SEC Approves Plan to Bring More Detailed Stock-Market Data to Public; Citi Trial Shows Chain of Gaffes Leading to $900 Million Blunder

Dec 10, 2020

First Read

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Steve Crutchfield


Hits & Takes
JLN Staff

Cboe Global Markets announced yesterday the retirement of Chief Marketing and Communications Officer Carol Kennedy. Carol has been a steady hand at the Cboe for 27 years through all the market and company changes, including the retirement of former Chairman and CEO Bill Brodsky and the elevation of now-Chairman and CEO Ed Tilly. Stacie Flemming has been named as Carol’s replacement. On behalf of JLN, we want to thank Carol for her years of service. And we want to congratulate Stacie on her new role. Her international experience will work well with a CBOE that is now Cboe Global Markets

ICE Data Pricing & Reference Data, LLC (“PRD”) was subject to a SEC cease and desist order. As a result of the order, the Cease-and-Desist Order requires, among other things, PRD to cease and desist from committing or causing any violations and any future violations of Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder. Additionally, “Intercontinental Exchange, Inc. (“ICE”) has submitted a letter, dated December 4, 2020, constituting an application for relief from ICE being considered an “ineligible issuer” under clause (1)(vi) of the definition of ineligible issuer in Rule 405 of the Securities Act of 1933 (“Securities Act”). ICE requests relief from being considered an “ineligible issuer” under Rule 405, due to the entry on December 9, 2020, of an order instituting administrative and cease-and-desist proceedings against ICE Data Pricing & Reference Data, LLC (“PRD”), a subsidiary of ICE (the “Cease-and-Desist Order”), according to a SEC release.

Steve Crutchfield was the latest donor to the JLN MarketsWiki Education GoFundMe campaign. Steve is a longtime JLN friend back from his days at NYSE Euronext. He is now the head of market structure and underlying market making at CTC. He gave one of the most brilliant MarketsWiki Education talk several years ago about how to design an options trading strategy in 10 minutes. Thank you to Steve and all who have given and all who have yet to give. Support our efforts to preserve industry history by donating to our GoFundMe campaign.

Thank you to Chris Hehmeyer for making a donation to the LaSalle Street Trading Tech Awards event. Thank you to all the donors who gave, including the Board of Trade Charitable Foundation, CME Group, Cboe Global Markets, CQG, FGMK, NFA, ABN AMRO Clearing Chicago and Joe Guinan and Advantage Futures. And of course, thank you again to Pat Kenny for being the most interesting event chairman. If you are interested in still donating, you can find our more information HERE.

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


A cryptocurrency protocol founder who went by the pseudonym, “Bruno Brock” has been busted by the U.S. Southern District Court of New York, the IRS, and the SEC. Bruno, real name Amir Bruno Elmaani, allegedly raised millions on a cryptocurrency startup called Oyster Pearl, then spent that money on various personal luxuries, including multiple yachts, in which he stored gold bars. I get the sense Mr. Elmaani has probably seen “The Wolf of Wall Street,” and possibly desired to emulate it – shame he apparently didn’t see how it ends.~MR

The Investment Adviser Association’s Active Managers Council is hosting an online discussion on ESG investing and implementation today, December 10, at 10 a.m. CT. Scheduled topics include the 2021 outlook and “the importance of an active process” when investing in ESG. More details and registration information is here. ~SC


Cboe Global Markets Announces Planned Retirement of Chief Marketing and Communications Officer, Appoints Successor; Carol Kennedy, Chief Marketing and Communications Officer, to retire after 27 years with company; Stacie Fleming, Vice President, Marketing and Communications, to succeed Kennedy
Cboe Global Markets, Inc.
Cboe Global Markets, Inc. (Cboe: CBOE), a market operator and global trading solutions provider, today announced the planned retirement of Carol Kennedy, Chief Marketing and Communications Officer, after 27 years of service to the company, on December 31, 2020. Cboe plans to promote Stacie Fleming, current Vice President, Marketing and Communications, and former Head of Marketing and Communications for Cboe Europe, to Senior Vice President, Marketing and Communications, effective January 1, 2021.

*****Carol and I first met in Bürgenstock at the Swiss Futures & Options Association conference there in 2004, the first year I attended. Classic story of having to go halfway around the world to meet someone who worked in the building next door.~JJL


MIAX and MGEX Announce SPIKES Futures December 14 Relaunch
Miami International Securities Exchange, LLC
Miami International Securities Exchange, LLC (MIAX) and the Minneapolis Grain Exchange (MGEX) today announce the planned December 14 relaunch of futures on the SPIKES Index (SPIKES Futures) on MGEX via the CME Globex platform.

*****Here is some competition in the vol space. I would like to remind my friends at Cboe that competition is good for the market and it is the market that we serve.~JJL


US authorities urged to investigate ‘illegal’ changes to CME market data fee policies; EDI has called on the CFTC, House of Representatives, and the US Senate to investigate fee changes at CME Group that would increase costs each year for the firm.
Annabel Smith – The Trade
Data distributor Exchange Data International (EDI) has urged regulators in the US to investigate derivatives exchange CME Group’s proposed changes to its data fee policies. Under the changes to fees, CME Group intends to charge redistributors like EDI a total of $120,000 per year from 2021 for redistribution of data across each of its four markets.

*****Here is The Trade’s follow-up story on the EDI press release that was the most popular story a couple of days ago in JLN.~JJL


The danger is growing that Trump’s lies about the election will lead to violence
Editorial Board – Washington Post
President Trump’s lying about the election has become dangerous — and not just in the sense that it damages democratic norms. It also increasingly threatens to spur physical violence against Americans who have done their duty to oversee a free and fair vote.

******Blessed are those who are trying to lower the political temperature.~JJL


Wednesday’s Top Three
The top story for Tuesday was the self-help article Tips for Finding Career Success After Age 50 from Bloomberg Businessweek. Second was Yahoo’s report on Jeffrey Sprecher, Sen. Kelly Loeffler’s Husband Bought Stock In Sectors Set To Benefit From Then-Secret Bill, and third was a new entry in John Lothian’s interview series, Kevin Darby – The Path to Electronic Trading — MarketsWiki Education.


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Lead Stories

SEC Approves Plan to Bring More Detailed Stock-Market Data to Public; Under the plan, data showing supply and demand for stocks will be added to public feeds
Alexander Osipovich – WSJ
The Securities and Exchange Commission approved a plan to beef up the public data feeds that broadcast stock prices to investors, broadening access to market information that exchanges sell to professional traders at a premium.

Citi Trial Shows Chain of Gaffes Leading to $900 Million Blunder
Chris Dolmetsch, Jennifer Surane, and Katherine Doherty – Bloomberg
Bank sued to get funds back from Revlon lenders; trial begins; Lenders say that’s what they were owed and they’re keeping it
Three employees working for Citigroup Inc. told a federal judge they made errors in processing an interest payment that resulted in the mistaken transfer of $900 million to Revlon Inc. lenders.

Advisers rack up $1.1bn in fees for LSE-Refinitiv deal; Bankers and lawyers including Goldman and Freshfields set for one of biggest paydays for a UK acquisition
Arash Massoudi and Philip Stafford – FT
Bankers, lawyers and other advisers working on London Stock Exchange Group’s takeover of data provider Refinitiv are set to earn $1.1bn in fees, one of the biggest paydays for a UK acquisition.

Brussels unveils emergency plans to prevent chaos in case of no deal Brexit; Temporary measures cover airlines, hauliers and fishing rights if trade talks fail
Jim Brunsden – FT
Brussels has published emergency plans to keep planes flying, trucks moving and prevent other chaos in the event that trade talks with Britain fail, as it warned of “significant uncertainty” around the fate of the Brexit negotiations.

SEC Adopts Rules to Modernize Key Market Infrastructure Responsible for Collecting, Consolidating, and Disseminating Equity Market Data; Fosters a competitive environment for core components of the national market system for the first time
The Securities and Exchange Commission today adopted rules to modernize the infrastructure for the collection, consolidation, and dissemination of market data for exchange-listed national market system stocks (“NMS market data”). This infrastructure has not been significantly updated since its initial implementation in the late 1970s. The adopted rules update and significantly expand the content of NMS market data to better meet the diverse needs of investors in today’s equity markets. The adopted rules also update the method by which NMS market data is consolidated and disseminated, by fostering a competitive environment and providing for a new decentralized model that promises reduced latency and other new efficiencies.

Brazilian banker Joseph Safra dies age 82; He was Brazil’s richest man and founder of nation’s eighth biggest bank
Bryan Harris – FT
Joseph Safra, Brazil’s wealthiest man and one of the world’s richest bankers, died of natural causes on Thursday, age 82. The descendant of a banking family from Syria, Safra moved to Brazil from Lebanon in 1962 and founded Safra Bank, which is now the Latin American country’s eighth largest bank.

CEOs Pledge One Million Jobs for Black Americans; Leaders of Merck, IBM, others have raised $100 million for OneTen, a startup that will focus on training Black candidates for corporate roles
Khadeeja Safdar – WSJ
A coalition of more than 30 chief executive officers from companies including Merck MRK 0.35% & Co., International Business Machines Corp. and Nike Inc. NKE -0.24% are backing a startup that will connect employers with Black workers.

Getting Everyone Vaccinated, With ‘Nudges’ and Charity Auctions; A Nobel laureate proposes selling a small proportion of early doses to the rich and famous, and rewarding reluctant recipients to accelerate herd immunity.
Richard H. Thaler – NY Times
The good news is that safe and effective vaccines from Moderna and Pfizer appear to be on the way soon and that more are likely to follow. The bad news is an usual combination: There won’t be enough vaccines on hand to meet initial demand, yet there is also a need to urge everyone to get shots.

Will wealthy Americans jump the queue for the Covid vaccine? ‘Lots of people will try to get it early — even if no one admits to it’
Gillian Tett – FT
On Monday, I received a text from my healthcare provider, the NYU Langone Health medical centre in New York, with the cheery message: “The Covid-19 vaccine will be here in early 2021. We will contact you as soon as we have info about who can get it when.”

Bowing Out Gracefully: LIBOR’s Retirement Draws Near – Speech By Andrew Hauser, Bank Of England Executive Director For Markets. – Given At The http://Risk.Net LIBOR Telethon On 8 December 2020
LIBOR is an interest rate benchmark used in financial markets, which is being phased out. Andrew Hauser sets out what businesses and lenders need to do to be ready for transition.

SIFMA Statement on the SEC’s Adoption of Market Data Infrastructure Rules under Regulation NMS
SIFMA today issued the following statement from SIFMA president and CEO Kenneth E. Bentsen, Jr. on the SEC’s adoption of market data infrastructure rules under Regulation NMS:

ISDA Responds to ESMA Consultation on Reporting by NFRD Entities
On December 4, ISDA submitted a response to the European Securities and Markets Authority’s (ESMA) consultation on reporting of non-financial information by entities in scope of the Non-Financial Reporting Directive (NFRD). The response highlights various perspectives that reflect the views of ISDA’s members and, in particular, those of non-financial members and of asset managers. In terms of next steps, the European supervisory authorities are meant to deliver their advice to the European Commission (EC) by February 28, 2021, and the EC is expected to adopt the delegated act on NFRD entity reporting under article 8 of the Taxonomy Regulation by June 1, 2021


How Pandemic Bonds Became the World’s Most Controversial Investment; Finance failed to shine during the Covid-19 outbreak.
Tracy Alloway, Tasos Vossos – Bloomberg
In late January 2015, just after the deadliest outbreak of Ebola in history, then-World Bank President Jim Yong Kim stood in front of a group of Georgetown University students and professors to introduce a new approach to fighting pandemics.

There’s Still Time to Beat Covid Without Lockdowns; South Korea’s successful approach of regimented masking, aggressive testing, and high-tech contact tracing is a blueprint for the U.S. and other democracies.
Matthew Campbell and Heesu Lee – Bloomberg
Park Young Joon was worried that South Korea could lose control. As director for epidemiological investigations at the Korea Disease Control and Prevention Agency, he’d been dispatched to Daegu, a city of 2.5 million in the south, to deal with an urgent situation. A rash of novel coronavirus cases had just emerged among members of the Shincheonji Church of Jesus, an obscure and secretive religious group whose services involve close physical contact.

London could face tighter Covid restrictions, warns Sadiq Khan; Mayor urges residents to avoid lowering their guard ahead of the festive season
Jasmine Cameron-Chileshe – FT
Sadiq Khan on Wednesday warned Londoners that the UK capital could soon be subject to England’s highest tier 3 category of restrictions, as the country’s leading scientific advisers told MPs that coronavirus infections could surge when curbs are lifted at Christmas.

US reports more than 3,000 deaths in a single day for first time; Daily tally exceeds number of victims from the September 11 terrorist attacks
Peter Wells – FT
The US reported more than 3,000 coronavirus deaths in a single day on Wednesday for the first time, as rising fatalities followed a record surge in cases and hospitalisations across the country over the past month. States attributed a further 3,054 deaths to coronavirus, according to Covid Tracking Project data on Wednesday, a tally that surpasses the overall death toll of 2,977 fatalities from the September 11 terrorist attacks in 2001.

Russia’s regions hit hard by Covid second wave; Outside Moscow, hospitals are struggling to cope as infections spiral
Max Seddon – FT
When Alina Kosova’s uncle fell ill in their Siberian village last month, the ambulance sent from the nearby city of Omsk left without him, prompting his family to drive him to the hospital themselves. When they arrived, the queue for patients was so long that he was only admitted 10 hours later, after colleagues pulled strings to find him a place.

Pandemic creates a ‘learning crisis’ in parallel to health emergency; The long-term effects of children staying off school are disastrous for poorer countries’ citizens and future
Andrew Jack – FT
When Uganda shut its schools in April in response to coronavirus, Charles Obore soon began to see the toll on his pupils and fellow teachers. He only expects the strain to escalate in the months ahead.

Russia Struggles to Make Promised Doses of Its Sputnik V Vaccine; Country turns to private drug companies as equipment problems and technical challenges hit year-end manufacturing targets
Georgi Kantchev – WSJ
In August, President Vladimir Putin heralded the approval of a Russian vaccine against Covid-19. Officials promised to produce millions of doses by year’s end.

The Coronavirus Vaccines Were Developed in Record Speed. Now, the Hard Part; Don’t squander this opportunity, America.
The Editorial Board – NY Times
The Food and Drug Administration is expected to grant emergency use authorizations to the first two coronavirus vaccines in the next several days. The sheer speed with which doctors and scientists were able to reach this stage is a major achievement, and the early results for both vaccines are undeniably impressive. New vaccines normally take years to develop, and scientists initially worried. But when all is said and done, making the vaccine might turn out to have been the easy part.

Exchanges, OTC and Clearing

LCH launches clearing for Oslo Børs derivatives market; LCH SA goes live clearing the Oslo Børs derivatives market following the acquisition of the Norwegian exchange operator by Euronext last year.
Annabel Smith – The Trade
The London Stock Exchange Group’s (LSEG) clearinghouse LCH SA has gone live clearing for the derivatives market at Oslo Børs. Since the migration five new members are now clearing listed equity derivatives contracts for Norwegian single stocks and indexes on Oslo Børs, LCH said.

LCH SA goes live clearing for Oslo Børs Derivatives Market
Provides enhanced risk management, liquidity and efficiencies to market participants;Clearing available for listed equity derivatives contracts on Norwegian single stocks and indexes;Latest milestone in LCH SA’s expansion of trading venues
LCH, a leading global clearing house, today announced that it is now offering clearing services for financial derivatives listed on Oslo Børs Derivatives Market. Following the migration, five additional members trading financial derivatives on Oslo Børs are able to access the risk management benefits of clearing at LCH SA, with two existing clearing members extending their membership to clear the Oslo market.

BNP Paribas and Goldman Sachs trade first basket equity total return futures at Eurex; The pilot phase at Eurex with BNP Paribas and Goldman Sachs marks a milestone in the shift from OTC to regulated, on-exchange trading.
Annabel Smith – The Trade
Investment banks BNP Paribas and Goldman Sachs have completed a pilot phase with derivatives exchange Eurex after trading the first basket trade in equity total returns futures (ETRFs). Eurex said the development marks a milestone in its support of the shift from over the counter (OTC) towards regulated, on-exchange trading.

Eurex’s pioneering Equity Total Return Futures support shift towards on-exchange trading; BNP Paribas and Goldman Sachs are the first banks to substantively trade a basket of Equity Total Return Futures (ETRFs)
Eurex, one of the leading derivatives exchanges globally, reaches a further milestone in futurization, the shift from OTC to regulated, on-exchange trading. The exchange today reports, following a successful pilot phase, its first substantive basket trade in its ETRFs. The transaction was concluded between BNP Paribas and Goldman Sachs.

MarketAxess rolls out US treasury trading following LiquidityEdge acquisition; The marketplace combines credit and rates trading capabilities from MarketAxess in a single location while giving traders access to US treasury liquidity.
Annabel Smith – The Trade
MarketAxess has launched a centralised fixed income platform with access to US treasury liquidity and trading after expanding into the market with its acquisition of LiquidityEdge last year.

Inclusio goes public and joins Euronext Brussels’ Real Estate Franchise; Inclusio’s IPO raised EUR60 million while the market capitalisation stands at approx. EUR154 million
Inclusio is the 18th Belgian Regulated Real Estate Company (RREC) listed on Euronext Brussels
Brussels – 10 December 2020 – The real estate company with social purpose Inclusio (ticker symbol: INCLU) today began trading on Euronext Brussels (Compartment B), with an initial market capitalisation of EUR154 million. Through this IPO, Inclusio joins a franchise of 17 regulated real estate companies currently listed on Euronext Brussels, representing a total market capitalisation of approx. EUR19 billion (per 30 November 2020).

Kraft Bank admitted to trading
Kraft Bank has today been admitted to trading on Euronext Growth (ticker code: KRAB). Kraft Bank offers refinancing of mortgages and unsecured loans to individuals with a challenging personal economy.

New local cooperation to foster ESG in China
While still in a preliminary stage, Green Finance and ESG is a rising market with a huge potential for rapid development in China. What is lacking is substantial ESG-related information to raise awareness of this area for institutional investors.

Total Return Futures Space Introduces New Products – Equity and Trade Basket TRFS
Return Futures (TRFs) provide a listed alternative to the Total Return Swap, seeking to replicate the flexibility of the Over-the-Counter (OTC) market with the operational efficiency of the exchange traded world. In addition to index TRFs, Eurex now offers TRFs for individual equities (ETRFs) as well as the ability to trade baskets of ETRFs. In a DerivSource Q&A, Stuart Heath, Director, Equity & Index Product Design at Eurex, explains how the new offerings work, how they may be used by Delta One and Equity Financing desks, and how he sees the market evolving.

ICE Data Services Launches Premium Hosting Services; Offers ultra-low-latency market access and managed infrastructure; Netrix collaboration provides additional hardware procurement, management and support
Intercontinental Exchange, Inc.
Intercontinental Exchange, Inc. (NYSE: ICE), a leading operator of global exchanges and clearing houses and provider of mortgage technology, data and listings services, today announced the launch of its premium hosting services and its managed services offering with Netrix.

SGX RegCo warns public of pump and dump activities exploiting Telegram chats and other social media channels
Singapore Exchange Regulation (SGX RegCo) would like to alert the public to possible market misconduct activities that exploit Telegram chat groups and other channels where investment strategy is discussed. Such platforms may be useful for investors to share knowledge and information. We are however aware of instances where wrongdoers may misuse these channels. The wrongdoers do so by engaging in “pump and dump” schemes where they would promote interest in a particular security(s) for their own benefit.

CME Group Declares Annual Variable Dividend
CME Group
CME Group Inc., the world’s leading and most diverse derivatives marketplace, today declared its annual variable dividend, amounting to $2.50 per share. The dividend is payable January 13, 2021, to shareholders of record on December 28, 2020.

DATE CHANGE: Adding Average Price Group ID and Group ID to the FIXML Trade Register – Effective January 25, 2021
CME Group
Please be advised that, as per Clearing Advisory 20-441, CME Clearing will be adding the tags for Average Price Group ID (@AvgPxGrpID) and Group ID (@GrpID) to the FIXML Trade Register. The Production date for this change has been re-scheduled for Trade Date Monday, January 25, 2021.

January 2021 Brazilian Real/US Dollar Futures and Options Contracts Terminate Trading Wednesday, December 30, 2020 at 9:15 AM CT
CME Group
The January 2021 Brazilian Real/US Dollar (“BRL/USD”) futures and options termination of trading day is Wednesday, December 30, 2020 at 9:15 a.m. Central Time (“CT”). The Central Bank of Brazil (“Banco Central do Brasil”) has confirmed that the end-of month spot “PTAX Rate” that it will publish on Wednesday, December 30, 2020, will be the same rate as determined and published on Thursday, December 31, 2020. Chicago Mercantile Exchange, Inc. (“CME” or “Exchange”) utilizes the reciprocal of the end-of-month “PTAX Rate” to cash settle expiring BRL/USD futures and options contracts.

Position Limits, Accountability Levels and Large Trader Reporting Requirements in Connection with the Initial Listing of the Cobalt Metal (Fastmarkets) Futures Contract
CME Group
In connection with the initial listing of Commodity Exchange, Inc.’s (“COMEX” or “Exchange”) Cobalt Metal (Fastmarkets) Futures contract on trade date Monday, December 14, 2020 (see SER-8680 published November 19, 2020), please note below and in Exhibit B of COMEX Submission No. 20-463, corresponding spot-month position limit (Rule 559), aggregation allocation (Rule 559.D.), single month and all month accountability levels (Rule 560) and reportable level (Rule 561) for the new contract. The new, financially settled, contract shall have a diminishing balance.

SGX welcomes the listing of Lion-OCBC Securities Hang Seng TECH ETF; Lion Global Investors and OCBC Securities partner to offer investors affordable access to Asia’s largest technology companies]
Singapore Exchange (SGX) today welcomed the listing of Lion-OCBC Securities Hang Seng TECH ETF with assets under management of S$64 million, providing efficient access to the fastest-growing Chinese technology companies as retail demand for exchange-traded funds (ETFs) reaches a new high.


Derivatives Veteran Jerome Kemp to Join Baton Systems as Senior Advisor
Baton Systems
Baton Systems (“Baton”), a provider of post-trade solutions for capital markets has appointed Jerome Kemp, global futures industry leader and former Global Head of Futures, OTC Clearing, and FX Prime Brokerage at Citi as Senior Advisor. Kemp will bring his deep expertise in cleared derivatives and OTC clearing to Baton as the company accelerates its position to deliver a fully end-to-end FX settlement ecosystem.

Barchart and Urner Barry Partner on Distribution for Benchmark Protein Prices
Barchart, a leading provider of market data and technology services to the financial, media and commodity industries; and Urner Barry, the leading publisher of market news and prices for the food industry, jointly announce a data and price distribution partnership for the global food and beverage market.

JP Morgan to roll out IHS Markit macroeconomic data to trading clients; Trading and securities services clients will gain access to IHS Markit macroeconomic data via the JP Morgan DataQuery platform.
Annabel Smith – The Trade
JP Morgan is set to expand its data platform for trading and securities services clients to include macroeconomic data from IHS Markit as part of a new integration. Clients using the DataQuery platform will gain access to IHS Markit’s historical macroeconomic and recent market developments data with detailed economic analysis and cross-country comparisons on more than 200 countries.

Former Citi and JP Morgan futures veteran joins Baton Systems in senior advisor role; Jerome Kemp joins Baton Systems as senior advisor after nearly 30 years at JP Morgan and Citi leading futures and OTC clearing.
Annabel Smith – The Trade
Futures and clearing industry veteran, Jerome Kemp, has been appointed a senior advisor at post-trade and blockchain technology provider Baton Systems. Kemp joins Baton Systems in the advisor role after recently retiring from Citi where he worked for nearly 10 years as global head of futures and clearing building out the OTC clearing platform.

UK-Based Trading Platform Infinox Announces Major Expansion In South America
UK-based CFD provider Infinox has followed up on its trailblazing rollout of forex futures trading in South America by offering Brazilian investors access to S&P 500 Micro futures.

Trendrating Delivers Advanced Portfolio Risk Management Capabilities To Bloomberg Terminal Users Mondovisione
Trendrating SA, a provider of advanced analytics and technology solutions to the global capital markets, today announced the launch of its “Portfolio Sentinel”(PLUS) application in the Bloomberg App Portal on the Bloomberg Terminal at {APPS PLUS }.


Fidelity Digital to Hold Bitcoin as Collateral for Cash Loans
Matthew Leising and Olga Kharif – Bloomberg
The loans are to be issued by blockchain startup BlockFi; Institutional demand for crypto still rising, Fidelity says
Fidelity Digital Assets will allow its institutional customers to pledge Bitcoin as collateral against cash loans in a partnership with blockchain startup BlockFi. The unit of Boston-based asset manager Fidelity Investments will hold the digital asset and not make loans itself, Tom Jessop, president of Fidelity Digital Assets, said in an interview. The target is Bitcoin investors who want to turn their digital stash into cash without selling, and potential customers include hedge funds, crypto miners and over-the-counter trading desks, Jessop said.

JPMorgan Says Gold Will Suffer for Years Because of Bitcoin
Eddie Spence – Bloomberg
Bank says investor adoption of Bitcoin has only just started; Gold ETFs are bleeding cash while Bitcoin funds absorb flows
The rise of cryptocurrencies in mainstream finance is coming at the expense of gold, says JPMorgan Chase & Co. Money has poured into Bitcoin funds and out of gold since October, a trend that’s only going to continue in the long run as more institutional investors take a position in cryptocurrencies, according to the bank’s quantitative strategists including Nikolaos Panigirtzoglou.

Northern Trust and Standard Chartered partner on crypto custody for institutional investors; Landmark move in the institutional crypto space as Northern Trust and Standard Chartered collaborate on missing piece of the puzzle for investors eyeing digital assets.
Jon Watkins – The Trade
Investment banks Northern Trust and Standard Chartered providers have collaborated to launch Zodia, an institutional-grade custody solution for cryptocurrencies. Both banks said they expect to begin operations in London in 2021 subject to registration with the UK Financial Conduct Authority (FCA), all applicable regulatory filings and customary closing conditions.

Bitcoin taxes: Understanding the rules and how to report cryptocurrency on your return
Janet Berry-Johnson – Business Insider
The IRS considers Bitcoin to be property rather than money, so transactions are subject to the same tax treatment as other investments. Bitcoin taxes can be triggered by trading, exchanging, or simply spending the cryptocurrency, so documenting everything is essential. Bitcoin is taxed at the special capital gains tax rate, which is often less than the ordinary income tax rate.

With investors expecting a Latin American cryptocurrency boom, Mexico’s Bitso raises $62 million
Jonathan Shieber – Tech Crunch
Six years after the launch of the Mexico-based cryptocurrency exchange and financial services platform Bitso, the company revealed it has closed on $62 million in financing to capitalize on the cryptocurrency boom investors expect to hit Latin America. The three major cryptocurrencies are all trading up in the waning months of 2020, with Bitcoin prices nearing (or exceeding) record highs. The global growth of these digital currencies and their applications in emerging markets have savvy financial services investors like the firm QED Investors (founded by the masterminds behind Capital One) intrigued. Which is why the firm joined the Latin American heavyweight investor Kaszek Ventures in financing Bitso’s $62 million round.

Privacy wallets are becoming a more frequent tool for criminals to launder bitcoin, says Elliptic
Saniya More – The Block
A new guide by blockchain analytics firm Elliptic claims more than 13% of all funds in bitcoin garnered from criminal activity are being laundered through privacy wallets. The guide, entitled “Financial Crime Typologies in Cryptoassets,” looks at over 35 so-called “financial crime typologies” that involve the use of cryptocurrencies, including the increasing use of mixers as a means of laundering digital assets.

France is on the verge of imposing mandatory KYC rules for all crypto transactions, industry sources say
Yogita Khatri – The Block
France is set to bring new, stringent measures for the crypto sector, The Block has learned. The country’s finance ministry is preparing to not only harden know-your-customer (KYC) rules for crypto firms but also bring crypto-to-crypto exchanges under regulation, Simon Polrot, president of French crypto association ADAN, told The Block in an interview. The main reason for the proposed stricter measures are the recent terrorist attacks on France, these sources told The Block.

Paxos files application with U.S regulator to obtain a national bank charter
Michael McSweeney – The Block
Crypto company Paxos is seeking a national bank trust charter from the Office of the Comptroller of the Currency, a top U.S. bank regulator. The firm outlined its bid in a Wednesday blog post. Paxos’s chief compliance officer and general counsel, Dan Burstein, wrote that “[i]f granted this national charter, Paxos will become the first custodian of digital assets to be regulated at both the state and federal levels.”

*****See also: Coindesk’s reporting on this story here.~MR

US Lawmakers Ask SEC to Clarify Broker-Dealer Rules
Nikhilesh De – Coindesk
Nine U.S. lawmakers asked the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) to clarify how crypto firms can become registered broker-dealers and provide custody services for crypto assets.
In a joint letter sent to SEC Chairman Jay Clayton Wednesday, the bipartisan group of representatives wrote they want the SEC to build out the requirements that would enable crypto firms to custody digital securities, and in turn allow FINRA to approve broker-dealer applications for the space.

Bitcoin payments startup BitPay wants to create a national bank in Georgia
Michael McSweeney – The Block
Bitcoin payments company BitPay has filed paperwork with the top U.S. banking regulator to create a national bank. Details of the effort were published in a December 8 legal notice published in the Atlanta Journal-Constitution. The notice offered some detail on the application submitted to the Office of the Comptroller of the Currency.


Brazil Puts a $10 Billion-a-Year Price Tag on Carbon Neutrality; The country, home to a large portion of the Amazon rainforest, has said it will accelerate its climate commitments if it can get enough support.
Simone Preissler Iglesias and Laura Millan Lombrana – Bloomberg
Brazil will set a new goal to zero out carbon dioxide emissions by 2060—or sooner, if it can raise $10 billion a year from other countries.

‘Will he ever concede?’: Trump keeps GOP leaders in endless political limbo
Tom McCarthy – The Guardian
First Republicans in Congress gave Donald Trump a week to admit he lost the presidential election. Then they called for the lame duck president to have his day in court, where the Trump campaign amassed a 1-51 win-loss record in challenging Democrat Joe Biden’s victory. Next Republicans pointed to the so-called “safe harbor” deadline of 8 December, when states would certify their respective results, as the date when Trump would surely be forced to admit his loss. But that deadline came and went on Tuesday, seemingly unnoticed by the White House.


South Korea threatens to jail short sellers under new rules; Regulators have clamped down on betting against stocks in move that has irritated hedge funds
Song Jung-a – FT
South Korea plans to jail and levy hefty fines on traders that illegally bet against the country’s stocks as part of a broader campaign against short selling that has annoyed hedge funds. Investors who break rules that outlaw so-called naked short selling could be imprisoned for at least a year or have to cough up financial penalties of up to five times any profit they make on a trade, South Korea’s top regulator the Financial Services Commission said on Thursday.

GE to Pay $200 Million to Settle SEC Accounting Probe; Securities and Exchange Commission says company failed to disclose problems in its power and insurance units
Dave Michaels and Thomas Gryta – WSJ
General Electric Co. GE 3.92% agreed to pay a $200 million penalty to settle federal claims that it misled investors by failing to disclose problems in its gas-turbine power and insurance businesses, capping an investigation into what went wrong inside the conglomerate.

General Electric Agrees to Pay $200 Million Penalty for Disclosure Violations
The Securities and Exchange Commission today announced that General Electric Co. (GE) has agreed to pay a $200 million penalty to settle charges for disclosure failures in its power and insurance businesses. In 2017 and 2018, GE’s stock price fell almost 75% as challenges in its power and insurance businesses were disclosed to the public.

Braggy billionaire Michael Platt’s firm fined $170M for deceiving investors
Thornton McEnery – NY Post
The hedge fund tied to a billionaire who last year got caught on a viral video bragging to a New York City cabby about his wealth just got slammed with a massive fine for two-timing its investors. BlueCrest Capital Management — co-founded by Michael Platt, a UK-based hedge-fund manager who in a December 2019 video boasted to his taxi driver that he was “the highest-earning person in the world of finance” — will pay $170 million to settle the feds’ charges that it used an inferior computer algorithm to manage clients’ money while assigning its most promising traders to make money for insiders.

ASIC releases technical updates to RG 246
ASIC today released technical updates to Regulatory Guide 246 Conflicted and other banned remuneration (RG 246) to reflect recent changes to the law.

Update: FINRA Board of Governors Meeting
FINRA’s Board of Governors met virtually last week, and I am pleased to share some updates from our discussions.

Report from FINRA Board of Governors Meeting – December 2020; Board Approves Rule Proposals, Reaffirms Financial Guiding Principles and Appoints NAC, SFAC and Regional Committee Members
FINRA’s Board of Governors met on Dec. 2-3. During the meeting it approved three rule proposals, reaffirmed FINRA’s Financial Guiding Principles, appointed members to the National Adjudicatory Council (NAC) and the Small Firm Advisory Committee (SFAC), received the results of recent SFAC and Regional Committee elections, and received several operational updates.

Global Securities Pricing Service to Pay $8 Million for Compliance Failures
The Securities and Exchange Commission today charged ICE Data Pricing & Reference Data LLC, a global securities pricing service and New York-based registered investment adviser, for compliance deficiencies relating to its delivery to clients of prices based on quotes it received from a single market participant, also known as single broker quotes. ICE Data PRD has agreed to pay $8 million to settle the charges.

FCA fines LJ Financial Planning Ltd £107,200
Independent financial advice firm is fined for providing its customers with unsuitable pension switching and transfer advice and failing to manage its conflicts of interest.

New Zealand Financial Markets Authority Issues Formal Warning For Market Manipulation
The Financial Markets Authority (FMA) has issued a formal warning to an individual for conduct that was likely to have amounted to market manipulation. Following an investigation, the FMA concluded that the individual had likely created a false or misleading appearance regarding the demand for, and price of, shares of a listed company, which is a breach of the Financial Markets Conduct Act.

FCA confirms speculative mini-bond mass-marketing ban
The FCA has confirmed proposals to permanently ban the mass-marketing of speculative illiquid securities – including speculative mini-bonds – to retail investors.

Investing and Trading

The Trends Behind the Russell 2000 Index’s Record Monthly Gain
Matt Moran, Director, Institutional Product Advancement – Cboe
The Russell 2000 Index (RUTSM) had its largest ever monthly percentage gain in November 2020, rising 18.3%. The index performed so well it out-performed several other indices, as noted in a recent edition of Inside Volatility Trading. So, what caused this dramatic increase?

Short Sellers Got Crushed in 2020 as Tesla, Moderna Soared
Lisa Pham – Bloomberg
Market recovery, short-selling bans, vaccine hopes hit shorts; Short-biased funds head for worst year ever, HFR data shows
Short sellers won some high-profile victories this year with the collapse of payments firm Wirecard AG and hospital operator NMC Health Plc. Otherwise, 2020 is shaping up to be the worst year on record for some investors seeking to profit from share price declines.

McLaren seeks up to £500m in possible blank-cheque merger; British supercar maker plans to pay down debt following cash injection as pandemic rocks company’s finances
Peter Campbell – FT
McLaren, the British supercar manufacturer, is in talks to raise up to £500m in fresh equity that could pave the way to a listing though a blank-cheque company.

European bond yields hit all-time lows ahead of ECB meeting; Central bank expected to increase its asset purchases to support region’s economy
Camilla Hodgson and Tommy Stubbington – FT
Eurozone bond yields fell to all-time lows ahead of Thursday’s European Central Bank policy meeting, as investors bet on further asset purchases and another round of cheap loans for banks.

Australia issues negative-yielding debt for first time; Investors will pay to lend country money following short-term treasury auction
Jamie Smyth – FT
Australia has sold short term treasury bills at a negative yield for the first time in its history, joining Japan and a raft of European nations that are being paid to borrow money from investors.

Airbnb Prices IPO at $68 a Share, Higher Than Expected Range; Pricing sets valuation at about $47 billion, with offering poised to raise about $3.7 billion
Maureen Farrell – WSJ
Airbnb Inc. priced its shares at $68 apiece, in the latest sign of exuberance in the IPO market. The price far exceeds the target range of $56 to $60 a share the company established earlier this week, which was higher than an earlier range as investors clamor for the stock in the midst of a historic boom in IPOs. Shares of the San Francisco home-rental startup are set to begin trading Thursday.

Metals Markets Steel for Price Rises as Australia Pushes to Save Cultural Sites; Delays to mining projects in Western Australia could push commodity prices higher and exacerbate shortages
Rhiannon Hoyle – WSJ
Rio Tinto RIO -0.69% PLC’s destruction of two ancient caves in Australia to expand an iron-ore mine could have ramifications for global commodity markets if local lawmakers intensify scrutiny of mining activities that threaten heritage sites.

Environmental, Social and Corporate Governance

BlackRock vows to back more shareholder votes on climate change; World’s largest asset manager has come under increasing pressure to wield its influence
Attracta Mooney – FT
BlackRock has vowed to back more shareholder resolutions on climate and social issues at annual meetings, as the world’s largest asset manager faces growing pressure to use its clout to change companies’ behaviour.

Who is making the ESG investment choices?
Ima Jackson-Obot – FT Advisor
The stereotype that it is just young people who are interested in ESG investing is quickly becoming out of date. While originally a fairly niche part of the investing universe, ESG investing has exploded and now every firm has to seriously consider it given the interest that is coming across the board. Recent figures from the IA on fund flows into ESG products show just how important this sector now is for advisers.

ESG Investments Reflect the Search for Value
Max Chen – ETF Trends
After the U.S. Department of Labor set its sights on environmental, social, and governance, or ESG, investments in America’s private sector retirement plans, financial industry experts have tried to highlight the importance of ESG factors as a source of value for investors first and foremost.


Credit Suisse-Backed Insurers to Wind Down as Investors Exit
Patrick Winters and Marion Halftermeyer – Bloomberg
Humboldt Re, Kelvin Re to stop underwriting new business; Guernsey-based vehicles reinsure natural catastrophe risks
Two reinsurance vehicles backed by Credit Suisse Group AG investment funds are winding down after key investors decided to pull out. Humboldt Re and Kelvin Re, which use money from institutional investors to reinsure natural catastrophes and other risks, will stop underwriting new business next year, Credit Suisse said in a statement Wednesday. Kelvin Re is funded with money from the Abu Dhabi Investment Council, according to reports. The bank declined to comment on the identities of the investors.

Caxton to shut main hedge fund to new money after record year; Group’s flagship fund up 40% in 2020 after bets on rising bond prices and gold trades
Laurence Fletcher – FT
Caxton Associates, one of the world’s oldest and best-known hedge funds, plans to shut its flagship fund to new money after a record year of gains during the coronavirus crisis.

What are active non-transparent ETFs? The new structure allows managers to make trades that are invisible to the end investor
Emma Boyde – FT
When people talk about active exchange traded funds they are referring to two broad types of actively managed ETFs. Both differ from traditional passively managed ETFs because they do not track a pre-determined basket of securities and nor do they aim to replicate the performance of their chosen index, for example the S&P 500, as closely as possible.


Norway Considers Taking More Activist Role in Oil Giant’s Future
Lars Erik Taraldsen – Bloomberg
The Norwegian state, which owns two-thirds of the country’s biggest oil company Equinor ASA, is debating how to use its stake in the future, with the biggest party in parliament arguing in favor of a more activist role.

Chinese Chip Maker in Default on $2.5 Billion of Dollar Bonds; Default by Tsinghua Unigroup unit triggers series of cross-defaults; nearly $2.5 billion of international bonds affected
Xie Yu – WSJ
Tsinghua Unigroup Co., a key player in China’s push for self-reliance in semiconductors, is in default on nearly $2.5 billion of international bonds, in the latest instance of financial stress in China spilling over into global markets.


Morgan Stanley to Shift About $120 Billion of Assets to Germany
Steven Arons – Bloomberg
Wall Street firm has already moved bankers to Frankfurt, Paris; Banks are beefing up their operations in the European Union
Morgan Stanley plans to move about 100 billion euros ($120 billion) of assets to Frankfurt, the latest Wall Street bank to shift business away from the U.K. The U.S. lender expects to transfer the bulk of the assets in the first quarter of next year, when the transition period for Britain’s exit from the European Union will likely have elapsed, people familiar with the matter said. They will sit in the Frankfurt-based subsidiary Morgan Stanley Europe SE, the people said, asking not to be named discussing private information.

Brexit Dinner Leaves No Deal Looking Likely, Officials Say
Ian Wishart, Alberto Nardelli, and Tim Ross – Bloomberg
Johnson-von der Leyen dinner was cordial, but changed little; Negotiators will spend coming days searching for breakthrough
Negotiations between the EU and the U.K. are on course to end without a trade deal barring a dramatic last-minute intervention, according to officials with knowledge of the discussions. Wednesday night’s dinner between Prime Minister Boris Johnson and Ursula von der Leyen left officials on both sides expressing concern that it may be impossible to reconcile their differences.

Brexit Stockpiling Frenzy Fuels Chaos in Cross-Channel Trade
Tara Patel, Siddharth Vikram Philip, and Deirdre Hipwell – Bloomberg
France and U.K. feel the strain from surge in cargo flows; Honda’s English plant halted work Wednesday amid parts delays
The split from the European Union is fueling an increasingly frenzied demand for goods, creating traffic snarl-ups at ports and highways on both sides of the English Channel and leading to at least one major factory shutdown.

What world is Brexit being launched into? ‘The EU has found in Brexit almost the only thing that unites its members’
Simon Kuper – FT
The most dangerous moment for any utopia is when it becomes reality. What world is Brexit about to be sprung into, with or without a deal? Here is where the main interested parties stand. Most Britons now think Brexit is a bad idea. In dozens of polls by YouGov from February 2018, majorities in almost every one said Britain was wrong to vote to leave. That looks like a robust consensus, whatever one’s reservations about polling.

Most Britons face bar from visiting EU under Covid safety rules; Non-essential travel from UK will be subject to curbs after Brexit transition ends
Michael Peel and Richard Milne – FT
Most Britons will be barred from visiting EU countries from January 1 when pandemic safety rules that allow free travel within the bloc stop applying to the UK.

UK and Singapore sign post-Brexit free trade agreement; Deal is a boost for Boris Johnson as talks with EU on future relationship go to the wire
Stefania Palma – FT
The UK and Singapore have signed a free trade agreement, delivering a modicum of positive news for Boris Johnson’s government as it remains locked in negotiations with the EU over its future relationship with the bloc.

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Past JLN Newsletters

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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