Stock Market’s Worst Month Gets Even More Dicey With Hawkish Fed

Sep 2, 2022

First Read

Hits & Takes
John Lothian & JLN Staff

John has had his hip surgery and it seems all went well. We knew he was doing fine when he was on his phone and sending staff messages a couple of hours after his surgery. We expect he will be Tweeting again soon.

Meanwhile, JLN staff has been pulling together to try to fill his shoes, which I’m sure you can imagine is not easy to do – what is he, a size 20? Matching his volume of Tweets is not easy. Thanks to everyone working for and with JLN for all your help.

OCC, formerly the Options Clearing Corporation, announced its August volume numbers today. Its year-to-date average daily volume through August 2022 was 40.5 million contracts, up 4.2 percent compared to ytd average daily volume through August 2021. Total volume was 912.5 million contracts, up 13.3 percent compared to August 2021 and the third highest month in OCC’s history. See the press release in Exchanges and Clearing below for more highlights.

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

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CME executives will speak at Barclays Global Financial Services Conference September 12 at 2:45 (EST). Chief Financial Officer John Pietrowicz, Deputy Chief Financial Officer Lynne Fitzpatrick and Senior Managing Director, Global Head of Commodities, Options and International Markets Derek Sammann will present a fireside chat at the New York event. You can watch the presentation via livestream on CME Group’s investor website. An audio webcast will also be available 24 hours later. Learn more here ~Sally Duros

Markets Media Group’s eighth-annual U.S. Women in Finance Awards will be held on November 17, 2022, live and in-person at the HardRock Hotel in New York City. The WIF awards event debuted in 2016 as an offshoot of the Markets Choice Awards, which launched in 2013. You can go here for more information and to nominate talented and accomplished women across the capital markets business.~SR

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MWE SHORT: Sandra Ro – Financial Services Disruption: the Rise of Bitcoin and Blockchain
JohnLothianNews.com

“There is this big debate as to whether bitcoin is a currency or a commodity. I would argue that it is its own category.”

Sandra Ro is a veteran in the world of bitcoin and blockchain, which simply means that she has been following the cryptocurrency and its underlying technology for over two years. In this MarketsWiki Education talk, Ro takes us through the nascent world of digital currencies, from the volatility of bitcoin, to the rise of blockchain technology and massive investments being made by venture capitalists, banks and other strategic investors. According to Ro, the next few decades are going to be exciting.

Watch the video »

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As the U.S. Dollar Surges, American Buyers Splurge on European Homes; Favorable exchange rates and steady property prices have led to big interest in markets like London, Paris and Tuscany
J.S. Marcus – The Wall Street Journal
Taking advantage of the most favorable exchange rates in a generation, and reeling from exploding prices at home, buyers are disregarding other sources of instability—including the threat of coronavirus flare-ups, rising interest rates, travel disruptions, and the war in Ukraine—to sink their dollars into European residential real estate, with savings on luxury properties, compared with last year, reaching into seven figures. Kate Everett-Allen, head of international residential research at London’s Knight Frank, identifies six European markets where American interest is now the most notable: London, Paris, Provence, Tuscany, northern Italy’s Lake Como and Lisbon.
/jlne.ws/3RwvSKI

**** I never got the sense that property prices in London and Paris were a bargain. But hey…happy to be JLN’s European correspondent if John wants to set me up (I think he wants to send me to Greenland though). ~JB

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The nation’s poorest state used welfare money to pay Brett Favre for speeches he never made
Ken Dilanian and Laura Strickler – NBC News
Brett Favre earned nearly $140 million as a star NFL quarterback over two decades and millions more in product endorsements. But that didn’t stop the state of Mississippi from paying Favre $1.1 million in 2017 and 2018 to make motivational speeches — out of federal welfare funds intended for needy families. The Mississippi state auditor said Favre never gave the speeches and demanded the money back, with interest.
/jlne.ws/3APKgr0

**** I know corruption is a thing but they’re not even trying to be circumspect anymore. ~JB

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Is Now a Bad Time to Retire?
Anne Tergesen – The Wall Street Journal
Retiring during a market downturn and soaring inflation can feel like sailing into the wind instead of the sunset. The market’s performance in the first few years of retirement can have a big impact on how long a nest egg lasts, partly because losses take a bigger bite out of a portfolio when it is typically at its largest, advisers and economists say. Of course, it isn’t always possible to time your retirement to coincide with a bull market.
/jlne.ws/3ebYoD3

**** Retiring seems to be less and less of a thing these days. ~JB

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Republican targeting of ESG laws is bad for business; America has become a minefield for financial companies trying to navigate contradictory laws
Gillian Tett — Financial Times
Until recently, Federated Hermes was a darling of the sustainability world. The Pittsburgh-based fund manager of a combined $1.6tn in assets seemed a champion of environmental, social and governance goals — and its London-based team is admired for the advice it dispenses to institutional managers. But then it emerged that Federated Hermes is also a so-called “gold sponsor” (ie funder) of the State Financial Officers Foundation. SFOF is a Republican lobby group which is campaigning to remove state pension assets from funds and companies that are hostile to fossil fuel.
/jlne.ws/3R9nEIV

**** Talking out of both sides of one’s mouth is bad for trust, bad for business, and in this case, bad for the environment. ~Sally Duros

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Thursday’s Top Three
Our top read story on Thursday was The Wall Street Journal’s Here’s What a $2 Million Retirement Looks Like in America. Second was the NFA’s We Are NFA – Diversity & Inclusion at NFA, a YouTube video. Third was Citadel Securities’ How does our culture drive constant innovation and success?, a YouTube video John criticized in Thursday’s newsletter.

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MarketsWiki Stats
26,997 pages; 240,516 edits
MarketsWiki Statistics

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Lead Stories

Stock Market’s Worst Month Gets Even More Dicey With Hawkish Fed; S&P 500 historically posts its weakest returns in September; ‘All about the employment data,’ says Canaccord’s Tony Dwyer
Jess Menton – Bloomberg
Wall Street is on edge as it heads into a dangerous final few months of 2022 with the Federal Reserve set to keep raising interest rates and the calendar flipping to September, historically the weakest month of the year for stocks. Investors who were thinking this year’s rise in inflation would be short-lived are growing worried about how long the pressures will persist. That spurred a fast rise in the 10-year note yield in August, which rattled growth shares, upending the stock market’s $7 trillion early summer rebound.
/jlne.ws/3RoPTmk

Cost of Growing Food in US Is Set to Rise by Most Ever in 2022; Prices for everything from fertilizer to animal feed to labor are skyrocketing.
Elizabeth Elkin – Bloomberg
The cost to grow food is soaring according to a new US report, a sign that inflation and its worst effects, such as hunger, aren’t over. Everything that farmers use to cultivate crops from fertilizer to feed and labor are skyrocketing in price. Production costs are estimated to rise by $66.2 billion or 18% in 2022, the most ever, according to the US Department of Agriculture.
/jlne.ws/3q2w7l5

Unnamed Public CEO Was the Victim of Catfishing Scheme, Federal Prosecutors Say
Chris Dolmetsch – Bloomberg
The chief executive officer of a publicly traded company was the victim of an extortion and catfishing scheme that targeted wealthy, high-profile men, according to federal prosecutors in New York. Neither the CEO nor his company was identified in a statement Thursday by the US Attorney’s Office announcing the arrest of a New York woman on extortion and cyberstalking charges.
/jlne.ws/3KE9MUi

Surging Copper Demand Will Complicate the Clean Energy Boom; Demand for the metal used in solar panels, wind turbines and power lines will far outstrip supply, says research firm BloombergNEF.
Nathaniel Bullard – Bloomberg
Copper is one of the essential elements of today’s economy, and tomorrow’s. It’s in the turbines and solar modules that generate electrons, the transmission and distribution lines that carry electricity to consumers, the home wiring that delivers it to dishwashers and iPhones, and the motors that move everything from elevators to electric bicycles. I think of copper as a common carrier, so to speak, of decarbonization. It is literally the wiring that connects the present to the future. Energy research firm BloombergNEF recently published its first global copper outlook, factoring in demand from the technological changes needed to wean the economy off fossil fuels. Its topline finding is striking: Copper demand will increase by more than 50% between now and 2040.
/jlne.ws/3CNBa0f

Rising Mortgage Rates Complicate Decision on Buying Versus Renting; The costs of buying and renting have both risen rapidly, but mortgage payments are the highest on record relative to rents
Ben Eisen and Nicole Friedman – The Wall Street Journal
Home buyers are feeling the pinch of rising costs more than renters. The median monthly mortgage payment was almost one-and-a-half times as much as the median monthly asking rent in the second quarter, the largest differential in records going back to 2009, according to data tracked by the Mortgage Bankers Association, an industry trade group.
/jlne.ws/3cIyOFu

Long-awaited final phase of UMR goes live today – here’s what it means
Wesley Bray – The Trade
Phase 6 of the Uncleared Margin Rules has been implemented today, with the regulation having the biggest impact on the buy-side yet. Industry experts react to the deadline, giving insights on where we stand today. The much-anticipated final phase of the Uncleared Margin Rules (UMR) has come into play today, concluding a six-year implementation journey with arguably the most discussed phase of all.
/jlne.ws/3eiE3Mz

Global Bonds Enter First Bear Market in Generation After 20% Plunge From 2021
Garfield Clinton Reynolds and Finbarr Flynn – Bloomberg
Under pressure from central bankers determined to quash inflation even at the cost of a recession, global bonds slumped into their first bear market in a generation.
The Bloomberg Global Aggregate Total Return Index of government and investment-grade corporate bonds has fallen more than 20% from its 2021 peak on an unhedged basis, the biggest drawdown since its inception in 1990. Officials from the US to Europe have hammered home the importance of tighter monetary policy in recent days, building on the hawkish message from Federal Reserve Chair Jerome Powell at the Jackson Hole symposium.
/jlne.ws/3RsxwNy

‘No time to waste on Brexit’: EU uneasy about Truss as UK leader
Michel Rose, Andrew Macaskill and Andreas Rinke – Reuters
Europe is anticipating the prospect of Liz Truss as Britain’s next prime minister with a mixture of irritation and unease: diplomats say that with the war in Ukraine and rampant inflation, the last thing they need is another Brexit battle. Frontrunner in a ruling Conservative party contest to succeed Boris Johnson, Truss has few admirers across the 27-nation European Union to start with. As foreign minister, she championed legislation that would unilaterally tear up part of Britain’s divorce deal with the EU and has promised, as prime minister, to get it passed – a move that would put London on a collision course with Brussels.
/jlne.ws/3BaIqlW

US Employment Report August 2022: 315,000 Jobs Added, Wages Rise
Reade Pickert – Bloomberg
US employers added jobs at a healthy, yet more moderate pace in August, and participation posted a sizable increase, offering little evidence of any kind of definitive slowdown despite a jump in unemployment.
Nonfarm payrolls increased 315,000 last month following a revised 526,000 advance in July, a Labor Department report showed Friday. The unemployment rate unexpectedly rose to 3.7% as the participation rate climbed.
/jlne.ws/3B57NFA

Ukraine Invasion

Inflation and War Are Stoking Civil Unrest Across Globe, Research Shows; Both developed and emerging economies are taking a hit, with the war in Ukraine, rising food, and energy prices fueling greater risk
Patrick Donahue – Bloomberg
The risk of civil unrest has spiked across the globe as developed nations and emerging markets alike grapple with spiraling inflation and upheaval exacerbated by Russia’s invasion of Ukraine, according to a report. Of 198 countries tracked in the Civil Unrest Index, 101 showed mounting risk in the third quarter of 2022, according to research collected by intelligence firm Verisk Maplecroft. That’s the biggest increase since the ranking was developed in 2016, it showed. The potential for unrest is rising across Europe, which is bracing for a long winter of energy disruption because of the war in Ukraine — as well as the developing world, where price spikes on basic staples have triggered concern of a global food crisis. The threat is set to grow over the coming months, researchers say.
/jlne.ws/3RdwchG

Vladimir Putin calls Ukraine an ‘enclave’ and reiterates threat to gas supplies; Russia is unbowed by sanctions, Russian president says in Kaliningrad
Max Seddon, Nastassia Astrasheuskaya and Roman Olearchyk – Financial Times
Vladimir Putin has called Ukraine “an anti-Russian enclave” as Moscow delivered a renewed threat to western efforts to curb surging energy prices. Speaking in the Russian exclave of Kaliningrad on Thursday, Putin said of Ukraine: “Our guys who are fighting there are defending both the residents of Donbas [the industrial area in the east largely occupied by Russia] and defending Russia itself,” according to news agency Interfax. “They started creating an anti-Russian enclave on the territory of today’s Ukraine that is threatening our country,” Putin said. At the start of the conflict in February, the Russian president said that the Kremlin’s invasion of Ukraine aimed to liberate the Donbas. But as the conflict has dragged on, Russia’s goals have expanded to dismantling the country and annexing large swaths of its Russian-speaking south-east, which Putin referred to on Thursday as Russia’s “historical territories”.
/jlne.ws/3Rq6tCq

Ukraine, Russia trade blame over nuclear plant as UN experts investigate
Tom Balmforth – Reuters
Ukraine and Russia traded accusations over each others’ actions around the Zaporizhzhia nuclear power plant on Friday as a team of inspectors from the UN nuclear watchdog tried to check the safety of the facility and avert a potential disaster.
/jlne.ws/3elnhfT

Exchanges, OTC and Clearing

OCC August 2022 Total Volume Up 13.3% Year-Over-Year, Third Highest Month on Record OCC
OCC, the world’s largest equity derivatives clearing organization, announced today that year-to-date average daily volume through August 2022 was 40.5 million contracts, up 4.2 percent compared to year-to-date average daily volume through August 2021. Total volume was 912.5 million contracts, up 13.3 percent compared to August 2021 and the third highest month in OCC’s history. Highlights: Total volume up 13.3% year-over-year, highest August on record; ETF options cleared contract volume up 59.6% year-over-year; Index options cleared contract volume up 58.7% year-over-year; Stock Loan transaction volume up 20.4% year-over-year.
/jlne.ws/3AI7kYC

FairXchange appoints LSEG’s former solutions business director as COO; Incoming COO brings a wide range of experience to FairXchange, having previously served at Google Cloud and Microsoft, as well as investment banks such as Credit Suisse and Morgan Stanley.
Wesley Bray – The Trade
FX liquidity analytics firm FairXchange, part of United Fintech, has appointed Martin Bradford as chief operating officer. Bradford joins FairXchange from London Stock Exchange Group (LSEG), where he most recently served as solutions business director with the firm’s data and analytics division – responsible for leading, transforming and delivering solutions with data platforms and services.
/jlne.ws/3B8XhNG

Interest Rates And Inflation Push ESG To Backseat As A Trading Driver For Remainder Of 2022 – Annual Trader Survey From Switzerland’s SIX Swiss Exchange Reveals Shift Across The Industry As Economic Drivers Take Hold
Mondo Visione
Today, SIX released the findings of the latest SIX Swiss Exchange Trader Survey, revealing that traders across Europe are more concerned with economic drivers like interest rates and inflation over geopolitical drivers like the conflict in the Ukraine. Also revealing is the fact that traders, when responding to the survey, viewed ESG investing as a lower driver of trading activity for the remainder of 2022, receiving only 7 of a total of 194 votes (see chart). In general, however, the survey found that half of surveyed traders expect continued stability within the market for the second half of 2022; overall, 93% are neutral or optimistic about the market outlook, compared to 86% at this time last year. The SIX Swiss Exchange Trader Survey was conducted in Q2 2022, with respondents from across Europe (Switzerland, France, Germany, UK&I, the Netherlands and Lichtenstein).
/jlne.ws/3TD6fdi

Ex-CFTC Commissioner Sommers Joins FTX US Derivatives Board
MarketsMedia
FTX US Derivatives, a Commodity Futures Trading Commission (CFTC) regulated digital asset futures & options exchange and clearinghouse, announced former CFTC Commissioner, Jill Sommers, has joined the Company’s Board of Directors.
/jlne.ws/3wRp1DU

FLASH FRIDAY: Clearing Firms Focus on Technology to Stay Competitive
Anna Lyudvig – Traders Magazine
Back in 1998, there was a Traders article, which stated that clearing remains a potentially lucrative business for well-capitalized broker dealers. What is the state of the clearing industry in 2022? Does it remain lucrative? According to Brett Thorne, President of RBC Clearing & Custody, competitive pressures and the commoditization of trading services “keep margins thin”.
/jlne.ws/3B5n0qb

Optiver becomes latest trading member on the Vienna Stock Exchange; The firm joins a list of 65 members who are currently admitted to trading on the exchange.
Wesley Bray – The Trade
The Vienna Stock Exchange has included electronic market maker Optiver as a new trading member on its platform. 65 members, including 23 Austrian and 42 international banks and securities firms, are currently admitted to trading on the Vienna Stock Exchange.
/jlne.ws/3B9EamH

Global Funding and Financing Summit
Deutsche Börse
13-15 September 2022; Luxembourg; Accelerate your journey. With this year’s key theme “Accelerate your journey”, we will explore trends, hear insights and discuss solutions with delegates from the entire industry and top-level speakers, such as Yuriko Backes (Minister of Finance, Luxembourg), Bertrand de Mazières, (Director General Finance, European Investment Bank) and Sean Kidney (CEO, Climate Bonds Initiative). Over many years, Deutsche Börse Group has established the GFF Summit as one of the major international events for the secured funding and securities financing industry. The conference combines the expertise of Clearstream, Eurex Clearing and Eurex Repo, all part of Deutsche Börse Group covering the entire lifecycle of collateral management, bringing together the experience of leading market players and providing insight into current industry developments.
/jlne.ws/3wPCY58

CME Group Reports 22% ADV Growth in August 2022
CME
Highest-ever August for Equity Index ADV; Record SOFR futures and options OI. CME Group, the world’s leading derivatives marketplace, today reported its August 2022 market statistics, showing average daily volume (ADV) increased 22% to 21.2 million contracts during the month. Market statistics are available in greater detail at https://cmegroupinc.gcs-web.com/monthly-volume.
/jlne.ws/3ehGv62

CME Group Executives to Present at Barclays Global Financial Services Conference
CME
CME Group, the world’s leading derivatives marketplace, today announced that Chief Financial Officer John Pietrowicz, Deputy Chief Financial Officer Lynne Fitzpatrick and Senior Managing Director, Global Head of Commodities, Options & International Markets Derek Sammann will present a fireside chat at the Barclays Global Financial Services Conference in New York on Monday, September 12, 2022 at 2:45 p.m. (Eastern Time). The presentation will be available for livestreaming via CME Group’s investor website. Please allow extra time prior to the presentation to visit the site and download the streaming media software required to listen to the online broadcast. An audio webcast will be available for replay at the same address approximately 24 hours following the conclusion of the conference.
/jlne.ws/3B4qXeF

Shanghai International Energy Exchange has announced its Circular on the Participation of Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors in Commodity Futures and Options Trading
SFE
With the approval of the China Securities Regulatory Commission (CSRC), starting from today, Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors can participate in the trading of the following commodity futures and options contracts of Shanghai International Energy Exchange (INE): 1. Crude Oil, TSR20, Low Sulfur Fuel Oil, and Bonded Copper futures contracts; 2. Crude Oil options contracts.
/jlne.ws/3AIq9uG

Cash market trading volumes in August
Deutsche Börse
Deutsche Börse’s cash markets generated a turnover of EUR99.23 billion in August (previous year: EUR110.64 billion). EUR96.65 billion were attributable to Xetra (previous year: EUR106.74 billion), bringing the average daily Xetra trading volume to EUR4.2 billion (previous year: EUR4.85 billion). Trading volumes on Börse Frankfurt were EUR2.58 billion (previous year: EUR3.9 billion).*
/jlne.ws/3Ba2cO4

Moscow Exchange launches trading in futures and options on foreign shares
MOEX
On September 6, 2022, settled futures contracts and options on the foreign stock index will begin trading on the derivatives market of the Moscow Exchange. The new contract will provide all categories of investors, including individuals, with additional opportunities to diversify their portfolios using global market instruments without the need to purchase a physical asset.
/jlne.ws/3CSSj98

Notice Of Disciplinary Action, # Cbot 20-1385-Bc
CME
Member: Société Générale International Limited; Rule Violations: 432. General Offenses (in part)Q. to commit an act which is detrimental to the interest of the Exchange or to engage in any conduct which tends to impair the dignity or good name of the Exchange.

Notice Of Disciplinary Action# CBOT 20-1384-Bc
CME
Member: R.J. O’Brien & Associates LLC; CBOT RULE VIOLATIONS: 432. General Offenses (in part) Q. to commit an act which is detrimental to the interest of the Exchange or to engage in any conduct which tends to impair the dignity or good name of the Exchange.
/jlne.ws/3TxxzcV

Notice Of Disciplinary Action; # CME 21-1472-Bc
CME
Non-Member: Mateer Brokerage Inc. Cme Rule Violations: Rule 526. – Block Trades (In Part) The Exchange shall designate the products in which block trades shall be permitted and determine the minimum quantity thresholds for such transactions.
/jlne.ws/3Q7A1DP

Eurex Exchange Readiness Newsflash | REMINDER: Release 1.1 of the Regulatory Reporting Solution (RRS) for non-MiFIR firms: Production start; Eurex Exchange Readiness Newsflash | REMINDER: Release 1.1 of the Regulatory Reporting Solution (RRS) for non-MiFIR firms: Production start
Eurex
Dear Eurex Participant,With this Newsflash we would like to remind you that the Production for the Regulatory Reporting Solution Release 1.1 (RRS 1.1) will start on 3 September 2022.
/jlne.ws/3RyMhyv

JSE Clear granted Independent Clearing House & Central Counterparty licence
JSE
Johannesburg, 1 September 2022: The Johannesburg Stock Exchange (JSE) is pleased to announce that JSE Clear, its wholly owned subsidiary, has been granted a licence to operate as an Independent Clearing House and Central Counterparty (CCP) by the Financial Sector Conduct Authority (FSCA), in agreement with the Prudential Authority (PA) and the South African Reserve Bank (SARB). The licence is subject to certain terms and conditions.
/jlne.ws/3wQY3fr

Regular Constituents Change in KRX K_New Deal, KRX 100, KRX Sector Indices
KRX
There will be regular constituents change in KRX K_New Deal, KRX 100, KRX Sector Indices effective from September 13, 2022.
/jlne.ws/3eijwrs

Update On Responsible Sourcing Reporting For LME-Listed Brands
LME
This notice provides an update on LME responsible sourcing – progress to date, and detail on next steps. Background: In October 2019, the LME published its LME Policy on Responsible Sourcing of LME-Listed Brands (the “Policy”), requiring all of its listed brands to comply with a set of requirements concerning the responsible sourcing of metals. The Policy aims to ensure that the supply chains of brands traded on the LME respect human rights and do not contribute to conflict financing or corruption.
/jlne.ws/3vimcfa

Fintech

The Operational Twists and Turns in the Race to Get Ready for T+1
Rob McGowan, Senior Sales Executive, Gresham Technologies – Traders Magazine
September 3rd marks a significant signpost on a long road that all market participants are going to have to travel. Financial institutions have just a little more than 700 days to prepare for one of the most significant market structure and technology compression changes in recent memory – the slashing of settlement timelines from T+2 to T+1.
/jlne.ws/3R53Gil

Liquidnet EMEA business development head departs for AI fintech Imandra; Appointment follows that of former chief operating officer at Goldman Sachs’ Sigma X MTF who joined Imandra in May.
Annabel Smith – The Trade
Liquidnet’s former head of business development for EMEA has left the firm to join artificial intelligence (AI) fintech Imandra in a similar role, The TRADE can reveal. Dan Squires has been appointed as a vice president of sales at Imandra after spending the last five years with Liquidnet, now part of interdealer broker TP ICAP.
/jlne.ws/3CSGOOX

CFPB Report Offers Cautionary Take on FinTech Platforms That Consumers Value
Pymnts
In case it’s unclear to anyone at this point, the Consumer Financial Protection Bureau (CFPB) is on edge about new payment types taking the markets by storm, concerns over which are spelled out in an August report that reads like part overview and part consumer warning.
According to a press release accompanying the 19-page CFPB report titled “The Convergence of Payments and Commerce: Implications for Consumers,” the CFPB is “focused on how large technology platforms and other emerging business models that operate outside of the traditional banking system use peoples’ sensitive spending and transaction data. We want to preserve the benefits of real-time payments, while still ensuring that the payments ecosystem in the United States is fair, transparent, and competitive.”
/jlne.ws/3B8sDDT

OCC requires Blue Ridge Bank to improve monitoring of fintech partners
Polo Rocha – American Banker
Charlottesville, Virginia-based Blue Ridge Bank has agreed to bolster its anti-money laundering program and improve its oversight of fintech partners in response to concerns from federal regulators.
An agreement with the Office of the Comptroller of the Currency, whose concerns helped scuttle a previously planned merger, would require Blue Ridge to make several improvements to “manage the risks posed by” its fintech partnerships, the bank said Thursday in a securities filing.
/jlne.ws/3TAyyZD

Cybersecurity

Cybersecurity stocks are beating the market in a volatile economy
Jordan Novet – CNBC
Economic concerns were a major theme across the technology industry during second-quarter earnings season, as companies cautioned about slower spending on ads, gadgets, e-commerce and software.
But with interest rates rising and inflation stuck near a 40-year high, one part of the tech sector is still showing booming demand: cybersecurity.
/jlne.ws/3QaDnpJ

Draghi Discussed Eni, GSE Hacks With Top Officials Thursday; Interministerial meeting looked into attack on energy company; Eni reported unauthorized access to its networks on Wednesday
Daniele Lepido and Alessandra Migliaccio – Bloomberg
Italian Prime Minister Mario Draghi discussed hacker attacks on oil giant Eni SpA and other energy companies with senior officials at a high-level security meeting Thursday, according to people familiar with the matter. Draghi and his undersecretary for security, Franco Gabrielli, held discussions at a meeting of the Interministerial Committee for Cybersecurity, said the people, who asked not to be named because the discussions were not public. A spokesman for the Italian government declined to comment.
/jlne.ws/3edLpRm

Global VPN Providers Pull India Servers Over New Cybersecurity Rules
Newley Purnell – The Wall Street Journal
Major global providers of virtual private networks, which let internet users shield their identities online, are shutting down their servers in India to protest new government rules they say threaten their customers’ privacy.
The Indian agency overseeing computer security will soon require VPN operators in India to collect information such as customer’s names, email addresses and the IP addresses they use to connect to the internet. Providers must maintain the data for at least five years and furnish the information to authorities when asked.
/jlne.ws/3wRGImD

FBI deploys cyber team to Montenegro following massive cyberattack
Ines Kagubare – The Hill
The FBI is deploying a team of cybersecurity experts to Montenegro to investigate a massive cyberattack that hit the country’s critical infrastructure over the weekend, The Associated Press reported on Wednesday.
The attack targeted Montenegro’s water supply systems, transportation services and online government services. Government officials have reported that the attacks are still ongoing, but that state infrastructure was not permanently damaged.
/jlne.ws/3RamUTG

Cryptocurrencies

FASB Excludes NFTs, Some Stablecoins From Crypto Accounting Project
Mark Maurer – The Wall Street Journal
The Financial Accounting Standards Board on Wednesday laid out its criteria for the assets it will include in its cryptocurrency project—parameters that left out nonfungible tokens and certain stablecoins. The decision marked another step toward an eventual proposal and a final rule, which would fill a void for companies holding these assets and would provide more detail to investors. For years, businesses and investors had asked the FASB for rules on how to account for and disclose their holdings of bitcoin and other digital assets, and for years the standard-setter had declined to do so, saying investment in crypto wasn’t widespread among companies. In May, however, the FASB added the crypto project to the technical agenda that sets its rule-making priorities.
/jlne.ws/3e5Xjww

U.S. sought records on Binance CEO for crypto money laundering probe
Reuters
U.S. federal prosecutors asked Binance, the world’s largest cryptocurrency exchange, to provide extensive internal records about its anti-money laundering checks, along with communications involving its chief executive and founder Changpeng Zhao, according to a late-2020 written request seen by Reuters.
/jlne.ws/3AIxtqa

A Sceptic’s Guide to Crypto: NFT Mania; Our new podcast series asks whether crypto and its supporting technology — the blockchain — have a future following a market crash
Financial Times
We are in the midst of a digital revolution, where the line between our physical world and cyber space is blurring. Tech Tonic is a show that investigates the promises and perils of this new technological age. Even after the crypto markets crashed this year, there are still a number of people who believe there’s a future for digital assets and blockchain technology. FT columnist and avowed crypto sceptic, Jemima Kelly, isn’t so sure.
/jlne.ws/3cco9Tk

Crypto Exchange FTX’s CEO Visited White House Amid Regulatory Fight
Sam Reynolds – CoinDesk
FTX CEO Sam Bankman-Fried and his government relations and policy team made a stop at the White House in May as lawmakers in the United States debate on whether to have the Commodity Futures Trading Commission (CFTC) or the Securities and Exchange Commission (SEC) act as the crypto industry’s primary federal market regulator. Newly released visitor logs show that Bankman-Fried; Eloria Katz, FTX’s director of government relations and policy; and Mark Wetjen, an ex-CFTC commissioner who is now FTX’s head of policy, visited in mid-May with Biden administration policy adviser Charlotte Butash and counselor Steve Ricchetti. The logs did not detail the subject of the meetings.
/jlne.ws/3Re5Ig0

Wave Financial Makes First Acquisition in Europe
MarketsMedia
Wave Financial LLC (Wave), the SEC regulated digital asset investment management company, is pleased to announce that it has acquired a minority stake in FINMA regulated Swiss based crypto investment manager Criptonite Asset Management. This is the first step of a planned full acquisition, subject to regulatory approval, expected to be completed by the end of 2022.
/jlne.ws/3Q4T0Pu

Politics

ESG in crosshairs of investors and politicians — with billions at stake
Justin Cash – Financial News
ESG should be about love and peace surely, not fighting? Someone should tell Texas comptroller Glenn Hegar and some of the world’s leading asset managers that. Hegar started quite the row with no lesser giants of the financial services world than BlackRock, UBS, Credit Suisse and BNP Paribas last week, when he blacklisted them among 10 firms the state claims are refusing to do business with fossil fuel companies. The consequences could be significant: state retirement plans with billions of assets are now barred from holding shares in the blacklisted firms.
/jlne.ws/3KNW5Cr

The U.K., a Maritime Insurance Hub, Commits to Cap Price of Russian Oil; A top Russian official said the country would refuse to sell oil at a capped price, raising questions about the U.S.-led plan
Amara Omeokwe and Andrew Duehren – The Wall Street Journal
The British Treasury chief said the U.K. was committed to a U.S.-led effort to put a cap on the price of Russian oil as a top Russian official said the country would refuse to sell oil at a capped price. In an interview at the British Embassy in Washington, Chancellor of the Exchequer Nadhim Zahawi said he was confident the price cap plan would succeed. Finance ministers from the Group of Seven wealthy nations are expected to virtually meet on Friday and endorse an outline for capping the price of Russian oil, The Wall Street Journal previously reported. “I’m confident that tomorrow we’re going to be able at the G-7 get everybody to the same place,” Mr. Zahawi said Thursday. He said the plan “will again make sure that next year and beyond we don’t see an oil price shock which could cause us obviously an even greater challenge than where we are today.”
/jlne.ws/3cLIhvz

EU Skeptical on Plan for Iberian Gas Pipeline to France; Spain has revived project after Russia’s invasion of Ukraine; Europe considering options including intervention, price caps
Jorge Valero – Bloomberg
European Union officials remain skeptical about the benefits of a proposed gas pipeline connecting the Iberian Peninsula with the rest of Europe, despite the risk of further cut-offs by Russia. The European Commission, the EU’s executive arm, considers that technical assessments show the new infrastructure would achieve no benefits and could take up to seven years to complete, according to an EU official who declined to be named on a confidential issue. The Midcat pipeline project, which would connect Spain and France through the Pyrenees, was abandoned in 2019. Spanish Prime Minister Pedro Sanchez revived the plan after Russia’s invasion of Ukraine to maximize use of the country’s terminals to process liquefied natural gas imported from third countries.
/jlne.ws/3cCtTFW

What are the EU’s plans to curb electricity prices?; Brussels advises member states to redirect power producers’ inflated profits to consumers, according to draft paper
Alice Hancock, Sam Fleming and Tom Wilson – Financial Times
Brussels has recommended member states funnel a share of the inflated profits generated by power companies to consumers as part of a plan to cushion soaring wholesale electricity prices in Europe. In a draft paper seen by the Financial Times, the European Commission advises governments to set a maximum price non-gas electricity producers can book and suggests that they redeploy any excess profit these companies generate above that level — a system that would be similar to a windfall tax. The recommendations, which will be circulated among energy ministers of the EU’s 27 member states before a meeting in Brussels next week, were leaked a few days after European Commission president Ursula von der Leyen promised quick measures to tackle the energy crisis in Europe.
/jlne.ws/3KGUbTZ

Regulation

Hedge fund co-founder Neil Phillips charged with market manipulation; DoJ says Phillips planned to manipulate South African rand to trigger a $20mn payout
Laurence Fletcher and Ortenca Aliaj – Financial Times
US federal prosecutors have charged Neil Phillips, a high-profile manager of a London-based hedge fund previously backed by George Soros, with conspiracy to manipulate currency markets. Phillips, 52, who co-founded Glen Point Capital, an emerging markets-focused hedge fund firm, in 2015, was arrested in Spain earlier this week, Department of Justice prosecutors said on Thursday. Phillips is charged with conspiracy to commit commodities and wire fraud, commodities fraud, and wire fraud over a plan to manipulate the South African rand exchange rate in order to trigger a $20mn payout on an option his fund had bought. “As alleged, Mr Phillips maliciously manipulated global markets in order to defraud financial institutions for illicit profit,” said an FBI assistant director Michael J Driscoll. Phillips, who could not immediately be reached for comment, previously worked at London-based BlueBay Asset Management, where he managed a $1.4bn global macro fund before leaving in 2014.
/jlne.ws/3R8szcR

Broadway Show Fund Faces SEC Probe for Misleading Investors
Chris Dolmetsch – Bloomberg
The managing partners of a fund that invests in Broadway shows are under investigation by the Securities and Exchange Commission, which sued them failing to comply a subpoena. In a suit filed Thursday in Manhattan federal court, the SEC said that it is probing whether Curtis Wayne Cronin and John Joseph of Broadway Strategic Return Fund LP, violated federal securities laws by making misleading statements to current and potential investors about how the funds’ assets are valued and whether the firm was under investigation.
/jlne.ws/3RcTa8R

SEC Charges Archer Capital Management Group, the Archer Growth Fund and Related Entities with Defrauding Investors
SEC
Lit. Release No. 25495 / September 1, 2022
Securities and Exchange Commission v. Archer Capital Management Group et al., No. 22-cv-61632 (S.D. Fla. filed September 1, 2022)
The Securities and Exchange Commission today charged Archer Capital Management Group, the Archer Growth Fund, and two related entities, HDR Management LLC and Silvermoon Group LLC, with operating a fraudulent scheme from December 2019 through December 2020 that raised approximately $2.6 million from at least 20 investors by using misrepresentations disseminated via Archer Capital’s website and other internet outlets.
/jlne.ws/3AGLg0w

SEC Charges Private Fund Adviser and Its Principal for Fraud
SEC
Litigation Release No. 25494 / September 1, 2022
Securities and Exchange Commission v. Ramas Capital Management, LLC and Ganesh H. Betanabhatla, No. 4:22-cv-02979 (S.D. Tex. filed September 1, 2022)
The Securities and Exchange Commission announced today that it filed charges against Ramas Capital Management, LLC (RCM), a Houston, Texas-based investment adviser, and Ganesh H. Betanabhatla, its managing partner, chief investment officer, and owner, for alleged misrepresentations and breaches of fiduciary duty to a privately-managed fund and its sole investor.
/jlne.ws/3COQf1B

SEC Files Subpoena Enforcement Action Against Two Principals of Broadway Musical Fund
SEC
Litigation Release No. 25493 / September 1, 2022
Securities and Exchange Commission v. Cronin and Joseph, No. 22-mc-248 (S.D.N.Y filed September 1, 2022)
The Securities and Exchange Commission announced that it has filed an action against Curtis Wayne Cronin (“Cronin”) and John Joseph (“Joseph”), both Managing Partners of Broadway Strategic Return Fund, LP (the “Fund”), a fund that invests in securities related to theatrical productions, seeking an order directing them to comply with investigative subpoenas for testimony and documents.
/jlne.ws/3eh28TQ

22-241MR ASIC review finds room for improvement remains with life insurance claims handling
ASIC
ASIC’s review of nearly 4800 individual disability income insurance (IDII) claims received between 1 January and 30 June 2021 has found more work is needed by insurers to ensure that consumers are protected from unfair practices in non-disclosure investigations and physical surveillances.
/jlne.ws/3KJoyZW

SFC welcomes Central Government’s support to enhance Hong Kong’s IFC status
SFC
The Securities and Futures Commission (SFC) welcomes the support of the Central Government and initiatives announced by the China Securities Regulatory Commission (CSRC) to broaden Stock Connect and further enhance Hong Kong’s position as an offshore Renminbi (RMB) centre and a risk management centre.
/jlne.ws/3TCuXKI

Investing and Trading

Women And Investing In 2022: Everything You Need To Know
Georgina Tzanetos – Bankrate
Women have altered the investing landscape in a big way over the past couple decades. While the stereotype of the typical investor targeted by the investment industry might be a man, women’s wealth is growing – and so is their investing footprint.
The number of women investors is surging. A 2021 study by Fidelity found that 67 percent of women are now investing outside of their retirement accounts. In 2018, this number was just 44 percent.
/jlne.ws/3cBw1xX

Investing expert: How ‘the smartest people in finance’ build wealth
Ryan Ermey – CNBC
If you follow financial figures on social media, chances are you’re getting inundated with new ideas every day. Whether it’s buying stocks, “HODLing” cryptocurrency or trading options, there’s always seemingly a new way to get richer faster.
While some people do manage to get rich quick through trading, for most, building wealth is a long-term game. And when your goal is decades away, the best advice tends to be boring. In fact, it may boil down to doing one simple thing.
/jlne.ws/3wTlWDf

ESG Funds Face Reckoning as Bear Market Slows Investing
Katherine Greifeld – Bloomberg
In late 2021, Cathie Wood’s ARK Investment Management introduced its first exchange-traded fund with a socially conscious bent. Less than eight months later, the ARK Transparency ETF was shuttered—the firm’s first-ever closure—and Wood declared on Bloomberg Television that “there was a lot of slapping lipstick on a pig” in the environmental, social, and governance investment industry.
/jlne.ws/3qbs5Xu

Environmental, Social and Corporate Governance

IOSCO: Education on Sustainable Finance Helps Protect Investors Against Fraud and Greenwashings
IOSCO Press Release via Traders Magazine
The Board of the International Organization of Securities Commissions (IOSCO) has published a report that identifies recent developments in investor education on sustainable finance, with a view to enhancing investor education and protection and supporting the sound development of this growing financial market.
/jlne.ws/3AKVDAo

Oil industry condemns first US fee on greenhouse gases; Methane charge of up to $1,500 a tonne clamps down on pollutant 80 times more potent than carbon
Myles McCormick – Financial Times
The landmark climate law signed by US president Joe Biden last month contains billions of dollars of financial carrots to reward investment in clean energy. The lone stick has been less heralded: a first-of-its kind fee on leaks of methane from the oil and gas sector. Methane traps 80 times more heat in the atmosphere than carbon dioxide over a 20-year period, making it a driver of climate change. In the US, the energy sector is the single largest source of methane emissions. The fee established by the Inflation Reduction Act marks the US’s first nationwide price on a greenhouse gas, as efforts to tax CO2 fizzle. Oil lobbies were quick to condemn it.
/jlne.ws/3qmYIC1

The Trump SPAC Needs More Time; Also barrier options, anti-ESG and Michael Saylor’s taxes.
Matt Levine – Bloomberg
Digital World Acquisition Corp. is a special-purpose acquisition company that has signed a deal to merge with Trump Media & Technology Group Corp., which runs Donald Trump’s “Truth Social” network, and take it public. Like most SPACs, DWAC has a time limit to complete its deal: Its corporate charter says that, if it has not completed a merger by Sept. 8 — next Thursday — it has to close up shop and return its money to shareholders. It is definitely not going to complete its merger with TMTG by next Thursday. (The main holdup is that the US Securities and Exchange Commission needs to review and sign off on the proxy statement for that merger; the SEC has various questions.)
/jlne.ws/3q31H23

The Anti-ESG Crusader Who Wants to Pick a Fight With BlackRock
Silla Brush and Saijel Kishan – Bloomberg
It was smiles all around as the familiar Wall Street ritual—the ringing of the closing bell—played out again at the New York Stock Exchange on Aug. 10. But this was no ordinary photo op. As the bell clanged and cheers went up, the figure in the center, Vivek Ramaswamy, was visibly delighted. A wealthy biotech entrepreneur turned anti-“woke” evangelist, he’s at the vanguard of a new conservative movement—one that’s bringing America’s political divisions to the money-loving heart of Wall Street. Its target: BlackRock Inc., the world’s largest asset management company. Forget #MeToo, Black Lives Matter, and rainbow flags. To Ramaswamy and his pack, the business of corporate America is business. Period.
/jlne.ws/3Rt9q59

Global ESG equity products grow; performance strong until 2022 – Investment Metrics
Hazel Bradford – P&I Online
Global ESG equity products nearly doubled in assets from 2019 to 2021, and most outperformed until 2022, according to a research paper by Investment Metrics, an investment analytics provider. The report by Brendan Cooper, senior research consultant, also found that 55% of global ESG products are based in Europe, excluding the U.K., and few of them have a value focus. Investment Metrics studied 52 funds from 45 asset managers in a global ESG equity peer group created by screening the broad IM global equity peer group for products branded or focused on ESG.
/jlne.ws/3ecB4VP

Institutions

Female Managers Make Fairer Pay Decisions Than Male Counterparts; Male managers pay less if it comes out of their own pay packet; Study comes as Europe mandates more diversity at board level
Olivia Konotey-Ahulu – Bloomberg
If you want a fairer pay packet, you have a better chance of getting it with a female manager, according to new research. When given the task of deciding how much to compensate employees for a set task, male managers chose to keep more for themselves than their female counterparts, according to the findings of researchers at the Karlsruhe Institute of Technology. “Various studies observe that women make more selfless and moral decisions than men,” political economy researcher and the report’s author, Nora Szech, said on Thursday. “However, we were shocked at how drastic the discrepancy was here.”
/jlne.ws/3Rwg6ja

Straits Times Index (STI) quarterly review
FTSE Russell
FTSE Russell announces that there will be one change to the constituents of the Straits Times Index (STI), following the September 2022 quarterly review. Emperador has been added to the STI and ComfortDelGro has been removed from the index.
The STI reserve list, comprising the five highest ranking non-constituents of the STI by market capitalisation, will be (in order of size) Olam Group, Suntec REIT, Keppel REIT, Frasers Centrepoint Trust and Ascott Residence Trust. Stocks on the reserve list will replace any constituents that become ineligible as a result of corporate actions before the next review. A full list of STI constituents can be found on the website.
/jlne.ws/3AHRZXJ

Changes in composition of the STOXX Europe 600 Index
Press Releases – Qontigo
Qontigo has announced the new composition of the STOXX Europe 600 Index. Effective as of the opening of European markets on September 19, 2022, the following stocks will be added to and deleted from the index and its respective size and sector indices:
/jlne.ws/3RmHbVU

Wellness Exchange

Covid Boosters Targeting Omicron Recommended by CDC; Signoff means the shots will be widely available in the coming days
Liz Essley Whyte and Peter Loftus – The Wall Street Journal
The CDC recommended newly authorized Covid-19 booster shots, the final regulatory step toward making the reformulated doses widely available. CDC Director Rochelle Walensky’s signoff on the shots on Thursday paves the way for them to become widely available. Most vaccination sites wait for the director’s decision before offering the inoculations. The action comes shortly after the Food and Drug Administration cleared the boosters, which target both the original virus and Omicron subvariants BA.4 and BA.5.
/jlne.ws/3CUTViq

CDC signs off on updated Covid-19 boosters
Brenda Goodman – CNN
Dr. Rochelle Walensky, director of the US Centers for Disease Control and Prevention, signed off Thursday on the recommendation of the agency’s independent vaccine advisers in favor of updated Covid-19 vaccine boosters from Pfizer/BioNTech and Moderna.
The CDC’s Advisory Committee on Immunization Practices voted 13 to 1 earlier in the day to recommend updated mRNA boosters for Americans this fall.
/jlne.ws/3CSZ3Uu

Shenzhen extends COVID curbs as China battles multiple outbreaks
David Kirton – Reuters
Parts of the southern Chinese tech hub of Shenzhen extended curbs on public activities on Friday but stopped short of a full lockdown, as cities across China battled COVID-19 outbreaks that dampen the outlook for economic recovery.
In the southwestern metropolis of Chengdu, which put its 21 million people under lockdown on Thursday, factories including plants run by auto giants Toyota and Volkswagen kept production running under self-contained “closed-loop” operations.
/jlne.ws/3B8Pj7d

China locks down 21 million residents in Chengdu to after COVID-19 outbreak
PBS NewsHour
Chinese authorities have locked down Chengdu, a southwestern city of 21 million people, following a spike in COVID-19 cases.
Residents have been ordered to stay home, and about 70% of the flights have been suspended to and from the city, which is a major transit hub in Sichuan province and a governmental and economic center.
/jlne.ws/3RsCQR2

Regions

In China, Some Cities Edge Into Covid-19 Lockdowns Ahead of Party Congress; Chengdu orders 21 million residents to stay home just weeks before Communist Party leadership shuffle
Raffaele Huang and Rachel Liang – The Wall Street Journal
Chinese cities tightened measures to halt Covid-19 flare-ups, threatening further damage to the country’s embattled economy ahead of a Communist Party congress to decide the nation’s top leadership. Chengdu ordered its 21 million residents to stay at home from 6 p.m. local time on Thursday, according to a statement from the city’s government. Authorities will conduct citywide Covid-19 tests through Sunday, with one person in each household allowed to leave home once a day to buy groceries, with proof of a negative Covid-19 test. They gave no date for when the measures would end. Chengdu, the capital of Sichuan province, is the economic heart of China’s vast inland area and the largest city put under a quasilockdown since Shanghai in April. Tighter Covid-19 controls had been spreading as about 700 locally transmitted infections of the virus were reported in the city over the past week.
/jlne.ws/3KFy8gw

Tech Companies Slowly Shift Production Away From China; Worried about geopolitical tensions and stung by pandemic shutdowns, Google, Apple and others are moving some work to nearby countries.
Daisuke Wakabayashi and Tripp Mickle – The New York Times
In the coming weeks, Apple and Google will unveil their latest generation of smartphones, jockeying to distinguish the new devices from previous models. But one of the most significant changes will go largely unnoticed by consumers: Some of these phones will not be made in China.
/jlne.ws/3TCbrOs

Russia shuts down Nord Stream gas pipeline to Europe; Three-day closure will compound concerns in European countries as they strive to secure supplies ahead of winter
David Sheppard, Max Seddon, Amy Kazmin and Roman Olearchyk – Financial Times
Russia has halted the flow of gas through the Nord Stream 1 pipeline to Europe for three days, the latest disruption to an energy link that has been central to Moscow’s efforts to squeeze supplies. Wednesday’s shutdown of the pipeline, which Russia claims is needed for essential maintenance, will add to anxiety in European countries as they seek to secure vital supplies ahead of the winter months. Russia has been accused of “weaponising” energy supplies to Europe and stoking a cost of living crisis in retaliation for western sanctions linked to its invasion of Ukraine.
/jlne.ws/3Qbvb8u

Russian Economic Optimism Is Based on Suspect Data; Western skepticism over Moscow’s claims on Ukraine is mostly absent regarding Russia’s economy
Josh Zumbrun – The Wall Street Journal
In the early weeks of Russia’s invasion of Ukraine, the U.S. and European allies rolled out wave upon wave of economic sanctions. As part of Moscow’s response, the Russian Federal State Statistics Service (known as Rosstat) and other government agencies halted publication of many economic statistics. Regular reports on imports and exports, debt, monthly oil production, banking, airline and airport passenger volumes, and so on, simply disappeared.
/jlne.ws/3KKBT4y

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China commodity trader woe a setback for Glencore

First Read Hits & Takes John Lothian & JLN Staff Congratulations to Larry Tabb. STA announced Larry as the 2022 Dictum Meum Pactum (DMP) Award recipient. Here is a success story for you. The Greenwood Project placed four interns at Goldman Sachs this summer...

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