Interactive Brokers to pay $11.5 million settlement for suspicious activity reporting failures

Aug 11, 2020

First Read

Hits & Takes
By John Lothian and JLN Staff

Yesterday a massive derecho hit the Chicagoland area, causing widespread destruction with trees knocked down and power failures. Internet service in the area was also impacted, which is why today’s newsletter may be lighter than usual in content. We will catch up tomorrow with any content we missed today.

Kevin T. Murphy has left Barclays and has joined StoneX Group as its treasurer. StoneX is the rebranded FC Stone INTL. Congrats to Kevin Murphy on his new role.

Following up on my look at the number of FCMs, IBs, CTAs and CPOs registered with the National Futures Association, I decided to take a look at the number of associated persons registered in trends over the last 10 years. The number of APs has dropped from last year, from the peak in 2014, and from 2010.

The number of associated persons registered with the NFA dropped 3% from the end of 2019 to the end of July 2020. This decline is part of a greater decline of almost 20% since the peak in the last 10 years of 57,419 APs at the end of 2014. At the end of 2019, there were 47,479 APs registered with the NFA. At the end of this July that number had dropped to 46,022 and was down from the end of 2014 with a total of 57,419 APs. The drop from 2014 to 2020 is 19.85%.

Back in 2010, there were 52,635 APs registered with the NFA, with July’s 46,022 representing a 12.56% drop in registrants.

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


Jamie Dimon and Jeff Bezos are among 27 NY-based CEOs Pledging to Hire 100,000 “traditionally underserved” New Yorkers within the next decade, as part of a new initiative called the New York Jobs CEO Council, Bloomberg reports.~SR

Meanwhile, over in the UK, Bloomberg also reports that the heads of the biggest banks there have made a number of public statements in recent weeks pledging to improve representation of Black men and women in senior management. However, “there are zero Black chief executive officers or chairmen at any major UK institution,” and several Black employees interviewed at firms in the City say the situation is “dire.”~SR


Trump Oversees All-Time Low in White Collar Crime Enforcement
Patricia Hurtado, Chris Dolmetsch, Clare Roth, and David Voreacos – Bloomberg
Donald Trump calls himself the “law and order” president, but when it comes to white collar crime, he has overseen a significant decline in enforcement.
The prosecution of securities fraud, antitrust violations and other such crimes has hit a record low as the pandemic slows the courts, according to one tracking service. But even before the coronavirus, the numbers were falling under the Trump administration.

*****Now there’s something to be proud of (sarcasm).~JJL



Monday’s Top Three
Our top story Monday was the picture of the board members of the NYMEX at their last board meeting before going public, with Richard Schaeffer, who passed away on Sunday, in the middle front. Second was Mr. Schaeffer’s obituary, from Dignity Memorial. Third was 97,000 children reportedly test positive for coronavirus in two weeks as schools gear up for instruction, from CBS News.


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Lead Stories

Interactive Brokers to pay $11.5 million settlement for suspicious activity reporting failures
The US financial watchdog said Interactive Brokers had failed to submit 150 suspicious activity reports over a one-year period.
Annabel Smith – The Trade
Interactive Brokers will pay $11.5 million to settle charges that it repeatedly failed to file suspicious activity reports (SARs) for US microcap securities trades, the US Securities and Exchange Commission (SEC) confirmed.

*****Also see the stories below regarding Interactive Brokers under “Regulation.”~SR

Robinhood Blows Past Rivals in Record Retail Trading Year
Sonali Basak – Bloomberg
Robinhood Markets Inc. is outrunning its online-brokerage rivals, at least by one widely followed industry metric for customer activity.
The company, which runs a no-fee trading app in the U.S. that’s drawing millions of new users as well as a few critics, said that daily average revenue trades — known as DARTs — were 4.31 million in June. That’s about four times the number of fee-generating trades at E*Trade Financial Corp. for the same period, and higher than all of its publicly traded rivals. Robinhood is among brokers that still use the DART term even though they don’t charge fees.

Robintrack, Chronicler of Day Trader Stock Demand, To Shut
Sarah Ponczek – Bloomberg, the website whose hourly updates on retail stock demand became a minor obsession of Wall Street, will end its service after owners of the Robinhood investing app curtailed access to the data on which it ran.

Tim Cook Net Worth: Billionaire Status as Apple Stock Nears $2 Trillion
Anders Melin
and Tom Metcalf – Bloomberg
Nine years after Steve Jobs stepped down and thrust Tim Cook to the top of Apple Inc., the company is more valuable than ever — and so is Cook.
Apple’s share price rose almost 5% last week, leaving the company Jobs co-founded 44 years ago in his parents’ California home on the cusp of stock-market milestone: a market value of nearly $2 trillion.

C.E.O.s Pledge to Hire 100,000 Low-Income and Minority New Yorkers
David Gelles – NY Times
A coalition of 27 major companies including Mastercard, Goldman Sachs and Verizon has pledged to hire 100,000 low-income and Black, Latino and Asian workers in New York City over the next 10 years, part of a broader push by corporate America to expand economic opportunities to marginalized communities.
The companies are funding the creation of a nonprofit organization, the New York Jobs C.E.O. Council, which they say will work with universities, the city government and other nonprofit groups to prepare a new generation of New Yorkers for high-paying jobs at some of the country’s biggest companies.

Black Finance Workers in London Face ‘Dire’ Prospects Despite CEO Pledges
Viren Vaghela – Bloomberg
There are zero Black CEOs at any of the major U.K. lenders; Bank chiefs pledge to improve diversity of senior management
One after another, the heads of the largest U.K. banks have made a flurry of public statements in recent weeks, pledging to improve the representation of Black men and women among senior management.

Stop laughing at European banks and start the mergers; After dismal quarters from Commerzbank, Société Générale and UniCredit, it is time for smart deals
Patrick Jenkins – FT
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.

Children and the virus: As schools reopen, much remains unknown about the risk to kids and the peril they pose to others
Haisten Willis, Chelsea Janes and Ariana Eunjung Cha – The Washington Post
The photos showed up on social media just hours into the first day of school: 80 beaming teens in front of Etowah High School near Atlanta, with not a mask on a single face and hardly six inches of distance between them — let alone the recommended six feet.
Amanda Seghetti, a mom in the area, said her parent Facebook group lit up when the pictures of the seniors were posted. Some people thought the images were cute. Others freaked out. Seghetti was in the latter constituency.
“It’s like they think they are immune and are in denial about everything,” Seghetti said.

Window of opportunity; As head trader at Polar Capital, Alex Jenkins has been establishing a centralised trading desk. Here, Hayley McDowell discovers that the move has proved invaluable for the investment firm amid a surge in market volatility.
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.

UK average daily FX volumes down in April from highs last year; Results from the latest Bank of England survey revealed that UK FX daily turnover in April 2020 has shrunk 16% since October 2019 to $2.4 trillion.
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. The Bank of England’s turnover survey, which includes data from 28 financial institutions, found that the average daily UK FX turnover was $2.4 trillion in April 2020.

The Spotify data model; In this episode of the TRADE Talks podcast, the editorial team catch up with global head of sales and market data at TraditionDATA, James Watson, who outlines potential new models to sell market data.
Kiays Khalil – The Trade
In this episode of the TRADE Talks podcast, multimedia journalist, Kiays Khalil, and editor, Hayley McDowell, are joined by The TRADE’s new reporter, Annabel Smith, to discuss the latest stories that have caught their eye. Later, the team catch up with global head of sales and market data at TraditionDATA, James Watson, who outlines potential new models to sell market data.

Oil and OPEC: Shale Job Losses Accelerate in U.S. as Virus Curbs Energy Demand
David Wethe – Bloomberg
Roughneck job cuts accelerated in July and the outlook may worsen as new Covid-19 cases stifle economic activity, according to the Petroleum Equipment and Services Association.
The U.S. oilfield-services sector shed 9,344 jobs last month, a 43% increase from June’s losses, the industry-funded trade group said in a report released Monday. That pushed the industry’s total job casualties since the pandemic emerged to 99,253.


Putin Says Russia Has Registered World’s First Covid-19 Vaccine
Jake Rudnitsky – Bloomberg
Russia began Phase 3 trials of the vaccine last week; Registering drug puts Russia on the path to mass vaccination
President Vladimir Putin said Russia has registered its first Covid-19 vaccine, calling it an effective protection against the deadly pathogen, and disclosed that one of his own daughters had already received it.

Russia to start mass use of its Covid-19 vaccine in coming weeks; Some experts cast doubt on Moscow’s ability to develop a suitable inoculation so fast
Henry Foy – FT
Russia has become the first country to grant regulatory approval to a vaccine against Covid-19, President Vladimir Putin said on Tuesday, and will begin mass production and immunisation of key workers in the next few weeks.

Most Americans Won’t Be Able to Get a Coronavirus Vaccine Until Well Into 2021
Anna Edney, Josh Wingrove and Robert Langreth – Bloomberg
Even if the most optimistic projections hold true and a Covid-19 vaccine is cleared for U.S. use in November, the vast majority of Americans won’t be able to get the shots until spring or summer next year at the earliest.
That likely timeline, based on interviews and remarks from top specialists including Anthony Fauci of the White House Coronavirus Task Force, means businesses, schoolchildren and families will continue to wait.

Covid-19 Cases Top 20 Million World-Wide
Allison Prang and David Hall – WSJ
Confirmed cases of the new coronavirus surpassed 20 million globally, while the U.S. reported its lowest number of new cases in about a week, as new infections in some parts of the country trended down.
Fewer than 47,000 new cases were reported Sunday in the U.S., while the total number of confirmed cases exceeded five million, according to data compiled by Johns Hopkins University.

EU Nationals Flee U.K. Workforce as Covid Crushes Hospitality
Lucy Meakin – Bloomberg
Employment of EU nationals dropped by 284,000 in the second quarter as the Covid-19 crisis prompted the U.K.’s biggest slump since the global financial meltdown, the Office for National Statistics said Tuesday.

Most Coronavirus Vaccine Projects Are Taking Unorthodox Routes; The more than 200 Covid-fighting efforts under way are generally skipping the chicken eggs and often trying to reinvent how vaccines work.
Peter Coy and Shawn Hasto – Bloomberg
Coronavirus particles, or virions, attach to the surface of a cell with their spikes, then pierce the cell and release a strand of RNA. The genetic code it carries hijacks the cell’s machinery to make more virions, which seek new targets.

Middle East Politics: Iran Closes Jahan-e Sanat Newspaper After Covid Criticism
Golnar Motevalli – Bloomberg
One of Iran’s main business dailies has been shut down by authorities after it published an interview with a government physician who said the country was covering up the extent of the coronavirus outbreak.

How coronavirus impacted a billion dollar blooms business
During these unprecedented times, Kenya’s flower industry has dealt with a period of logistical nightmares and lost revenue. CNN’s Eleni Giokos takes a look at how this blooming industry has worked to get their perishable product to market around the world.

London office market yet to feel ‘true impact’ of coronavirus, says landlord; Job cuts and business failures will leave workplaces empty and hit rents
George Hammond – FT
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.

Trump considers blocking Americans who may have Covid-19 from coming home
The Guardian
The Trump administration is reportedly considering a measure to block US citizens and permanent residents from returning home if they are suspected of being infected with coronavirus.
A senior US official told Reuters that draft regulation, which has not been finalized and could change, would give the government authorization to block individuals who could “reasonably” be believed to have contracted Covid-19 or other diseases.

Infectious Disease Expert Predicts When U.S. Coronavirus Cases Will Again Explode
Lee Moran – HuffPost
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.

Covid is Forcing Real-Estate Developers to Rethink Buildings
Katy McLaughlin – WSJ
Someday, years from now, a resident will wake up in their luxury condominium at developer Gregg Covin’s The Cedars Lodge & Spa in Hendersonville, N.C. They’ll make breakfast on the island in their big kitchen and sit on their heated balcony. They’ll walk out of their private entrance and use an elevator that serves only three other units. They’ll work out in a series of small exercise rooms and gather with friends at a restaurant in a glass atrium.

Exchanges, OTC and Clearing

AFX Welcomes Citizens Bank, N.A. of Providence, RI, Marking the 200th Institution to Join the Exchange; AFX Membership Jumps 30% from Year-Ago Levels
The American Financial Exchange (AFX), an electronic exchange for direct lending and borrowing for American banks and financial institutions, announced that Citizens Bank, N.A. of Providence, Rhode Island, joined the AFX, marking the exchange’s 200th institution to become a member since its inception in 2015. AFX membership is up 30 percent from a count of 154 from August 1, 2019. The total assets of member banks are now over 2.9 trillion dollars.

JP Morgan and LBBW clear first SOFR swaps at Eurex
Annabel Smith – The Trade
Eurex has confirmed it has cleared its first SOFR swaps transactions with JP Morgan and LBBW submitting the initial trades.
The central clearing counterparty (CCP) said the development underlines its clients’ increasing commitment to clearing over the counter (OTC) products with Eurex and marks an important addition to its liquidity pool.

TMX Group Equity Financing Statistics – July 2020
Press Release
TMX Group today announced its financing activity on Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) for July 2020.
TSX welcomed 10 new issuers in July 2020, compared with 24 in the previous month and nine in July 2019. The new listings were four exchange traded funds, two technology companies, one clean technology company, one real estate company, one financial services company and one mining company. Total financings raised in July 2020 decreased 3% compared to the previous month, but were up 78% compared to July 2019. The total number of financings in July 2020 was 34, compared with 57 the previous month and 38 in July 2019.


TikTok Faces Probe from French Privacy Watchdog After Complaint
Helene Fouquet and Stephanie Bodoni – Bloomberg
App’s Chinese parent faces scrutiny in Europe over privacy; U.S. President Trump has threatened to ban app after Sept. 15
France’s privacy watchdog opened a probe into TikTok, marking another examination of ByteDance Ltd.’s social media app, which is facing broader scrutiny of its privacy policies.

Facebook Financial to Pursue Payments and Commerce, Led by Libra’s David Marcus
Kurt Wagner – Bloomberg
Facebook Inc. unveiled a new group to pursue payments and commerce opportunities and put David Marcus, co-creator of its Libra cryptocurrency project, in charge of the initiative.
Called F2 internally, short for Facebook Financial, the team will run all payments projects, including Facebook Pay, the company’s universal payments feature that it plans to build inside all of its apps.

Revolut racks up losses as hiring spree offsets revenue; UK fintech remains confident about outlook and says it is on track to break even this year
Nicholas Megaw – FT
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.

Vitesse, a fintech providing real-time cross-border payments for businesses, scores £6.6M Series A
Steve O’Hear – TechCrunch
Vitesse, the London-based fintech that offers real-time cross-border payments for businesses, has raised £6.6 million in Series A funding. The round is led by Octopus Ventures, with participation from existing backers including Hoxton Ventures and various angel investors.


Blockchain In Capital Markets ‘On The Cusp’ Of Acceleration
Shanny Basar – MarketsMedia
Todd McDonald, co-founder of enterprise blockchain software firm R3 , said the use of blockchain in capital markets is on the cusp of some really exciting developments.McDonald told Markets Media: “We need to ensure the technology is simple to use for institutional investors and that its why the collaboration with Nasdaq is important. They have experience running a regulated exchange and we are providing something additive to what is out there already.”

With All Eyes On Bitcoin, Another Crypto Is Up 500% In The Last Year—And It’s Still Soaring
Billy Bambrough – Forbes
Bitcoin has been pushed back into the spotlight thanks to its recent rally and renewed interest from Wall Street and big-name day traders.
The bitcoin price, jumping over $12,000 per bitcoin late Sunday evening, has added 30% in the last month—though some smaller cryptocurrencies have made far bigger gains.

Facebook Financial Formed to Pursue Company’s Payments Plans
Kurt Wagner – Bloomberg
Facebook Inc. unveiled a new group to pursue payments and commerce opportunities and put David Marcus, co-creator of its Libra cryptocurrency project, in charge of the initiative. Called F2 internally, short for Facebook Financial, the team will run all payments projects, including Facebook Pay, the company’s universal payments feature that it plans to build inside all of its apps.

Facebook launches group to oversee “all things payments” with David Marcus at the helm
Momina Khan – The Block
Facebook has launched Facebook Financial, a new group focused on all payments and commerce-related opportunities with Libra co-founder David Marcus at the helm. Marcus will now head up all payments projects at the tech giant. According to a Bloomberg report published Monday, the project, internally known as F2, is an effort to reorganize commerce strategy at Facebook. Facebook also added former Upwork Inc. Chief Executive Officer Stephane Kasriel to its payments team. Kasriel will report to Marcus as the vice president of payments.

Following OCC Letter, Some US Banks Appear Open to Providing Crypto Services
Nikhilesh De – Coindesk
Major U.S. banks might be willing to support cryptocurrency services – with just a bit of additional guidance from the Office of the Comptroller of the Currency (OCC), their federal regulator. Multiple national banks responded to the OCC’s June “Advance Notice of Proposed Rulemaking” (ANPR), which asked the general public to weigh in before Aug. 3. on how cryptocurrencies and other fintech tools might be used in the financial sector. Notably, several banks, including U.S. Bank and PNC, indicated they might be interested in actually providing crypto custody and other services to customers.

Revolut racks up losses as hiring spree offsets revenue
Nicholas Megaw – FT
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.

Coinbase hires Lyft and Google alum to lead engineering team
Aislinn Keely – The Block
Coinbase has tapped Lyft’s former vice president of engineering to take a leading role on its engineering team. Manish Gupta is joining the exchange as executive vice president of engineering, according to an announcement from the firm. Gupta spent 16 years on Google’s engineering team, eventually as a VP, before moving to Lyft. At Google, Gupta’s efforts were focused on the tech giant’s advertising platform. At Lyft, he lead teams focused on the development of the main rideshare product.

Ethereum Classic’s Terrible, Horrible, No Good, Very Bad Week
William Foxley – Coindesk
Ethereum Classic developers were still licking fresh wounds late last week when yet another 51% attack was launched against their blockchain early Thursday morning. And as the bits settle, the proof-of-work blockchain’s future remains in question more than ever. The first attack occurred on Aug. 1, the network’s second ever. Five days later, a second 51% attack followed the news that the first had indeed seen a successful double-spend of $5.6 million worth of ETC.

Riot Blockchain Reports Second Quarter 2020 Financial Results, Recent Operational & Financial Highlights
PR Newswire
Riot Blockchain, Inc., one of the few Nasdaq listed public cryptocurrency mining companies in the United States, reported financial results for the quarter and year to date periods ended June 30, 2020. The financial statements are available on Riot’s website and here.

China’s Blockchain Infrastructure Launches Website for Global Devs
David Pan – Coindesk
Blockchain-Based Service Network (BSN), a Chinese state-sanctioned blockchain infrastructure project, launched its English-language website for international decentralized applications (dapp) developers on Monday.

Report: European agency declines deal between Binance’s CZ and Union Bank
Frank Chaparro – The Block
Swiss media has reported that the Liechtenstein Financial Market Authority (FMA) has rejected an application for Union Bank to bring on Binance chief executive as a “major” shareholder. According to a translation of a report from Inside Paradeplatz, the investment in Union by Binance CEO Changpeng Zhao would have saved the bank from closure after recent financial and legal troubles, including an ongoing corruption case involving its former majority backer. The bank had plans to relaunch as a crypto banking platform, but is now in the process of liquidating.

Blockchain to Play ‘Essential Role’ in Farming Supply Chains, Says US Government
Paddy Baker – Coindesk
The U.S. Department for Agriculture says it expects blockchain will become a key component in supply chain management and traceability. In the Federal Register last week, the Agricultural Marketing Service (AMS), the Dept. of Agriculture’s standardization and testing authority, said distributed ledger technology (DLT), which includes blockchain, will likely play an “essential role” in complex supply chains. Businesses can use DLT to track a single item in real-time in a secure, verifiable, and transparent way, AMS said. The agency added many modern DLT solutions are permissioned; confidential and business-sensitive information is only disclosed to authorized entities.


Biden Prepares for Vice Presidential Pick as Early as Midweek
Jennifer Epstein and Tyler Pager – Bloomberg
Democratic presidential nominee Joe Biden is closing in on an announcement of a running mate as early as midweek, having completed interviewing all the top candidates, people familiar with the planning said Monday.

Joe Biden’s Links to Wall Street, Silicon Valley
Dealbook – NY Times
The wallets of Wall Street are with Joe Biden, if not the hearts, report The Times’s Kate Kelly, Shane Goldmacher and Thomas Kaplan. The millions of dollars that financiers donated to the Democratic presidential candidate’s once flagging campaign saw him through the primaries, and into a lead in national polls.

Trump Says He’s ‘Seriously’ Mulling a Capital Gains Tax Cut
Laura Davison and Mario Parker – Bloomberg
President Donald Trump said he’s “very seriously” considering a capital gains tax cut, a move he decided against last September after saying it wouldn’t do enough to help the middle class.
“We’re looking at also considering a capital gains tax cut, which would create a lot more jobs,” Trump said Monday at a White House news conference.

Apple to Amazon Line Up Against Trump’s Immigrant Visa Ban
Robert Burnson – Bloomberg
Several of nation’s largest tech companies — including Apple, Facebook, Amazon and Microsoft — are the latest to join the court battle against President Donald Trump’s ban on new visas for temporary foreign workers.
The group asked a court Monday to be allowed to add the industry’s voice to a lawsuit opposing the ban, saying it’s causing “irreparable harm on businesses and the nation’s economy.”

The Disparate Financial Impact of the American Justice System; An in-depth analysis of court data in Seattle reveals the racial breakdown of fines and court fees.
Laura Bliss – Bloomberg
Among the less visible ways that policing and the justice system can disproportionately impact people of color is through their pocketbooks. Fines for infractions such as running a red light or littering, and fees charged for going through the court system, can lead to lasting damage for those who can’t afford to pay, from lost drivers’ licenses to jail time.

Japan’s #FreeAgnes Campaign Shows Support for Detained Hong Kong Activist
Isabel Reynolds – Bloomberg
Japanese have dubbed activist the ‘goddess of democracy’; Cross-party lawmakers’ group set to hold protest meeting
While the world focuses on the detention of Hong Kong media mogul Jimmy Lai, it’s the plight of 23-year-old activist Agnes Chow that has made the battle over human rights in the city personal for many in Japan.

Trump Executive Order Isn’t an Eviction Moratorium
Kriston Capps – Bloomberg
With Senate Republicans still deadlocked over how or whether to renew protections for Americans struggling due to the coronavirus pandemic, President Donald Trump stepped into the breach on Saturday, signing an executive order on evictions and foreclosures and issuing several memos on other policy issues.

Macron Is the Wild Card in the U.K.’s Attempt to Get an EU Deal
Ian Wishart – Bloomberg
It looks increasingly like Emmanuel Macron holds the key to whether the U.K. and European Union will get a trade deal.
Officials on both sides of the negotiations see the French president as the wild card who could scupper an agreement at the last minute if he thinks there’s more to gain by refusing to compromise.


CFTC Orders Interactive Brokers LLC to Pay More Than $12 Million for Anti-Money Laundering and Supervision Violations
The Commodity Futures Trading Commission today filed and simultaneously settled charges against Interactive Brokers LLC, a registered futures commission merchant (FCM), for failing to diligently supervise its officers’, employees’, and agents’ handling of several commodity trading accounts and failing to adequately implement procedures to detect and report suspicious transactions as required under federal anti-money laundering (AML) laws and regulations. Brought in connection with the Division of Enforcement’s Bank Secrecy Act Task Force, this case marks the first CFTC enforcement action charging a violation of Regulation 42.2, which requires registrants to comply with the Bank Secrecy Act.

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.

SEC Charges Interactive Brokers With Repeatedly Failing to File Suspicious Activity Reports
The Securities and Exchange Commission today announced that Interactive Brokers LLC will pay an $11.5 million penalty to settle charges it repeatedly failed to file Suspicious Activity Reports (SARs) for U.S. microcap securities trades it executed on behalf of its customers. In parallel actions, the Financial Industry Regulatory Authority (FINRA) and the Commodity Futures Trading Commission (CFTC) today announced settlements with Interactive Brokers related to anti-money laundering failures in which the registered broker-dealer agreed to pay penalties of $15 million and $11.5 million, respectively, for a total of $38 million in penalties paid to the three agencies.

Hertz Sold $29 Million in Stock Before SEC Stepped In
Becky Yerak – WSJ
Hertz Global Holdings Inc. raised $29 million selling its likely worthless stock before regulators dissuaded the bankrupt rental-car company from selling more.
The Florida-based company, which filed for chapter 11 protection in May, on Monday disclosed the results of a controversial effort to sell as much as $500 million in shares despite the severe financial strains that drove the company into bankruptcy.

Egypt’s Financial Regulatory Authority Approves EGX Reviewed Criteria Of Shares Eligible For Short Selling
Press Release
The Financial Regulatory Authority (FRA) adopted the Egyptian Exchange’s (EGX) proposal amending selection criteria of short selling, as a step to increase securities eligible to trade in this mechanism.

Investing and Trading

With College Football in Jeopardy, Sports-Betting Stocks Tumble
Bailey Lipschultz – Bloomberg
Shares of sports-betting companies tumbled on Monday, hurt by the growing likelihood that more big college-football conferences will cancel their seasons.
DraftKings Inc. fell as much as 9.6%, while Penn National Gaming Inc. tumbled 7.7%. Flutter Entertainment Plc, William Hill Plc and other stocks also slipped.

An $82 Billion Gold-Bug ETF Has Biggest Exodus Since March
Claire Ballentine – Bloomberg
After a massive rush into the world’s biggest gold ETF, some investors trimmed their positions amid a mixed economic outlook.
State Street Corp.’s SPDR Gold Shares exchange-traded fund (GLD), suffered $382 million in outflows on Friday, according to data compiled by Bloomberg. While that’s a drop in the bucket for the $82 billion fund, it marked the largest withdrawal since March.

Many new investors are making this old mistake—what to do instead
Kevin Voigt – MarketWatch
As the coronavirus pandemic took hold early this spring and markets plunged, a wave of Americans saw an opportunity to start investing. But one expert says this new herd is making some old mistakes — namely, chasing hot stocks.
“I’ll say it: Individual stocks are terrible investments for people just starting out,” Christine Benz, the director of personal finance for investment research firm Morningstar MORN, -1.25% , recently posted on Twitter. “[W]e haven’t talked enough about how poorly many small investors are apt to do with individual-stock purchases, especially if they’re just learning.”

Saudi Aramco’s $75bn dividend dilemma; Months after the world’s biggest IPO, the state oil company is finding it harder to pay shareholders
Anjli Raval and Andrew England – FT
Saudi Aramco executives began 2020 in a celebratory mood after pulling off the world’s largest stock market listing. But it has rapidly become the state-controlled oil company’s toughest year in decades, hit by the twin shocks of coronavirus and a slump in crude prices.

If there’s an ‘actionable bubble’ in the stock market, this might be it, says BTIG’s Emanuel
William Watts – MarketWatch
Spotting a stock-market bubble isn’t as easy as it sounds. And even when traders do correctly identify one, economist John Maynard Keynes’s famous warning that the market can remain irrational “longer than you can remain solvent” should still ring in their ears, says Julian Emanuel, chief equity and derivatives strategist at BTIG.

Home-Building Stock Index Reaches First Record in 15 Years
Karen Langley – WSJ
Shares of home builders have been on a tear since the stock market bottomed in late March, boosted by a recovery in the housing market as record-low mortgage rates draw buyers.
The S&P 500’s home-building subindustry index—currently made up of Lennar Corp., D.R. Horton Inc., PulteGroup Inc. and NVR Inc. —is up 23% this year and closed Monday at its first record in 15 years. The S&P 500, in comparison, has risen 4% and is within 1% of its February high.

Kodak Shares Fall as Planned $765 Million Loan Is Put on Ice
Rachael Levy – WSJ
Eastman Kodak Co. shares lost more than a quarter of their value Monday after news that a planned $765 million loan to the company was put on hold as the deal has come under congressional and regulatory scrutiny.
The U.S. International Development Finance Corp. announced plans last month to loan Kodak the funds to produce drug ingredients at its factories. But in a tweet late Friday, the agency said that “recent allegations of wrongdoing raise serious concerns. We will not proceed any further unless these allegations are cleared.”

Disney Investors Could Look Goofy Soon
Laura Forman – WSJ
Walt Disney investors are enjoying the recent show, but they might not get their happily ever after.
Following better-than-feared fiscal third-quarter earnings last week, shares of the media giant have recovered to early February levels achieved before the coronavirus pandemic hit the U.S. Investors pricing in a relatively quick pandemic recovery should brace for some plot twists.

From Cocoa to Coffee and Sugar, Soft Commodities Stage Simultaneous Rally
Kirk Maltais – WSJ
The raw ingredients for goods including chocolate and clothes have rebounded after their pandemic-fueled declines, lifted by supply constraints and investors’ bets that a recovering economy will boost consumer demand.
Cocoa, coffee and other soft commodities trading on the Intercontinental Exchange have bounced back from their lows earlier this year and now number among the world’s best-performing major assets. In the past month alone, cocoa futures have risen 17% to $2,488 a metric ton and coffee futures have climbed 14% to $1.12 a pound.

Environmental, Social and Corporate Governance

Active tech, healthcare and ESG funds outpace passives
Investors are seeking exposure to trends that could benefit from the Covid-19 crisis
Dawn Cowie – FT
Actively managed funds have been outpacing passives in hot-ticket equity sectors as investors seek exposure to the economic megatrends that have been accentuated by the Covid-19 crisis.

Visa Beats Google’s Record Low Yield in Debut Green Bond Sale
David Caleb Mutua – Bloomberg
Visa Inc. sold bonds at a record low yield as it became the first consumer finance company to issue debt to fund environmentally friendly projects.
The world’s largest payments network, sold $3.25 billion of debt in three parts. The shortest portion of the deal is a seven-year green note with at 0.75% coupon, sliding past Google parent Alphabet Inc.’s record low 0.8% from last week on an ESG debt sale with a similar maturity.

Barclays Shuffles Top Bankers in Beefing Up Sustainability Unit
Jennifer Surane – Bloomberg
Barclays Plc is moving some top bankers to its new sustainability teams as it seeks to gain a larger foothold in providing financing and advice for activities that help mitigate climate change.
Justin Peagram, previously a managing director in the natural-resources group, will now focus on sustainable energy and other emerging-growth areas as part of the sustainable and impact-banking group, Barclays said Monday in a statement. Greg Cass and Atul Jhavar will lead the green, social and sustainability debt-financing units for investment-grade clients in the Americas and Asia-Pacific region, respectively.


SoftBank to Create Asset Management Firm to Buy Public Stocks
Pavel Alpeyev – Bloomberg
SoftBank Group Corp. founder Masayoshi Son said that he is creating an asset management company to invest in publicly traded stocks, including the biggest tech companies in the world. Son said the unit would have about $555 million in capital and has already started investing. Among the stocks purchased already are Apple Inc., Inc. and Facebook Inc.

Softbank Earnings: It’s a Fund, Not a Technology Company
Tim Culpan – Bloomberg
SoftBank Group Corp. has given up pretending to operate anything.
Once the owner of two telecom companies and a collection of other operating businesses, the Japanese conglomerate would report quarterly operating profit and net income.

Fed denies Goldman’s appeal against stress test results; Investment bank will have to maintain largest capital cushion among its peers
Robert Armstrong – FT
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.


Switzerland Saves Billions From Free Trade
Leonard Kehnscherper – Bloomberg
Switzerland’s highly trade-dependent economy is gaining billions of dollars from free trade agreements like the one it has with the European Union, a government study found. Importers and consumers saved 2.5 billion francs ($2.7 billion) in tariffs in 2018, according to an analysis published by the State Secretariat for Economic Affairs on Tuesday. “Thanks to free trade agreements, Swiss companies were able to improve their competitiveness in domestic and foreign markets,” it said.

China Is Ditching Expensive Brazilian Soybeans for U.S. Supplies
Isis Almeida and Tatiana Freitas – Bloomberg
China, the world’s top soybean buyer, is ditching expensive Brazilian purchases and replacing previously done deals with American supplies, according to people familiar with the transactions.
Traders are washing out Brazilian purchases made earlier in the year as the price gap to American supplies widened, said the people, who asked not to be identified because the information is private. Some traders have struck the arrangements to supply their own operations in China, while others are doing them on behalf of Chinese clients, the people said.

Not Even a $35 Billion Turkey Stock Slump Can Deter Local Buyers
Tugce Ozsoy – Bloomberg
Benchmark Istanbul index fell 11% in two weeks as lira slid; Stocks favored by local retail investors posted further gains
The latest market rout in Turkish assets erased about $35 billion from the value of Istanbul-listed companies, but it has fallen short of discouraging local buyers.

Total Seizure in Global Tourism Is a Lingering Threat for Emerging Markets
Mike Bird – WSJ
There are many types of economic activity for which coronavirus-related workarounds have been found. International tourism isn’t one of them.
That is bad news for jet-setters but potentially disastrous for a handful of emerging-market economies. Tourism is an export sector and a major source of foreign income for some, which can act as a buffer against financial shocks. Among those most at risk, Turkey—already in bad shape before the pandemic—looks particularly vulnerable.

Kuwait Pension Fund Plans 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%.”

UN Sends 50,000 Tons of Wheat to Lebanon to Avert Food Crisis
Salma El Wardany – Bloomberg
Shipments will be enough to last for three months, says the UN; The first batch of 17,500 tons of wheat will arrive in 10 days
The United Nations is sending grain to Lebanon to avert a food crisis following last week’s explosion in Beirut that killed 160 people and destroyed grain silos. The World Food Programme will ship 50,000 tons of wheat flour to Beirut, enough to supply Lebanon for three months, it and the Office for the Coordination of Humanitarian Affairs, another UN body, said Tuesday. The first batch of 17,500 tons will arrive in 10 days.

Media Tycoon’s Arrest Sends Warning to Hong Kong’s Free Press
Kari Soo Lindberg – Bloomberg
Right before China retook control of Hong Kong in 1997, tycoon Jimmy Lai started Apple Daily in part to promote democracy in the city. For 25 years the newspaper survived advertising boycotts and political pressure but never backed off its tough coverage of the Chinese government and pro-Beijing lawmakers.

An 1,100% Stock Gain Is Hong Kong’s New Protest Rallying Cry
John Cheng – Bloomberg
They’ve occupied Hong Kong’s central business district, marched by the hundreds of thousands through the city’s streets and endured tear gas and pepper spray in pitched battles with riot police.
Now Hong Kong’s pro-democracy supporters are wielding a new protest weapon: their stock-market trading accounts.


UK trade deal with Japan stalls over blue cheese demands
George Parker – FT
Talks between Tokyo and London over a new trade deal have hit a snag after Liz Truss, UK trade secretary, insisted on bringing Stilton cheese into the negotiations. Both sides came close to an agreement in London last week, but Ms Truss is holding out for a better deal for British food, with a particular focus on attempts to boost sales of blue cheese in Japan. The dispute reflects the “cars for cheese” trade talks between the EU and Japan ahead of last year’s agreement between the two economic superpowers. But while the UK is aiming to largely mirror that deal, Ms Truss is hoping a symbolic Stilton cheese “win” will show the UK is able to secure a better deal than the one obtained by the EU.

Love of Stilton drives wedge between UK and Japan in post-Brexit trade talks
Justin McCurry – The Guardian
Having promised to rush through a post-Brexit trade deal, Japan and Britain made significant progress only to discover that the fate of Stilton has driven a wedge between them. During recent talks in London, international trade secretary Liz Truss and the Japanese foreign minister, Toshimitsu Motegi, reached a “substantial” preliminary agreement on trade, promising to conclude a preliminary deal by the end of this month.

Mike Bartlett on Albion, Brexit and Covid: ‘national identity is critical to coming out of this’
Arifa Akbar – The Guardian
The drama first staged after the EU referendum has taken on new relevance and is being broadcast by the BBC. Mike Bartlett’s 2017 play Albion returned to London’s Almeida theatre in February, the week after Britain left the EU. It didn’t mention Brexit but the story reflected its mournful divisions. Then the Covid-19 pandemic struck and dwarfed the drama’s concerns of nationhood, patriotism and nostalgic notions of Englishness.


On the Shores of Cape Cod, Where the Oyster Is Their World
Randy Harris – NY Times
When I first met Chris Crobar, he was a half mile from the shore, on the tidal flats that stretch far out into Cape Cod Bay. It was 5 a.m., and I was out for a walk at low tide. From a distance, I saw what looked like little black sails in the water.
Chris was a spectacle: alone with his boat and table in the middle of the bay — like an artist with his easel, painting a fiery sunrise. He stood there fastidiously scraping the barnacles off his oysters, then tossing them back into the cages where they’ll sit for a couple of years on the floor of the bay.

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