One of Chicago’s biggest high-speed trading firms makes a surprising move

Oct 14, 2020

First Read

Joe Sullivan’s Influence and Success
By John Lothian – John Lothian News

Joseph Sullivan’s life impacted so many others, including many or even most reading this newsletter, because of the successful launch he led of the first new securities exchange since the enactment of the 1934 act that created the U.S. Securities & Exchange Commission.

His work paved the way for the U.S. options industry by doing the heavy lifting of creating a new exchange, working with the SEC, which was unsure of the process for how to approve an exchange and somewhat skeptical of the guys from Chicago who were doing it.

One of the lives former Wall Street Journal reporter Sullivan influenced was that of William Brodsky, who would later become the chairman and CEO of the Chicago Board Options Exchange. Sullivan’s marketing of CBOE memberships for $10,000 a piece led the New York brokerage firm where Brodsky worked to buy one and Brodsky to become their approved compliance person.

During a slowdown in trading that was going to negatively impact his bonus at the time, Brodsky was encouraged to “do something” by his wife, he said. What he did helped determine his future career course, and it started with Joe Sullivan.

To read the rest of this commentary, go here.


Latest Cannabis License Lawsuit Pits Craft Growers v. the State of Illinois
By Suzanne Cosgrove – John Lothian News

Lawsuits related to stalled cannabis licenses are piling up in Illinois, with the latest suit filed Monday by the Illinois Craft Cannabis Association v. Gov. J.B. Pritzker, the State of Illinois and the Illinois Department of Agriculture. It is an attempt to force the state to issue overdue craft licenses and provide relief to craft cannabis grower, infuser and transporter applicants.

In a statement released Tuesday, the nonprofit ICCA said it met with state officials last week before filing the lawsuit, but the group was unable to determine when the state planned to issue licenses or if it would provide relief to applicants.

The craft licenses were expected to be issued July 1, 2020 by the Illinois Department of Agriculture, but on June 29 Gov. Pritzker issued an executive order that indefinitely suspended the deadline for awarding craft licenses, citing emergency actions related to the outbreak of COVID-19 and subsequent measures taken to address the outbreak of the virus.

To read the rest of this story, go here.


Hits & Takes
JLN Staff

The JLN GoFundMe campaign to support MarketsWiki Education and our general operations had additional contributions yesterday, including another donation by the famous “anonymous” donor. Or who knows. Also giving were Arthur Gary Flagler, Anna Watson, and George Stein. Gary Flagler is a longtime JLN friend who is bringing the message of the MexDer market to the U.S. after a long career at JP Morgan. Anna Watson is a former head of communications for the World Federation of Exchanges who now has her own communications shop called Watson Wordsmith. And George Stein is a trade surveillance professional at HSBC. Thank you to all of them, all who have given and all who will yet give.

Bank of America has consistently supported the SGX’s Bull Charge charity effort over the years and is a Gold Bull Sponsor this year. They are to be lauded for their consistent support for this charitable effort.

The Harvard Business Review has an article titled “Finding Virtue in the Finance Industry” by JC de Swaan. I find lots of virtue in the industry every day. It is full of amazing people filled with virtue, integrity and grace.

As part of the OCC’s ongoing commitment to diversity and inclusion, OCC is a sponsor of Hispanic Alliance for Career Enhancement (HACE), an organization that supports the professional development of Latinx people.

If you have not watched the Chris Hehmeyer, Open Outcry Traders History Project video yet, you should. It is full of stories from the earliest days of financial futures trading at the CBOT and Hehmeyer tells the stories well.

Today, we have another Open Outcry Traders History Project video, this one of David Johnson, formerly of Morgan Stanley. Like Bill Brodsky, Johnson was attracted to Chicago’s options market, and once he came to Chicago he never left. Johnson saw the tremendous growth of the options markets and the need for electronics to help manage all the risk. He was also on the original Globex committee.

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


The FIA on Tuesday announced a new board chair, vice chair and new board members.
The board of directors elected Nicholas Rustad of J.P. Morgan Securities as chair and Alicia Crighton of Goldman Sachs as vice chair of the FIA Board of Directors. Rustad had been serving as the board’s vice chair and served as interim chair following the retirement of Citi’s Jerome Kemp earlier this year. Crighton has served on the board since 2018 and has been active in the board’s diversity initiative. You can go here for the complete list of the FIA’s board of directors.~SR


David Johnson – Open Outcry Traders History Project

David Johnson was trading OTC stocks and options for Pershing in 1970. He was in the right place at the right time when the CBOT decided to launch an options exchange. He came to Chicago in 1974 from New York and never left. He saw the immense growth of the CBOE and the options business, but dealt with the tough times, including the stock markets crash of 1987. He experienced the growth that ultimately demanded technology to manage the risk. He was always a proponent of technology. He joined Morgan Stanley in 1982. He served on the original Globex Committee at the CME with Leo Melamed and John Geldermann.

Watch the video »



FIA Announces New Board Chair, Vice Chair And New Board Members
FIA today announced that the Board of Directors have elected Nicholas Rustad of J.P. Morgan Securities as Chair and Alicia Crighton of Goldman Sachs as Vice Chair of the FIA Board of Directors. Rustad had been serving as the Board’s Vice Chair and served as interim Chair following the retirement of Citi’s Jerome Kemp earlier this year. Crighton has served on the Board of Directors since 2018 and has been active in the Board’s diversity initiative. In addition, the board of directors elected Christopher Perkins of Citi and Gary Saunders of Barclays to FIA’s governing board.

****Thank you to Jerome Kemp for his service.~JJL


Joseph Sullivan, CBOE founder who ‘changed the face of American finance,’ dies at 82
Robert Channick – Chicago Tribune
When Joseph Sullivan joined the Chicago Board of Trade in the late 1960s, he was a finance industry novice put in charge of a moonshot project to create the first marketplace for trading listed stock options.

*****Good to see the Chicago Tribune cover the industry.~JJL


Countries Start Hoarding Food as Prices Rise and Covid Worsens
Isis Almeida and Dan Murtaugh – Bloomberg
Jordan, Pakistan and Egypt among countries to boost purchases; Pandemic stokes fears of supply disruption, empty shelves
Agricultural commodity buyers from Cairo to Islamabad have been on a shopping spree since the Covid-19 pandemic upended supply chains. Jordan has built up record wheat reserves while Egypt, the world’s top buyer of the grain, took the unusual step of tapping international markets during its local harvest and has boosted purchases by more than 50% since April. Taiwan said it will boost strategic food stockpiles and China has been buying to feed its growing hog herd.

*****Anyone see someone with a colorful cloak around lately?~JJL


People with poor numerical literacy ‘more susceptible’ to Covid-19 ‘fake news’
Natalie Grover – The Guardian
People with poor numerical literacy are more likely to believe Covid-19 misinformation, according to a survey conducted in five countries.
Researchers at Cambridge University said the findings suggested improving people’s analytical skills could help turn the tide against an epidemic of “fake news” surrounding the health crisis.

****This is for all of those people who sat in math class and told themselves, “I’ll never need to use this.” ~JB


Goldman Sachs’s ‘Womenomics’ Stocks Outperform
Ksenia Galouchko – Bloomberg
Gender pay gap in Europe’s major nations smaller than in U.S.; Goldman’s basket of European stocks includes LVMH, Nestle
Companies with a higher presence of female executives have historically rewarded their equity investors with better performance, said Goldman Sachs Group Inc. strategists as they unveiled a basket of European firms that employ an elevated number of women.

*****When will the world wake up? We need to give all people the chance to realize their potential to help the world.~JJL


Tuesday’s Top Three
Our top story Tuesday was A Dose of Optimism, as the Pandemic Rages On, from The New York Times. Second was the Financial Times’s Winning bid: how auction theory took the Nobel memorial prize in economics. Third was The Trade’s Cboe mourns the death of first president and founder, about Joseph Sullivan, who was also the MarketsWiki Page of the Day yesterday.


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Lead Stories

One of Chicago’s biggest high-speed trading firms makes a surprising move; Trader Don Wilson built a secretive trading empire with DRW over the past 25 years. Now his company aims to add CME Group clearing privileges.
Lynne Marek – Crain’s Chicago Business
DRW Execution Services, a unit of Chicago trading mogul Don Wilson’s DRW Holdings, has applied to become a clearing member at futures exchange operator CME Group. The DRW unit applied for clearing member status last month, but hasn’t yet been added to the published list of firms on CME’s website. The notice invites members to pass along any information regarding the firm to the clearing house risk committee, suggesting there is a review process.

Digital Thieves Are Hacking Brokerage Accounts: Is Your Money Safe? Some Robinhood customers say their money was looted, suggesting online stock trading may be less secure than investors hoped.
Charlie Wells, Annie Massa, and Sophie Alexander – Bloomberg
It feels as easy as it does safe. With a few swipes of the thumb, investors anywhere can trade stocks straight from their mobile phones, identifying themselves with the unique biometric data stored in their fingerprints or faces. But an expanding pool of consumer complaints suggests that online trading, which has soared in popularity during the Covid-19 pandemic, may be less secure than investors would hope. Bloomberg News reported last week on the experience of some users on Robinhood Markets Inc.’s brokerage app who say their money was stolen.

Does Gold Protect Your Investment Portfolio? Think Again; After falling alongside stocks amid March’s market panic and again last month, the metal might continue to move with shares for some time
James Mackintosh – WSJ
There is no asset that prompts more emotional reactions than gold, so I really shouldn’t have dismissed its role in a modern investment portfolio with a mere throwaway line in a recent column. I pointed out that gold had been a hopeless hedge last month and warned that it was likely to continue moving in the same direction as stocks, making it ineffective as a way to protect against share-price losses.

CFTC releases no-action letters offering further relief for clearing organisations during Libor transition; The two no-action letters will offer swap transaction and pricing data reporting relief to clearing organisations transitioning to SOFR.
Annabel Smith – The Trade
The Commodity Futures Trading Commission (CFTC) has published two additional no-action letters offering relief to derivatives clearing organisations (DCOs) transitioning to the secured overnight financing rate (SOFR). The no-action letters will offer swap transaction and pricing data reporting relief to DCOs that will help transition certain cleared swaps from discounting using the effective federal funds rate (EFFR) to the SOFR.

Japan firms fall woefully short of meeting government goals on women in management: Reuters poll
Tetsushi Kajimoto – Reuters
About one-fifth of Japanese companies have no female managers and most say women account for less than 10% of management, a Reuters monthly poll found, highlighting the struggle for the government’s “womenomics” drive to make headway.

Invesco to Launch Four New Funds Tied to Flagship QQQ Tech ETF; New products include a QQQ mutual fund for retirement accounts and a lower cost version of QQQ
Michael Wursthorn – WSJ
Invesco Ltd. IVZ 3.21% is adding more Qs to its fund lineup, a wager by the world’s fourth-biggest issuer of exchange-traded products that investors’ love affair with technology stocks will continue. The Atlanta-based asset manager will launch four new investment products tied to its flagship ETF, the Invesco QQQ Trust fund. At $134 billion, the Qs, as it is known across Wall Street, has grown to become one of the biggest exchange-traded products in the world and accounts for roughly 42% of Invesco’s ETF assets.

China’s stock market value hits record high of more than $10tn; Equities boosted by strength of country’s economic recovery following coronavirus
Hudson Lockett – FT
The total value of China’s stock market has climbed to a record high of more than $10tn, as the country’s accelerating economic recovery propelled it past the previous peak hit during an equities bubble five years ago.

An Unpopular IPO Rule Hands Chinese Banks Big Windfalls; Forced to buy stocks in companies they take public on Shanghai’s STAR market, banks have made hundreds of millions of dollars in gains
Xie Yu – WSJ
When China rolled out its own Nasdaq-style listings venue last year, the country’s regulators forced investment banks to buy stocks in the companies they took public. That unusual requirement for banks to eat their own cooking is now paying off big time. In a measure meant to ensure underwriters brought good deals to market at fair prices, authorities required the most senior institutions on any deal on Shanghai’s Science and Technology Innovation Board, also known as the STAR market, to take part themselves. These banks, known as sponsors, must buy between 2% and 5% of the shares sold, up to a maximum of about $147 million, and then hold the stock for at least two years.

Manhattan Emptied Out During the Pandemic. But Big Tech Is Moving In; The four companies known as Big Tech — Amazon, Apple, Facebook and Google — now have more than 22,000 employees in the city, with thousands added just this year.
Matthew Haag – NY Times
Facebook has just leased enough new office space in Manhattan to nearly triple its current local work force, including at one of the city’s most iconic buildings, the 107-year-old former main post office complex near Pennsylvania Station.

Jefferies puts maximum exposure to loss due to involvement with FXCM at $136.8m
Maria Nikolova –
Jefferies puts maximum exposure to loss due to involvement with FXCM at $136.8m
Investment bank and financial services firm Jefferies Financial Group Inc (NYSE:JEF) has posted its 10-Q filing for the quarter to end-August 2020 with the Securities and Exchange Commission (SEC). The document reveals Jefferies’ assessment of the impact of its involvement with provider of online Forex trading services FXCM Group, LLC.

Citigroup Needs to Spend Money to Make Money; The bank has a lot of big tasks ahead as it seeks to get out of Washington’s penalty box
By Telis Demos – WSJ
Citigroup C -4.80% had a big quarter on Wall Street, and credit costs were much lower. But that probably didn’t matter to many investors. Instead, many Citi shareholders are focused on the bank’s regulatory woes. Beyond the $400 million penalty imposed by regulators last week, it is not yet clear how much it will cost to resolve the consent order the bank is now operating under. Among other things, the bank will need to invest substantially more in data infrastructure to help its risk management. Dealing with Washington can be costly in general, but technology upgrades at banks can be particularly drawn-out. Before the fine, Citigroup had already disclosed $1 billion in new technology investment for this year, but it hasn’t given specific further figures tied to the consent order.

Jessica Kane Named Director of Division of Corporation Finance’s Disclosure Review Program
The Securities and Exchange Commission today announced that Jessica S. Kane has been named Director of the Division of Corporation Finance’s Disclosure Review Program.

Larry Fink Wants Future With Just 50% of Workers in Offices
By Annie Massa and Francine Lacqua – Bloomberg
BlackRock Inc. Chief Executive Officer Larry Fink said the world could be a lot greener if office buildings never reached their full capacity again. If just half of workers returned to offices, traffic in cities would be eased and employees’ quality of life would be improved, Fink said Tuesday during an International Monetary Fund virtual event hosted by Bloomberg Television.

Citi’s Corbat Asked to Prove His Bank Isn’t the Next Wells Fargo
By Jennifer Surane – Bloomberg
CEO also faces calls to move up retirement on contentious call; Lender is embarking on costly effort to clean up its systems
A public slap from regulators, new limits on dealmaking and a surprise handover of the CEO reins all made for plenty to talk about on Citigroup Inc.’s earnings call. The recent swirl of news surrounding the bank has investors and analysts feeling anxious. It’s even led to a bit of deja vu, with the worry that Citigroup is in for a round of regulatory oversight similar to what rival Wells Fargo & Co. has spent years trying to work through, with a Federal Reserve-imposed asset cap that’s caused the company to miss out on at least $4 billion in profits.

JPMorgan, Citi See an Economic Grind Rather Than a Spiral
By Michelle F Davis and Jennifer Surane – Bloomberg
Loan-loss provisions were less than half what analysts foresaw; Still, bank executives see a long road ahead for the economy
Two of the biggest U.S. banks are gaining confidence that the pandemic won’t send the economy into a calamitous slide, even if they see a long path back to growth. JPMorgan Chase & Co. and Citigroup Inc. set aside just $2.87 billion for loan losses in the third quarter, less than half what analysts expected and even lower than the charge-offs they had this period, in part because they’d already been aggressive in beefing up their reserves in the first half of the year. The lenders said they’ve been encouraged as consumers have been quick to pay down their credit-card bills and corporate borrowers have repaid the revolving credit lines they tapped at the start of the lockdowns.


Trump Covid adviser Scott Atlas pushes herd immunity; White House team member wants to protect vulnerable while letting virus run its course
Kiran Stacey – FT
While Donald Trump is on the campaign trail, his administration’s coronavirus policy is increasingly being shaped by Scott Atlas, a neuroradiologist who has been championing a new version of the controversial “herd immunity” strategy. The US president appointed Dr Atlas to his coronavirus task force earlier this year, and his voice has become increasingly prominent in recent weeks as other members have been sidelined.

Two Covid-19 drug trials halted on safety concerns; Johnson & Johnson and Eli Lilly announce pauses in blow to hopes for pandemic remedy
Donato Paolo Mancini and Kiran Stacey – FT
Safety concerns prompted two big US pharmaceutical companies to halt trials of experimental Covid-19 drugs, dealing a blow to hopes for a medical intervention to stop the pandemic.

UK forced to update contact tracing app after ‘ghost’ alerts; Disappearing messages led to confusion among users about the need to self-isolate
Siddharth Venkataramakrishnan – FT
The UK government has been forced to update the NHS Covid-19 contact tracing app after users complained about receiving confusing messages about “possible exposure” to the virus.

Many Trump supporters unruffled about Covid even as US cases rise; President’s backers say his quick recovery is further proof that coronavirus risk is overblown
Kiran Stacey, Patti Waldmeir and Peter Wells – FT
Ardis Cerny does not wear a face mask, even though she is 71 and living in a coronavirus hotspot. Nor do her 90-year-old neighbours. Like some other Republicans, Ms Cerny believes the risk from the virus has been overplayed by a liberal establishment determined either to damage Donald Trump or scare his voters.

Northern Ireland unveils new curbs as Covid tests political consensus; Measures to include closure of most hospitality outlets and extension of school half-term break
Arthur Beesley – FT
Northern Ireland’s devolved government on Wednesday imposed a series of tougher coronavirus restrictions as a surge in infection rates in the region piles pressure on its divided political leaders.

In England, Shifting Virus Rules Close Doors One Day and Open Them the Next; In a country where pubs can welcome customers but open-air stadiums cannot, the incoherence of government regulations is on full display in soccer.
Rory Smith – NY Times
There were two soccer games played over the weekend at Hayes Lane, a neat, compact stadium in a quiet corner of southeast London. The first, on Saturday afternoon, played out in the pin-drop silence that characterizes sports amid the pandemic. Just as they are in the Premier League, fans were barred from attending when Bromley F.C. — the team that owns the place — faced Torquay United in English soccer’s fifth tier.

On the Hunt for Office Space, Companies Stay Low to the Ground; Groundscrapers have been considered less exalted than their soaring brethren, but their ability to house an entire company on a single floor has made them more desirable in the pandemic.
Jane Margolies – NY Times
The skyscraper, the iconic urban office tower, still captivates by offering jaw-dropping views and the thrill of hovering in the clouds. But the skyscraper’s opposite — a building as horizontal as a skyscraper is vertical — has been grabbing attention: Make way for the groundscraper.

Exchanges, OTC and Clearing

HydrogenPro admitted to trading
The cleantech company HydrogenPro has today been admitted to trading on Merkur Market (ticker code: HYPRO-ME). HydrogenPro provide customised turn-key plants for large-scale production of green hydrogen to global industrial clients.

New CRM puts Eurex at the leading edge; The latest stage of Deutsche Börse’s implementation of its SAP Roadmap involves a new CRM for Eurex, the Eurex Sales Cloud. This will bring a range of benefits for both colleagues and clients.
The Eurex Sales Cloud will help the relevant teams at Eurex monitor and steer client interactions, reducing the burden of, for example, reporting obligations and allowing us to focus on what matters the most: our clients. A range of product design and sales processes will now be automated and the user experience for colleagues greatly enhanced. Furthermore, the new system is highly customizable, allowing colleagues to choose to only receive the information they really need and adapt the available tools to their own requirements.

Newcrest Begins Trading on Toronto Stock Exchange; Australia’s largest gold producer celebrates new listing on TSX with virtual market open
Toronto Stock Exchange (TSX) announced today that Newcrest Mining Limited (Newcrest), Australia’s largest gold producer, began trading this morning under the symbol TSX:NCM. Newcrest is one of the world’s leading gold producers and becomes one of the largest companies that trades on TSX by market capitalization.

Invesco Launches New QQQ Innovation Suite in Partnership with Nasdaq; New products offer all investors access to NASDAQ-100 Index and NASDAQ Next Generation 100 Index
Invesco Ltd. (NYSE: IVZ) today announced the launch of the Invesco QQQ Innovation Suite, which offers investors access to the NASDAQ-100® Index and NASDAQ Next Generation 100 Index® through a variety of investment structures and exposures. The Invesco QQQ Innovation Suite represents the next step in the continued democratization of investing. It advances the growing concept that innovation in investing continues to drive benefits to the end investor, not just through direct cost-savings, but in the personalization of the investment model. The Invesco QQQ Innovation Suite meets all clients’ implementation preferences, providing every type of investor a simple way to invest in ingenuity and innovation.

Performance Bond Requirements: Agriculture Margins – Effective October 14, 2020
CME Group
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.

Transition to SOFR Price Alignment and Discounting for U.S. Dollar OTC IRS Products
CME Group
On October 13, 2020 the Commodity Futures Trading Commission (“CFTC”) approved CME’s rules and procedure for transitioning to SOFR PA/discounting set out in this Advisory Notice pursuant to section 5c(c)(5) of the Commodity Exchange Act and Commission Regulation 40.5. The rules set out in this Advisory Notice will be effective from October 16, 2020.

Increase in maximum precision of Eurodollar and SOFR strike prices Associated changes to strike price formats to four decimal places Change confirmed for Monday November 23, 2020
CME Group
This advisory updates and supersedes previously published clearing advisories 20-371 and 20-384. We have received confirmation from certain clearing firms and software providers, which had requested additional time to test, that their systems will be able to handle this change.


Turkish fintech company rolls out text message payments; Payguru offers service for millions of customers who do not have a bank account
Laura Pitel – FT
When bus passengers in the Turkish city of Kahramanmaras wanted to replenish their travel cards remotely in years past, they had only one option: use a credit card to top up online.

Fintech wins when bank stocks go down, Jim Cramer says
Tyler Clifford – CNBC
When money flows out of the financial stocks, the financial technology segment of the market draws interest from amateur buyers, who place bets on their stocks, CNBC’s Jim Cramer said Tuesday.

Fintech partnerships help TD weather the pandemic
Penny Crosman – American Banker
Like most banks, TD Bank Group has seen customers’ usage of its digital channels grow during the pandemic. But because of pre-existing experiments with fintech partners, the Toronto-based bank was relatvely well positioned to take advantage of the shift in consumer preferences.


‘DeFi’ Replaces ‘Blockchain’ as the Must-Have Crypto Moniker
Olga Kharif – Bloomberg
Tron, EOS, other coins announce they are part of DeFi movement; Rebranding efforts are prompting a surge in token prices
Remember when Long Island Ice Tea Corp. sent its shares soaring by reinventing itself as a crypto company before crashing and burning? Well, it’s happening again in the digital-asset sphere, but instead of adding “blockchain” to a name, DeFi is the moniker of choice.

Coinbase’s chief compliance officer is set to leave the firm
Frank Chaparro – The Block
Coinbase’s chief compliance officer Jeff Horowitz is set to exit the cryptocurrency exchange, according to several people familiar with the personnel move. Horowitz, whose career in financial services compliance spanned firms like Lehman Brothers and Citigroup, joined Coinbase in 2018. As the firm’s first CCO, he played a role in shaping Coinbase’s anti-money laundering policies as well as its compliance with recommendations from the Financial Action Task Force (FATF). He also played “a big part” in onboarding JPMorgan as a banking partner for the cryptocurrency exchange, according to a source.

Will a Sharded Ethereum Be Flexible Enough for Decentralized Finance?
Brady Dale – Coindesk
“Money legos” might be an apt metaphor for what decentralized finance (DeFi) does, but since the summer another one has applied: jackpot. Money legos is the term used to describe the way Ethereum allows different financial services to be plugged into each other, also known as composability. That used to be mostly a buzzword, but over the past year composability has become a very real competitive advantage for DeFi. Mixing and matching smart contracts on the fly has proven incredibly valuable.

Chainalysis Doubles Q3 Revenues, Grows Team with New Hires
Aziz Abdel-Qader – Finance Magnates
Blockchain intelligence platform, Chainalysis said it has grown the number of its customers by 65 percent over a yearly basis thanks to higher demand on its investigative technology from public sector agencies. The New York-based crypto compliance startup also stated that it had doubled its quarterly revenues during the July-September period. Chainalysis has recently onboarded the Wyoming’s Division of Banking, the banking regulator responsible for the chartering and supervision of state banks, to help the regulator combat money laundering, sanctions violations, and other criminal activities that use digital assets.

Bank of Russia Seek Limit on Amount of Digital Assets Retail Investors Can Buy
Anna Baydakova – Coindesk
Bank of Russia published several regulation proposals clarifying how it will be regulating the digital assets in the country. Russia has already passed a law about the issuance of digital securities, which includes cryptocurrencies. Most notable, the Russian central bank wants to limit the amount of digital assets non-qualified investors can buy in a year.

Around 100 Italian banks are now part of a permissioned blockchain network developed by R3
Ryan Weeks – The Block
A cohort of 42 Italian banks has signed up to use a private blockchain network known as Spunta, bringing the total number now using the payment infrastructure to around 100. Spunta, which is based on R3’s permissioned blockchain platform, Corda, is an interbank reconciliation system. The network verifies the matching of correspondent accounts, which banks maintain in order to pay each other. In Italy, the process has historically been carried out in the back office via cumbersome means. In theory, distributed ledger technology can simplify the process by allowing for the automatic detection of non-matching transactions and giving all network participants a comprehensive view of their transaction history.

Government agencies help Chainalysis double its recurring revenue in Q3
Yogita Khatri – The Block
Blockchain analytics firm Chainalysis says that its recurring revenue grew 100% year-over-year in the third quarter of 2020, largely thanks to demand from government agencies for its solutions. Chainalysis did not share dollar figures. But the firm told The Block that the growth in annual recurring revenue — the kind of revenue that a company expects it will continue to generate in the future — from public sector customers increased 170% year-over-year and 32% quarter-over-quarter in the third quarter of this year. Overall, the firm’s customers grew by 65% in the third quarter, it said, though it did not reveal a specific headcount. Chainalysis has become known as a go-to analytics service for federal agencies. The firm’s platform has been used in a number of recent high-profile law enforcement cases.

WEF Releases Report Assessing Global Blockchain Standards
Sebastian Sinclair – Coindesk
The World Economic Forum has teamed up with the Global Blockchain Business Council, an advocacy group, to assess the current state of blockchain technology. The Global Standards Mapping Initiative (GSMI), released Wednesday, is the most “comprehensive” attempt so far to survey blockchain technical standards, according to the organizations. The GSMI mapped data from over 30 technical standard-setting entities, 185 jurisdictions, and almost 400 industry groups.

In Effort to Differentiate, Litecoin Makes a Move to Privacy
Daniel Cawrey – Coindesk
Litecoin (LTC), a nine-year-old cryptocurrency whose price returns have chronically underperformed the bigger and better-known bitcoin in recent years, is hitching its wagon to a new star: privacy. The blockchain industry subsector of “privacy coins” – cryptocurrencies with embedded technology that shields identifying information from public view – is becoming one of this year’s hottest buys. One of the biggest privacy coins, zcash (ZEC), which offers “shielded transaction” capabilities, has nearly tripled so far in 2020, while monero (XMR), which uses a technique called “ring signatures” to obscure sender and receiver data, has doubled.

Australian Central Bank Sees ‘No Strong Public Policy Case’ for CBDC
Nikhilesh De – Coindesk
The Australian central bank sees no need to issue its own retail digital currency just yet, a top official said Wednesday. Tony Richards, head of payments policy at the Reserve Bank of Australia (RBA), told the UWA Blockchain, Cryptocurrency and Fintech conference that his agency had evaluated retail central bank digital currencies (CBDCs) and found “no strong public policy case” for introducing a general use version of the Australian dollar. “Even though the use of cash for transactions is declining, cash is still widely available and accepted as a means of payment,” he said.

Fidelity makes it clear: Bitcoin volatility is worth the risk for institutions; A new report shares a number of notably bullish sentiments with regard to Bitcoin and the larger crypto industry.
In a recently released report titled Bitcoin Investment Thesis, Fidelity Digital Assets demonstrated how portfolio managers could increase their returns by allocating a portion of their holdings to Bitcoin (BTC). The report also speculated that in the near future, increased institutional interest could expand Bitcoin’s market capitalization by hundreds of billions of dollars.

JPMorgan Calls Square’s $50M Bitcoin Investment ‘Strong Vote of Confidence’ for the Cryptocurrency
Kevin Reynolds – Coindesk
JPMorgan Calls Square’s $50M Bitcoin Investment ‘Strong Vote of Confidence’ for the Cryptocurrency
Square’s recently announced $50 million investment in bitcoin (BTC) is a “strong vote of confidence for the future of bitcoin” and a signal the payments company sees “a lot of potential” for the cryptocurrency as an asset, JPMorgan analysts said in a report dated Tuesday.

Prime Trust and Bittrex Integration Enables Liquidity for Corporate and Institutional Customers; New API enhancement offers traders capital efficiency, ease of use and speed of transfer
Prime Trust
Prime Trust, the innovative open-banking financial solutions provider, announced today that the institution has integrated Bittrex, a leading U.S.-based blockchain technology and cryptocurrency exchange, into its system to allow traders to move fiat on the exchange in real time and on a limitless basis.


California Republican Party Admits It Placed Misleading Ballot Boxes Around State
Government officials say the receptacles are illegal and could lead to voter fraud, but the party says it will continue the practice.
Glenn Thrush and Jennifer Medina – The New York Times
The California Republican Party has admitted responsibility for placing more than 50 deceptively labeled “official” drop boxes for mail-in ballots in Los Angeles, Fresno and Orange Counties — an action that state officials said was illegal and could lead to voter fraud.

Morgan Stanley Suggests Investors Focus on Race for U.S. Senate
Joanna Ossinger – Bloomberg
Zezas says Senate race likely key to outlook for fiscal policy; Democratic sweep pressuring stocks may be buying opportunity
Investors should focus on the Senate race in the U.S. election since that contest is likely key for the fiscal policy outlook, Morgan Stanley said, adding that a Democratic sweep may create a buying opportunity by sparking a temporary drop in stocks. If Joe Biden wins the presidency, “control of the Senate will mean the difference between substantial fiscal expansion and fiscal gridlock, which would challenge some of our colleagues’ more bullish views on risk assets,” strategists including Michael Zezas and Ariana Salvatore wrote in a note.

Supreme Court Allows Trump Administration to End Census Count Early; Civil-rights groups, cities said ending count early would lead to undercount of some Americans
Jess Bravin and Paul Overberg – WSJ
The Supreme Court on Tuesday approved Trump administration plans to end the 2020 census before a Oct. 31 deadline, suspending lower court orders requiring the decennial count to continue according to a schedule announced in April. The eight-member court gave no reasons for its unsigned order, which was issued over the dissent of Justice Sonia Sotomayor.

China Got Better. We Got Sicker. Thanks, Trump; With a different leader, the United States could have contained the coronavirus.
Thomas L. Friedman – NY Times
As I watched the first Trump-Biden debate, a vision popped into my head. I imagined that the Politburo of the Chinese Communist Party had also gathered to watch the debate — but its members decided to make it more entertaining by playing a drinking game. Every time Donald Trump said something ridiculous or embarrassing for America, each Politburo member had to down a shot of whiskey. Within a half-hour, all 25 members were stone-cold drunk.

Riled Up: Misinformation Stokes Calls for Violence on Election Day; Baseless claims are circulating online about a Democrat-led coup, inflaming tensions in an already turbulent election season.
Davey Alba – NY Times
In a video posted to Facebook on Sept. 14, Dan Bongino, a popular right-wing commentator and radio host, declared that Democrats were planning a coup against President Trump on Election Day. For just over 11 minutes, Mr. Bongino talked about how bipartisan election experts who had met in June to plan for what might happen after people vote were actually holding exercises for such a coup. To support his baseless claim, he twisted the group’s words to fit his meaning.

Petition Targeting Murdoch Swamps Australian Parliament’s Website; More than 200,000 people signed a petition drawn up by a former prime minister calling for an examination of Rupert Murdoch’s media empire in Australia.
Isabella Kwai – NY Times
Most Australians would probably not choose to spend their weekends browsing Parliament’s website. But a petition calling for a public inquiry into Rupert Murdoch’s media empire in Australia, posted by a former prime minister, generated so much interest over the weekend that it overwhelmed the website’s cyberdefenses and shut down access to the document.

U.S. TV news networks aim for credibility, not speed, on election night
By Helen Coster – Reuters
In preparing for election night, some top U.S. television news executives see a cautionary tale in a notorious November evening two decades ago.


FCA fines hedge fund £900,000 for not disclosing short selling; Asia Research and Capital Management failed to make required notifications, said regulator
Nathalie Thomas in Edinburgh and Matthew Vincent – FT
A Hong Kong hedge fund that built up a large short position in the North Sea energy group Premier Oil has been fined more than £870,000 by the UK regulator for hundreds of disclosure failures over more than two years.

ASIC suspends the AFS licence of Ballast Financial Management Pty Ltd
ASIC has suspended the Australian financial services (AFS) licence of Perth-based financial advice provider Ballast Financial Management Pty Ltd (Ballast) until 18 December 2020.

New Research: U.S. Investors Unfazed by Pandemic-Related Market Volatility; African American and Hispanic Investors Showed Greatest Increase in Interest in Investing
Despite dramatic market volatility related to the COVID-19 pandemic during early 2020, investor optimism about the stock market remained high, and one in five Americans indicated an increased interest in investing, according to a new research study by the FINRA Foundation and NORC at the University of Chicago. At the same time, low levels of investment knowledge underscore the need for additional investment education opportunities, especially among African Americans and Hispanics, the research shows.

2020 Ketchum Prize: The Financial Security of Americans with Disabilities
In the 30 years since the passage of the of the Americans with Disabilities Act, or ADA, there have been profound changes. But in this 30th Anniversary year, much remains to be done to advance the economic self-sufficiency of Americans with disabilities. Michael Morris’s research into and advocacy work around the financial security and capability of Americans with disabilities earned him the 2020 Ketchum Prize, the FINRA Foundation’s highest honor, which looks to recognizes outstanding service and research to advance investor protection and financial capability in the U.S.

Tamara Brightwell Named Deputy Director of Division of Corporation Finance’s Disclosure Review Program
The Securities and Exchange Commission today announced that Tamara M. Brightwell has been named Deputy Director of the Division of Corporation Finance’s Disclosure Review Program.

CFTC Staff Provides Reporting Relief for Swaps Related to Upcoming DCO Auctions as Part of the Industry-Wide Initiative to Transition Away from LIBOR
The Division of Market Oversight of the Commodity Futures Trading Commission today announced it has provided swap transaction and pricing data reporting relief to specific derivatives clearing organizations (DCOs) and market participants participating in upcoming DCO auctions that will help transition certain cleared swaps from discounting using the Effective Federal Funds Rate (EFFR) to the Secured Overnight Financing Rate (SOFR). This discounting transition is an essential part of the industry-wide initiative to transition from swaps that reference the London Interbank Offered Rate (LIBOR), and other interbank offered rates, to swaps that reference alternative benchmarks.

Federal Court Orders Affiliate Marketer to Pay More Than $13.8 Million for Binary Options Fraud
The Commodity Futures Trading Commission announced today that the U.S. District Court for the District of Hawaii entered an order of default judgment on September 14, 2020 finding that Peter Szatmari, formerly of Hawaii, fraudulently solicited U.S. residents to open binary options trading accounts. Szatmari is required to pay more than $13.8 million in connection with the fraud.

CFTC’s Energy and Environmental Markets Advisory Committee to Meet on October 16
Commissioner Dan M. Berkovitz, the sponsor of the Energy and Environmental Markets Advisory Committee (EEMAC) at the Commodity Futures Trading Commission, announced that the EEMAC will hold a public meeting on Friday, October 16, 2020 to hear remarks on the integration of environmental, social, and governance (ESG) factors within the energy and environmental markets. The meeting will begin at 9:00 a.m. (EDT) and be held via videoconference in accordance with the agency’s implementation of social distancing due to the COVID-19 (coronavirus) pandemic.

Investing and Trading

Pandemic Sets Off 6,700% Rally in One Stock
Konrad Krasuski – Bloomberg
Mercator Medical’s market value overtakes Commerzbank unit; Resurgence in Covid-19 cases drives latest gains for Mercator
The meteoric rise of a little-known Polish protective gloves maker provides one of the clearest examples of how the pandemic has changed the world for Warsaw equity investors. Mercator Medical SA’s shares soared more than 30 times back in the Polish spring as the first wave of Covid-19 infections spurred explosive demand for its products and boosted its sales. Now, as infection rates jump in a resurgence of the illness, Mercator’s market value has doubled again. A 13% surge in the stock on Tuesday followed by a similar jump on Wednesday means it has risen by more than 7,000% this year, the best performance of companies listed in Warsaw’s main market.

Ant Group under scrutiny over exclusive sale of shares in IPO; Chinese company sold exposure via its mobile payments platform in deal with 5 funds
FT Reporters
China’s Ant Group, controlled by billionaire Jack Ma, is facing growing scrutiny for offering retail investors access to its $30bn share sale through an exclusive arrangement on its own mobile payments app.

Business Insider Parent Nears Deal to Buy Controlling Stake in Morning Brew; The startup, Morning Brew, has a popular email newsletter on business and finance
Benjamin Mullin – WSJ
Business Insider parent Insider Inc. is nearing a deal to acquire a controlling stake in Morning Brew, a news startup known for a popular email newsletter on business and finance, according to people familiar with the situation. The terms the companies are discussing would value Morning Brew at over $75 million, including certain performance incentives, the people said. The companies haven’t completed a deal, and the talks could still fall apart.

Airline Makes Real Money on Fake Flights; Industry’s new revenue-generating schemes mirror the desperation felt by cooped-up consumers
Jinjoo Lee – WSJ
Nothing brings to mind pleasure quite like the memory of bumping elbows with strangers while trying to carve up “chicken or beef” with plastic cutlery. At least, that’s what ticket holders to Singapore Airlines ‘ dining event seem to think. The airline is offering a chance for a meal on its “largest passenger aircraft,” the A380, for two weekends starting October 24 while parked on the tarmac. Don’t get your hopes up too much, though—all seats are sold out, though one can still join a wait list.

Delta Can’t Avoid Shrinking-Airline Syndrome; The carrier announced a fresh round of cutbacks to its fleet, signaling even more pain ahead for plane manufacturers and their suppliers.
By Brooke Sutherland – Bloomberg
Delta Air Lines Inc. may be the best positioned of the U.S. carriers to weather the pandemic slump in air travel, given its relatively strong balance sheet and historically top-tier operating performance. But even Delta sees reason for further cutbacks. It’s yet another reminder of just how painful the near-term trajectory is for the aerospace industry.

What Is Bad for Delta Is Worse for Other Airlines; Delta’s disappointing third-quarter results are a warning of what is to come, but could also be a buying opportunity
Jon Sindreu – WSJ
Unlike most companies, airlines seem set to disappoint investors this earnings season. It could offer a window of opportunity to pick out the best among them, though. On Tuesday, Delta Air Lines DAL -2.67% reported a $5.4 billion loss for the third quarter, compared with a profit of $1.5 billion a year earlier. Excluding restructuring costs due to the pandemic, earnings per share were a negative $3.30 before taxes, 9% worse than Wall Street analysts were forecasting. A positive surprise in cargo revenues wasn’t enough to offset a 83% drop in sales to passengers, which were expected to top $2.3 billion and instead came in at $1.9 billion.

Deflationary Trends Are Growing More Powerful; The latest consumer price index report proves that the path of least resistance for inflation is lower.
By Gary Shilling – Bloomberg
After nosediving from March through May as the pandemic-sired lockdowns devastated U.S. household spending, consumer prices rebounded in the following four months. Some fear this is the start of a resurgence of inflation. The Federal Reserve Bank of New York’s survey of consumer inflation expectations shows a jump from 2.4% to 3% for both one and three years ahead.

Environmental, Social and Corporate Governance

Lagarde Says ECB Needs to Question Market Neutrality on Climate
Carolynn Look – Bloomberg
The European Central Bank must question whether mirroring the composition of the bond market in its asset purchases is appropriate in light of climate risks, according to President Christine Lagarde. Her argument centers on whether investors are correctly pricing bonds issued by polluting companies. With the European Union pushing an aggressive agenda to make the continent climate-neutral by the middle of the century, those assets might drop in value, posing a risk to the central-bank balance sheet.

Global emissions fell 8.8% in first half of 2020, study shows; Drop reflects contraction in economic activity, but will not slow warming of planet
Leslie Hook – FT
Global emissions fell by 8.8 per cent in the first half of the year amid restrictions on movement and economic activity owing to the coronavirus pandemic, according to a new report.

Climate concerns reaching ‘tipping point’ for family offices; Younger members of wealthy families are exerting pressure on their elders to review their investments
Alice Ross – FT
Just months after the 2015 Paris climate change agreement was sealed, Giorgiana Notarbartolo decided it was time to talk to her family about money.

Better stock selection boosted ESG funds, research suggests; Nine of the 10 largest sustainable ETFs and mutual funds outperformed in H1
Steve Johnson – FT
Avoiding exposure to fossil fuel companies, which slumped earlier this year when oil prices crashed, cannot explain all of the outperformance of funds, invested according to environmental, social and governance principles, new research suggests. The World Resources Institute, a Washington DC-based sustainable development think-tank, found that nine of the 10 largest US mutual and exchange traded ESG funds, all of which are focused on large-cap US stocks, outperformed a benchmark, the Vanguard S&P 500 ETF (VOO), after fees, in the first half of 2020. On average they beat the benchmark by 2.1 percentage points.

U.S. activists seek data to test corporate diversity pledges
Ross Kerber, Simon Jessop – Reuters
More data disclosure will help investors, employees and customers judge the pledges many American companies have made to diversify their workforces and boardrooms, activists and analysts said on Tuesday.


Credit Suisse Taps Ex-BofA Rainmaker to Target Richest Clients
Patrick Winters, Dinesh Nair, Ambereen Choudhury, and Steven Arons – Bloomberg
Christian Meissner to join new unit helping wealthy do deals; Bank is seeking to deepen relationships with richest clients
Credit Suisse Group AG tapped the former top rainmaker at Bank of America Corp. as it vies with UBS Group AG for ways to get more business out of the richest customers.

Credit Suisse Hires Veteran Meissner to Lead New Unit Serving Wealthy Clients; Appointment comes as competition to bank the ultra-rich stiffens
By Margot Patrick – WSJ
Credit Suisse Group AG CS -1.51% hired Christian Meissner, a Bank of America Corp. BAC -2.84% and Goldman Sachs Group Inc. GS -1.55% veteran, to head a new unit connecting its wealthiest clients with its investment bank.

Hedge fund short sellers target pandemic winners; Bets laid that earnings boosts for companies that rode lockdown best will fade faster than many anticipate
Laurence Fletcher – FT
Some hedge funds are betting that the best days for the stock market’s coronavirus winners are in the past. Shares linked to home computing and gym equipment, grocery retail and healthcare soared when the pandemic forced countries into lockdown earlier this year. Many were lifted by hopes that changing behaviour and shopping patterns as a result of Covid-19 would feed through into stronger, long-term earnings growth, even though some companies have until recently been unprofitable.

Bank of America Profit Falls 16%; Lender says it is well prepared to weather the coronavirus recession
Ben Eisen – WSJ
Bank of America Corp.’s BAC -2.84% profit fell 16% in the third quarter, though the bank indicated that it is well prepared to weather the coronavirus recession. The Charlotte, N.C., lender said Wednesday that it earned $4.88 billion in the July-to-September period, compared with $5.78 billion a year ago and $3.53 billion in the prior quarter.

Citi appoints head of New York eTrading in department shake-up; Allegra Kawalerski will lead the eTrading desk in New York alongside a newly reorganised leadership team according to an internal memo seen by The TRADE.
Annabel Smith – The Trade
Citi has appointed one of its cross-product technology specialists to head up its New York eTrading desk and become a principal stakeholder manager, according to an internal memo seen by The TRADE. Allegra Kawalerski will assume the role after 10 years with Citi, most recently as velocity content and analytics development lead in the cross-product technology department.

Citigroup’s Profit Falls 34% as It Sets Aside More Money for Bad Loans; Bank set aside $2.26 billion for potential loan losses, down from the more than $7 billion it set aside in each of the past two quarters
David Benoit – WSJ
Citigroup Inc. C -4.80% said Tuesday that its third-quarter profit slumped 34%, with the bank continuing to prepare for a coronavirus-induced recession. Citigroup posted a profit of $3.23 billion, or $1.40 a share, down from $4.91 billion, or $2.07 a share, in the same period a year ago. Analysts had expected 91 cents a share, according to FactSet. In the second quarter, profit had fallen to 50 cents a share.

BlackRock Has 8 Trillion Reasons for Fund Euphoria; Three recent events in fund management reinforce the argument that only the biggest will thrive.
By Mark Gilbert – Bloomberg
BlackRock Inc., the biggest beast in the fund management forest, on Tuesday announced that it grew its assets under management by 12% to $7.81 trillion in the third quarter from a year earlier. In normal times, that would be a staggering achievement; coming in the middle of a pandemic, it’s astonishing. It highlights the advantage that scale brings in winning new business and retaining existing clients in the arena of managing other people’s money.


S&P Sees ‘Start of a New Era’ for Gulf Banks as Oil Wealth Ebbs
Abeer Abu Omar and Paul Abelsky – Bloomberg
Lenders face ‘longer lasting’ period of lower profitability; Saudi lending growth to slow but may still outpace Gulf peers
Gulf banks are entering an age of weaker profits as a result of the coronavirus outbreak and a decline in crude prices, according to S&P Global Ratings. “The pandemic and drop in oil prices could mark the start of a new era,” S&P analysts led by Mohamed Damak in Dubai said in a report. “This new era is characterized by a decline in oil wealth, a lower multiplier effect in the local economies, and lower profitability.”

China Is Buying Up Record Chunks of Japan’s Debt Mountain
Stephen Spratt – Bloomberg
Lower global yields, asset swaps may be drivers: JPMorgan; China has been rotating out of U.S. Treasuries for months
China went on a record-buying spree of Japanese bonds over the summer months, snapping up $20.9 billion of the low-yielding debt to spur talk that it’s diversifying reserves. The 2.2 trillion yen of purchases, made in June to August, are a record in local currency terms for a three-month period based on data from Japan’s Ministry of Finance going back to 2005. The last time Chinese buyers had gone on a similar splurge was back in 2016.


EU pushes UK to budge at ‘critical stage’ in Brexit talks
Gabriela Baczynska and Marine Strauss – Reuters
The European Union demanded “substantive” movement on Tuesday from Britain on fisheries, dispute settlement and guarantees of fair competition in their talks on a post-Brexit trade deal, with Germany saying they were at a “critical stage”.

Disorderly Brexit could damage UK’s economic recovery from Covid, says OECD
Ian Wishart – The Guardian
Britain’s economy faces a double risk to recovery from a disorderly Brexit as the coronavirus pandemic drags down growth, the Organisation for Economic Co-operation and Development has warned.
On the eve of a critical EU leaders’ summit in Brussels, the influential Paris-based thinktank said the Covid crisis would further complicate a disorderly Brexit as companies were less prepared for the end of the transition period, having diverted attention away from leaving the EU.

Brexit news latest – trade talks stuck ahead of Boris Johnson deadline
Silvia Amaro – CNBC
It looks increasingly likely that the U.K. and EU will not reach a trade agreement by Oct. 15, missing a deadline imposed by British Prime Minister Boris Johnson.
The U.K. stopped being a member of the European Union in January but agreed to keep applying EU rules until the end of 2020 to ensure it would have time to agree on new border arrangements. However, negotiations over a future trade deal remain gridlocked, raising serious questions about how the process will play out.

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