new cash, its investors wanted to cash out. Workplace messaging platform Slack Technologies Inc. followed suit last year and Silicon Valley buzzed with speculation whether Airbnb Inc. or a dozen other tech unicorns might be next. Little of what was predicted has come to pass, though, until now.

Exchanges, OTC and Clearing

MIAX PEARL Equities Begins Trading In NMS Test Symbols, Live Symbols Will Commence Trading On September 29, 2020
Press Release
Miami International Holdings, Inc. (MIH), the parent holding company of the MIAX, MIAX PEARL and MIAX Emerald exchanges, today announced that it has begun trading in all NMS test symbols on MIAX PEARL Equities, MIH’s first equities exchange. MIAX PEARL Equities will begin live trading Tuesday, September 29, 2020 with its first symbol NTGR (NETGEAR Inc.) and will rollout additional symbols beginning October 2, 2020. With its launch, the MIAX Pearl Equities Exchange joins current options exchanges MIAX Options, MIAX PEARL and MIAX Emerald as part of the MIAX Exchange Group.

Brigitte Trafford Joins LSEG As Chief Communications And Marketing Officer
Press Release
London Stock Exchange Group (LSEG) announces today that Brigitte Trafford is joining the Group as Chief Communications and Marketing Officer and a member of the LSEG Executive Committee, reporting to David Schwimmer, CEO. In this newly created role, Brigitte will lead the Group’s Communications, Government Relations, Regulatory Strategy and Marketing functions.

LCH Swap Agent Processes Its First SONIA/SOFR Cross-Currency Basis Swap
Bank of America and Lloyds Bank Corporate Markets acted as counterparties to the swap
LCH SwapAgent offers standardised infrastructure and efficiencies to the non-cleared derivatives market
LCH SwapAgent, a service for the non-cleared derivatives market announces that it has registered its first SONIA/SOFR cross-currency basis swap. The GBP / USD basis swap was executed between LCH SwapAgent members Bank of America and Lloyds Bank Corporate Markets.


Differential machine learning: the shape of things to come
Brian Huge, Antoine Savine – Risk.net
Brian Huge and Antoine Savine combine automatic adjoint differentiation with modern machine learning. In addition, they introduce general machinery for training fast, accurate pricing and risk approximations, applicable to arbitrary transactions or trading books, and arbitrary stochastic models, effectively resolving the computational bottlenecks of derivatives risk reports and regulations.

Where’s the Best Place in the World To Be a Woman in Fintech?
Natalie Marchant – The Fintech Times
Rhona Parry, CEO of UK debt management company Indesser, said: “In my experience – and this is a generalisation – but the US is much better for fostering diversity, including gender balance. From what I’ve seen, in the US, women are encouraged and facilitated in financial services. I haven’t experienced an ‘old boys club’ there.” But she followed this up with a caveat. “The US has a broader workforce ‘inclusion’ challenge compared to the UK – the long working hours culture, limited vacation etc – this isn’t conducive to (some) women thriving. Maybe the two things cancel each other out?”

Channel Arbitrage And Other Ways Fintech Is Disrupting Financial Services
Kimberly A. Whitler – Forbes
Technology is shifting the way industries market to, acquire, and serve consumers. To understand how technology will impact the financial services industry, I turned to Jonathan Metrick, the Chief Growth Officer for Portage Ventures, a fintech focused VC. Below are his insights.

Building Malaysia’s First Unicorn?
Vincent Fong – FintechNews
The South East Asian startup scene is ripe with opportunities and home to some of the most exciting startups within Asia and beyond. The region has given birth to unicorns who are household names like Grab, Gojek, Sea Group, Traveloka, Lazada, and more. Globally, there are roughly 491 unicorns at the cumulative valuation of over US$ 1.5 trillion, according to CB Insights. However, despite our best efforts, Malaysia is not part of the action. Of course, some may argue that Grab is a Malaysian company but that’s a tired and old argument because the fact is, they are headquartered in Singapore and the ship has sailed in labelling them a Malaysian company. I think we have to come to terms with that and look towards the future and figure out what it takes for Malaysia to start producing high-valued startups.


$2B Locked: Uniswap Now Bigger Than Entire DeFi Industry Just Two Months Ago
Sebastian Sinclair – Coindesk
Uniswap is now bigger than the entire decentralized finance space just two months ago, as the trading protocol becomes the first to pass the $2 billion milestone. Uniswap clocked the record figure just after midnight (UTC) Monday and currently has $2.06 billion worth of crypto assets locked in, according to crypto rankings website DeFi Pulse. Testament to its neck-breaking growth, there’s now more value just in Uniswap than there was in the entire DeFi space on July 9.

Bitfinex Launches Tether-Settled Perpetual Contracts Based on European Equities
Omkar Godbole – Coindesk
Cryptocurrency exchange Bitfinex has launched tether (USDT)-settled perpetual contracts that track two European equity market indices.

Crypto Broker Sees Users Drawn to Bots to Beat Volatile Trading
Zheping Huang – Bloomberg
A fledgling Chinese brokerage is betting that investors will flock to bot trading to capitalize on the price swings in the $300 billion cryptocurrency market. BitUniverse, a startup that counts China’s Shunwei Capital and ZhenFund among its backers, has a monthly trading volume of around $5 billion on its online brokerage platform, according to Beijing-based founder Chen Yong. And more than 80% of its 100,000-some users run a grid trading algorithm every day, which automates buy and sell orders at certain regular intervals to capitalize on normal price volatility, Chen said.

Centralized assets now constitute 40% of MakerDAO’s vaults
MK Manoylov – The Block
New data interpretation from The Block shows that centralized assets comprise 40% of the collateral locked in MakerDAO. MakerDAO is a protocol enabling users to generate DAI, a synthetic stablecoin previously solely backed by ether. In November 2019, MakerDAO migrated to a Multi-Collateral Dai system, allowing multiple collaterals to back DAI. The Block’s research shows that 40% of DAI appears to have centralized collateral backing them.

SEC issues no-action letter in response to digital asset securities questions
Michael McSweeney – The Block
A September 25 letter from the Securities and Exchange Commission (SEC) has cleared the way for additional means of using alternative trading systems to facilitate the trade of digital asset securities. The no-action letter, drafted by the SEC’s Division of Markets and Trading and addressed to FINRA vice president of risk oversight and operational regulation Kris Dailey, focuses on a specific approach to handling trades on an ATS, namely a so-called “Three-Step Approach” that some broker-dealers have sought permission to use.

Over $150M Drained in KuCoin Crypto Exchange Hack
Ada Hui, Wolfie Zhao – Coindesk
Over $150 million of an Asian cryptocurrency exchange’s funds have been compromised in a security breach. The Singapore-headquartered digital asset exchange KuCoin said in a statement that it detected large withdrawals of bitcoin (BTC) and ethereum (ETH) tokens to an unknown wallet beginning at 19:05 UTC time on Friday. In a live stream on 4:30 UTC time Saturday, KuCoin CEO Johnny Lyu said that one or more hackers obtained the private keys to the exchange’s hot wallets. KuCoin transferred what was left in them to new hot wallets, abandoned the old ones and froze customer deposits and withdrawals, Lyu said.

EY launches Ethereum-based procurement solution for enterprises
Yogita Khatri – The Block
“Big Four” accounting firm Ernst & Young (EY) has launched an Ethereum-based procurement solution for enterprises. Dubbed EY OpsChain Network Procurement, the solution allows companies to run procurement activities on the Ethereum blockchain. It is designed to convert procurement agreements into digital smart contracts, said EY. Smart contracts help automate procurement processes beyond any single enterprise resource planning (ERP) system, said EY. ERP is a type of software that allows organizations to manage day-to-day business activities such as procurement, supply chain, accounting, and project management.

Huobi Zeroes In On Russian Crypto Traders with New Mobile App
Rachel McIntosh – Finance Magnates
Singapore-based cryptocurrency exchange Huobi Global has today announced the launch of a native mobile app designed specifically for one of the more overlooked landscapes of the crypto world: Russia. According to an announcement from the company, the app will enable iOS and Android users in Russia to “access Huobi’s spot market and trade hundreds of digital assets and cryptocurrencies.”

Lawmakers want to amend the Securities Act to provide more clarity for crypto assets
Aislinn Keely – The Block
Two bills introduced on the same day are seeking to create clear rules of the road for crypto in the U.S. The Securities Clarity Act is a companion to the Digital Commodity Exchange Act. The bill would amend existing securities laws to include a new definition that would capture the in-between nature of some tokens.


Long-concealed Records Show Trump’s Chronic Losses And Years Of Tax Avoidance
Russ Buettner, Susanne Craig and Mike McIntire – The New York Times
The Times obtained Donald Trump’s tax information extending over more than two decades, revealing struggling properties, vast write-offs, an audit battle and hundreds of millions in debt coming due.
Donald J. Trump paid $750 in federal income taxes the year he won the presidency. In his first year in the White House, he paid another $750.

Trump Helps U.S. Foes by Hedging Transfer of Power, Ex-Aide Says
Tony Czuczka – Bloomberg
President Donald Trump’s refusal to commit to a peaceful transfer of power should he lose the November election helps enemies that want to undermine U.S. democracy, his former national security adviser said. H.R. McMaster, who served in the post between February 2017 and April 2018, singled out Russia for seeking to amplify domestic political divisions within the U.S.

TikTok Attacks Trump Ban as Irrational Amid Talks on Stake Sale
David Yaffe-Bellany – Bloomberg
A lawyer for TikTok told a federal judge that President Donald Trump’s impending ban on the video-sharing app is irrational given that its Chinese owner is in talks to strike a deal the president himself has demanded.
“How does it make sense to impose this app-store ban tonight when there are negotiations underway that might make it unnecessary?” attorney John Hall asked at an unusual Sunday morning hearing on TikTok’s request to temporarily block the ban.

Ex-President of Pakistan Is Indicted on Money Laundering Charges
Salman Masood – The New York Times
A former president of Pakistan, Asif Ali Zardari, was indicted on Monday in a money laundering case, the latest legal action against him and one that his supporters say is part of a wider trend against politicians opposed to Prime Minister Imran Khan. Mr. Zardari is the widower of former Prime Minister Benazir Bhutto, who was assassinated in 2007. He served as president from 2008 to 2013, and is currently a member of Parliament. He is also facing a raft of court cases.

Democrats Sweep May be Best for Risk Markets, Credit Suisse Says
Joanna Ossinger – Bloomberg
A potential Democratic sweep in the U.S. elections may be the rosiest scenario for risk markets like value and cyclical stocks. Joe Biden in the White House and his party controling the Senate and House has been cited by some strategists as a potential downer for markets because it could lead to higher corporate tax rates. But to Credit Suisse Group AG, the chance of greater deficit spending under that scenario is “massively pro-growth” and outweighs other concerns for equities.


Ex-Deutsche Bank Traders Convicted of Wire Fraud in Market-Manipulation Case
Dave Michaels – WSJ
A jury on Friday convicted two former Deutsche Bank employees accused of manipulating precious-metals prices, boosting prosecutors’ efforts to punish traders for conduct that has cost banks millions of dollars in civil and criminal fines.
The verdict represents prosecutors’ second win in trials over conduct known as spoofing, a rapid-fire manipulation tactic that involves sophisticated detective work to expose.

Whistleblower in Orthofix Bribery Case Awarded $1.8 Million
Mengqi Sun – WSJ
The U.S. Securities and Exchange Commission awarded $1.8 million to a whistleblower whose tip helped the regulator conduct an investigation that led to bribery charges against Orthofix International NV.
The regulator, which announced the award Friday, didn’t name the company nor did it identify the tipster, but lawyers representing the whistleblower said the award was connected to a 2017 bribery settlement involving Orthofix, a Lewisville, Texas, medical-device company.

U.S. Places Restrictions on China’s Leading Chip Maker
Ana Swanson and Raymond Zhong – NY Times
The Trump administration has placed new restrictions on exports to Semiconductor Manufacturing International Corporation, China’s most advanced maker of computer chips, a measure that could deepen the technology conflict between China and the United States.
In a letter on Friday, the Department of Commerce told American companies in the chip industry that they must first acquire a license to sell technology to SMIC and its subsidiaries. The department said it was taking the action after a review in which it determined that the Chinese company “may pose an unacceptable risk of diversion to a military end use in the People’s Republic of China.”

CFTC Staff Extends Relief from Certain Reporting Obligations under the Ownership and Control Reports Final Rule
The Commodity Futures Trading Commission’s Division of Market Oversight (DMO) today issued a no-action letter that extends current relief from reporting obligations under the ownership and control reports final rule (OCR Final Rule). The OCR Final Rule, approved in 2013, requires the electronic submission of trader identification and market participant data.

Statement By The Acting Comptroller Of The Currency Regarding FSOC’s Consideration Of Secondary Mortgage Market Activities
Press Release
Acting Comptroller of the Currency Brian P. Brooks made the following statement today at the meeting of the Financial Stability Oversight Council (FSOC) with respect to the FSOC’s activities-based review of secondary mortgage market activities and issuance of a public statement on the subject:

Hedge fund manager Odey pleads not guilty to indecent assault charge
Maiya Keidan – Reuters
LONDON – Crispin Odey, one of Britain’s highest-profile hedge fund managers and political donors, pleaded not guilty in court on Monday to a charge of indecent assault.
Odey, 61, was charged in May with indecently assaulting a woman in 1998 under the Sexual Offences Act.

June Bug vs. Hurricane:* Whistleblowers Fight Tremendous Odds And Deserve Better, SEC Commissioner Allison Herren Lee, Sept. 23, 2020
Press Release
In recent times, it seems that nearly every day has provided us with an opportunity to appreciate the contributions of whistleblowers.[1] Often, they display extraordinary bravery to expose fraud and wrongdoing, and to shine light in some very dark places.[2] In doing so, they reinforce our fundamental values – that the rule of law matters, and no one is, or should be, above the law. All too often, sometimes very publicly and sometimes in the shadows, those whistleblowers face retaliation from the powerful figures they expose.[3] They help create transparency, and from transparency flows crucial accountability. Unfortunately, today’s rules do not serve these individuals well.

SEC Charges Top Executive of California Microcap Company for Misleading Claims Concerning COVID-19 Test and Financial Statements
The Securities and Exchange Commission today charged Mark Schena, the President and Chief Science Officer of Arrayit Corporation, for making allegedly false and misleading statements concerning Arrayit’s development of a COVID-19 blood test and its intention to resolve its delinquency in filing required periodic reports with the SEC.

ESMA To Recognise Three UK CCPS From 1January 2021
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has today announced that the three central counterparties (CCPs) established in the United Kingdom (UK) – ICE Clear Europe Limited, LCH Limited, and LME Clear Limited – will be recognised as third country CCPs (TC-CCPs) eligible to provide their services in the EU, after the end of the transition period following the withdrawal of the UK from the EU on 31 December 2020.

SEC Charges Companies, Former Executives as Part of Risk-Based Initiative
Interface and Two Former Executives Charged With Accounting and Disclosure Violations; Fulton Financial Corporation Charged With Disclosure Violations

Investing and Trading

Bonds Are Beating Stocks in Topsy-Turvy 2020
Paul Vigna – WSJ
Stocks have staged a furious rally since bottoming in late March, but bonds are still winning the race for returns this year.
Despite a 47% rise since March 23, the S&P 500 is up just 2.1% in 2020. The Dow Jones Industrial Average is down 4.8% and the Russell 2000 index of small-capitalization stocks is off 12%. Only the Nasdaq Composite has managed a meaningful increase this year, up 22%, because of a surge in a handful of big technology stocks.

Investors Ramp Up Bets on Market Turmoil Around Election
Amrith Ramkumar and Julia-Ambra Verlaine – WSJ
Investors are betting on one of the most volatile U.S. election seasons on record, wagering on unusually large swings in everything from stocks to currencies as they brace for what could be a weekslong haul of unpredictable events.
The bets go beyond the Wall Street hedging that typically precedes an election. Traders are scooping up a variety of investments that would pay out if volatility extends far beyond Election Day itself, concerned that the outcome of the presidential contest could remain unclear into December.

Environmental, Social and Corporate Governance

Sustainable-Bond Market Boosted by Europe’s Top Institutions
Anna Hirtenstein – WSJ
Europe’s two most powerful institutions have thrown their weight behind the market for environmentally friendly bonds, a move that could make sustainable finance more mainstream and improve its transparency.
The European Central Bank this week said it would start buying sustainability-linked corporate bonds as part of its quantitative-easing program and accept them as collateral for loans to commercial banks, starting next year.

Regulation Best Interest and ESG Investing: Confluence for the SEC or Consternation Under ERISA?
Compliance with new Regulation Best Interest (“Regulation BI”) need not prevent environmental, social, and governance (“ESG”) investing, but beware of new proposed restrictions for some.
As of June 30, 2020, U.S.-registered broker-dealers must comply with the Securities and Exchange Commission’s (the “Commission”) Regulation BI, which establishes a standard of conduct for broker-dealers making recommendations to retail customers and prohibits broker-dealers from putting their financial interests ahead of their customers’ interests. Under Regulation BI’s Care Obligation, a broker-dealer making recommendations must consider several factors in its exercise of care, including the cost of the product, the existence of reasonable alternatives, and any material limitations (e.g., limited product offerings) the broker-dealer may have. Once a recommendation is objectively analyzed, it then must be vetted for consistency with a customer’s investment profile, including any stated investment objective.

Deep Dive into climate change: ESG investing on the cusp of becoming mainstream
Catherine Cahill – Investment Week
In a brand new series replacing Bull Bears, Investment Week takes a deep dive into one particular asset class each week. Four commentators – one specialist fund manager, one multi-asset manager, one fund-picker and one CIO or economist – will each provide their in-depth takes on the market area, including the biggest potential risks, long-term themes and where they are seeing investment opportunities.


FinCEN Files: HSBC moved Ponzi scheme millions despite warning
FinCEN Files reporting team – BBC
HSBC allowed fraudsters to transfer millions of dollars around the world even after it had learned of their scam, leaked secret files show. Britain’s biggest bank moved the money through its US business to HSBC accounts in Hong Kong in 2013 and 2014.

Wall Street firms’ return-to-work movement gaining steam
Steve Cuozzo
Slowly but surely, the movers and shakers are dribbling back from their Hamptons and Connecticut basements to their office desks. The question is how much longer it will take for the rank-and-file to follow.

Commerzbank poaches Deutsche Bank’s Knof as new CEO
German lender Commerzbank CBKG.DE has poached a senior executive of its larger rival Deutsche Bank DBKGn.DE to assume the role of chief executive, filling a leadership vacuum after months of turmoil.


Why Hong Kong’s era as a global financial centre is far from over
Ken Chu – South China Morning Post
While sceptics argue that Hong Kong’s stock market is overwhelmingly Chinese in character, the various stock and bond connect schemes between Hong Kong and the mainland ensure the global orientation of the city’s financial sector
The Greater Bay Area will consolidate Hong Kong’s role as the region’s financial hub

China’s carbon pledge will require complete inversion of existing system
Country will need to kick addiction to coal and build eye-watering amount of wind and solar capacity
Jillian Ambrose – The Guardian
China’s President Xi Jinping stunned climate action observers in a speech at the United Nations general assembly last week with a pledge to reach “peak carbon” before 2030, and drive down emissions to virtually zero by 2060.

Emerging Markets on Edge as Goldman and Deutsche Bank Flag Risks
Netty Idayu Ismail, Karl Lester M Yap, and Sydney Maki – Bloomberg
Emerging markets are heading toward the end of the third quarter with more reasons to be cautious than optimistic.
Developing-nation stocks, currencies and bonds had their worst week in the five days through Friday since the coronavirus pandemic rocked global markets in March. The gap between implied volatility in emerging-market currencies and their Group-of-Seven peers is at the widest since June amid concerns over renewed lockdown measures and delays to further U.S. fiscal stimulus.

Brazil’s IPO market on track for biggest year since 2007
Companies take advantage of higher valuations after retail investors head into stocks
Bryan Harris in São Paulo and Richard Henderson in New York – The Financial Times
The market for initial public offerings in Brazil is on track for its biggest year since 2007, fuelled by a recovery in asset prices and a surging number of everyday investors buying into stocks. Seventeen groups have already debuted in Brazil this year and almost 40 more are in the pipeline as companies — and the banks marketing them — work flat out in a year truncated by the coronavirus crisis.

In April 2020, the Council of Financial Regulators published a table of deferred regulatory initiatives due to COVID-19. This has now been updated to guide financial services businesses on future initiatives.
Download the updated CoFR Timetable of Regulatory Initiatives (Sept 2020) PDF.


Brexit teams race against clock as trade talks enter final straight
Tentative signs of progress as negotiations enter crucial phase
Jim Brunsden in Brussels and Sebastian Payne in London – The Financial Times
EU and UK negotiators are set for showdown Brexit talks this week as they seek to build on tentative signs of progress which have raised hopes that a trade deal may be possible.
Teams will meet on Tuesday for three days of talks at the European Commission’s headquarters in Brussels, with a month remaining until what EU chief negotiator Michel Barnier has said is the “realistic deadline” for a deal, if it is to be ratified in time for the end of Britain’s transition period on January 1.

EU Companies Are Losing Hope of a Brexit Deal
Stefan Nicola and Christian Wienberg – Bloomberg
It was hard to ignore the sense of foreboding when a group of German executives logged into a remote meeting on Tuesday.
Poring over the implications of Brexit at an event organized by the economic council of Chancellor Angela Merkel’s governing party, the topics were familiar in a country that sends more goods to the U.K. than any other exporter: tariffs, logistical logjams and disrupted supplies.

EU companies warned of 700,000 job losses in no-deal Brexit
Research suggests smaller countries could suffer bigger hit relative to size of labour markets
Martin Arnold in Frankfurt – The Financial Times
More than 700,000 jobs would be at risk for EU companies exporting to Britain if the UK and Brussels fail to agree a trade deal this year, according to a leading German economic research institute. In total, including companies outside the EU that export to the UK, there would be 1m potential job losses in a no-deal Brexit scenario, according to an unpublished report by the Halle Institute for Economic Research seen by the Financial Times.

Johnson should rip up Brexit divorce deal, think-tank says
An influential pro-hard Brexit think-tank urged Prime Minister Boris Johnson to tear up his divorce deal with the European Union on Saturday, saying it would still allow the bloc too much power in Britain.
Johnson’s government has sought this month to pass laws that could override parts of Britain’s EU exit treaty that it signed in January, despite a warning from Brussels that doing so would wreck their future relationship.


Inside eBay’s Cockroach Cult: The Ghastly Story of a Stalking Scandal
David Streitfeld – NY Times
Veronica Zea is pretty sure that before showing up to work at eBay in the spring of 2017, she used the site only once. She bought a surfing poster. It ended up in her closet.
Although Ms. Zea grew up in Santa Clara, Calif., in the heart of Silicon Valley, she cared little for the dazzlements of technology. In college, she studied criminology. After graduating, and a year spent recovering from knee surgery, she surprised herself by answering a classified ad and ending up at the e-commerce pioneer.

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