Fed’s Williams: SOFR Rate System Has Performed Well During Coronavirus Crisis

Jul 14, 2020

First Read

Hits & Takes
By JLN Staff

Welcome to New York, may I see your papers? If you don’t have the right papers, you can be fined $2000. A new “emergency health order” issued by Gov. Andrew Coumo wants to know your contact information upon entering New York from 14 different states where the coronavirus outbreak is spreading rapidly. If you don’t provide the information, the fine is $2000.

Hong Kong will fine you $645 for not wearing a mask on public transport. They also closed down Disneyland again. It is getting real in Hong Kong. In London, on July 24, people will be required to wear masks in shops.

In New York and around the country, flour and toilet paper are back on the shelves, the New York Times is reporting. However, companies have cut back on the variety of products they produce to pump out core products in demand.

The Wall Street Journal is reporting demand for guns in the U.S. is at an all time high

Bloomberg has a story by Sarah Ponczek that reports 10,000 traders an hour are buying Tesla shares. She reports that almost 40,000 Robinhood users traded Tesla during a four hour period. That is a lot of retail participation. BTW, Robinhood raised $320 million in their latest offering.

Yesterday, we interviewed Art Margulis of Cognitive Capital for the Open Outcry Traders HIstory Project. Art started with the Cboe and joined Hull Trading shortly afterwards and ultimately became a Hull partner. Mike Forrester was in the office with Art, but here you can see my computer screen showing a Zoom call with him. In my place where I would be sitting in the studio is a stand with an iPad and Zoom call. This was the second interview we have done like this.

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


The FIA’s June 2020 Volume Highlights, released Monday, included: Worldwide volume of exchange-traded derivatives was 3.97 billion contracts in June, up 25.8% from the previous month and up 38.6% from June 2019.
On a year-to-date basis, volume in the first half of the year was 21.87 billion contracts, up 32.1% from the first half of 2019.
Total open interest at the end of June was 915 million contracts, down 3.9% from the previous month but up 3.4% from a year ago.~SR

As noted Monday, Cboe Global Markets plans to launch trading in Mini Cboe Volatility Index futures on the Cboe Futures Exchange beginning August 10 (subject to regulatory review). The contract revives a prior mini-VIX offering, listed from 2009 to 2014. Volatility has been up since the start of the pandemic, but why bring back a pint-size VIX now? In an emailed response, Matt McFarland, head of futures at Cboe, said the exchange believes the market will be receptive to the relaunch given the current popularity of other mini- and micro-futures contracts (think CME Group’s Mini S&P futures contract, for example). McFarland added that in 2009, smaller market investors who wanted to trade volatility favored “pre-packaged products” like ETFs that track VIX futures’ performance, but customer demands have evolved and volatility strategies of smaller, sophisticated market participants “now include seeking direct access to VIX futures.” With Mini VIX futures, “market participants are provided with the opportunity to construct their own views on volatility and to tailor their own volatility strategies,” he said.~SC

The CME Group announced today that they will launch Micro E-Mini S&P 500 Options, pending a regulatory review – because you knew they would eventually. They also announced that trading for Micro E-Mini Nasdaq-100 futures contracts would begin on August 31, 2020, pending regulatory review. You can read the full press release here or in the “Exchanges, OTC and Clearing” section of today’s newsletter.~MR


Politics Won’t Stop the Pandemic; A comprehensive shutdown may be required in much of the country.
John M. Barry – NY Times
When you mix science and politics, you get politics. With the coronavirus, the United States has proved politics hasn’t worked. If we are to fully reopen both the economy and schools safely — which can be done — we have to return to science.

*****Barry is the author of “The Great Influenza: The Story of the Deadliest Pandemic in History.”~JJL


The NFL Is Supposed to Start Soon. It Doesn’t Have a Plan Yet; Training camps are set to open on July 28—and there still isn’t a concrete plan for if and how the season will work in 2020
Andrew Beaton – WSJ
The NFL began the pandemic in an enviable position. The virus shut down every other major sports league, but the country’s most popular sport was in its offseason. It had months to plan how to deliver football to its millions of fans in the fall.

*****Even a bad plan is better than no plan at all. However, here is the thing, as soon as the season starts and the Covid-19 cases start hitting teams, the plan will change. All the best battle plans for war go out the window as soon as the first shot is fired.~JJL


Investors must prepare portfolios for Covid-19 debt crunch; The recovery value of assets will soon come to the fore, demanding closer scrutiny
Mohamed El-Erian – FT
The financial stress caused by Covid-19 is far from over. Investors should brace for non-payments to spread far beyond the most vulnerable corporate and sovereign borrowers, in a reckoning that threatens to drag prices lower.

******Investors must have a plan?~JJL


A U.S. Firm Is Turning Arabian Desert Air Into Bottled Water
Verity Ratcliffe – Bloomberg
Dubai plant to make drinking water from moisture in atmosphere; Project to be first in world to sell water-from-air in bottles
The Arabian Desert scarcely seems like an ideal place to source drinking water. But an Arizona-based technology firm is doing just that, in what may be the first operation of its kind. Instead of drilling wells or purifying seawater, it will wring moisture from the air to create bottled water at a plant 20 kilometers (12 miles) from Dubai.

*****And for my next trick, I will pull a camel out of my hat!~JJL


Queen Elizabeth II sells gin made from leaves found at Buckingham Palace after tourist revenues crash
Rupert Steiner – MarketWatch
Queen Elizabeth II is selling gin made from leaves found at the back of Buckingham Palace as cash from tourists visiting her residences has plunged. Royal Collection Trust, a department of the Royal Household, launched a premium small-batch London dry gin for sale in its shops on Monday, infused with bay and mulberry leaves found in her back garden.

****When life gives you juniper berries… ~JB



Monday’s Top Three
Our top story Monday was (yep, I called it), Seven Rules of Zoom Meeting Etiquette From the Pros, from the Wall Street Journal. These days, Zoom meetings consume a large percentage of our lives. Second was MSNBC’s Black Lives Matter opposed by senator, a WNBA team co-owner about Senator (and former Bakkt CEO) Kelly Loeffler. Third was Traders drunk at home in lockdown spark worry as pubs reopen, from Financial News, about “rocketing” alcohol consumption among finance workers in London.


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Lead Stories

Fed’s Williams: SOFR Rate System Has Performed Well During Coronavirus Crisis; The New York Fed president said banks should stop pricing new deals using Libor now
Michael S. Derby – WSJ
Federal Reserve Bank of New York President John Williams said Monday that a replacement for the scandal-plagued Libor interest-rate reference regime has fared well amid the stresses seen in the financial system during the coronavirus pandemic.

Libor Was Largely Guesswork at the Height of Volatility in March
William Shaw and Silla Brush – Bloomberg
Banks leaned on ‘expert judgment’ over actual data, BOE says; The benchmark is being phased out over the next 18 months
At the peak of the pandemic-induced market meltdown, guesswork played a vital role in setting international borrowing costs. Transactional data used to calculate sterling Libor all but vanished as markets became volatile in March, reinforcing the case for abandoning the benchmark, Bank of England Governor Andrew Bailey said in a speech on Monday.

Price of EU carbon credits soars to 14-year high; Traders bet on increased demand for the instruments following politicians’ ‘green recovery’ pledges
Camilla Hodgson – FT
The price of EU carbon credits soared to its highest level in 14 years on Monday, gaining as much as 5 per cent as traders bet that politicians’ promises of a “green recovery” would increase demand for the instruments.

Bridgewater Loses Claims It Brought Against Ex-Employees Who Launched Hedge Fund; Arbitration panel rules against world’s largest hedge fund over its claims on former employees’ activities
Rachael Levy and Juliet Chung – WSJ
Bridgewater Associates LP lost an arbitration dispute it had brought against two former investment employees who started their own hedge fund, a rare setback for Bridgewater that could hamper its ability to limit former employees’ options after they leave the firm.

Bridgewater ‘manufactured false evidence’ in trade secrets case; Arbitration ruling in dispute with former employees quoted in court filing
Ortenca Aliaj – FT
Bridgewater Associates, the world’s largest hedge fund, was found to have “manufactured false evidence” by a panel of arbitrators in its attempt to prove that former employees had stolen its trade secrets.

Blank-Check Boom Gets Boost From Coronavirus; Volatility prompts companies to go public through SPAC deals rather than traditional IPOs
Alexander Osipovich – Bloomberg
Fallout from the coronavirus has fueled a fresh wave of interest in an unusual investment vehicle with a shaky reputation: the blank-check company. Blank-check companies are essentially big pools of cash, listed on an exchange, whose sole purpose is to do an acquisition. When a blank-check company buys a target firm, the firm gets its spot on the exchange. For the target firm, it is a backdoor way of doing an initial public offering—and with the IPO market rattled by Covid-19 and wild volatility, it has become a more attractive way to go public.

Wirecard Draws German Scrutiny Over Insider Trading Suspicion
Nicholas Comfort – Bloomberg
German financial markets regulator BaFin has asked Munich prosecutors to probe possible insider trading in Wirecard AG shares before the company’s collapse last month, according to a BaFin spokeswoman. Eight days before Wirecard’s share price slump, an individual posted in an online forum that auditor EY wouldn’t be able to sign off completely on its accounts on June 18, Handelsblatt reported earlier. This was because Wirecard couldn’t explain certain funds, the newspaper said.

London Arrests in Tax Scandal Are ‘Tip of the Iceberg’ as Brexit Looms
Karin Matussek, Donal Griffin, and Gaspard Sebag – Bloomberg
Lawyers say prosecutors likely to look at other companies; While German case sped up, Covid-19 delayed probes elsewhere
A few months after a landmark trial in the sprawling German Cum-Ex scandal, the multi-billion dollar tax probe is showing no signs of slowing down. The arrest warrants issued for Duet Group Chief Executive Officer Henry Gabay and another official at the London hedge fund company may have been the first sign that prosecutors are accelerating their probe as they faced looming deadlines from a 10-year statute of limitations and Brexit.

R.J. O’Brien Taps Industry Veteran Mark Donlon to Lead New Swaps Desk; Initially Focused on U.S. Dollar Interest Rate Swaps, Desk to Complement Firm’s Futures Expertise
RJ O’Brien
Chicago-based R.J. O’Brien & Associates (RJO), the oldest and largest independent futures brokerage and clearing firm in the United States, today announced that industry veteran Mark Donlon has joined the firm to head up a newly established over-the-counter (OTC) swaps sales and trading desk. Initially focused on U.S. dollar interest rate swaps, the desk will expand on the services provided to existing RJO institutional clients as well as introduce new clients to the firm.

The Need for a Designated Crypto Asset Regulator
Wei-Shen Wong – Waters Technology
Senior academic says a new taxonomy—and a new regulator—is needed to determine whether crypto assets should fall under existing financial frameworks.

Universities Cut Oil Investments as Student Activism Builds; Push for large-scale divestment at colleges marks the latest blow to companies; some call it counterproductive
Matt Wirz – WSJ
When the University of Michigan’s chief financial officer asked the school’s Board of Regents in December to authorize a new $50 million oil-and-gas investment, they gave an answer he had never heard before: No.

Turkey Punishes Brokerages for Short-Selling Rule Breaches
Tugce Ozsoy and Taylan Bilgic – Bloomberg
Regulator hands out fines to seven firms, 18 investors; Individuals get six-month trading bans for market manipulation
Turkey’s market regulator fined seven brokerages for violating short-selling rules and imposed a six-month trading ban on individuals it suspects of stock-price manipulation through social-media platforms.

America’s Jobless Are About to Lose Their $600-a-Week Lifeline
Reade Pickert, Michael Sasso, and Maeve Sheehey – Bloomberg
Interviews reveal benefit ranges from perk to necessity; Policy makers at odds about extending weekly unemployment aid
In about two weeks millions of Americans could lose a crucial economic lifeline of this pandemic: $600 a week in extra federal unemployment benefits. The scheduled end will ripple through households and the entire economy. The program accounts for a big chunk of the Treasury Department’s record jobless payments last month, which exceeded $100 billion. Without the additional cash, some of the hardest-hit households may be forced to choose which bills to pay and which to let slide.

Hong Kong Security Law Prompts Departure of China Fund Adviser; Resignation of DeAnne Julius comes as survey shows rising concern about Beijing within business community
Julie Steinberg and Dan Strumpf – WSJ
An American-British member of an advisory body to China’s sovereign-wealth fund has stepped down from her post due to concerns over Chinese restrictions on free speech, including Beijing’s controversial new national-security law for Hong Kong.

These Are the Deutsche Bank Executives Responsible for Serving Jeffrey Epstein; When New York regulators punished the bank for its work with Mr. Epstein, no individuals were named. The Times identified them.
James B. Stewart – NY Times
Jeffrey Epstein, the sex criminal and financier, didn’t act alone. Now we know in vivid detail who some of his financial enablers were: executives and bankers at Deutsche Bank.


Hospitals Stock Up on Covid-19 Drugs to Prepare for Second Wave in Fall; Health systems build up inventories of antivirals like remdesivir and common drugs like acetaminophen; shortages of some ICU meds remain
Jared S. Hopkins – FT
Hospitals across the country are stocking up on drugs for treating Covid-19, hoping to avoid another scramble for critical medications should a second wave of the virus threaten new drug shortages.

As U.S. Surge in Coronavirus Cases Continues, Some States Tighten Rules
Countries where the virus seemed to be contained impose new restrictions to combat outbreaks
Adam Martin – WSJ
Coronavirus cases in the U.S. continued to surge Monday, with some states instituting new measures to stem transmission, while some countries where the virus once appeared to be contained imposed new restrictions to combat fresh outbreaks.

Second Wave of Covid-19 in U.K. Could Lead to 120,000 Deaths
Jade Wilson – Bloomberg
Health system should begin preparing for scenario, report says; Surge would add to annual burden from seasonal flu outbreak
A potential new wave of coronavirus infections this winter poses a serious risk to the U.K. and could lead to as many as 120,000 hospital deaths from September to June, according to a report.

UK warned of winter resurgence in Covid-19; Without action, hospital deaths could hit 120,000 between September and next June, report says
Anna Gross – FT
A winter resurgence of Covid-19 in the UK could result in more cases and deaths than the recent peak unless action is taken now to prepare the health system, according to a government-commissioned report.

‘Within 11 days, I lost my mother, my father, and my brother’: How Texas’s coronavirus outbreak spiraled out of control in a matter of weeks
Business Insider
For 53 years, Betty and Curtis Tarpley were a team. Their son Tim doesn’t know when or how the pair was exposed to the coronavirus in Fort Worth, Texas — he just knows his mother took ill first. Within 12 days, both of them were in the hospital in critical condition.

Miami is now the coronavirus epicenter as cases surge, one expert says
Christina Maxouris, CNN
With more than 2,000 patients hospitalized and hundreds in ICUs, “Miami is now the epicenter of the pandemic,” one infectious disease expert said Monday, comparing the South Florida metropolitan area to the city where the pandemic originated.

English Shoppers Must Wear Masks After Pressure on Johnson
Thomas Penny – Bloomberg
Announcement Tuesday follows criticism of confused messaging; Police to enforce new shopping rules with fines from July 24
Face coverings will be compulsory in all shops in England from July 24 as part of attempts to stop the spread of coronavirus, Health Secretary Matt Hancock will announce Tuesday.

Japan Threatens Clubs With Closure as Tokyo Sees 143 More Cases
Masumi Suga – Bloomberg
Infections remain in triple figures, but again fall below 200; Minister threatens closures for clubs that flout guidelines
Japan’s government is striking a harsher tone to clamp down on infections at nighttime establishments as the capital Tokyo continues to report more than 100 coronavirus cases a day.

Why Covid-19 Won’t Stop the New Shadow Banks; Funds that extend loans directly to companies face some trouble, but the big players will likely use the crisis as an opportunity to expand
Jon Sindreu – WSJ
Shadow banking isn’t what it used to be. The Covid-19 crisis, far from tripping it up, could help complete its transformation. Last week, investment giant Apollo Global Management APO -1.78% announced the creation of a $12 billion platform that will make loans of around $1 billion. This is another early sign that “direct lending”—where funds take on the role of banks by extending loans directly to firms—is expanding beyond its middle-market niche toward funding big companies

You Know What Else Has Sold Well During the Pandemic? Weed Edibles; Pandemic anxiety and mounting concerns about vaping have helped shift sales of cannabis products.
Alison Stine – NY Times
Ben Emerson had never tried cannabis edibles before his birthday in April. He was raised in the Evangelical Presbyterian Church, which he left five years ago, and marijuana was “this thing that I had never really even thought that I was allowed to do,” he said.

Coronavirus Tests Role of Higher Education as Recession Buffer; Social distancing could lead to lower enrollment, and it’s unclear how many colleges and universities will reopen
Josh Mitchell – WSJ
In past recessions, the U.S. higher education system has served as a buffer of sorts by absorbing unemployed workers. The peculiarities of the coronavirus-induced recession present obstacles to colleges playing a similar role this time around, some economists say.

Opium Demand Jumps as Desperate Afghan Villagers Seek Covid Cure; Demand from Covid patients pushes up farm prices more than 60%
Etaf Najafizada – Bloomberg
In a remote Afghan village, Lal Mohammad says he is beating the coronavirus by consuming opium after the drug helped his relatives recover.

The Virus Is Still Sapping China’s $6 Trillion Power to Consume
Bloomberg News
New regular Bloomberg News consumer tracker collates data; Slow, vulnerable recovery seen in data from dining to gambling
Three months after China started to emerge from its coronavirus restrictions, its army of shoppers that help power the global economy are still nervous of travel, reticent to spend and forming habits that may change the face of consumption permanently.

Fauci says US local public healthcare is ‘in tatters’; Top expert on coronavirus task force warns that doctors are ‘building the plane while flying’
Hannah Kuchler – FT
Anthony Fauci has warned that the infrastructure for US local public health is “in tatters”, and has called for the government to learn the lessons of the current pandemic and to invest in preparations for the next one.

Exchanges, OTC and Clearing

ICE ETF Hub has Record Notional Volume in the Second Quarter; Continues to Build Member Community
Intercontinental Exchange, Inc.
Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced that ICE ETF Hub had record notional volume of $148 billion in the second quarter of 2020, compared to $137 billion in the first quarter, an increase of 9%.

The ChiNext Board Stock Issuance Regulation Committee Of The Shenzhen Stock Exchange Board Of Directors Releases An Initiative To Guarantee Stable, Orderly Issuance And Underwriting On The ChiNext Board
On July 10, the ChiNext Board Stock Issuance Regulation Committee of the SZSE Board of Directors (“the Issuance Regulation Committee”) held the second working conference of 2020, which briefed recent work progress, analyzed and judged situations that issuance and underwriting business may face and countermeasures, and studied and discussed targeted measures for jointly promoting a steady start of issuance and underwriting on the ChiNext Board under the registration-based IPO system. Through panel discussion, all members reached a consensus and launched the initiative on further guaranteeing standard issuance on the ChiNext Board.

Brockhaus Capital Management AG new in the Prime Standard of the Frankfurt Stock Exchange; Technology group with a focus on high-margin and high-growth technology leaders in German medium-sized companies
Deutsche Börse Group
As of today, Brockhaus Capital Management AG (ISIN: DE000A2GSU42 ) is listed in the Prime Standard of the Frankfurt Stock Exchange. At the start of trading, the shares of the technology group from Frankfurt were listed at EUR 36.55, the issue price was EUR 32.00.

Raphael Polansky Joins Management Board Of Boerse Stuttgart Digital Ventures GmbH
Raphael Polansky (38) has become a member of the Management Board of Boerse Stuttgart Digital Ventures GmbH on 1 July 2020. Polansky will join Dr Ulli Spankowski in the Management Board of the company, which was founded in 2017 and develops innovative business models for exchange and over-the-counter trading in fungible products. Boerse Stuttgart Digital Ventures GmbH invests in promising startups and enters into partnerships with selected partners to implement its digitisation strategy. Its wholly-owned subsidiaries are Sowa Labs GmbH and blocknox GmbH, where Raphael Polansky is also a member of the Management Board. Polansky joined Boerse Stuttgart in September 2018 and has since held various management positions in the IT department. Prior to that, he had been working for Deutsche Börse AG since 2009, among other things as Head of Trading, Clearing & Data Controlling and as a Project Manager in the IT Executive Office.

CME Group Announces Aug. 31 Launch of Micro E-mini Options
PR Newswire
CME Group, the world’s leading and most diverse derivatives marketplace, today announced options on its Micro E-mini S&P 500 and Micro E-mini Nasdaq-100 futures contracts will be available for trading Aug. 31, 2020, pending regulatory review. “Since their introduction a year ago, Micro E-mini Equity futures have benefited market participants of all types, who have used them to scale their equity index exposure up or down or more precisely hedge existing equity portfolio positions,” said Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products.”

Nigerian Stock Exchange Simplifies Investing In The Capital Market With Comic Book
The proliferation of dubious investment schemes that often result in loss of money by unsuspecting members of the public continues to make the role of financial literacy imperative. To play its part, Nigeria’s leading bourse, The Nigerian Stock Exchange (NSE or The Exchange) has issued the second edition of its comic, StockTown, dedicated to providing financial literacy education to Nigerians.


Broadridge Emerging As Go-To Solution For Leading Financial Intermediaries For New European Shareholder Rights Directive (SRD II) – Broadridge SRD II Solution Is Market-Ready; Onboarding Underway In Multiple Regions
Responding to the urgent need for financial institutions globally to comply with the European Commission’s (EC’s) updated Shareholder Rights Directive (SRD II) by the September 3, 2020, deadline, Broadridge Financial Solutions, Inc. (NYSE:BR), a global Fintech leader, has announced a record number of new signings for its multiple-industry, award-winning SRD II solution. Broadridge is now onboarding these new clients, which are based both within and outside of Europe and include both retail- and institutional-focused firms to its production-ready SRD II solution for global proxy voting and shareholder disclosure.

Broker Tradition Shifts to Virtual Desktops
Joanna Wright – Waters Technology
The company is considering a full move to virtual-working solutions after investing in remote access for brokers and other staff during the Covid-19 pandemic..

MarketAxess introduces Dealer Direct to boost streaming capabilities; Dealer Direct from MarketAxess aims to provide dealers with more visibility control when streaming axes to investor clients.
Kiays Khalil – The Trade
Fixed income electronic trading platform provider MarketAxess has launched a new dealer streaming tool to provide investors with axes alongside enhanced visibility functionality.

US hedge fund D1 takes stake in £4bn fintech giant TransferWise
Mark Kleinman – Sky News
An American hedge fund which has placed substantial bets on some of the world’s biggest technology companies is taking a stake in TransferWise, the British fintech champion which has just hit a $5bn (£4bn) valuation.
Sky News has learnt that D1 Capital Partners, which was set up two years ago by Daniel Sundheim, a prominent Wall Street investor, has agreed to buy roughly $200m worth of TransferWise shares as part of a secondary share sale that was signed last week.

Fintech in Need of Finance? Report States COVID-19 May Necessitate £825 Million in New Financing
JD Alois – Crowdfund Insider
A new report indicates that COVID-19 has hit UK Fintechs hard as this sector of finance may need to raise £825 million for these firms to make it beyond the global pandemic. According to KPMG’s Fintech Focus report, annual losses for Fintech startups are hovering around £1.5 billion. The Fintech sector is estimated to be worth $48.5 billion and continues to generate encouraging returns on paper yet.

STO: What’s Happened With the So-Called ‘Next Big Thing in Fintech?’
Artem Tolkachev – CoinTelegraph
The ICO boom of 2017 failed thousands of investors worldwide, but it has also demonstrated how technology can improve the way companies raise capital. The obvious problem with the crypto market was the lack of regulation that has resulted in leaving investors unprotected.

Robinhood Now Worth $8.6 Billion After a New $320 Million Round
Aziz Abdel-Qader – Finance Magnates
Despite its multiple outages, investors continue to pour money, and at a rising valuation, into the no-fee investing app Robinhood. Announcing the new mega-fuding Monday, Robinhood has nabbed $320 million at an $8.6 billion valuation in a round led by previous investors as well as new backers including TSG Consumer Partners and IVP.

Mckay Brothers Launches Illinois-Busan And Tokyo-Busan Bandwidth At Lowest Known Latency
McKay Brothers International (MBI) announced expansion of its lowest known latency private bandwidth services to Busan. The company launched hybrid microwave/fiber private bandwidth services between Illinois and Busan as well as between Tokyo and Busan. Both services are offered at the lowest known latency.


Crypto Firm Co-Founder to Plead Guilty in Celeb-Touted Scam
Chris Dolmetsch – Bloomberg
The third co-founder of a cryptocurrency firm plans to plead guilty to duping investors into putting more than $25 million in an initial coin offering that the company promoted with the help of celebrities including boxer Floyd Mayweather and musician DJ Khaled. Sohrab “Sam” Sharma, co-founder of Centra Tech Inc., has agreed to change his plea, his lawyers told U.S. District Judge Lorna G. Schofield in a court filing Monday in New York. Sharma had been scheduled to go to trial in November.

Bank of England Debating Digital Currency Creation, Bailey Says
Jill Ward – Bloomberg
The Bank of England is reviewing whether it should create a central bank-backed digital currency, according to governor Andrew Bailey. “We are looking at the question of, should we create a Bank of England digital currency,” Bailey said Monday in a webinar event with students. “We’ll go on looking at it, as it does have huge implications on the nature of payments and society.”

Bitcoin’s mining difficulty hits a new all-time high
Celia Wan – The Block
The bitcoin mining difficulty jumped 9.89% on Monday, pushing the total rate to above 17 trillion for the first time. The difficulty rate, which benchmarks how difficult it is to mine a block and is adjusted approximately every two weeks, hit 17.34 trillion after its latest adjustment. The total network hashrate currently sits at around 124 EH/s. Positively related to the total network hashrate, the bitcoin difficulty has had a turbulent year thus far. At the beginning of the year, it was impacted by delays in mining machine shipments due to COVID-19. In May, the Bitcoin subsidy halving — when the block reward dropped from 12.5 BTC per block to 6.25 BTC — left a temporary dent on the total network hashrate.

IRS Violated ‘Taxpayer Bill of Rights’ With 2019 Crypto Letters: Watchdog
Danny Nelson – Coindesk
Cryptocurrency users in the U.S. remember July 26, 2019, as the day the Internal Revenue Service (IRS) came out swinging. It now turns out the agency may have been hitting below the belt. That day, for the first time in its history, the IRS demanded thousands of virtual currency-holding taxpayers fess up to unreported crypto trading gains.

Cryptocurrency app maker Abra to pay $300K in SEC, CFTC settlements
Brendan Pierson – Reuters
Abra, a California-based cryptocurrency investment app company, and its Philippines-based partner have agreed to pay a total of $300,000 to settle U.S. regulators’ claims of selling unregistered swap contracts. The U.S. Securities and Exchange Commission and Commodity Futures Trading Commission announced the separate $150,000 settlements with Abra and Plutus Technologies Philippines Corp on Monday.

5 questions about Coinbase’s rumored IPO
Jeff John Roberts – Fortune
A news report last week claimed that Coinbase, the country’s most prominent cryptocurrency company, is exploring an initial public offering. The report said the company is talking to bankers and lawyers and could go public late this year or sometime in 2021. This is not exactly a bombshell. Every prominent Silicon Valley startup, including names like Robinhood and Stripe, have plans for an IPO at some point. In the case of Coinbase, though, any eventual IPO will be more intriguing than most, given how it has become the effective standard-bearer for Bitcoin and the still-emerging cryptocurrency industry.

2020: The Year Ethereum Stayed Home
Brady Dale – Coindesk
This is a weird year for everyone and everything, but it’s a particularly weird year for Ethereum. Why? The second-largest blockchain by market cap and the largest by contributing developers has always been known for having lots of events. COVID-19 has put the kibosh on that. “These folks are in a state of constant BUIDLing” Amanda Cassatt, a ConsenSys alum who launched its Ethereal event series, told CoinDesk in an email. “Ethereum is also, by design, a uniquely collaborative community. These factors contribute to the prevalence of and enthusiasm for in-person events.”

PayPal reveals that it is developing crypto capabilities
Yogita Khatri – The Block
Payments giant PayPal has revealed that it is developing cryptocurrency capabilities. In a letter to the European Commission in March, PayPal said it is “monitoring the evolution of the crypto-asset space” and has taken “unilateral and tangible steps to further develop its capabilities in this area,” especially since the Libra stablecoin project was announced in June 2019. PayPal was a member of the Libra project for about four months before it withdrew in October 2019, along with other payment giants such as Mastercard and Visa.

Crypto investment firm Paradigm is now sponsoring a Bitcoin Core developer
Frank Chaparro – The Block
Crypto investment firm Paradigm is joining the list of digital asset companies that fund bitcoin development with a grant for Australian bitcoin core developer Anthony Towns. The California-based crypto investment firm is known for backing the likes of Tagomi, Argent, and Uniswap. Co-founder Matt Huang told The Block its move to fund bitcoin development reflects the firm’s view that bitcoin is “the most important cryptocurrency” and that Paradigm has a responsibility to support its improvement.

Gate.io, Huobi Enter Booming Crypto Options Scene
Paddy Baker – Coindesk
As the crypto options market explodes, crypto exchange Gate.io opens its new options trading feature and rival Huobi preps for a launch later this year. Chicago’s Gate.io said Tuesday that their first bitcoin options contract had been released with short-term expiries of up to twenty-four hours. This comes as crypto options volumes went from $200 million in August 2019 to over $3 billion in May 2020, according to data site CryptoCompare. Following the halving, options volumes settled at $2.5 million last month.

Binance Says its Stablecoin Purchase Volume Hits $1 Billion
Aziz Abdel-Qader – Finance Magnates
Binance’s USD stablecoin, BUSD, has surpassed $1 billion in purchase volume, chipping away at a segment in the cryptocurrency market that still dominated by Tether’s TUSD. The token hits this milestone just 260 days after it was originally launched back in September 2019. Binance has boosted its stablecoin’s dominance by widening its use cases which now include trading in exchanges, crypto wallets, decentralized finance (DeFi) protocols, payment and fiat gateways, etc.

Even the IRS Admits Some Crypto Tax Regulations Are ‘Not Ideal’
Nikhilesh De – Coindesk
Roughly four hours into a phone call with a TurboTax representative, in which she had to sort through the company’s own internal resources in order to answer my questions, I found out I probably didn’t owe any taxes on my admittedly meager bitcoin holdings. It should have been obvious: At no point did I sell for fiat or convert into another crypto.

DApps Need to Nail Usability to Move From Crypto Niche to Mainstream
Gareth Jenkinson – Cointelegraph
From CryptoKitties to Compound, decentralized applications and decentralized finance have become increasingly popular in the blockchain space, but the sector has gone through a fair share of teething problems since DApps first appeared in 2017. DApps were popularized around the same time that Bitcoin (BTC) experienced a monumental surge in value toward the end of 2017. Ethereum quickly established itself as the protocol of choice for blockchain developers to build and launch DApps, and the success of projects such as CryptoKitties proved that people were actively looking to get involved in the space. CryptoKitties was so popular at the time that the Ethereum network took major strain due to the influx of users and subsequent transactions for the crypto collectibles.

BitGo Adds Support for FATF’s Travel Rule
Arnab Shome – Finance Magnates
BitGo, a crypto custodian-turned financial service provider, has announced its compliance with the Financial Action Task Force’s (FATF) Recommendation 16, popularly known as Travel Rule, for both its cold and hot wallets. Sharing with Finance Magnates, the California-headquartered firm detailed that it is extending existing API endpoints for clients to append the additional data required for the compliance.


Trump Aides Rule Out Ending Hong Kong Dollar Peg as Punishment
Saleha Mohsin and Jennifer Jacobs – Bloomberg
Attacking currency peg proposed as way of hurting China; Trump has faulted China over Hong Kong actions, coronavirus
Top advisers to President Donald Trump have ruled out undermining the Hong Kong dollar’s peg to the greenback as they seek to punish China for infringing on the territory’s political freedoms, according to people familiar with the matter.

TikTok’s Massive Data Harvesting Prompts U.S. Security Concerns
Shelly Banjo, Kartikay Mehrotra, and William Turton – Bloomberg
Wells Fargo, Democratic National Committee discourages app use; Facebook, Google collect info too but don’t have ties to China
TikTok has become one of the world’s most popular apps by serving up a steady beat of lip-syncing videos and viral memes. But behind the scenes the company, owned by one of China’s biggest tech firms, is also scooping up massive amounts of data on Americans and tracking users’ every move.

WNBA Team Owner Sen. Kelly Loeffler Writes Whitesplaining Opinion Piece For Notoriously Racist Site
Players are calling for her to step down after she said they should not honor Black Lives Matter.
BET Staff
Georgia Sen. Kelly Loeffler, who is up for reelection, is outraged that people are holding her accountable for insisting players on the Atlanta Dream team she co-owns, can’t honor Black Lives Matter.

*****Sen. Kelly Loeffler on Friday published an op-ed in the Daily Caller, whose founder (Tucker Carlson) was in the news over the weekend because one of his top writers was forced to resign for writing racist comments under a pseudonym. The timing of Sen. Loeffler’s op-ed and the selection of its venue suggests she was not very “woke” in this case. In this case, “woke” is not hitting the snooze button, but rather “being aware of social injustice.”

The ludicrous plot against Fauci
Opinion by Michael D’Antonio – CNN
Since 1984, scientist and physician Anthony Fauci has led America’s response to infectious disease, saving countless lives and gaining the world’s gratitude as he advised five prior presidents. Now, as America’s coronavirus pandemic death toll passes 135,000, a sixth president needs Dr. Fauci and his expertise. Instead, aides to President Donald Trump are trashing Fauci, apparently setting him up for bureaucratic assassination.

EU Open to Prolonged Digital Tax Talks to Avoid Trade War
William Horobin – Bloomberg
OECD talks not moving as quickly as hoped, EU official says; U.S. elections make tax agreement difficult before year end
The European Union may delay digital tax proposals to give countries move time to hammer out a deal and avert a transatlantic trade war, a top official from the bloc said.

America shuts down again — choosing reality over Trump’s false claims
Analysis by Stephen Collinson, CNN
While President Donald Trump obsesses about his reelection hopes in his White House bubble, state and local leaders are frantically reversing state reopenings that he demanded, which turned America into the world’s biggest coronavirus hotspot.


CFTC Sanctions Two Firms Offering Digital Asset-Based Swaps for Illegal Off-Exchange Trading and Registration Violations
The Commodity Futures Trading Commission today issued an order filing and settling charges against respondents Plutus Financial, Inc. d/b/a Abra of California, and Plutus Technologies Philippines Corp. d/b/a Abra International of the Philippines for entering into illegal off-exchange swaps in digital assets and foreign currency with U.S. and overseas customers and registration violations. This case was brought in connection with the Division of Enforcement’s Digital Asset Task Force.

CFTC to Hold Open Commission Meetings on July 22 and 23
Commodity Futures Trading Commission Chairman Heath P. Tarbert today announced the CFTC will hold open meetings on July 22 and 23. The meetings will be held via conference call in accordance with the agency’s implementation of social distancing due to the COVID-19 (coronavirus) pandemic.

SEC Charges App Developer for Unregistered Security-Based Swap Transactions
The Securities and Exchange Commission today charged California-based Abra and a related firm in the Philippines for offering and selling security-based swaps to retail investors without registration and for failing to transact those swaps on a registered national exchange.

Two Former Unaoil Managers Convicted on U.K. Bribery Charges; The former Unaoil Group managers faced charges related to a scheme to pay bribes to secure contracts in Iraq
Mengqi Sun – WSJ
Two former Unaoil Group managers were convicted on charges related to a scheme to pay bribes for securing contracts in Iraq, the U.K’s white-collar crimes prosecuting agency said Monday.

UK retail investors fall victim to ‘impersonation fraud’; Criminals have begun been cloning asset managers’ popular products
Madison Darbyshire – FT
Increasing numbers of retail investors are falling victim to “impersonation fraud” as criminals clone popular investment products and dupe investors into parting with large sums of money.

FCA to launch enhanced Financial Services Register
The FCA will be replacing its existing Financial Services Register with an enhanced Financial Services Register later this month (27 July). We will then add a directory of certified and assessed persons to the Register later this year.

Investing and Trading

Executives at Bankrupt Companies Scored $131 Million in Bonuses
Allison McNeely and Madeleine Ngo – Bloomberg
Boards are looking for stability through restructuring process; U.S. has recently disputed about a dozen payouts, but in vain
Before the bankruptcies came the bonuses: $10 million at J.C. Penney Co., $25 million at Chesapeake Energy Corp., $1.5 million at Hertz Global Holdings Inc. That’s how much was promised to executives only weeks or in some cases days before bankruptcy. Of the 100 or so major companies that have filed since the coronavirus shutdown began, 19 of them have committed to paying a total of $131 million in retention and performance bonuses, both before and after filing, a number that’s poised to climb as a record number of Americans are jobless and the pandemic spreads.

States Take Aim at People With No Retirement Plan; With so many workers having no money in retirement accounts, states are passing legislation to help people to start saving
Bailey McCann – WSJ
Don’t have a retirement plan? You aren’t alone. But the state you live in might be working on solving that problem. According to data from the National Institute on Retirement Security, 59% of working-age people in America don’t have any money in a retirement account—whether an employer-sponsored 401(k) or an IRA—and aren’t covered by defined-benefit pensions. For those who do have a retirement account, most have balances smaller than their annual income. In other words, the average working American most likely won’t be able to maintain their current standard of living in retirement.

Environmental, Social and Corporate Governance

BlackRock punishes 53 companies over climate inaction; World’s biggest asset manager is under scrutiny for its role in tackling global warming
Attracta Mooney – FT
BlackRock has punished more than 50 companies from US oil major ExxonMobil to Swedish carmaker Volvo over their lack of progress on tackling global warming, six months after it warned of huge investment risks from climate change.

Want More Diversity? Some Experts Say Reward C.E.O.s for It; Only a small number of large companies have tied executive compensation to goals for hiring and promotion of workers from underrepresented groups.
By Peter Eavis – NY Times
When Charles E. Jones, the chief executive of a large Ohio-based utility, realized that his senior executives weren’t fully behind his push to hire and promote people of color and women, he decided to do something to get their attention.


Woodford re-emerges with investment boutique; Neil Woodford, former fund manager at Woodford Investment Management
Imogen Tew and David Thorpe – FT Adviser
Former star fund manager Neil Woodford has re-emerged in the asset management world, advising on the same type of illiquid assets which ultimately led to his downfall last year.

Federated Hermes adds trader from Woodford Investment Management; Dominic Eccles joins the trading desk at Federated Hermes after more than four years with Woodford Investment Management.
Hayley McDowell – The Trade
Asset management firm Federated Hermes has hired an equity trader from Woodford Investment Management as it expands its trading desk.

Cowen expands execution services division with traders from Citi, Societe Generale and Macquarie; Four traders have joined Cowen Execution Services as the broker-dealer looks to strengthen its portfolio trading talent.
Hayley McDowell – The Trade
Cowen has expanded its UK-headquartered execution services business with four senior trading hires from major institutions including Citi, Societe Generale and Macquarie.

JPMorgan Profit Drops 51% As Bank Sets Aside Billions For Coronavirus Loan Losses; New York bank sets aside more than $10 billion to cover potential losses
David Benoit – WSJ
JPMorgan Chase & Co. set aside $10.47 billion to cover potential losses on loans to borrowers hurt by the coronavirus pandemic, cutting its second-quarter profit in half. The nation’s biggest bank by assets is stockpiling reserves, worried about how the pandemic will affect the financial health of its consumer and corporate clients. JPMorgan put aside more than $8 billion for potential loan losses in the first quarter, which ended just weeks into the crisis.

Hedge fund Axonic raises $1bn to scour credit market for bargains; New York-based firm homes in on opportunities in mortgage-backed securities
Laurence Fletcher and Joe Rennison – FT
Axonic Capital, one of the hedge funds hit hardest during a big credit-market sell-off in March, has raised close to $1bn in new capital this year, suggesting that investors are clamouring for exposure to beaten-down assets they believe still offer value.

Morgan Stanley’s Head of Asia Flow Credit Trading Leaves Firm
Alastair Marsh – Bloomberg
Saher Bin Jung, who ran Morgan Stanley’s flow credit trading operations for Asia, excluding Japan, has left the bank, a spokesperson confirmed on Tuesday without providing further detail.

Fidelity Bets Against China Bond Rout With Record Holdings
By Ruth Carson – Bloomberg
Fund likes euro, yen on weakening greenback: Efstathopoulos; Investment grade credit allocation has risen as Fed buys bonds
A savage rout in China’s $2.6 trillion sovereign debt market is offering Fidelity International opportunities to snap up bonds from the world’s second-largest economy. Portfolio manager George Efstathopoulos has boosted investments in Chinese government bonds to a record on expectations of more foreign capital inflows. He also sees them offering protection against risk asset sell-offs and favors their higher yields and lower volatility relative to the likes of U.S. Treasuries.


SBI to institute work-from-anywhere infra, hopes to save Rs 1,000 cr; SBI chief said the focus will be on cost reduction, rationalization and reskilling of workforce, improving staff productivity and redeployment of workforce from admin offices to sales roles
Business Standard – Press Trust of India
Amid Covid-19 induced disruption, the country’s largest lender State Bank of India (SBI) will institute work-from-anywhere infrastructure and expects to save Rs 1,000 crore from this measure, Chairman Rajnish Kumar said.

Gazprom plunges to first loss since 2015 as Europe gas demand tumbles; Russian state group also hit by drop in value of the rouble
Henry Foy – FT
Gazprom has reported its first quarterly loss in more than four years as the coronavirus pandemic slashes gas demand and prices. A 30 per cent fall in the value of the rouble during the first quarter of 2020 sparked by the oil price collapse compounded a slide in both shipments and prices for the Russian state gas group that is expected to continue throughout the year.

India Market for Bank Bonds Faces Key Test After Yes Bank Crash
Divya Patil – Bloomberg
Bank of Baroda to seek bids for riskier type of bond this week; Lenders need $20 billion of capital over the next year: CS
One of India’s largest state-run lenders is planning to sell a riskier type of bank bond this week, in the first sale of such debt since local authorities permanently wrote down similar securities of a rival.

Dirty Oil Gets More Pricey as Major Producers Bank on Asia
Sharon Cho – Bloomberg
Iraq, U.A.E., Qatar boost medium-sour crude prices for August; Distillates-rich lighter oil out of favor on low fuel demand
Middle East producers are banking on robust demand from Asia for its more sulfurous and dense crude, boosting prices for the dirtier oil even as OPEC+ considers loosening cuts that would increase supply.

Singapore Slumps Into Recession With Record 41.2% GDP Plunge
Michelle Jamrisko and Ruth Carson – Bloomberg
Construction, services, manufacturing contracted amid lockdown; Economists see second quarter as likely bottom of cycle
Singapore’s economy plunged into recession last quarter as an extended lockdown shuttered businesses and decimated retail spending, a sign of the pain the pandemic is wreaking across export-reliant Asian nations.


Brexit Border Bureaucracy Looms for Truckers, Pet Owners and Travelers
Stephen Castle – The New York Times
No more seamless access to medical care. A spike in cellphone bills. And months of preparation if you are bringing the dog. For Britons who have lapsed into complacency about crossing the English Channel in the four years since they voted for Brexit, the situation will soon get a lot more complicated. Up until now, the biggest problem they faced was driving on the wrong side of the road when reaching France. With Brexit grinding into its final phase, a government publicity drive is warning that Britons will lose health care rights in European Union countries and could pay roaming fees when using cellphones there.

Brexit: MPs question promise of ‘unfettered’ trade between NI and GB
John Campbell – BBC
A group of MPs has questioned if the government can meet its promise of “unfettered” trade between Northern Ireland and the rest of the UK. The Northern Ireland Affairs Committee has been examining the NI part of the Brexit deal, known as the protocol. The government said that when it takes effect in January it will not mean new processes for NI to GB trade. But the MPs said unfettered access will need a concession from the EU that it has not yet granted. The focus is on a piece of administration known as an exit summary declaration.

London Arrests in Tax Scandal Are ‘Tip of the Iceberg’ as Brexit Looms
Karin Matussek, Donal Griffin, and Gaspard Sebag – Bloomberg
A few months after a landmark trial in the sprawling German Cum-Ex scandal, the multi-billion dollar tax probe is showing no signs of slowing down. The arrest warrants issued for Duet Group Chief Executive Officer Henry Gabay and another official at the London hedge fund company may have been the first sign that prosecutors are accelerating their probe as they faced looming deadlines from a 10-year statute of limitations and Brexit.

U.K. Gambling With Future of Northern Ireland After Brexit, Panel Says
Joe Mayes – Bloomberg
Northern Ireland Affairs Committee says businesses in the dark; Promise of ‘unfettered’ trade unlikely to be kept: chairman
Businesses in Northern Ireland lack information on how to prepare for Brexit and will be at a disadvantage to rivals elsewhere in the U.K., a cross-party panel of lawmakers said in a report published Tuesday.

British business faces £7bn red tape bill under Brexit border plan; Government’s ‘new start’ will generate 215m customs declarations a year and need 50,000 extra customs agents
George Parker, Peter Foster and Daniel Thomas – FT
British companies trading with Europe will have to absorb a post-Brexit bureaucracy burden and fill in an extra 215m customs declarations at a cost of about £7bn a year, according to government officials.


Carnage for digital publishers in what was meant to be turnround year; Tougher environment for likes of BuzzFeed and Vice raises prospect of more consolidation
Anna Nicolaou and Alex Barker – FT
It was supposed to be the year that digital publishers finally turned a profit. After years of cost-cutting, consolidation, lay-offs and missed forecasts, venture capital-backed companies including BuzzFeed and Vice Media were on a stronger footing at the start of 2020 and feeling optimistic again as their businesses matured.

While America Looks Away, Autocrats Crack Down on Digital News Sites; Independent journalism is on the defensive, from Hungary to Malaysia.
Ben Smith – NYTimes
Like many American media types, I spent a lot of time last week reading heated arguments about free speech. I was wondering if I, too, could count myself as a “veteran of the Twitter wars” when Steven Gan distracted me by telling me about his car.

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