High-Speed Trader Virtu Discloses $6.9 Million Hacking Loss

Aug 12, 2020

First Read

Richard Schaeffer Remembrances by Former Colleagues
By John Lothian et al.

JLN asked some former colleagues of Richard Schaeffer’s to share some remembrances of him. We have collected ones from CME Executive Chairman & CEO Terry Duffy, former NYMEX CEO Jim Newsome and former NYMEX CIO Sam Gaer so far. Here are their comments:

From the CME Group:

“Richie Schaeffer was passionate about everything he did. As a longstanding member, director and Chairman of the New York Mercantile Exchange (NYMEX), he helped expand the exchange into the global leader in energy risk management. He was also instrumental in facilitating the acquisition that allowed that business to become part of CME Group. Richie will be missed, and we extend our condolences to his family.”

Terry Duffy, CME Group Chairman & Chief Executive Officer

To read the rest of these remembrances, go here.


Hits & Takes
By John Lothian & JLN Staff

The FIA has published a risk disclosure template for negative contract prices or account opening documents for futures trading. This is something I noticed was missing when oil prices went negative. Thank you to the FIA Law and Compliance Division for putting this together.

There are still about 7,000 people in my city who have no power. The two main power lines into Elmhurst were damaged in the storms on Monday. We are lucky to have power, but my internet is still a little sketchy.

On Monday and Tuesday, I will be on the road to take my son Robby back to school at the University of Missouri in Columbia. All of his classes are now online, but he had signed a lease and needs to get away from home after a little too much unplanned togetherness after school moved online last spring. Learning online for him comes naturally, as he uses Youtube extensively to research about technology and its uses. He has really impressed me with this knowledge as he helped me outfit my office to be more of a studio to record video and audio.

College football is on the brink, according to Bloomberg, as the Big 10 and the Pac-12 have postponed their fall football schedules.

Today would be a good day for the CFTC Commissioners to agree to drop the charges against Jitesh Thakkar and his firm. Yes, it would be a good day for all.

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


Morning Brew’s Business Casual did an interview with Nasdaq President and CEO Adena Friedman which was published as a podcast on Tuesday. Kinsey Grant spoke with Friedman about a number of topics, including market access, investor education and the role of corporations. It is titled “How to solve capitalism? Public market access, education, & the economy.” You can listen to it here.~SR

Bloomberg has a useful Guide to the World’s New Benchmarks After Libor in the U.S., EU, UK and other countries.~SR

The OCC cleared 30,119,472 contracts yesterday, 6 percent more than its YTD average.~MR

FIA published this interview with Petal Walker, special counsel at the international law firm WilmerHale, about the mentors that helped her become a top derivatives lawyer and the “unspoken, and often unknown, assumptions” keeping people of color from growing into leadership roles in the financial services industry.~MR


Eventus CEO Travis Schwab: Growth opportunities in the trade surveillance tech business

A lot is going on at Eventus, a financial compliance and trade surveillance software firm based in Austin, Texas. JLN spoke with Eventus CEO Travis Schwab for a look at the market for such technology in exchange traded products, including fixed income, FX and digital assets. He also discussed competition, regulation, and Eventus’ expansion into Europe and Asia.

Listen to the podcast »


Wearing a neck gaiter may be worse than no mask at all, researchers find
Allyson Chiu – Washington Post
(The Washington Post is providing this important information about the coronavirus for free.)
As the number of novel coronavirus cases continues to rise nationwide, the recurring message from many public health experts and doctors has been simple: Wearing masks saves lives.
“We are not defenseless against covid-19,” Robert R. Redfield, director of the Centers for Disease Control and Prevention, said in July. “Cloth face coverings are one of the most powerful weapons we have to slow and stop the spread of the virus – particularly when used universally within a community setting.”

****Worse than nothing is pretty bad.~SR


‘This Is All Beyond Stupid.’ Experts Worry About Russia’s Rushed Vaccine; Vaccines are among the safest medical products in the world — but only because of the intense rigor of the clinical trials that test their safety and effectiveness.
Carl Zimmer – NY Times
When Vladimir Putin announced Tuesday that Russia had approved a coronavirus vaccine — with no evidence from large-scale clinical trials — vaccine experts were worried. “I think it’s really scary. It’s really risky,” said Daniel Salmon, the director of the Institute for Vaccine Safety at Johns Hopkins University.

*****The story of the quick and the dead.~JJL


Buzzkill: Mississippi rejects state flag featuring giant mosquito
The Guardian
Mississippi will not put a huge mosquito on its new state flag.
The state department of archives and history (MDAH) said on Tuesday that a design featuring the blood-sucking insect had slipped through the screening process and should not have been among the selections posted online on Monday.

*****Consider that idea squashed.~MR



Tuesday’s Top Three
Our top story Tuesday was Interactive Brokers to pay $11.5 million settlement for suspicious activity reporting failures, from The Trade. Second was the picture of the last Nymex board meeting with the late Richard Schaeffer in the front center. Third was again the obituary for Mr. Schaeffer from Dignity Memorial.


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Lead Stories

High-Speed Trader Virtu Discloses $6.9 Million Hacking Loss; The company detailed the breach in a lawsuit against its insurer seeking coverage of the loss
Alexander Osipovich – WSJ
Virtu Financial Inc. said it lost $6.9 million to hackers who seized control of the email account of one of its executives and used fake emails to send two fraudulent wire transfers to bank accounts in China. Virtu, one of the world’s largest high-speed trading firms, disclosed the May breach in a lawsuit filed Monday against Axis Insurance Co., in an effort to get the insurer to cover the loss.

Small Businesses Are Dying by the Thousands — And No One Is Tracking the Carnage
Madeleine Ngo – Bloomberg
They simply close down and never show up in bankruptcy tallies; More than half of owners are worried their firm won’t survive
Big companies are going bankrupt at a record pace, but that’s only part of the carnage. By some accounts, small businesses are disappearing by the thousands amid the Covid-19 pandemic, and the drag on the economy from these failures could be huge. This wave of silent failures goes uncounted in part because real-time data on small business is notoriously scarce, and because owners of small firms often have no debt, and thus no need for bankruptcy court.

Robinhood to Add Hundreds of Representatives After Trading Surge
Sophie Alexander – Bloomberg
Robinhood Financial, the online brokerage that has attracted millions of novice investors since the pandemic began, said it plans to hire hundreds of registered representatives this year for new offices in Texas and Arizona. “We’ve more than doubled our support team since January and we’ll continue to grow our teams to provide timely, helpful responses to our customers,” Alex Mesa, Robinhood’s head of customer experience, said Tuesday in a blog post.

BEC Scam Costs Trading Firm Virtu Financial $6.9 Million; Company Sues Its Insurer for Failure to Pay for Damages
Doug Olenick – Bank Info Security
High-speed trading firm Virtu Financial says it lost $6.9 million in a business email compromise scam in May. The company is now suing its insurer for failure to cover the loss, according to legal documents filed in the case.

Two U.S. Agencies Examining Investments Sold by Crowdfunding Site YieldStreet; SEC is investigating firm; FBI is collecting information on some of its practices
Dawn Lim and Dave Michaels – WSJ
Two U.S. agencies are examining investments sold by YieldStreet Inc., an online platform that pitches itself as giving people the chance to get in on deals usually reserved for the largest investors. The Securities and Exchange Commission is investigating YieldStreet and collecting information on some of the firm’s business dealings, people familiar with the matter said.

Fed denies Goldman’s appeal against stress test results
Robert Armstrong – Financial Times
The Federal Reserve has turned down Goldman Sachs’ request for less onerous treatment after the results of its annual stress test, leaving the bank with the highest capital requirement among its large peers.
The Fed on Monday published the final common equity tier 1 (CET1) requirements for the 34 largest US banks. Goldman’s requirement, at 13.7 per cent, was unchanged from the figure indicated after the stress test result was delivered to the bank in June.

Kodak Chief Says Company Supports Federal Decision to Halt Loan
Rachael Levy – WSJ
The chief executive of Eastman Kodak Co. said the company supports a federal agency’s decision to halt a potential loan to the company, backing the move in Kodak ‘s first earnings call since the potential deal was announced about two weeks ago.
Kodak CEO Jim Continenza said on Tuesday the preliminary deal with the government requires more work. He also said Kodak was a solid pick for the potential deal because of the company’s history in chemicals manufacturing and “vast infrastructure,” among other attributes.

ABN Amro Exit Threatens Commodity-Trader Liquidity Squeeze
Andy Hoffman and Ruben Munsterman – Bloomberg
Options for trade finance are waning as another bank retreats; ABN Amro’s loans to wind down in next three to four years: CFO
ABN Amro Bank NV became the latest bank to exit the commodity and trade finance business, further shrinking the pool of funds available to trading houses moving trillions of dollars of oil, metals and grains around the world every year. The Amsterdam-based lender, once a key pillar of a triumvirate of Dutch banks providing short-term loans to traders, said Wednesday it’ll close the division after racking up losses from a series of trading scandals. Following similar retreats by one-time stalwarts BNP Paribas SA and Societe Generale SA, it’s a blow for commodity traders dependent on such credit to fund their operations.

ABN Amro Cuts a Third of Investment Bank After Virus Losses
Ruben Munsterman – Bloomberg
As many as 800 jobs may go as division winds down businesses; Trade and commodity finance operations to be dropped entirely
ABN Amro Bank NV will cut its investment bank by about a third and shut down lending outside of Europe as the Dutch bank tries to turn around business hit hard by the market chaos caused by the coronavirus crisis. ABN Amro will stop providing corporate finance outside Europe and exit trade and commodity financing altogether, the Dutch bank said on Wednesday. As many as 800 jobs could be lost over three to four years as the investment bank pulls back from activities that currently bring in about 45% of client loans.

TradingScreen Enhances Offerings Through Strategic Partnership With Imagine Software; OEMS to further benefit buy-side customers with seamless real-time risk solutions and pre-trade compliance function
TradingScreen Inc. (TS), the all-asset class order and execution management system (OEMS), today announced upgrades to its partnership with Imagine Software, which offers real-time portfolio, risk, and compliance management solutions.

Morgan Stanley boss is frequent caller to SEC chairman; James Gorman has had more contacts with regulator than heads of other big Wall Street banks
Kadhim Shubber and Laura Noonan – FT
When Jay Clayton takes calls from America’s top bankers, more often than not James Gorman of Morgan Stanley is on the line. The chairman of the Securities and Exchange Commission has had more private contacts with Mr Gorman, the Morgan Stanley chief executive, than the head of any other big Wall Street bank, according to the regulator’s public calendar.

Federal Reserve’s Covid Response Fuels Private-Equity Debt Boom; Private-equity firms are bingeing on junk bonds as central bank moves have supported high-yield debt markets
Chris Cumming – WSJ
The private-equity industry has been a little-noticed beneficiary of the Federal Reserve’s efforts to combat the economic fallout of the coronavirus pandemic, as central bank support has spurred a surge in junk-bond issuance by buyout firms.

CFTC Sets the Parameters for Which Virtual Currencies are Subject to Full CFTC Jurisdiction by Merit of How They are Bought and Delivered
Andrew Schaffer, Timothy Spangler, Audrey Wagne and Nicholas C.D. Ward via JD Supra
The Commodity Futures Trading Commission published in the Federal Register on June 24, 2020 its final interpretive guidance concerning retail commodity transactions involving certain digital assets (2020 Guidance).1 The 2020 Guidance clarifies the CFTC’s views regarding the “actual delivery” exception to Section 2(c)(2)(D) of the Commodity Exchange Act (CEA) in the context of digital assets that serve as a medium of exchange, colloquially known as “virtual currencies.” The actual delivery determination is important because it delineates the virtual currencies over which the CFTC has full regulatory jurisdiction and those over which the CFTC merely has anti-fraud and market manipulation jurisdiction.

Is Kelly Loeffler a ‘Corporate Liberal’ or ‘Attila the Hun’?
Lachlan Markay – Yahoo News
Sen. Kelly Loeffler’s (R-GA) business career was supposed to be one of her key political assets when she was appointed to a vacant Senate seat in January. Instead, it’s turned into an albatross that threatens to make her both the wealthiest and the shortest-serving U.S. Senator of the Trump era.

We all need to stay alert to the ancient art of invoice fraud; Dubious IOUs have played a part in a series of corporate collapses this year
Robert Smith – FT
We may have just entered the third decade of a new millennium, but 2020 is rapidly becoming a banner year for one of the oldest scams in the book: invoice fraud.

R.J. O’Brien Names Emre Degirmenci Managing Director, EMEA for RJO Limited UK Affiliate
R.J. O’Brien & Associates
Chicago-based R.J. O’Brien & Associates (RJO), the oldest and largest independent futures brokerage and clearing firm in the United States, announced today that Emre Degirmenci has been named Managing Director, EMEA for its London-based affiliate, R.J. O’Brien Limited (RJO Limited), effective September 1.

Retail Chains Abandon Manhattan: ‘It’s Unsustainable’
Matthew Haag and Patrick McGeehan – NY Times
For years, Bryant Park Grill & Cafe in Midtown Manhattan has been one of the country’s top-grossing restaurants, the star property in Ark Restaurants’ portfolio of 20 restaurants across the United States.
But what propelled it to the top has vanished.
The tourists are gone, the office towers surrounding it are largely empty and the restaurant’s 1,000-seat dining room is closed. Instead, dinner is cooked and served on its patio, and the scaled-down restaurant brings in about $12,000 a day — an 85 percent plunge in revenue, its chief executive said.


The World’s Airports Are Catching Covid, Too; After they invested billions of dollars to become retail and leisure hubs, the pandemic has caused a dearth of free-spending travelers.
Bruce Einhorn, Angus Whitley – Bloomberg
In surveys of the world’s best airports, Singapore’s Changi regularly ranks near the top. A leader among utilitarian transportation hubs that have been transformed into upscale shopping destinations, Changi Airport in 2019 added Jewel, a futuristic play land with 1.5 million square feet of stores and attractions including a rainforest, hedge maze, and the world’s highest indoor waterfall. And the government had planned this year to begin selecting contractors to work on a huge fifth terminal to boost annual capacity 55%, to 140 million passengers.

Infectious Disease Expert Predicts When U.S. Coronavirus Cases Will Again Explode
Lee Moran – Yahoo News
Infectious disease expert Michael Osterholm on Monday contradicted President Donald Trump’s fanciful claim that the U.S. will soon be in “very good shape” with the coronavirus pandemic, instead predicting “an explosion” in new cases starting next month.
Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota, told CNN’s Don Lemon that the U.S. is “just really beginning to get to the really large part of the problem” with an average of 45,000 to 50,000 new confirmed cases of the virus per day.

Russia Defends First Covid-19 Vaccine as Safe Amid Skepticism
Henry Meyer and Ilya Arkhipov – Bloomberg
First vaccinations of health workers to start in two weeks; Health minister blames Western jealousy for criticism
Russia brushed aside international concerns about the safety of the world’s first Covid-19 vaccine and announced it will start mass inoculation this month before clinical testing is completed. “Western colleagues, who can sense the competitive advantage of the Russian drug, are trying to express some opinions that are completely unjustified in our view,” Health Minister Mikhail Murashko told a briefing on Wednesday. “This vaccine is a platform that is already well-known and studied,” he said, adding that other countries have developed antidotes under accelerated testing programs.

Coronavirus Tests the Leadership Style of Goldman Sachs’s C.E.O.
Kate Kelly – NY Times
David M. Solomon started 2020 on his back foot.
Mr. Solomon had been on the job as chief executive of Goldman Sachs, perhaps Wall Street’s most storied and vilified institution, for just over a year, working to broaden the bank’s offerings by pursuing lines of business that his predecessors had long avoided.

Moderna Inks $1.5 Billion Coronavirus Vaccine Deal With U.S.
Jared S. Hopkins – WSJ
Moderna Inc. said Tuesday it agreed to provide the U.S. government 100 million doses of its experimental coronavirus vaccine in exchange for more than $1.5 billion.
The drugmaker’s vaccine agreement is the latest with the U.S., which has already secured hundreds of millions of doses from other companies.

New Zealand probes freight as mystery source of virus outbreak; First locally acquired Covid-19 cases in 102 days threaten to hit economy ahead of election
Jamie Smyth – FT
New Zealand authorities are investigating whether the country’s first locally acquired cases of Covid-19 in more than 100 days were spread by refrigerated freight imported from overseas.

Netherlands and Belgium split over tackling virus hotspots; Authorities in The Hague and Brussels take sharply different approaches to surge in Covid-19 cases
Mehreen Khan and Michael Peel – FT
The Netherlands and Belgium are battling some of Europe’s sharpest increases in new Covid-19 cases despite taking sharply different strategies that highlight the difficulties governments still face in quelling the virus.

925 Quarantined for Covid. Is This a Successful School Reopening? A suburban Atlanta county opened its schools amid controversy and a growing case count, previewing a difficult national back-to-school season.
Richard Fausset – NY Times
CANTON, Ga. — The first letter went out on Aug. 4, one day after students in the Cherokee County School District returned to their classrooms for the first time since the eruption of the coronavirus pandemic. “Dear Parents,” wrote Dr. Ashley Kennerly, the principal of Sixes Elementary School. “I am writing this letter in order to communicate that a student in 2nd grade has tested positive for Covid-19.”

Exchanges, OTC and Clearing

Wall Street bank fees from China listings jump despite political tension; Growth reflects surge in activity even as ties between Washington and Beijing fray
Hudson Lockett – FT
Wall Street banks have earned hundreds of millions in fees from Chinese groups selling shares in New York and Hong Kong in 2020, illustrating the fee pool that is at stake as Washington threatens to delist these companies from US markets.

Notice Of Summary Action
CME Group
FINDINGS: Barclays Capital Inc. failed to maintain a complete electronic audit trail for various trade dates during the timeframe of June 2015 through February 2020.

SGX RegCo and Israel Securities Authority agree to cooperate to enhance investor protection for dual listings
Singapore Exchange Regulation (SGX RegCo) and the Israel Securities Authority (ISA), the national securities regulator, have agreed to cooperate to enhance protection for investors in issuers dual listed on Singapore Exchange (SGX) and Tel-Aviv Stock Exchange (TASE).

SGX reports market statistics for July 2020
Cash equity activity still at elevated levels year-on-year, moderating slightly from strong June;Equity index futures volumes up with continued risk management focus; China economic reopening fires up optimism on Asia recovery, stokes iron ore derivatives
Singapore Exchange (SGX) today reported its July 2020 market statistics. Markets continued to be focused on the ongoing reopening of global economies and news of fresh waves of COVID-19 infections in some countries. Equity market activity remained higher than a year earlier but moderated from a strong June. Equity index futures trading was more active as risk management remained in focus. Iron ore derivatives reflected optimism about China’s recovery and a broader Asian economic rebound from the pandemic.


Revolut racks up losses as hiring spree offsets revenue
Nicholas Megaw – Financial Times
Losses at British fintech Revolut tripled in 2019 as rising staff costs more than offset revenue growth, but the company said it was on track to break even this year despite the impact of coronavirus.
Revolut reported a pre-tax loss of £107m, more than triple the £33m loss in 2018, driven largely by a massive hiring spree. Staff numbers increased from 633 to 2261 over the year, including hundreds of appointments to strengthen its customer service and compliance functions.

Banking on TT: Why One Global Financial Institution Switched to TT Score for Trade Surveillance and Compliance
Trading Technologies
When a large tier-one bank with operations around the world realized that their legacy trade surveillance system not only failed to detect patterns of potential spoofing activity, but also generated too many false positive alerts, their compliance staff knew they needed to make a change.
This bank, a long-time Trading Technologies client, had already migrated hundreds of users from the legacy X_TRADER platform and three internal trading platforms to TT. The TT platform includes a fully integrated solution for trade surveillance and compliance, TT Score. This unique offering leverages machine learning to identify trading behavior, such as spoofing, that may prompt regulatory inquiries. The bank’s desire to bolster their existing legacy parameters-based system with a machine-learning-powered Spoofing model sparked their interest in TT Score.

The European Digital Bank That Is Prospering in the Pandemic
Simon Clark – WSJ
The coronavirus pummeled shares of most banks as it ripped through economies world-wide in the first half of the year. But one European lender that specializes in investment advice and eschews a traditional branch network has flourished.

SimCorp launches Dimension platform as a service on Microsoft Azure cloud; With Microsoft Azure, SimCorp has rolled out its Dimension platform for buy-side firms as a service in latest cloud technology development.
Annabel Smith – The Trade
Trading and investment software provider SimCorp has launched its front-to-back investment management system, SimCorp Dimension, on Microsoft Azure as part of its ongoing cloud strategy.

Trumid secures $200 million investment from BlackRock and T. Rowe Price funds;The recent funding round was led by Dragoneer Investment Group and included private equity firm TPG, as well as funds managed by BlackRock and T. Rowe Price.
Annabel Smith – The Trade
Fixed income e-trading platform, Trumid, has secured $200 million in growth capital investment from TPG, as well as funds and accounts managed by both BlackRock and T. Rowe Price.

TradingScreen and Imagine Software partner on front-to-back trading solution; New buy-side front-to-back trading solution from TradingScreen and Imagine Software combines integrated trading, risk, and compliance functionality.
Annabel Smith – The Trade
Trading systems provider TradingScreen has expanded its partnership with Imagine Software and combined their services to launch a front-to-back buy-side trading solution.

Over 20 asset managers looking to sign up to free bond data pooling start-up
Hayley McDowell – The Trade
A start-up aiming to solve issues around the lack of a consolidated tape for fixed income in Europe has more than 20 asset managers looking to join its data pooling network for bond traders.
Glimpse Markets founder and chief executive officer, Paul O’Brien, told The TRADE that 21 buy-side firms are going through the legal review process to sign up to the data sharing platform, with plans to go live in the fourth quarter this year.

Broadridge Reports Fiscal 2020 Results
PR Newswire
Broadridge Financial Solutions, Inc. (NYSE:BR) today reported financial results for its fourth quarter and fiscal year 2020. Results for the three months and fiscal year ended June 30, 2020 compared with the same period last year were as follows:


Jay Z, Charles Schwab-Backed Ethereum App Opens Doors to Public
Matthew Leising – Bloomberg
Alchemy tools used by 70% of the top applications on Ethereum; App available to anyone building smart contract-based projects
The behind-the-scenes blockchain startup Alchemy, which powers 70% of the top applications on Ethereum, is stepping into the public eye as it opens its services to any company or developer looking for tools to build smart contract-based projects.

Bitcoiners Launch Cryptocurrency Relief Fund Following Beirut Explosion
Leigh Cuen – Coindesk
Bitcoiners have quickly mobilized to raise relief funds following an explosion that wreaked havoc in Beirut last week. The campaign comes as the Lebanese banking system remains in crisis. A group of Lebanese expats in Europe organized the Crypto Disaster Relief For Beirut Explosion fund, spreading the word on Instagram. The site’s tagline: “Embracing Cryptocurrency services to bypass Lebanon’s corrupted financial system.”

CoinMarketCap launches ‘Earn’ — a Coinbase-like education rewards program
Yogita Khatri – The Block
Binance-owned crypto market data provider CoinMarketCap has launched “Earn” — a Coinbase Earn-like education rewards program. CoinMarketCap Earn allows users to watch supported blockchain projects’ educational videos, take a quiz, and earn rewards, but only “up to a limit of $10” worth of each project’s tokens. The first supported project on CoinMarketCap Earn is Band Protocol, a cross-chain data oracle provider that is backed by Binance and Sequoia Capital. A total of $160,000 worth of BAND tokens are on offer for the earn program.

Unpacking the Avit, Avanti Bank’s New Digital Asset Being Built With Blockstream
Nathan DiCamillo – Coindesk
When Avanti Financial hinted at a new bank-issued digital asset late last month, it was scant on details. “Avit has no analog,” Avanti CEO Caitlin Long said at the time. “It is a digital asset. Blockstream is our technology partner. We’re not going to announce anything more than that. One could presume that the Bitcoin blockchain will be involved.”

Grayscale Tells SEC Its Bitcoin Trust Rose $1.6B Over Six Months
Paddy Baker – Coindesk
The total value of Grayscale’s flagship Bitcoin Trust (GBTC) increased over $1.6 billion in the first six months of 2020. The New York-based crypto investment firm said the dollar value of total assets in GBTC went from $1.87 billion at the end of 2019 to $3.5 billion by the end of Q2 2020 – an increase of 90%. The disclosure came in a quarterly report filed with the Securities and Exchange Commission (SEC) last Friday. GBTC was successfully registered with the regulator in January.

Yield farmers deposit $76M in unaudited DeFi project in less than an hour
The Block
Yield farmers are going wild for YAM — not the vegetable, the newly launched DeFi project. Mimicking the elastic supply of Ampleforth, Yam is an “experimental protocol mashing up some of the most exciting innovations in programmable money and governance,” according to a Medium post by the team. Launched at 7:00 PM UTC on Tuesday, the project began distributing its YAM tokens to eight staking pools. Liquidity providers are required to provide one of the eight tokens in one of the pools to receive YAM tokens in return. These tokens are: COMP, LEND, LINK, MKR, SNX, WETH, YFI and ETH/AMPL Uniswap v2 LP tokens.

Software firm MicroStrategy makes a massive bet on Bitcoin with a $250 million purchase
Jeff John Roberts – Fortune
MicroStrategy, a Virginia-based business intelligence software company that trades on the NASDAQ, announced on Tuesday it has acquired 21,454 Bitcoin in what describes as a “capital allocation strategy.” The move is a novel one for a publicly traded firm. While many companies put surplus capital into bonds and other investments as part of their treasury management strategies, a bet of this size on Bitcoin is all but unheard of.

Coinbase exits trade group following entry of upstart rival Binance.US
Frank Chaparro – The Block
Exchange-operator Coinbase has resigned from cryptocurrency and blockchain advocacy group the Blockchain Association following the admittance of an upstart rival, The Block has learned. In a letter penned to the association on August 11, Coinbase said it was resigning from the DC-based lobbying group, led by former congressional staffer Kristin Smith, effective immediately.

Appeals Court Backs Coinbase in Bitcoin Gold Fork ‘Breach of Contract’ Lawsuit
Sebastian Sinclair – Coindesk
A California appeals court has ruled in favor of U.S cryptocurrency exchange Coinbase over its decision not to support the Bitcoin Gold hard fork in 2017. Ruling at the state’s First Appellate Court (Division One), Judge Ethan P. Schulman agreed with the summary judgment of a prior trial court that was decided in favor of Coinbase, according to a court document filed on Monday.

Russian Financial Crime Agency Plans AI Tool to Link Crypto Transfers to Users
Anna Baydakova – Coindesk
The Russian agency charged with collecting data to counter financial crimes has proposed building its own software to track cryptocurrency transactions and link them to users. Rosfinmonitoring, which has the power to block bank accounts within the nation, is seeking to effectively remove some of the anonymity from those making crypto transfers, the RBK news agency reported Tuesday.

Riot Blockchain Mined 227 Bitcoin in Q2
Zack Voell – Coindesk
Castle Rock, Colo.-based cryptocurrency miner Riot Blockchain reported earnings for the June quarter Monday, noting a decrease in mining revenue from a year ago. The company mined 227 bitcoins in the second quarter of 2020, down 28% from 2019 when Riot reported 316.19 mined bitcoins. In 2019, Riot switched to mining bitcoin exclusively, said Jeff McGonegal, CEO of Riot Blockchain. Previously, the company also mined litecoin and bitcoin cash.


Trump’s YouTube Ads Run on Chinese State Media, Study Finds
Mark Bergen and Eric Newcomer – Bloomberg
Ads also ran on channels with links to Kremlin, Omelas says; Review finds one Biden ad on video from China-backed outlet
U.S. President Donald Trump’s campaign is inadvertently funding Chinese state media outlets and entities tied to the Kremlin through automated advertisements on YouTube, according to a study of thousands of videos on the Google service. Omelas Inc., a Washington-based security software firm, reviewed the YouTube clips in early August and found 22 Trump campaign ads running on YouTube channels linked to the Chinese government.

The Tax Biden Would Double and Trump Looks to Cut
Laura Davison – Bloomberg
Capital gains taxes are the price of making a good investment. They’re levied on profitable stock trades and real estate deals but also can apply to sales of businesses, pieces of art, collectible cars, gold and other assets. For the second time in a year, President Donald Trump says he’s “very seriously” considering reducing capital gains tax bills for investors, while his presumptive Democratic challenger, Joseph Biden, would raise money for his domestic agenda in part by doubling that tax rate.

China Banks Act to Comply With Trump Sanctions on Hong Kong
Bloomberg News
Biggest lenders take steps to meet new U.S. sanctions; China is leaning on its banks to help economic recovery
China’s largest state-run banks operating in Hong Kong are taking tentative steps to comply with U.S. sanctions imposed on officials in the city, seeking to safeguard their access to crucial dollar funding and overseas networks.

Trump’s WeChat Assault Endangers $280 Billion Tencent Rally
Zheping Huang and Jeanny Yu – Bloomberg
Donald Trump’s WeChat ban targets a celebrated Chinese innovation at the heart of the world’s largest mobile gaming and social media empire, threatening one of the more eye-catching stock rallies of 2020.
It’s hard to overstate WeChat’s importance to Tencent Holdings Ltd. It’s the means through which Tencent introduces a billion people to games and other online content, funneling trillions of dollars in annual payments to brands from Apple Inc. to Walmart Inc. WeChat’s reach underpinned Tencent’s $280 billion gain in market value since a March 18 Covid-19 trough — equivalent to one Samsung Electronics Co. and the fifth biggest dollar-gain on the planet over that period.

Troubled India Shadow Banks See Signs of Revival on Stimulus
Divya Patil – Bloomberg
Two of four gauges compiled by Bloomberg point to improvement; Spreads on non-bank lenders’ bonds decline most since 2012
The fortunes of India’s shadow lenders are showing signs of turning, suggesting stimulus measures from policy makers will help the troubled sector weather some of the fallout from the pandemic.

Joe Biden names Kamala Harris as his Democrat running mate; Senator is the first black woman on a main US party’s presidential ticket
Lauren Fedor – FT
Democrat Joe Biden has named Kamala Harris as his vice-presidential running mate, making the senator from California the first African-American woman on a main US party’s presidential ticket.

What Kamala Harris Means for Wall Street and Silicon Valley
On the ticket.
Dealbook – NY Times
A V.P. pick that big business can back
Joe Biden has selected Senator Kamala Harris of California as his vice-presidential running mate. On Monday, we wrote about how Mr. Biden was gaining traction among crucial donors in Big Finance and Big Tech. His pick for V.P. looks to have strengthened that support.


Instagram Faces Lawsuit Over Illegal Harvesting of Biometrics
Robert Burnson – Bloomberg
Facebook Inc. is facing new allegations that it illegally harvests the biometric data of users, this time in a lawsuit that targets the company’s photo-sharing app Instagram. Last month, the social media company offered to pay $650 million to settle a lawsuit in which it was accused of illegally collecting biometric data through a photo-tagging tool provided to Facebook users.

Two U.S. Agencies Examining Investments Sold by Crowdfunding Site YieldStreet
Dawn Lim and Dave Michaels – WSJ
Two U.S. agencies are examining investments sold by YieldStreet Inc., an online platform that pitches itself as giving people the chance to get in on deals usually reserved for the largest investors.
The Securities and Exchange Commission is investigating YieldStreet and collecting information on some of the firm’s business dealings, people familiar with the matter said.

Singapore Regulator Warns of More Bank Job Losses in Second Half
Chanyaporn Chanjaroen – Bloomberg
MAS encourages financial firms to employ, promote Singaporeans; Bank retrenchment at ‘subdued’ levels in first six months: MAS
Singapore’s financial-services sector, which accounts for 4.5% of total employment, may see more job losses during the second half of the year as the country goes through its worst recession ever, the central bank warned Wednesday.

The curious story of Kodak’s pivot to pharma; Investigators should probe why the US government made its loan offer
Andrew Edgecliffe-Johnson – FT
The usual critique of state aid is that governments should not be in the business of picking winners. It is worse when they pick losers. The Trump administration’s plan to lend $765m to fund Kodak’s pivot to making ingredients for the generic drugs that might one day combat coronavirus looked far-fetched when the two sides announced it last month.

Customer Advisory: Beware of Gold and Silver Schemes Designed to Drain Your Retirement Savings
The Commodity Futures Trading Commission advises the public not to take cash from their retirement plans under relaxed distribution rules provided in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to speculate or invest in gold, silver, or other precious metals without first consulting licensed or registered financial, tax, or legal advisors.
Find a registered advisor, planner, or accountant
Since the CARES Act was enacted in March in response to the COVID-19 (coronavirus) pandemic, the CFTC has observed a growing trend of precious metals promoters and dealers encouraging investors to use the CARES Act distribution rules to convert their retirement savings into investments of gold or silver coins, self-directed gold individual retirement accounts (IRAs), or make leveraged purchases of physical metals.

FINRA Fines Interactive Brokers $15 Million for Widespread AML Failures
FINRA announced today that it has fined Interactive Brokers LLC $15 million for widespread failures in the firm’s anti-money laundering (AML) program, which persisted for more than five years. As part of the settlement, FINRA also required Interactive Brokers to certify that it will implement the recommendations of a third-party consultant to remedy the firm’s AML program failures. Also today, the Securities and Exchange Commission, and Commodity Futures Trading Commission announced disciplinary actions fining Interactive Brokers $11.5 million for AML failures, resulting in more than $38 million in total fines and other penalties.

Weekend Testing Opportunity – Members Exchange – August 15, 2020
Members Exchange (“MEMX”) is providing a testing opportunity this weekend in preparation for their September launch. Firms participating in the August 15, 2020 test may send OATS data related to those orders to the OATS Certification Testing environment before the following Monday’s OATS reporting deadline. OATS will then attempt to match to the MEMX test data. Matching statistics for the weekend test will be provided to firms upon request and will not be published to OATS CT Website.

Investing and Trading

Tesla Splits Stock to Make Lofty Shares Attainable Again
Edward Ludlow – Bloomberg
Move follows Apple and may presage other splits, analyst says; Shares surge 7% before the start of regular trading Wednesday
Tesla Inc. is splitting its richly valued shares in a 5-for-1 exchange, a move designed to make the stock less expensive for individual investors after the company become the world’s most valuable automaker.

Six Things You’re Doing Wrong When Buying Stocks on Your Own; Avoid these amateur mistakes before you sink all your money into the market.
Edward Robinson – Bloomberg
Lena Birse is a stay-at-home mom who loves buying tech stocks during market crashes. Jay Smith is a former pro gamer who switched from cryptocurrencies to blue chips. Heloise Greeff is a data scientist who uses machine learning to analyze trading patterns. And Mik Mullins is a retired hotel executive who’s betting the market is about to plunge.

Tesla Says Short Seller Is Funding Ex-Employee’s Lawsuit
Edvard Pettersson – Bloomberg
Former worker accused of disclosing confidential information; Tesla gets emergency order from U.S. magistrate judge
Tesla Inc. says hedge fund Cable Car Capital LLC, which is shorting the company’s stock, is funding a former employee’s allegations that the company smeared him by accusing him of sabotage and stealing sensitive information.

Gold and U.S. Treasuries Can’t Both Be Trusted; A sharp reversal in these assets at the same time muddles the economic outlook.
Brian Chappatta – Bloomberg
Nothing gets Wall Street fired up quite like a sharp reversal in prevailing trends across markets. So the excitement in the air was palpable on Tuesday, with the price of gold tumbling by the most since 2013, yields on 30-year Treasuries jumping by the most in more than two months and industries like banks, energy and automobiles powering stocks higher instead of technology companies. The initial impetus for selling everything that was once in favor, and buying previously unloved assets, seemed to be Russia’s announcement that it registered its first coronavirus vaccine (though there’s reason to be skeptical of it) and President Donald Trump’s comments that he’s “seriously” considering a capital gains tax cut.

Gold’s evolution into a ‘must-have’ asset is storing up trouble; Price rise is being driven by investors adding the metal to long-term portfolios
Mohamed El-Erian – FT
Until recently, the rapid rise in the price of gold had more to do with opportunistic financial trading than any larger structural investment theme, let alone a drop in physical supply or an increase in industrial use.

Window of opportunity – As head trader at Polar Capital, Alex Jenkins has been establishing a centralised trading desk
Hayley McDowell – The Trade
The market volatility stemming from the COVID-19 pandemic came as a challenge for many traders, but for Polar Capital’s recently-appointed head trader, Alex Jenkins, it presented a window of opportunity to showcase what a centralised trading desk can really do.
Having taken on the role in early December, Jenkins – much like all of us – could never have anticipated the global events that would ensue as she was tasked with building an internal trading desk that the investment firm’s portfolio managers can utilise. Polar Capital had recognised the lack of volatility that had loomed over markets for the past decade was unsustainable, and when the industry entered periods of market stress it would be favourable to have a wholly-focused execution desk in-house.

Airbnb Plans to File for IPO in August; Shares in the home-sharing platform could begin trading by year-end
Corrie Driebusch, Maureen Farrell and Cara Lombardo – WSJ
Airbnb Inc. is close to filing to go public in a move that would underscore a surprising rebound for the home-sharing giant and the IPO market. The company plans to file IPO paperwork with the Securities and Exchange Commission later this month, laying the groundwork for a potential listing before the end of the year, according to people familiar with the matter. Morgan Stanley MS 2.37% has been tapped to lead the offering, with Goldman Sachs Group Inc. GS 0.80% also playing a key role, the people said.

Barstool’s Dave Portnoy slammed by short-seller over Remark stock
Noah Manskar – NY Post
Small investors with stimulus funds drive post-coronavirus market surge
Dave Portnoy says he buys stocks based on his mantra that they “only go up” — but a muckraking short-seller thinks one of his bets is in for a stomach-churning plunge.

UK average daily FX volumes down in April from highs last year
Annabel Smith – The Trade
Average daily foreign exchange turnover in the UK fell 16% in April this year, down from the record highs seen in October last, according to the latest statistics from the Bank of England.

Environmental, Social and Corporate Governance

ESG screens provided no protection in virus sell-off, says study
Billy Nauman – Financial Times
Strong environmental, social and governance credentials provided no special protection to risky companies during the Covid-19 related drop in markets earlier this year, according to research that challenges the idea that such attributes can make a portfolio more durable.
A new study from Marty Fridson, chief investment officer of Lehmann Livian Fridson Advisors, found that indices of high-yield bonds that skew towards companies with high ESG scores did better than the broader market during the sharp sell-off in March — but this had little if anything to do with ESG.

Bloomberg Launches Proprietary ESG Scores | Press
Bloomberg today announced the launch of propriety ESG scores. This initial offering includes Environmental and Social (ES) scores for 252 companies in the Oil & Gas sector, and Board Composition scores for more than 4,300 companies across multiple industries.


Stop laughing at European banks and start the mergers
Patrick Jenkins – Financial Times
Germany’s second-biggest listed bank has rarely seemed more deserving of its nickname. Commerzbank, or Comedy Bank as many in the City of London have long referred to it, might not be a barrel of laughs for management, or for beleaguered investors whose shares are now worth barely a fifth of their net asset value.

The Spac race: Wall St banks jostle to get in on hot new trend
Richard Henderson, Eric Platt and Ortenca Aliaj – Financial Times
The last time Credit Suisse was neck and neck with the likes of Morgan Stanley and Goldman Sachs as a top underwriter of equity offerings, the Zurich-based bank still had the words First Boston in its name.
But this year, it has one major Wall Street trend to thank for putting it back in the top three for the first time since 2005: a boom in so-called blank cheque companies.

Hedge Funds Warn That Shorting Dollars Is Now a Crowded Trade
Ruth Carson and David Ramli – Bloomberg
Leveraged funds went long on euro first time in two years;
August tends to mark start of seasonal flows backing dollar Betting against the dollar is looking increasingly like a crowded trade that’s due for a squeeze, some hedge funds say. BlueBay Asset Management, which oversees more than $60 billion, has taken profit on short dollar positions, while AMP Capital Ltd. pared its bullish bets on emerging-market currencies. K2 Asset Management Ltd. is taking risks off the table partly on concern over a sudden bounce in the world’s reserve currency.

ABN Amro to slash size of investment bank; Dutch lender will also stop providing trade and commodity finance
Nicholas Megaw – FT
Dutch bank ABN Amro said it would slash the size of its corporate and investment banking business after a series of high-profile losses highlighted excessive risk-taking in the division and exacerbated the impact of coronavirus.

New crop of ETFs offer creative investing ideas for volatile times; Fresh approaches abound in funds focused on gold, Chinese equities and ESG
David Stevenson – FT
Given how incredibly volatile markets have been during the past few months, it probably won’t come as a surprise that fund managers haven’t been racing to introduce new funds.

Top Europe Stock ETF Gets Largest Inflow Since 2017 on Stimulus
Ksenia Galouchko – Bloomberg
European equities, enjoying a rare streak of global outperformance, just got a strong seal of approval from the largest exchange-traded fund focused on the region.
The Vanguard FTSE Europe ETF saw inflows of $242 million in the last session for which Bloomberg has data, the biggest single-day inflow since June 2017. It’s the latest confirmation of money pouring in to back the region’s stock rally that has recouped more than half the losses seen in the aftermath of the coronavirus outbreak.

‘Fidelity held my cash hostage and I lost £3,000’; Richard Parfect was unable to reinvest his savings when markets plunged in February because of the hold up
Sam Benstead – Telegraph
A delayed pension transfer by Fidelity Personal Investing has cost an investor nearly £3,000 in lost returns after the provider failed to move the cash on time. Richard Parfect, a 47-year finance professional from Cheshire, had amassed £18,000 in cash in his self-invested personal pension with Fidelity, equivalent to 9pc of his portfolio. He was waiting for a market drop in order to pounce on lower share prices.


Philippine Central Bank Buys Almost Half of Government Borrowing
Claire Jiao and Ditas B Lopez – Bloomberg
The Philippine central bank has helped finance almost half of the government’s local borrowings in the first seven months of the year, an unprecedented move that could keep debt yields low. Bangko Sentral ng Pilipinas’s bond purchases of about 800 billion pesos ($16 billion) is equivalent to 45% of the government’s domestic borrowings as of end-July, according to Bureau of the Treasury data compiled by Bloomberg and confirmed by analysts including from Bank of the Philippine Islands.

UK economy suffers worst slump in Europe in second quarter; Historic recession as quarterly output collapses 20% despite sharp recovery in June
Delphine Strauss – FT
The UK economy suffered a bigger slump than any other major European economy in the second quarter, shrinking by a fifth and falling into its deepest recession on record.

China squeezes diversification out of MSCI’s EM equities nest; Three countries in Asia now account for almost two-thirds of MSCI benchmark
Steve Johnson – FT
ETF investors who buy global emerging market equities might think that they are getting broad exposure to the developing world, but research shows this is far from the truth.

Middle East News: Kuwait Pension Fund to Triple Infrastructure Investments
Manus Cranny, Yousef Gamal El-Din, and Fiona MacDonald – Bloomberg
Kuwait’s $112 billion pension fund is looking to more than triple investments in infrastructure as part of its asset-allocation strategy over the next couple of years.
“In infrastructure, we’re looking to build up aggressively,” Meshal Al-Othman, director general of the Public Institution for Social Security, said in an interview with Bloomberg TV on Tuesday. “We’re at 3% today. We’re taking that up to roughly 10%.”

London office market yet to feel ‘true impact’ of coronavirus, says landlord
George Hammond – Financial Times
The real impact of coronavirus on London’s office market has not yet been felt, with job losses and business failures likely to increase vacancies and drag down rents, according to one of the capital’s leading landlords.
Derwent London, which owns the Brunel building in Paddington and the White Collar Factory on Old Street, said the “true impact of the lockdown” was yet to be reflected in the market, and predicted sweeping changes for workplaces because of coronavirus.

RJ O’Brien expands in Dubai
Wendy Lisney – FOW
RJ O’Brien is strengthening its presence in Dubai with the acquisition of interdealer broker (IDB) Lombard Forte Securities (LFS).
The deal, which adds 14 brokers and continues the Chicago-based futures broker’s growth strategy, was completed through its Dubai affiliate RJO MENA.


UK officially in recession for first time in 11 years
Szu Ping Chan & Robert Plummer – BBC
The UK economy suffered its biggest slump on record between April and June as coronavirus lockdown measures pushed the country officially into recession. The economy shrank 20.4% compared with the first three months of the year. Household spending plunged as shops were ordered to close, while factory and construction output also fell.

The U.K. Is Officially In Recession After Suffering The Deepest Slump In Europe
Isabel Togoh – Forbes
The severe economic toll of the coronavirus crisis in the U.K. is starting to emerge as closure of shops, restaurants, hotels, and schools—ordered to save lives in the midst of the pandemic—has pushed the economy into its first recession in 11 years with output shrinking a record 20% in the second quarter.


Feel Like You’re Going Out of Your Mind? Consider Your Mind-Set
Alina Tugend – NY Times
About 13 years ago I made a mistake in a column written for this newspaper. In the hierarchy of errors, it wasn’t a major one, but it was embarrassing.
I said daylight saving time had begun when it actually had just ended. And making matters worse, it was in the opening paragraph. A correction had to be written and affixed to the bottom of the article, where it will remain for as long as the article exists. I was deeply annoyed with myself.

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