JPMorgan Prepares for Wave of Defaults Linked to Coronavirus Shutdown

Apr 14, 2020

Observations & Insight

Buck Haworth – Open Outcry Traders History Project – Part 2
JohnLothianNews.com

Buck Haworth has been a consultant, a CPA, a back office accountant, an exchange audit department executive, a foreign exchange arbitrage desk manager, an exchange member, a scalper, a spreader, an exchange board member and officer, and a technology entrepreneur.

In part 2 of his interview with John Lothian News for the MarketsWiki Education Open Outcry Traders HIstory Project, he talks about why traders prefer to be bears and not bulls. He says floor traders are the “largest concentration of people with ADHD” and how this influences them in being bullish or bearish. He tells the story of some traders banging into other traders before the open to get their energy levels up.

He talks about the FBI sting at the CME in the late 1980s, the CME Group going public, and the dynamics on the exchange’s board over hiring and then getting rid of Jim McNulty as CEO, and he speaks candidly about the relationship between brokers and their favorite locals. His work on the board of the CME took up so much time that Haworth lost the feel for floor trading. His efforts to try electronic trading left him with the observation that electronic trading is a video game and floor trading is rugby. He said few people can do both successfully.

In part 2, he continues to offer frank answers to the questions posed to him and says, “Life is not fair, the floor was not fair,” and that we should get over it. Enjoy this second and final part of the interview with Born Technology Co-founder and CFO Buck Haworth.

Watch the video »

Lead Stories

JPMorgan Prepares for Wave of Defaults Linked to Coronavirus Shutdown
David Benoit – WSJ
JPMorgan Chase & Co., bracing for a severe recession, set aside another $6.8 billion to cover potential losses on loans to consumers and companies struggling to stay afloat during the coronavirus shutdown.
/on.wsj.com/3egcm2t

Will the coronavirus trigger a corporate debt crisis?
Andrew Edgecliffe-Johnson in New York and Peggy Hollinger, Joe Rennison and Robert SmithFinancial Times
Since 1925, the Grand Ole Opry has featured the music of countless country and bluegrass stars, from Bill Monroe to Dolly Parton.
As Ryman Hospitality Properties built a hospitality and entertainment empire around the original Nashville radio show, the parent company’s debt grew to over $2.5bn, but its chairman insisted that its balance sheet was “really strong”.
/on.ft.com/33dWnwA

Massive short squeeze sends Nikkei to 1-month high; SoftBank Group jumps
Tomo Uetake – Reuters
Japan’s stock benchmark Nikkei jumped 3% to its highest closing level in more than a month on Tuesday, driven by a gigantic short squeeze, with semiconductor-related companies and retailers leading gains.
The Nikkei average rose 3.1% to close at 19,638.81, a peak unseen since March 10.
The Nikkei’s volatility index, a measure of investors’ volatility expectations based on option pricing and considered to be a fear gauge, slid 11.9% to a three-week low of 37.48.
/reut.rs/2yiMRg8

Why FX Traders Are Looking at the Short and Long Term
Richard Stevens – CME Group
There has been a marked change in volatility levels in the FX markets in recent weeks.
At the start of the year FX market volatility was approaching all-time lows. The widely viewed JP Morgan G7 FX volatility index was below 7 for most of 2019 and fell below 5 in January 2020. In comparison, the lowest value observed in 2016 was 9.12. However, in March the index topped 15, its highest level in over 8 years, coinciding with multiple central bank interest rate changes and concerns over U.S. dollar funding as a result of the coronavirus.
/bit.ly/3b8Klbb

Exchanges and Clearing

New SEC-Approved ETF Listing Rule Clears Hurdles for Cboe Issuers
Laura Morrison – Cboe
We say this a lot, but that’s only because it’s true: everything we do is guided by our mission to improve the markets and provide a better experience. That is why we were so excited at the start of April when the Securities and Exchange Commission approved Cboe’s request to create a new listing rule that aligns Cboe’s ETF listing standards with the SEC’s ETF Rule (6c-11). This approval was a huge step forward in providing a more efficient and streamlined process for our ETF issuers. I’m excited to share this news and how it will benefit issuers at Cboe.
/bit.ly/2xs6jag

Technical glitch halts trading on Frankfurt stock exchange for four hours
Hans Seidenstuecker – Reuters
Trading on the Frankfurt stock exchange was halted for more than four hours on Tuesday, one of its longest outages ever, due to a technical glitch on Deutsche Boerse’s (DB1Gn.DE) Xetra and Eurex platforms, the exchange operator said.
Stock exchanges in Vienna, Budapest, Prague, and in Balkan countries, were also affected.
/reut.rs/3eoOeKQ

MIAX Options Exchange – SPIKES Special Settlement Auction Settlement Reference Price Opening Width and Valid and Priority Quote Width Tables used in the April 15, 2020 SPIKES Special Settlement Auction
MIAX
Due to sustained market volatility, MIAX Options will continue to use the Settlement Reference Price Opening Width and Valid and Priority Quote Width tables detailed in MIAX Regulatory Circular 2020-11 for opening the SPY May 15, 2020 options used in the April 15, 2020 SPIKES Special Settlement Auction.
/bit.ly/3a9wK1G

Regulation & Enforcement

Libor Exit Plans Set Up Showdown for Firms Versus Regulators
William Shaw and Tasos Vossos – Bloomberg
Corporate treasurers in crisis-fighting mode look set to miss looming deadlines to abandon the scandal-plagued Libor benchmark, threatening a showdown with regulators powering ahead with reforms.
In the grip of this once-in-a-generation pandemic, many businesses have already given up on this year when it comes to shifting away from the reference rate that has underpinned trillions of dollars in loans, bonds and derivatives, according to the Association of Corporate Treasurers.
/bloom.bg/3emVyH2

Coronavirus Hobbles Corporate Compliance Monitoring
Mengqi Sun – WSJ
Lockdowns intended to blunt the spread of coronavirus are delaying the work of corporate monitors who rely on visits to companies and access to sensitive data to ensure that regulator-mandated changes to compliance regimes are being upheld.
With travel restricted as well, monitors have reached for digital tools to continue their work. But observing corporate culture and day-to-day operations at a virtual remove is less than ideal.
/on.wsj.com/2XHyQDo

Strategy

Walmart’s Earnings Are Going to Be a Blockbuster. Here’s How to Play Them.
Steven M. Sears – Barron’s
When bad things happen to the U.S. economy, good things happen to Walmart. Economic recessions, and especially fears of depression , make everyone think more carefully about how they spend their money.
This more careful financial stewardship tends to benefit Walmart (ticker: WMT), which famously offers low prices at thousands of no-frill, cavernous warehouses scattered across the country. Rising cost consciousness tends to increase Walmart’s sales, which boosts corporate earnings, and this is reflected in the stock price—now dancing around a 52-week high ahead of a pending earnings report that should be dramatic.
/bit.ly/34zo9EF

Keep a core bearish position in the stock market and protect your gains
Lawrence G. McMillan – MarketWatch
The oversold rally in the stock market that began with an intraday reversal on March 20 regained steam after apparently seeming to fail at the 2650 level for the S&P 500 index in early April. During the first full week of April, it blew through that resistance, and a bullish buying spree was “on.” The rally eventually rose above its declining 20-day moving average — which is typical of oversold rallies coming off “crash-like” lows.
/on.mktw.net/2Vun3Wl

Miscellaneous

‘It’s a complete abomination’: Hedge funds are applying for government bailouts to weather the coronavirus crisis
Theron Mohamed – Markets Insider
US lawmakers recently earmarked $350 billion to help small businesses cover payroll, rent, and other costs during the novel coronavirus pandemic. Some hedge funds have applied for the assistance, according to Bloomberg.
“It’s a complete abomination,” Nate Koppikar, a partner at hedge fund Orso Partners, told the news outlet.
Hedge funds’ low headcounts could mean they’re eligible for the government loans, which can become grants if recipients keep on or rehire workers.
/bit.ly/2RzyP0r

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