‘Muppets v Sharks’ as retail investors feel pain of negative oil

Apr 23, 2020

First Read

Hits & Takes
By John Lothian & JLN Staff

Give Terry Duffy credit, the well-tanned Executive Chairman and CEO of the CME Group went on CNBC yesterday to talk about negative oil prices and respond to the ham-handed accusations of manipulation from oilman Harold Hamm. Duffy said the market “worked to perfection” as prices moved negative because of market fundamentals of cratering demand and excess supply.

Duffy drew attention to the announcement by President Trump on March 12 that he would push for the US to add to the strategic oil reserve. However, the $3 billion he sought to buy the oil was stripped from the CARES Act. Prices moved negative, because “no one was willing to step up,” Duffy said. He also mentioned that the exchange had worked with the regulators two weeks ago about allowing negative prices, so it should not be a surprise to anyone that negative prices in WTI actually happened. I beg to differ on this point, as I have a pretty good sense of news and public awareness. CME should have done more to inform the public about this, not just the trading community.

He also said that USO, the oil ETF, was out of the May futures on Monday, and it was just a few speculators and commercials with open positions. He said open interest in May on Monday was 130,000 contracts and 154,000 traded Monday, with 80% of the trade above the price of zero.

Former CBOT Vice Chairman John Benjamin died on April 20. Benjamin worked at Uhlmann Grain Company, H. Hentz & Co., Drexel Burnham and Salomon Smith Barney. He was a director of the Futures Industry Association (FIA) from 1986 to 1992, and in 2006 he was inducted into the FIA Futures Hall of Fame.

The American Financial Exchange (AFX) announced plans by Cboe Futures Exchange to launch futures on the One-Month AMERIBOR (American Interbank Offered Rate) interest rate benchmark. The new futures contract will launch on June 8, 2020. The one-month futures contract will complement CFE’s current AMERIBOR futures complex, which includes three-month and seven-day futures contracts.
Nasdaq CEO and President Adena Friedman has joined the Vanderbilt University Board of Trust

Bloomberg reported that Zero Hedge has been permanently suspended from Twitter for ‘harassment.’

A certain reader named Robert Hakker took offense at my quote from George Carlin yesterday. I apologize to anyone who was offended. As Forrest Gump said, “Stupid is as stupid does.” Oops, I have done it again.~JJL


Women In Listed Derivatives is hosting its first virtual trivia night for WILD members and guests. The event will take place Thursday, April 30, 2020 at 6:00 – 7:30 PM (CT). It’s a Zoom meeting, and Zoom details will follow later. Prizes include gift cards to Winestyr. You can go here to register, and it’s free. (There are currently 58 spots remaining out of 120.) ~SR


Angelo Evangelou: SA-CCR Early Greenlight a Great Step in the Right Direction

The SA-CCR is an expansive set of rules that applies to more than just the options markets, but Angelo Evangelou, Cboe’s chief policy officer, explained why Cboe is excited about the change and optimistic about its potential impact on the options markets.

Listen to the podcast »


JPX Employee Tests Positive for Coronavirus
Japan Exchange Group, Inc. (JPX) announces that an employee based in Tokyo has tested positive for novel coronavirus (COVID-19). The employee exhibited fever symptoms on April 19 and tested positive for COVID-19 last night (April 22). The employee is currently warded and receiving medical treatment in hospital under instruction from a public health center. JPX Group implements remote work arrangements and has been encouraging all staff to work from home during this period. The employee last came to the office on April 3 and had since been working from home. Accordingly, no one at its Tokyo offices is considered to have, or be likely to have, had close contact with the employee. As such, JPX Group will continue business operations without shutting down its Tokyo offices.

*****Prayers for the JPX employee.~JJL


Switch to Bachelier Options Pricing Model – Effective April 22, 2020
To Clearing Member Firms; Chief Financial Officers; Back Office Managers
From CME Clearing
CME Group
Pursuant to Clearing Advisory 20-152 that was published on April 8th, the clearing house will switch the options pricing and valuation model to Bachelier to accommodate negative prices in the underlying futures and allow for listing of option contracts with negative strikes for the set of products specified in the link below. The switch will be effective for the margin cycle run at the end of trading tomorrow April 22, 2020 and will remain in place until further notice.

*****This was a notice from the CME on April 21. I think this is something the industry and the greater public need to understand better what it means. I would like to invite interested parties to participate in a Zoom panel discussion about this. I will moderate and I would like three or four panelists. Contact me at johnlothian@johnlothian.com if you are interested in participating, or even sponsoring.~JJL


Traders adapt to life at home; Following the removal of live interaction within teams, systems being stretched and the ensuing market turbulence, among multiple other factors, Hayley McDowell finds traders could be more error prone and risk vulnerable.
Hayley McDowell – The Trade
When news broke in early March that HSBC was forced to evacuate part of its trading floor in Canary Wharf after a worker tested positive for coronavirus, it became clear that this crisis was different. The days, even hours, that followed would see banks, brokers and buy-side split trading teams sending staff to work from home or at backup sites to ensure business continuity.

*****A new risk is the fat paw error from the dog or cat seeking attention.~JJL


How Bad Might It Get? Think the Great Depression; The coronavirus collapse has the ingredients to surpass the disaster of the 1930s.
Noah Smith – Bloomberg
As the economic carnage from the coronavirus pandemic continues, a long-forbidden word is starting to creep onto people’s lips: “depression.” In the 19th and early 20th centuries, there was no commonly accepted word for a slowdown in the economy. “Panic” was the term typically used for financial crises, while long slumps were commonly called depressions. Presidents such as James Monroe and Calvin Coolidge used the d-word to describe downturns during their administrations. There was even a slump in the 1870s that many referred to as the “Great Depression” at the time.

*****We are in the first stages of this pandemic and economic calamity. Getting back to “normal” is unlikely anytime soon.~JJL


Wednesday’s Top Three
Our most read story Wednesday was Interactive Brokers Issues Statement on Crude Oil Contracts and Margin Loss. Second was Negative Oil Prices Pose Headache for Futures Giant CME from the Wall Street Journal. Third was A new bitcoin exchange wins approval; Bitnomial, which has backing from Chicago investors, will let market participants trade on margin and take physical delivery of bitcoin, from Crain’s Chicago Business.


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Lead Stories

‘Muppets v Sharks’ as retail investors feel pain of negative oil; Small players taught perils of volatile crude market but big trading houses win out
David Sheppard, Anjli Raval, Laurence Fletcher and Henry Sanderson – FT
As the first casualties of negative oil prices crawl from the wreckage of the US oil market, one of the wildest trading days in history looks to have been a one-sided fight. Small-time retail investors and day traders, attracted to what they hoped was a one-way bet on oil’s eventual recovery from the coronavirus crisis, have emerged as some of the biggest losers from Monday’s carnage, with the world’s top commodity traders and oil funds standing victorious.

European business activity crashes under coronavirus lockdowns; Companies in services and manufacturing sectors warn of impending fall in employment
Martin Arnold and Valentina Romei – FT
The coronavirus lockdown is doing “unprecedented damage” to European business activity as companies across the services and manufacturing sectors report a record deterioration and warn of a substantial fall in employment, according to data published on Thursday.

ETFs and the Danger of an Illiquidity Doom Loop; Turmoil in oil and bond markets puts the popular funds in the spotlight.
Katherine Greifeld, Catherine Ngai – Bloomberg
Exchange-traded funds have been taking a bigger role in financial markets in the past decade. So it should come as no surprise that they’ve also been featured players in the rolling market dramas that have accompanied the coronavirus crisis.

How hedge fund shorting triggered the USO’s epic AUM growth
Izabella Kaminska – FT
ETFs, ETNs and ETPs are among the most shorted instruments in the market, with short interest regularly hitting double-digit percentages and in some unique cases triple-digit percentages. Among the reasons they are so popular for shorting is their convenience and low cost, especially compared to alternatives like futures or options. Other advantages include the fact they are not subject to the uptick rule, which can bring trading advantages (or so we are told).

Marex puts trading restrictions on oil futures after market rout; Broker to raise margin requirements and ‘restrict’ new positions in June contracts
Philip Stafford, Neil Hume and David Sheppard – FT
Marex Spectron, the commodities broker, will restrict many of its customers from taking new positions in oil futures contracts expiring in June as well as raising its margin requirements, in a move to insulate itself and its clients from further wild swings in prices.

‘Crude Oil Treasure’ Turns Toxic For Chinese Bank and Its Small Investors; About 3,000 investors owe Bank of China collectively the equivalent of about $52.2 million, analysts say
Xie Yu and Frances Yoonn – WSJ
Oil derivatives sold to Main Street investors, including some that could be bought with a few clicks on a bank app, have produced hundreds of millions of dollars of losses in South Korea and China. Their plight echoes losses suffered by individual investors in the U.S., who were also burned by this week’s extraordinary price action, in which one futures contract for West Texas Intermediate crude plunged below zero.

Execution algorithms unlikely to be ‘magic bullet’ for FICC; Report from FMSB emphasises limitations and challenges in adopting algorithmic trading in less liquid markets.
Hayley McDowell – the Trade
Execution algorithms are no ‘magic bullet’ in fixed income, currencies and commodities (FICC) trading as they are in cash equities, as challenges persist in adoption in less liquid markets, a new report has highlighted. According to the FICC Markets Standard Board (FSMB), the use of execution algorithms offered by banks or dealers to clients on an agency basis for order execution remains lower in FICC, with fundamental issues around data and governance persisting.

Hedge funds suffer worst quarterly outflows since financial crisis; Performance-based losses take industry to less than $3tn for the first time since 2016
Ortenca Aliaj – FT
Hedge funds have suffered their worst quarterly outflows in more than a decade after market volatility and uncertainty during the coronavirus pandemic prompted investors to flee.

Mom and Pop Piled Into Biggest U.S. Oil ETF During Historic Rout
Luke Kawa and Katherine Greifeld – Bloomberg
Number of users holding USO more than doubled since Friday; ETF has plunged more than 30% with oil turning negative
The historic rout in oil this week has done little to deter mom and pop investors who are convinced they can see a bottom for the beleaguered commodity.

The Meat Number That Makes Even Naysayers Worry About Shortages
Michael Hirtzer and Isis Almeida – Bloomberg
At least seven major American meat plants have seen halts; Frozen U.S. supplies are equal to about two weeks of output
First, it was just one plant shutting down. But now, it’s at least seven major U.S. meat facilities that have seen halts in the space of a few weeks. And all those voices previously assuring Americans that supplies would be fine now sound like a chorus of concern over shortages.

How to Lose 90% of Your Money in 14 Years; Retail investors ignored the warning signs on betting on oil prices, and will continue to do so unless the alarm bells ring louder.
Lionel Laurent – Bloomberg
The freedom to dabble in financial markets is a luxury few can afford in times like these, with the virus crisis unleashing a crippling recession, soaring unemployment and a rise in mortality.

Ocean Tomo to Expand Size and Scope of Firm Following Bow River Capital Partnership
Ocean Tomo, LLC, the intellectual capital merchant banc™ firm is pleased to announce a recapitalization by Bow River Capital 2017 Fund, expanding the firm’s offering from “IP-only” to “IP-driven” to further address a broad range of technology valuation and investment banking matters as well as pursue select key hires and follow-on acquisitions. As part of the transaction, Ocean Tomo’s existing equity owners retain a meaningful ownership stake in the Company and will continue to lead the organization on a go-forward basis.


McConnell Says States Should Consider Bankruptcy, Rebuffing Calls for Aid
Carl Hulse – NY Times
Senator Mitch McConnell took a hard line on Wednesday against giving cash-short states more federal aid in future emergency pandemic relief legislation, saying that those suffering steep shortfalls amid the coronavirus crisis should instead consider bankruptcy.

BTIG offers certain funds free trading services in COVID-19 pandemic; Free trading initiative from BTIG is aimed at charitable, state and union pension funds, as well as medical and educational endowments and emergency services benefit programs.
Kiays Khalil – The Trade
Agency broker BTIG has said it will provide free trading services to certain funds affected by the coronavirus crisis, in order to support professionals who are on the front-line of the pandemic.

Will the Coronavirus Pandemic Doom North Sea Oil? The steep fall in prices and demand is undermining a proud yet declining industry.
Stanley Reed – NY Times
For decades, the oil rigs rising out of the North Sea off Scotland provided Britain with hundreds of thousands of jobs in a thriving industry and billions in tax revenue. Much of that now seems a memory. The collapse in oil prices from the coronavirus pandemic, coupled with infections aboard the drilling rigs, are imperiling the vast industry that sprawls across the waters off Scotland and Norway.

All that drama about fixed-income ETFs was overplayed; Exchange traded funds holding bonds played a key role in easing March turmoil
Robin Wigglesworth – FT
Everyone loves a crisis that confirms biases. And in the case of exchange traded funds, this has been a good period for their legions of detractors. But what if ETFs actually eased, rather than exacerbated, the market mayhem that broke out last month?

Bloomberg to spearhead virus tracing in New York; Andrew Cuomo enlists billionaire to lead an ‘army of tracers’ to aid state reopening
Joshua Chaffin and Peter Wells – FT
New York governor Andrew Cuomo has enlisted billionaire Michael Bloomberg to spearhead a vast coronavirus testing and tracing effort that will help determine when the state can reopen for business.

EU should ‘not aim for self-sufficiency’ after coronavirus, trade chief says; Phil Hogan says recent surge in EU medical manufacturing is a crisis-response solution — not a permanent one
Alan Beattie and Jim Brunsden – FT
The EU should reject calls for mass repatriation of manufacturing to Europe in response to the coronavirus pandemic and press ahead with signing new trade deals to cut tariffs, the bloc’s top trade official has said.

How the Coronavirus Crisis Pushed the Fed Into Truly Uncharted Territory
Joe Weisenthal and Tracy Alloway – Bloomberg
The fate of the economy remains extremely unclear. However, there is little doubt that the Fed has taken dramatic steps to arrest the crisis. Not only has Jerome Powell’s Federal Reserve dusted off old tools that were designed during the last crisis, it’s engaged in unconventional actions, such as lending directly to municipal authorities, as well as becoming a player in the market for private sector corporate debt. Amid this crisis, Nathan Tankus, a researcher at the Modern Money Network, has emerged as one of the foremost experts on what the Fed has done, and what it’s capable of doing, through his widely read newsletter. He joined us on this episode to explain and contextualize the historic nature of the Fed’s actions so far.

New Study Shows Nearly 9 in 10 Covid-19 Patients on Ventilators Don’t Make It
Robert Langreth
Researchers tracked 2,634 outcomes in NY-area hospitals; Only 3% of those over 65 on ventilators survived, report says
A giant study that examined outcomes for more than 2,600 patients found an extraordinarily high 88% death rate among Covid-19 patients in the New York City area who had to be placed on mechanical devices to help them breathe.

Cuomo to Build ‘Tracing Army’ in Preparation for N.Y. Return
Keshia Clukey – Bloomberg
Deaths pass 15,000 but one-day number is lowest in weeks; Cuomo says the state has weeks to get tracing program ready
New York is building a “tracing army” to track the origin of individual coronavirus cases and reduce the spread so the state can focus on reopening, Governor Andrew Cuomo said.

States rushing to reopen are likely making a deadly error, coronavirus models and experts warn; Closing America was hard. Science suggests reopening amid coronavirus will be even harder
William Wan, Carolyn Y. Johnson and Joel Achenbach – Washington Post
By the end of the week, residents in Georgia will be able to get their hair permed and nails done. By Monday, they will be cleared for action flicks at the cineplex and burgers at their favorite greasy spoon.

Under Trump, coronavirus scientists can speak — as long as they mostly toe the line
Ashley Parker, Josh Dawsey, Yasmeen Abutaleb and Lena H. Sun – Washington Post
Robert Redfield, director of the Centers for Disease Control and Prevention, issued a candid warning Tuesday in a Washington Post interview: A simultaneous flu and coronavirus outbreak next fall and winter “will actually be even more difficult than the one we just went through,” adding that calls and protests to “liberate” states from stay-at-home orders — as President Trump has tweeted — were “not helpful.”

Nasdaq CEO sees taking workers’ temperatures as part of coronavirus plan to reopen their offices
Kevin Stankiewicz – CNBC
Nasdaq CEO Adena Friedman told CNBC on Wednesday that taking employees’ temperatures will probably be part of their coronavirus plan to return workers to company offices around the world.

‘Instead of Coronavirus, the Hunger Will Kill Us.’ A Global Food Crisis Looms; The world has never faced a hunger emergency like this, experts say. It could double the number of people facing acute hunger to 265 million by the end of this year.
Abdi Latif Dahir – NY Times
In the largest slum in Kenya’s capital, people desperate to eat set off a stampede during a recent giveaway of flour and cooking oil, leaving scores injured and two people dead.

Exchanges, OTC and Clearing

CME boss says his exchange is not for retail investors and it’s ‘no secret’ futures can go negative
Jesse Pound – CNBC
The futures market for oil contracts worked “to perfection” on Monday for the professional investors that the market is intended for, CME Group Chairman and CEO Terry Duffy said Wednesday.

The oil ‘futures market worked to perfection,’ says head of world’s largest exchange of crude’s historic plunge to $0
Mark DeCambre – MarketWatch
It might not have been pretty to some but the crude-oil market worked as it should have on Monday, according to Terrence Duffy, CEO of CME Group.

HKEX To Implement Volatility Control Mechanism First Phase Enhancements On 11 May
Hong Kong Exchanges and Clearing Limited (HKEX) is pleased to announce that it will implement the first phase enhancements of the Volatility Control Mechanism (VCM) on 11 May 2020.

Performance Bond Requirements: Energy and Agriculture – Effective April 23, 2020; To Clearing Member Firms; Chief Financial Officers; Back Office Managers; Margin Managers
From CME Clearing
As per the normal review of market volatility to ensure adequate collateral coverage, the Chicago Mercantile Exchange Inc., Clearing House Risk Management staff approved the performance bond requirements for the following products listed in the advisory at the link below.

Performance Bond Requirements: Energy Margins – Effective April 23, 2020; To Clearing Member Firms; Chief Financial Officers; Back Office Managers; Margin Managers
From CME Clearing
As per the normal review of market volatility to ensure adequate collateral coverage, the Chicago Mercantile Exchange Inc., Clearing House Risk Management staff approved the performance bond requirements for the following products listed in the advisory at the link below.

Listed@ASX Compliance Update no. 04/20; Changes to temporary emergency capital raising relief
ASX announced in section 3 of Listed@ASX Compliance Update no 03/20 dated 31 March 2020 that it had introduced two class order waivers (“Class Waivers”) implementing temporary emergency capital raising measures to help listed
entities affected by the COVID-19 pandemic to raise urgently needed capital.

HKEX to Implement VCM First Phase Enhancements on 11 May
Hong Kong Exchanges and Clearing Limited (HKEX) is pleased to announce that it will implement the first phase enhancements of the Volatility Control Mechanism (VCM) on 11 May 2020. HKEX’s VCM is designed to prevent extreme price volatility among individual stocks and was first introduced to the securities market in August 2016.

Repo Liquidity as a Solution to (Un)cleared Derivatives Cash Margin Requirements; Guest commentary at Securities Finance Monitor
Frank Odendall – Global Head of Securities Financing Product & Business Development – Eurex
Entities in the scope of phases five and six of the Uncleared Margin Rules (UMR) will need reliable and efficient access to cash in order to manage their daily OTC derivatives collateral obligations. Yes, the current coronavirus pandemic has delayed the deadlines, but the challenge has not disappeared. Impacted firms need to take this time to better prepare for compliance and take the opportunity to put a complete solution in place.


Barchart Launches Daily cmdty Yield Forecast Indexes for Corn and Soybeans
Barchart, a leading provider of data and technology services to the financial, media, and commodity industries, announces the launch of daily cmdty Yield Forecast Indexes and a 2020 forecast roadmap. Provided through the cmdty product line, the forecasts include corn and soybeans for the United States and were beta released during the 2019 growing season.

Zoom users top 300 million as ban list grows
Zoom (ZM.O) video conferencing app’s user base grew by another 50% to 300 million in the last three weeks, as the company fought to quell a backlash around security and safety that has seen a number of governments and firms ban its applications.

Will ‘big data’ restore active managers’ mojo?
Conrad De Aenlle – Chicago Tribune
Thinking is expensive, and you often don’t get what you pay for. That, more or less, is why actively managed funds have such trouble matching the returns of index funds, which merely seek to mirror markets, not beat them.

Five startups join Investment Association’s rebranded FinTech scheme; Formerly known as Velocity, the buy-side trade group’s FinTech initiative has been renamed Engine.
Kiays Khalil – The Trade
Five startups have been chosen to participate in the Investment Association’s FinTech accelerator programme, following a rebrand of the initiative.

BNP Paribas teams up with BlackRock to bolster front-to-back offering; Agreement between custodian and asset manager will include BNP Paribas using Aladdin to perform middle-office outsourced services.
Jon Watkins – The Trade
BNP Paribas Securities Services and BlackRock have entered into a partnership via Aladdin Provider to deliver integrated end-to-end investment management capabilities to mutual clients.

High-Frequency Metrics Give a Better Picture of This Recession; Taking the pulse of the faltering U.S. economy requires more immediate data than the old standbys.
Eliza Winger, Tom Orik – Bloomberg
Traditional indicators are no match for this fast-paced, virus-induced recession, which is why Eliza Winger and Tom Orlik of Bloomberg Economics have assembled an alternative set of high-frequency metrics.

Zoom Backlash Widens With Daimler, Ericsson and BofA Curbs
Debby Wu, Vlad Savov, and Lananh Nguyen – Bloomberg
Teleconferencing app has rocketed in usage during the pandemic; Security concerns have put companies and countries off its use
Some of the world’s largest companies have advised against the use of Zoom Video Communications Inc.’s conferencing app, fueling a growing backlash against a service that shot to prominence during the Covid-19 pandemic.


Derivatives Exchange, FTX, Adds Oil Futures With Buffer to Protect Against Negative Prices; FTX launches oil future contracts following plummeting crude oil prices. According to the announcement, the new futures are structured to add an extra $100 as buffer on every contract to safeguard against negative settlement rates.
Lujan Odera – Bitcoinexchangeguide.com
Following the tanking of crude oil prices, FTX, a crypto derivatives exchange has now unveiled crude oil futures on their platform. This follows the oil market crash experienced earlier on April 20th as prices plummeted to below zero for the first time in history, analysts pointing to COVID-19 pandemic effects and Saudi-Russian price wars.

Crypto derivatives exchange FTX launches crude oil futures
Yogita Khatri – The Block
Crypto derivatives exchange FTX has rolled out crude oil futures, at a time when oil prices for May contract fell below zero for the first time in history earlier this week.

Libra’s Long Road From a Facebook Lab to the Global Stage: A Timeline
Nikhilesh De – Coindesk
What a long and winding two and half years it’s been for Libra, the digital currency project spawned by Facebook. For much of that time, all that was known about the social network’s ambitions for the cryptocurrency space was rumor and conjecture. The full scope of the project, unveiled in June 2019, exceeded most of this speculation – including the revelation that Facebook aimed to decentralize control of its creation, starting by handing it over to a governing council. But the Libra Association’s actions since have mostly been to scale back its hopes and try to address a largely hostile reaction to the project among the world’s governments.

Stablecoins Aren’t Inflating Crypto Market, Study Concludes
Zack Voell – Coindesk
Stablecoin issuances do not push up the price of bitcoin or other cryptocurrencies, according to research funded by University of California Berkeley’s Haas Blockchain Initiative. In their report, issued Friday, Richard Lyons, U.C. Berkley’s chief innovation and entrepreneurship officer, and Ganesh Viswanath-Natraj, assistant professor of finance at the Warwick Business School, found stablecoins serve as tools for investors to react to market movements and not as drivers of price inflation or collapse. Their analysis of trading data shows flows are consistent with investors using stablecoins as a store of value during periods of risk or price depreciation.

Binance launches social payments app ‘Bundle’ in Africa
Yogita Khatri – The Block
Crypto exchange Binance has rolled out a new social payments app called “Bundle.” Targeted at the African market, the app allows users to send and receive cash, as well as buy, sell and store cryptocurrencies. At launch, the supported fiat currency is Nigeria naira (NGN), and the supported cryptocurrencies are bitcoin (BTC), ether (ETH) and Binance coin (BNB).

dYdX’s Crypto Loans Hit $1B as Traders Scramble to Capitalize on Coronavirus-led Volatility
Paddy Baker – Coindesk
Decentralized margin trading exchange dYdX has seen loan originations spike in recent months as traders borrowed digital assets to exploit volatile market conditions. The San Francisco-based project said Saturday it had lent more than a billion dollars worth of loans over the past 12 months. Until January, monthly volumes had been below $100 million, but a sudden spike in February and March, which together accounted for approximately $700 million, took dYdX’s 12-month volumes up past the billion-dollar threshold.

Jack Dorsey-backed token listing platform CoinList expands to DeFi
Celia Wan – The Block
CoinList, a token listing platform backed by Twitter CEO Jack Dorsey and Polychain Capital, has quietly moved into the Decentralized Finance (DeFi) market. The San Francisco-based firm said it has been helping institutions acquire wBTC – an ERC20 token pegged one-to-one by bitcoin – since February, and has minted 25% of the total wBTC supply so far.

Cryptocurrency in Focus: Decentraland and Binance Join Forces Against Covid-19
Flipside Crypto – The Street
Two crypto companies are proving that when you go virtual, you can do good for those fighting the Covid-19 pandemic on the frontlines while also living a somewhat normal — yet virtual — life under lockdown. We’re talking about Decentraland and Binance, who have both joined forces to raise funds for Covid-19 relief.

Starbucks, McDonald’s Among 19 Firms to Test China’s Digital Yuan: Report
Wolfie Zhao – Coindesk
Starbucks and McDonald’s are reportedly among 19 restaurants and retail shops that will be involved in testing China’s central bank digital currency in the country’s Xiong’An new district. The Reformation and Development Commission of the Xiong’An district in Hebei province reportedly convened a meeting on Wednesday regarding the rollout of a pilot for China’s digital yuan initiative, a local news outlet reported on Thursday, citing a government document.

New App Lets Coronavirus-Hit Businesses Take Crypto Payments for Zoom Calls
Sebastian Sinclair – Coindesk
As the coronavirus pandemic makes it harder for businesses to rake in an income, a new app is offering users a way to earn cryptocurrency through the popular video conferencing software, Zoom. Called SmartSessions, the Ethereum-based crypto paywall developed by 2key New Economics allows firms and “solopreneurs” to take advantage of crypto payments when offering services through Zoom.

Ex-Deutsche Bank Veteran Shrugs Off Turmoil With Crypto Startup
Takashi Nakamichi and Takako Taniguchi – Bloomberg
Tokyo-based FXcoin to start Bitcoin trading services in May;; Wants to create swaps market for crypto assets to offer hedges
A former Deutsche Bank AG veteran’s Japanese cryptocurrency exchange is poised to start trading services just as Bitcoin shows signs of a recovery from coronavirus-fueled turmoil. More than two years after its foundation, FXcoin Ltd. plans to offer Bitcoin transactions on its platform from May, it said in a statement Thursday. The firm has recently begun accepting applications from customers who want to open accounts.

ZUBR’s Crypto Derivatives Platform Provides Faster Exchange Access via Avelacom
Trader’s Magazine (press release)
ZUBR, the arbitrage hub for digital asset derivatives, has selected Avelacom to provide low latency and resilient connectivity services across major cryptocurrency markets in Europe and APAC. Through Avelacom’s network, the ZUBR platform will be able to offer its clients direct connectivity to crypto exchanges, as well as the ability to easily scale its ecosystem and connect clients through AWS, Alibaba, Google and Microsoft Azure clouds to crypto exchanges in Dublin, Hong Kong, Tokyo and other places.

Most of China’s biggest banks are already using blockchains
Celia Wan – The Block
More than 70 financial services firms in China, including every state-owned bank and the biggest tech companies, are deploying blockchain-based financial applications. That’s according to the Industrial and Commercial Bank of China (ICBC), one of the nation’s largest state-owned banks. In a new white paper, the ICBC said Chinese banks are planning to use blockchains in areas like trade financing, supply chain management, settlement, digital invoices, and other applications.

China’s Rainy Season Is Coming. This Time Bitcoin Miners Aren’t Investing
Wolfie Zhao – Coindesk
Spring is usually a welcome time of year for bitcoin mining businesses in China. The upcoming rainy season brings excessive hydropower, making electricity cheap and mining more profitable … all else equal. This year, however, two key variables have changed, upending the calculus for operators of mining facilities and for miners themselves in the world’s hub for this activity.


Mnuchin Says ‘We Need to Spend What It Takes’ to Overcome Coronavirus Crisis
Treasury secretary emphasizes low interest rates, urgency of economic aid amid concerns over rising federal debt
Richard Rubin – WSJ
Treasury Secretary Steven Mnuchin said he is sensitive to concerns about rising federal debt but emphasized that low interest rates and the urgency of helping the economy during the coronavirus outbreak cut in the other direction.

‘Sadness’ and Disbelief From a World Missing American Leadership; The coronavirus pandemic is shaking bedrock assumptions about U.S. exceptionalism. This is perhaps the first global crisis in more than a century where no one is even looking for Washington to lead.
Katrin Bennhold – NY Times
As images of America’s overwhelmed hospital wards and snaking jobless lines have flickered across the world, people on the European side of the Atlantic are looking at the richest and most powerful nation in the world with disbelief.

Oil price rebound gathers pace as Trump stokes Iran tensions; Concerns over crude glut persist as coronavirus hits global demand
Hudson Lockett and Myles McCormick – FT
The rebound in oil prices gained momentum following this week’s mammoth sell-off as the prospect of renewed tensions in the Middle East and optimism over supply cuts helped offset fears of a collapse in global demand due to coronavirus.

Elizabeth Warren was made for this moment. Joe Biden should recognize that.
Helaine Olen – Washington Post
There’s little doubt the medical and economic catastrophe of the coronavirus pandemic will dominate the presidential race. On Wednesday, Axios published a Joe Biden campaign memo revealing his plan to make the case against President Trump, based on the president’s corrupt, inept and out-of-touch response to the coronavirus pandemic. The former vice president and presumptive Democratic nominee can strengthen his argument by selecting Sen. Elizabeth Warren (D-Mass.) as his vice president. There is no one better equipped than Warren to help make the case Republicans are largely responsible for both the mounting death toll and economic carnage of covid-19.


CTA Members: Amendments to NFA Compliance Rule 2-29 and related Interpretive Notice now effective
NFA Compliance Rule 2-29 and Interpretive Notice 9003 – NFA Compliance Rule 2-29: Communications with the Public and Promotional Material require, among other things, that past performance used in promotional material be presented net of all commission, fees and expenses. NFA recently amended these requirements to allow commodity trading advisor (CTA) Members that are also SEC registered investment advisers (RIA) to present past performance to eligible contract participants (ECP) on a gross basis in non-public, one-on-one presentations. To rely on this limited exception, a CTA Member/RIA must:

Statement of Commissioner Dan M. Berkovitz—Meeting of the Agricultural Advisory Committee on the COVID-19 Pandemic and Agricultural Commodity Markets
Thank you Mr. Chairman for convening this meeting of the CFTC’s Agricultural Advisory Committee. I am pleased to join you in your first meeting as sponsor of the Committee. I am also pleased to welcome Secretary of Agriculture Sonny Perdue. Commitment and cooperation among all levels and branches of government are critically important as our country seeks to overcome the COVID-19 pandemic and its economic consequences, including in the agricultural sector. We are meeting with the Secretary of Agriculture in this spirit today.

Opening Statement of Commissioner Brian Quintenz before the CFTC Agricultural Advisory Committee
Thank you Chairman Heath P. Tarbert for your leadership in convening today’s meeting of the Agricultural Advisory Committee (AAC). Given the ongoing, unprecedented volatility in the agricultural cash and futures markets, I am pleased that this Committee could come together today to share their insights regarding the liquidity, integrity, and accessibility of the futures markets with the Commission. America’s agricultural producers and growers tirelessly dedicate themselves to putting food on our kitchen tables while they, themselves, constantly struggle to ensure the solvency of their farms and ranches. The CFTC, along with the futures exchanges and market intermediaries, must work just as tirelessly to ensure that our futures markets remain a reliable, efficient hedging tool for them. I am honored to join this important conversation and look forward to when we can convene again in person.

Opening Statement of Chairman Heath P. Tarbert Before the April 22 Agricultural Advisory Committee Meeting
I am humbled to be the sponsor of the Agricultural Advisory Committee. The members of this committee and the industry groups that you are a part of have mobilized and risen to the challenge of feeding the nation during this COVID-19 (coronavirus) pandemic. During these unprecedented times, agriculture plays an essential and critical role in addressing our country’s most basic needs. I realize a lot of you and your members are struggling, but I want to say thank you on behalf of the CFTC for the important work you are doing. It is truly an honor to know you.

Proposed Rule Change to Amend FINRA Rule 8312 (FINRA BrokerCheck
Disclosure) to Allow the Dissemination of IAPD Information through BrokerCheck
Financial Industry Regulatory Authority, Inc. (“FINRA”) is filing with the Securities and Exchange Commission (“SEC” or “Commission”) a proposed rule change to amend FINRA Rule 8312 (FINRA BrokerCheck Disclosure) to allow the dissemination through BrokerCheck® of information already publicly disseminated through the SEC’s Investment Adviser Public Disclosure (“IAPD”) database about registered brokers who are, or were, licensed as investment adviser representatives. The proposed rule change also would make non-substantive, technical changes to FINRA Rule 8312.

ESAs consult on Environmental, Social and Governance disclosure rules
The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) have today issued a Consultation Paper seeking input on proposed environmental, social and governance (ESG) disclosure standards for financial market participants, advisers and products.

ASIC supports increased transparency in capital raisings
ASIC notes the Australian Securities Exchange’s (ASX) class waiver decision – Temporary Extra Placement Capacity dated 31 March 2020 and the further amendments to the Class Waiver dated 22 April 2020, as well as, the recent publication of the Compliance Update no 04/20. ASIC supports the enhanced disclosure requirements for placement allocations and Share Purchase Plans (SPP) that are being conducted by companies using the temporary emergency capital raising waiver announced by ASX on 31 March 2020.

Investing and Trading

Introducing Dynamic Investment Theory: An Innovative Approach to Investing
Leland B. Hevner, President, National Association of Online Investors (NAOI)
This is the second in a series of articles that show how the National Association of Online Investors (NAOI) is changing how investing works to better cope with modern market volatility. The first article entitled “A ‘Vaccine’ for Protecting Portfolio Value in Sick Markets” is found at this link.
Overview: In this article I show how the NAOI developed an alternative to Modern Portfolio Theory (MPT) for designing and managing investment portfolios. Called Dynamic Investment Theory (DIT), it creates market-sensitive investments and portfolios designed to thrive in today’s volatile markets.

Here’s how to invest in oil — but beware it’s a slippery business
Noah Manskar – NY Post
The oil market may look like a dollar-store clearance rack — but that doesn’t mean investors should buy up barrels like they’re out-of-season Easter candy. Rock-bottom prices have piqued the interest of would-be oil barons who furiously googled tips this week on how to bet on crude. They could usually do that through exchange-traded funds and oil company stocks because buying actual oil is expensive and complicated.

Market ructions test faith in classic portfolio mix; Investors are ‘at the mercy of the gods’ now bonds are behaving like equities
Robin Wigglesworth – FT
One of the basic rules of investment is coming unstuck, forcing some fund managers to rethink how they build their portfolios. For much of the past century, the building blocks of most investment portfolios have been a combination of riskier stocks and steadier, safer bonds. Like a see-saw, one typically rises if the other falls, smoothing returns and offering a hedge.

Julien Sevaux on lessons from European revolutions; Stanhope co-founder and Worms family heir says Warren Buffett and 1848 inspired his new venture
Siobhan Riding – FT
“Why would you invest at a time of unprecedented change and upheaval?” asks Julien Sevaux. The question posed by the Anglo-French financier will ring true to many market watchers in a week when US oil prices fell below zero for the first time in history and the coronavirus pandemic wreaked more havoc on asset prices and economies across the world.

The risk of a US double-dip depression is real; Reopening states to boost the economy despite the scientific evidence will do more damage than good
Edward Luce – FT
If you think one lockdown is painful enough, imagine a second. It is too soon to gauge the lasting impact of putting the US economy into a deep freeze for weeks. But it will be very hard for consumers and businesses to shake off a lingering sense of risk aversion. The shock of a second wave of sheltering-in-place would be orders of magnitude worse. Twice bitten, multiply shy. Given the choice, no self-preserving leader would take risks with the spectre of another outbreak later this year.

Rating agencies put 1,000 CLO slices on review for downgrade; Economic effects of coronavirus push up risks for leveraged loan investors
Joe Rennison – FT
Rating agencies have placed more than 1,000 slices of debt backed by leveraged loans on review for downgrades, anticipating that strains emerging from the global economic shutdown will damage Wall Street’s debt machine.

What an Oil ETF Has to Do With Plunging Oil Prices
Catherine Ngai and Katherine Greifeld – Bloomberg
The oil market is in disarray, a result of a coronavirus-led collapse in demand, surplus supply following a price war and a shortage of storage. Yet there have been plenty of people willing to bet on a rebound in basement-level crude prices, and for many retail investors the vehicle of choice has been an exchange-traded fund. However, those wagers via the biggest American ETF – – the U.S. Oil Fund, or USO – – have contributed to market mayhem and helped push crude prices below zero.

Harvard Professor Reaps 17,000% Return on Early Moderna Bet
Benjamin Stupples – Bloomberg
Timothy Springer a billionaire after shares of biotech surge; Moderna is among firms seeking to develop coronavirus vaccine
Timothy Springer thought his fortune was excessive, even before he became a billionaire. “I’ve had more than enough wealth for myself for some time,” Springer said in a 2018 interview. “I don’t feel I need more.” The Harvard University medical professor’s riches are much bigger now, thanks to his stake in Moderna Inc., the U.S. biotechnology firm attempting to develop a vaccine for the novel coronavirus. Shares in the Cambridge, Massachusetts-based company surged 152% this year through Wednesday, boosting Springer’s net worth to more than $1 billion, according to the Bloomberg Billionaires Index.

Oil Extends Recovery From Selloff But Concern Over Glut Lingers
Elizabeth Low and Alex Longley – Bloomberg
U.S. crude stockpiles rise to highest in almost three years; WTI futures jump 13% after swinging between gains and losses
Oil extended its recovery from Monday’s plunge below zero, but trading remains volatile with the market under intense pressure from a swelling global glut.

De Beers Slashes Diamond Production Forecasts
Thomas Biesheuvel – Bloomberg
The global diamond industry has been shut down by pandemic; Anglo cuts coal, iron ore and platinum production targets
Anglo American Plc will mine significantly fewer diamonds this year than it previously planned to, as the biggest supplier of the gems contends with a complete shutdown of the global supply chain.

As Carbon Recedes Due to Virus, Methane Will Likely Increase; With oil and gas companies putting off scheduled pipeline maintenance, early detection of leaks is more important than ever.
Vanessa Dezem – Bloomberg
The travel restrictions and economic unraveling triggered by the coronavirus have led to an unprecedented drop in carbon emissions worldwide. That may feel like a rare bit of silver lining—and yet climate advocates aren’t celebrating. Many are worried about an uptick in emissions of the lesser-known greenhouse gas: methane.

Weather Is Still the Wild Card in Global Food Supply
Agnieszka de Sousa – Bloomberg
Droughts looming across bread-basket regions of the world; Crop-damaging weather and the virus threatening global supply
The coronavirus pandemic is putting untold pressure on the supply chains that produce and transport the world’s food. Yet there’s one vital factor even harder to control than panic buying — the weather.

Think Oil Price Volatility Is Over? Think Again; There’s a bigger problem lurking in the market than the price of WTI.
David Fickling – Bloomberg
The best argument for taking a sanguine approach to oil prices collapsing into negative territory this week is that it’s strictly a local problem. As my colleague Matt Levine has written, once you unpack what “oil prices” means, the bizarro-world implications of negative pricing aren’t so mysterious. It’s common to talk about West Texas Intermediate crude oil priced at Cushing, Oklahoma as if it’s a proxy for the oil market as a whole, but that’s never been the case. The world’s twin oil supply and demand shocks have made the shortage of storage and pipeline capacity at that specific location so acute that producers are prepared to pay to get their place in the queue. That need not have wider implications.


Credit Suisse earnings boosted by tax windfall; Swiss bank benefits from rules to ease coronavirus impact on lenders but sees assets under management fall
Sam Jones – FT
Assets under management at Swiss bank Credit Suisse fell 9 per cent to SFr1.37tn in the first three months of the year, even as the lender reported its highest quarterly net income since 2015.

Credit Suisse boosts loan provisions sevenfold as coronavirus hits clients; Swiss bank’s CFO warns it is entering ‘worst economic crisis the world has seen since 1920s’
Stephen Morris and Sam Jones – FT
Credit Suisse reported a sevenfold increase in reserves for bad loans in the first quarter, as the Swiss bank became the latest global lender to brace for a wave of potential bankruptcies and defaults amid the coronavirus pandemic.

Credit Suisse Girds for Soured Loans as Profit Rises; Swiss bank sets aside $584 million to cover potential loan losses from global corporations and Swiss borrowers
Margot Patrick – WSJ
Credit Suisse Group AG CS 1.68% joined U.S. banks in sharply raising the cash it holds against potential losses from borrowers affected by the coronavirus shutdown, in the first report of first-quarter earnings by a major European bank.

Luckin Collapse Adds to Credit Suisse’s Asian Loan Losses
Cathy Chan and Patrick Winters – Bloomberg
Swiss bank on the hook for $100 million in soured loans; Mark-to-market credit losses offset gain in markets businesses
Credit Suisse Group AG was stung by the collapse of Luckin Coffee Inc. in China following an accounting scandal, which led to a five-fold increase in Asian loan-loss provisions.

Credit Suisse Warns Worst May Not Be Over After $1 Billion Hit
Patrick Winters and Marion Halftermeyer – Bloomberg
Bank says targets under pressure, may add to reserves; Says full impact of coronavirus still difficult to quantify
Credit Suisse Group AG signaled the worst may not be over after the bank set aside $1 billion to cover the impact of the coronavirus, the biggest such hit in more than a decade. Chief Executive Officer Thomas Gottstein said key profit targets and capital levels will be under pressure and the bank may need to put more cash to the side to cover bad loans or account for a drop in asset values. At the same time, it signaled that trying to predict the full impact on its business is still more art than science.


China’s US stock market flops raise governance concerns ; Companies suffer steep share-price falls while Luckin implosion highlights risks
Hudson Lockett – FT
A series of stock market flops by Chinese companies that have listed in the US has heightened concerns over standards of corporate governance, particularly in the wake of Luckin Coffee’s implosion last month. Shares in the 29 Chinese companies that listed on the New York Stock Exchange since the start of 2017 have fallen by an average of 16 per cent since they went public, according to Dealogic data. Non-Chinese companies listed on the exchange, meanwhile, are down less than 3 per cent over the same period.

Norway oil fund chief admits he ‘screwed up’ in flight scandal; Outgoing CEO sends apology to staff for taking paid trip from hedge fund boss set to replace him
Richard Milne – FT
The chief executive of Norway’s $1tn oil fund has admitted he “really screwed up” and damaged its reputation by accepting a paid flight by the hedge fund manager due to succeed him.

Japan Insurance Giant Targets Overseas Credit in ‘Severe’ Market
Chikako Mogi and Komaki Ito – Bloomberg
Nippon plans to boost yen bond holdings by 1 trillion yen; Plans to put a net 500 billion yen in foreign debt this fiscal
Japan’s biggest private life insurer plans to boost its positions in credit — and overseas securities in particular — this year as it copes with depressed Japanese government bond yields and paper losses on equity holdings.

Norway Oil Giant Slashes Dividend to Weather Oil-Market Crash
Mikael Holter – Bloomberg
Cuts payout for first quarter by 67% to 9 cents per share; Follows moves to halt buybacks, reduce investments and costs
Equinor ASA became the first major oil company to cut its dividend amid an historic market rout. The move by Norway’s biggest crude producer may be a signal of what’s to come from others in the industry, including Royal Dutch Shell Plc and Chevron Corp. They’ve already slashed investments and buybacks, but have so far steered clear of the dividends that shareholders are counting on.

CEO of World’s Biggest Wealth Fund Says He ‘Really Screwed Up’
Mikael Holter – Bloomberg
The outgoing chief executive of Norway’s $1 trillion sovereign wealth fund has apologized to his staff for straying from compliance rules and accepting a free flight from the hedge fund manager set to replace him. “I really screwed up,” Yngve Slyngstad wrote in an internal memo sent to employees in Norges Bank Investment Management on Thursday night and seen by Bloomberg. “It was lack of good judgment and a classic example of how not to be professional.”


Assets at Barclays’ Irish unit soar to EUR69bn in preparation for Brexit
Joe Brennan – Irish Times
Barclays Irish unit’s assets soared almost 450 per cent last year to EUR69 billion as it became the British banking giant’s European Union hub in preparation for Brexit, with the balance sheet growth driven largely by financial derivatives.

UK making ‘impossible demands’ over Europol database in EU talks
Philip Oltermann, Daniel Boffey – The Guardian
The British government is making impossible demands over access to Europol databases in the negotiations over the future relationship with the EU, according to a leaked assessment of the UK’s position drawn up by the German government.


Former Labradoodle breeder tapped to lead U.S. pandemic task force
Aram Roston and Marisa Taylor – Reuters
On January 21, the day the first U.S. case of coronavirus was reported, the secretary of the Department of Health and Human Services appeared on Fox News to report the latest on the disease as it ravaged China. Alex Azar, a 52-year-old lawyer and former drug industry executive, assured Americans the U.S. government was prepared.

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CME to permanently close most trading pits

CME to permanently close most trading pits

First Read $40,626/$300,000 (13.5%) Anonymous ++++ Hits & Takes John Lothian & JLN Staff Without fanfare or amplification from its executives, the CME Group shut the books on most -- but not all -- of its floor trading history Tuesday afternoon with the...

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