The Great Wall (Street) of China

Oct 12, 2020

First Read

Hits & Takes
JLN Staff

The JLN MarketsWiki Education GoFundMe campaign had some additional contributions on Friday and over the weekend. Thank you to Russell Levens, Tony Pettipiece, Cliff Histed, Joanna Mallers, and Third Street Ag Investments for their support. Third Ag Investments includes Robert Otter, whom we profiled sometime back. Also, Joanna Mallers was formerly one of the owners of First American Discount, for whom I worked. Cliff Histed is a former deputy chief of the securities & commodities fraud section of the U.S. Attorney’s Office, Northern District of Illinois and a former chief trial attorney at the Commodity Futures Trading Commission. He is now a partner with K&L Gates. Tony Pettipience is a crypto-focused consultant and board member for the Chicago crypto start-up association and chair of policy & regulation committee for the Global Digital Asset & Cryptocurrency Association Part-time. Russell Levens is the managing partner of Oxford Global Derivatives.

Please help support our MarketsWiki Education program, and our general operations, by contributing to our GoFundMe campaign.

Don’t forget to sign up for DC Fintech Week 2020, a virtual event.

CME Group veteran Jim Moran and Carey McDonald have joined Leslie Sutphen at Financial Markets Consulting LLC.

Our family camping trip went well, except for the part where my wife, Cheryl, slipped on a step while hiking with our three kids and fell on her backside and braced herself with her left arm, which is now broken. We were at a state park in Missouri, Ha Ha Tonka State Park, and she received some good care from two EMT’s in training who were happening by. And the EMS and State Ranger who arrived also provided quality care. I was stationed in a picnic area at the time because I knew the trail was too difficult for me.

Also on the bad news side, my son Tim’s roommate and co-worker came down with some symptoms associated with COVID-19 and their Montessori school has been closed for a cleaning. Tim will be tested. More than likely, this is not COVID-19, as Tim’s roommate works with one to three-year olds at the school and this is probably just another kid-related bug.

The committee for the LaSalle Street Tech Awards of the Pathway to Adventure Council of the Boy Scouts of American have set December 3 as the date of the event. This is the 50th year of the event, which will be virtual this year. Pat Kenny of CQG, as previously announced, is the chairman of the event. Also, we received word Friday that the Chicago Board of Trade Clearing Corporation Foundation would be making a contribution this year, courtesy of trustee David Johnson. Thank you to Dave and the foundation and all the trustees for their loyal support over the years.

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


The Annual Chicago Conference on Futures And Derivatives, hosted by Marc Nagel and sponsored by Thompson Coburn and Exchange Analytics, is taking place on October 20 as a virtual program. Fresh off a record year for enforcement actions, the former director of the CFTC’s Division of Enforcement, James McDonald, will join this year’s panel on enforcement. Maybe someone will ask him if a record year for enforcement actions signifies a) investigations and prosecutions have improved, b) regulators’ tools have become more sophisticated, c) enforcement actions are keeping pace with trading volume growth, or d) the deterrent aspect of rule enforcement is deteriorating and there are more violations? More information about the conference is available here. ~Thom Thompson

The Hedge Fund Association is holding a webinar Wednesday, October 28 from 12:00 noon to 1:00pm ET on “Perspectives on Fraud, Money Laundering & Cybersecurity.” The event is complimentary for all HFA members and future members. You can go here for more information and to register. ~SR


The Spread: Is 2020 Over Yet?

This week on The Spread: the CME launches futures trading on the VOLQ, Eurex launches futures and options trading on two ESG indices, and more.

Watch the video »



Capital markets and video games – close cousins
The Trade
On the surface, capital markets and the video games industry have little in common, with the exception of the fact that they are both extremely large. Banking is about trading, risk management and finance and video games are about great graphics, interactive experiences and ensuring users have a good time. In fact, the challenges faced by software teams in both industries are not as far apart as it might first appear. In many cases, the problems for which they need to solve in order to achieve success are very similar, even if the outcomes look, feel and act very different.

*****The object is not to get killed. Pretty simple.~JJL


Robinhood Users Say Accounts Were Looted, No One to Call
Sophie Alexander and Annie Massa – Bloomberg
Brokerage says systems not breached, criminals targeted emails; The SEC has reached out to customers in response to complaints
It took Soraya Bagheri a day to learn that 450 shares of Moderna Inc. had been liquidated in her Robinhood account and that $10,000 in withdrawals were pending. But after alerting the online brokerage to what she believed was a theft in progress, she received a frustrating email. The firm wrote it would investigate and respond within “a few weeks.” Now her money is gone.

*****I’ve noticed that a lot of these big tech platforms seem to go out of their way to avoid giving customers access to customer service. I once found AirBnB’s customer service number after digging around on the internet for a spell. When the person on the other end of the call answered, it sounded like I had called their cell phone. I said it had been hard to find the number, and the guy said the company makes it hard on purpose. This was in 2017, so I don’t know if their practices have improved.~MR


Why it’s so important to hope
Alia E. Dastagir – USA TODAY
Most people hope for something. The big things: An end to the pandemic. Their candidate to w?in the presidential election. A better future for their children. They hope for tangible things: a bigger paycheck, a safe home, good health. And the more amorphous ones: love, respect, to feel seen. Recent polls show that while most Americans remain at least somewhat hopeful about the future, hope is being tested. Suffering and division are ever-present, and there doesn’t seem a clear path forward. But psychologists say hope is not a luxury. For mental health, it’s a necessity.

*****Hope, faith and love. These are the essentials.~JJL


Friday’s Top Three
Our top story Friday was the Financial Times’ Bubble warning: even college kids are touting Spacs, about the proliferation of special purpose acquisition companies. Second was the Wall Street Journal’s How Citadel CEO Ken Griffin Built a $1 Billion Private Property Portfolio. Third was JLN’s Suzanne Cosgrove’s STA 2020: New Exchanges Taking Seats At The Sips Table, a conversation about the new MIAX and MEMX equities exchanges.


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Lead Stories

The Great Wall (Street) of China; 2020 marks the year when Beijing finally threw open its doors to US banks despite broader Sino-American tensions
Patrick Jenkins – FT
At the high point of Donald Trump’s relationship with Xi Jinping, when they met in Beijing three years ago, the Chinese president responded to his US counterpart’s pressure to liberalise financial services with a pledge: “We will never close our doors. They will only open wider and wider.”

Black Lives Matter provokes change on Wall Street; Street protests encourage investors to apply pressure on boardrooms
Patrick Temple-West – FT
Asset managers are poised to push companies to do more on racial injustice, spurred by the outcry about the killings of Black people by police in the US and the rise of the Black Lives Matter movement. While some companies, such as Apple and retailer Target, donated cash to civil rights groups after the death of George Floyd on May 25, others, such as US bank Wells Fargo and its Wall Street competitors, have stepped up efforts to hire and promote people of colour.

Nobel Prize in economics awarded to duo for work on auction theory; Paul Milgrom and Robert Wilson developed new types of auctions for sale of goods and services
Delphine Strauss – FT
Paul Milgrom and Robert Wilson, professors at Stanford University, have won this year’s Nobel Prize in economics for their work on auction theory and the design of new auction formats. The committee awarding the prize — officially known as the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel — said the theory they developed had been instrumental in developing new and complex auction formats now used around the world, for purposes ranging from the sale of radio spectrum to allocating airport landing slots and setting up emissions trading systems.

Milgrom, Wilson Win Nobel in Economics for Work on Auctions
Niclas Rolander, Charles Daly, and Craig Stirling – Bloomberg
Theories applied in areas from landing slots to mobile phones; Wilson was the thesis adviser of fellow winner Milgrom
Two Stanford University academics who helped design the U.S. auction that allocates mobile-phone frequencies will share the 2020 Nobel Prize in economics. Paul Milgrom and Robert B. Wilson, whose ideas have been applied to sales of anything from aircraft landing slots to fishing quotas, won’t need to travel to Stockholm to receive the award because of the Covid-19 crisis, according to Nobel officials.

Mesirow reaching back to get ahead; In a rapidly changing industry, and with ever-larger rivals invading its turf, the financial services firm looks to its last leader for the future.
Lynne Marek – Crain’s Chicago Business
Mesirow Financial Chairman Richard Price reclaimed the CEO title last month, after handing it off two years ago to the company’s president. Now it’s up to him to jump-start growth at the midsize Chicago financial services firm as competition encroaches. In his last go-round as CEO, from 2011 to 2018, Price mainly shed parts of Mesirow that his late predecessor Jim Tyree had cobbled together. He sold a big insurance business, a smaller hedge fund unit and other pieces, leaving Mesirow with three mainstays: managing investments for institutions and individuals, selling and trading debt products, and advising companies on employee retirement plans.

How Investors Are Trading November’s Election; Traders are buying shares of green-energy companies and gauging the impact of possible corporate-tax increases as they brace for a Biden win
Amrith Ramkumar – WSJ
With market volatility rising ahead of November’s U.S. presidential and Congressional elections, investors are parsing what polls and policy proposals mean for everything from energy stocks to shares of private-prison operators.

China stock listings on Wall Street accelerate under Trump; Chinese groups stage growing number of IPOs despite US delisting threats
Hudson Lockett and Richard Henderson – FT
The number of Chinese groups listing their shares in the US has grown faster under the Trump administration than during that of predecessor Barack Obama, despite moves to decouple the two economies.

Morgan Stanley: can mega deals widen the gap with Goldman Sachs? James Gorman’s acquisitions of ETrade and Eaton Vance place less emphasis on the investment bank operations
Laura Noonan – FT
Within weeks of signing the second-biggest deal of his career, Morgan Stanley boss James Gorman was recovering from Covid-19 in his Manhattan apartment and watching the world’s economies lurch towards a coronavirus-driven recession.

Former Irish Stock Exchange chief joins Aquis as non-executive director; Deidre Somers joins Aquis Exchange as an independent non-executive director with 23 years of stock exchange experience in primary and secondary markets.
Annabel Smith – The Trade
European subscription-based equities platform Aquis Exchange has appointed the former chief executive of Euronext Dublin and BlackRock board member to its board as an independent non-executive director. Deidre Somers brings 23 years of stock exchange experience to the role. She currently also serves as an independent non-executive director and audit committee member for BlackRock iShares, holding the position since April 2019.

Intercontinental Exchange Provides Update on Plans to Launch ICE Futures Abu Dhabi and World’s First Murban Crude Futures Contracts
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 provides an update on its plans to launch ICE Futures Abu Dhabi (IFAD) and the world’s first futures contracts based on Murban crude oil.

One of the Year’s Worst Short Bets Defies Scathing Reports and an SEC Investigation; No stock has been more heavily attacked by activist short sellers than GSX Techedu, but the Chinese tutoring company has so far come out on top
Jing Yang and Xie Yu – WSJ
No stock has been more heavily attacked by activist short sellers this year than GSX Techedu Inc., GSX 12.14% a New York-listed Chinese tutoring company. So far, GSX has come out on top. After quintupling this year, it is one of the world’s most valuable education businesses, with a market capitalization of $27.3 billion.m”Shorting this, it has been just a nightmare,” said Richard Smatt, a mathematics professor at Flagler College in St. Augustine, Fla., who said he is sitting on tens of thousands of dollars in unrealized losses on GSX.

SEC Probes Small Bond Trades That Lead to Big Returns; ‘Odd lot’ buying in mortgage portfolios attracts scrutiny
Justin Baer – WSJ
When AlphaCentric Income Opportunities fund made its debut in late May 2015, it began to beat its peers almost immediately, an unusual development for the slow-moving world of bond investing. By June 30 of that year, the fund was up 5.6%. In that same period, its benchmark fell by nearly 1%, according to Morningstar Direct.

When Your Last $166 Vanishes: ‘Fast Fraud’ Surges on Payment Apps; People are getting defrauded as they turn to Square’s Cash App and PayPal’s Venmo to do more online banking in the pandemic.
Nathaniel Popper – NY Times
Charee Mobley, who teaches middle school in Fort Worth, Texas, had just $166 to get herself and her 17-year-old daughter through the last two weeks of August.

Why Some Millennials Just Can’t Manage Their Money; More financial literacy is needed in Asia to move beyond parents’ views on property, gold and prudence.
Anjani Trivedi – Bloomberg
In 2008, Jackie and I arrived at our investment banking jobs on Wall Street. Fresh out of college, we were now among the top earners in our peer group. Twenty-hours-plus daily, most days of the week, working hard on pitchbooks, models and deals. We saw eye-to-eye on most things: people, what we were going to eat that night off of, and, more or less, life.

Banks Have a Chance to Come Up for Air;l Credit provisions won’t be a huge driver of bank earnings this quarter, leaving investors some space to focus on other trends driving their performance
Telis Demos – WSJ
For the first time since the start of the coronavirus pandemic, U.S. bank earnings aren’t expected to be overwhelmed by waves of credit provisions when these lenders begin reporting third-quarter results this week. That could give investors a chance to focus more on other trends, where there might be some surprising undercurrents.


‘I Feel Like I Have Dementia’: Brain Fog Plagues Covid Survivors; The condition is affecting thousands of patients, impeding their ability to work and function in daily life.
Pam Belluck – NY Times
After contracting the coronavirus in March, Michael Reagan lost all memory of his 12-day vacation in Paris, even though the trip was just a few weeks earlier. Several weeks after Erica Taylor recovered from her Covid-19 symptoms of nausea and cough, she became confused and forgetful, failing to even recognize her own car, the only Toyota Prius in her apartment complex’s parking lot.

FCA action against companies dropped at start of pandemic; Number of enforcement cases opened by City of London regulator fell sharply
Matthew Vincent – FT
The City of London regulator took significantly less action over financial misconduct at the start of the coronavirus pandemic, with enforcement cases against companies and individuals falling 76 per cent in the period around the national lockdown.

Banks call back stayaway staff abroad amid tax warning; Employees working from holiday homes during pandemic could face large bill
Laura Noonan and Stephen Morris – FT
The City of London’s top banks are clamping down on staff who have been waiting out the pandemic in their Mediterranean holiday villas or home countries, warning of hefty tax bills for those who stay away.

Coronavirus survives for almost a month on cash and phones, study finds; Australian agency says pathogen stays infectious for ‘significantly longer’ on smooth surfaces
Jamie Smyth in Sydney – FT
The virus responsible for Covid-19 can survive for up to 28 days on common surfaces such as banknotes and mobile phone screens, much longer than previously thought.

Sweden Faces Historic Pay Battle for Its Covid Fighters
Rafaela Lindeberg – Bloomberg
Sweden is about to find out just how much of a game changer the coronavirus has been for its economy. With wage talks for 3 million employees under way, union bosses for public sector workers such as nurses are banking on a lot more popular support to help force through their demands. The upshot could be a hefty increase in pay levels that ends up jump starting inflation and filtering through the entire economy.

Czechs Plan to Tighten Virus Curbs Without Shutting Economy
Krystof Chamonikolas and Peter Laca – Bloomberg
Finance minister expects more limits on public gatherings; Health minister says people won’t be banned from leaving homes
The Czech Republic plans to further tighten social-distancing rules to stem the European Union’s worst coronavirus surge — without repeating the economic paralysis from this spring.

Coronavirus May Stay for Weeks on Banknotes and Touchscreens
Jason Gale – Bloomberg
SARS-CoV-2 has been found to persist longer on smooth surfaces; Research reinforces need for regular hand-washing and cleaning
Sign up here for our daily coronavirus newsletter on what you need to know, and subscribe to our Covid-19 podcast for the latest news and analysis. The new coronavirus may remain infectious for weeks on banknotes, glass and other common surfaces, according to research by Australia’s top biosecurity laboratory that highlights risks from paper currency, touchscreen devices and grab handles and rails.

Inhaled Vaccines Aim to Fight Coronavirus at Its Point of Attack; Vaccines sprayed into the nose or inhaled through the mouth won’t require needles and could be easier to roll out. They may be more effective too.
James Paton – Bloomberg
The Covid-19 vaccines closest to the finish line are designed to be injected into the arm. Researchers are looking at whether they can get better protection from inoculations that fight the virus at its point of attack — the nose and mouth. Most vaccines in human testing require two shots for effectiveness, and developers still aren’t even sure if they’ll prevent infections. Scientists are hoping to generate superior immune responses with inhaled vaccines that directly target the airway cells the virus invades.

France Must Avoid General Lockdown by All Means, Castex Says
Geraldine Amiel – Bloomberg
France must avoid another general lockdown by all means possible in the face of a “very strong” resurgence of Covid-19, said Prime Minister Jean Castex. Speaking Monday on France Info radio, Castex urged the public to wear face coverings as much as possible, keep contacts to a minimum and take other basic sanitary measures to avoid infection.

Today’s Travel Bookings May Be More Fiction Than Fact; Bookings are improving across the travel sector, but investors shouldn’t assume demand will translate to dollars
Laura Forman – WSJ
Future bookings are beginning to recover, buoying shares of some travel and leisure companies. But investors should ask themselves just how much of that is fantasy money versus real future revenue on which they can hang their hats.

People Harmed by Coronavirus Vaccines Will Have Little Recourse; Any payouts for injuries will come from a less-generous program than in years past
Peter Loftus By Susan Pulliam – WSJ
The U.S. government paid out $4.4 billion over more than 30 years covering injuries relating to a host of vaccines—from flu to polio—but payouts for potential injuries from Covid-19 vaccines will be covered by a far less-generous program

Silicon Valley Pay Cuts Ignite Tech-Industry Covid-19 Tensions; Bay Area staffers move to less-costly locales to work remotely in pandemic, triggering cost-of-living salary reductions and stoking debate
Katherine Bindley and Eliot Brown -WSJ
Tech workers fleeing the San Francisco Bay Area to work remotely amid the pandemic are facing a new reality: pay cuts. Over the past several months, Covid-19 has shaken traditional notions of where employees can work. In Silicon Valley, which has a relatively high cost of living and an employee base with access to state-of-the-art remote-work tools, companies are devising plans for a future with decentralized staffs. In some cases, changes can include cutting salaries by 15% or more depending on where someone moves.

Iran Deaths Hit Record; U.K. to Lay Out New Curbs: Virus Update
Bloomberg News
The coronavirus continued its unrelenting spread, with resurgences across Europe spurring containment efforts. U.K. Prime Minister Boris Johnson is set to tighten restrictions on Monday, while Italy is also considering measures.

Covid Makes Domestic Work Even More Precarious; An outbreak at the White House shows just how vulnerable housekeepers can be in a pandemic.
Adam Minter -Bloomberg
White House officials have been likening their workplace to a “ghost town” since President Donald Trump was diagnosed with Covid-19. East Wing staffers are under orders to work from home, while many in the West Wing — if they aren’t isolating with their own cases — are also staying away. It’s a smart choice, but not one that’s available to everyone. Out of sight, the White House residence staff, numbering about 90, continues taking care of the daily needs of a contagious president and first lady.

Can You Handle Herd Immunity? Ask These Philosophers; The human cost of reaching a point of immunity should give us pause.
John Authers – Bloomberg
Welcome to the weekend. We have a special Points of Return today, but rest assured that there is nothing about markets or investment in it. Instead, I hope you’ll be interested in my latest essay on the moral dilemmas raised by the coronavirus. The idea of “herd immunity” through infection, ruled out almost everywhere six months ago, is now under serious consideration in capitals across the world. It’s a hugely complicated scientific issue, but it also poses an unavoidable moral dilemma. I hope what follows will help to frame that moral question and make it easier for all of us to participate in a very difficult debate. This is the fourth essay in a series that has been coming out at roughly two-month intervals since the outbreak of the pandemic. To get the newsletter delivered directly to your inbox, sign up here.

Exchanges, OTC and Clearing

SGX reports market statistics for September 2020
Optimism of improving market conditions spurs capital market fundraising; Uncertainties ahead of U.S. elections boost risk-management activity across asset classes
Singapore Exchange (SGX) today released its market statistics for September 2020. Optimism of improving market conditions spurred capital market fundraising, while uncertainties ahead of November’s U.S. elections boosted portfolio risk-management activity across asset classes.

Amendments to the Termination of Trading and the Exercise and Assignment Rules of the Monthly and Weekly Options on the Mexican Peso/U.S. Dollar (MXN/USD) Futures Contract and Currency Fixing Time of the Related Futures Contract
CME Group
Effective Sunday, November 15, 2020 for trade date Monday, November 16, 2020, and pending all relevant Commodity Futures Trading Commission (“CFTC”) regulatory review periods, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will amend the termination of trading time of the Monthly and Weekly Options on Mexican Peso/U.S. Dollar (MXN/USD) Futures contract (the “Contracts”) from 9:00 a.m. Central Time (CT) to 11:30 a.m. CT as in the table below as well as amend the CME Currency Fixing Price time for MXN/USD Futures from 9:00 a.m. CT to 11:30 a.m. CT and commencing with the December 2020 contract month and the November Week 3 contracts and beyond.

September monthly figures at Eurex and EEX; Another positive month for OTC Clearing volumes at Eurex
OTC Clearing had another positive month in September with notional outstanding volumes up 45% – from 12,253 billion EUR to 17,771 billion EUR – and total average daily cleared volumes up 93% to 145 billion EUR. Average daily cleared volumes in Interest Rate Swaps grew by 25%, up from 334 billion EUR in September 2019 to 418 billion EUR this year.

TECO 2030 admitted to trading
The cleantech company TECO 2030 has today been admitted to trading on Merkur Market (ticker code: TECO-ME). TECO 2030 is an engineering and equipment development company with focus on a greener and cleaner environment. Recently, the company raised NOK 80 million through a private placement.

EGX Adopts Regulatory Amendments For Its SMEs Platform
The Egyptian Exchange’s (EGX) adopted amendments in the regulations of its SME platform to be presented to the Financial Regulatory Authority (FRA) for approval. These amendments are within the framework of EGX management’s policy for the development of the SMEs market in a way that contributes to companies’ growth and expansion and in accordance with the comprehensive development strategy formulated with the relevant market parties conducted in coordination with the European Bank for Reconstruction and Development (EBRD).

EGX Ringing Of Bell Ceremony Celebrating The World Investor Week (WIW) 2020
The Egyptian Exchange (EGX) Chairmen and Board members participated in the World Investment Week (WIW) “Ring the Bell for Financial Literacy” initiative with opening of trading session today (October 11). The event was held in the presence of Haitham Al Haj Ali, represented by the Minister of Culture and leaders of the Egyptian Capital Market.

An Updated OpenMarkets. See What’s New.
CME Group
Welcome to the new look OpenMarkets. We’ve reimagined our site to align with the viewing habits of today’s readers on desktop, mobile and web. Take a look around, and we think you’ll find it easier to navigate to the markets and economics content of most interest to you.


5 Bank And Fintech Partnership Ideas To Generate Revenue
Ron Shevlin – Forbes
Today’s realities in the banking industry:
Banks and credit unions need new sources of non-interest income.
Fintech startups need to start generating revenue.
Bank/fintech partnerships are a win/win: They help banks offer services that would take them years to develop and they help fintechs scale distribution faster and more cheaply than they could on their own.
There are bank/fintech partnership opportunities out there that could generate revenue for both parties, yet few banks are pursuing those opportunities.
Why is that?

China’s digital yuan tests leap forward in Shenzhen
Rita Liao – TechCrunch
Shenzhen, known for its maker community and manufacturing resources, is taking the lead in trialing China’s digital yuan.
Last week, the city issued 10 million yuan worth of digital currency to 50,000 randomly selected residents who applied. The government doled out the money through mobile “red envelopes,” a tool designed to digitize the custom of gifting money in red packets and first popularized by WeChat’s e-wallet.

Productivity Commission claims wide-spread regtech adoption will lift compliance
Aimee Chanthadavong – ZDNet
An information paper by the Productivity Commission has highlighted how there is scope for Australia to adopt regulatory technology (regtech) beyond the financial sector, with the belief it can improve regulatory outcomes and reduce the costs of administration and compliance.
In its regulatory technology information paper [PDF], the Productivity Commission noted how Australia is “well-placed” to develop regtech solutions given its “relatively stable and sophisticated” regulatory systems, but currently, extensive use of regtech remains relatively low.

Broadridge Adds Talent And Funds Expertise In Europe
Broadridge Fund Communication Solutions business is delighted to welcome Linda Power, as Operations Director in Dublin. Linda brings extensive experience in fund accounting management, coupled with expertise in fund lifecycle operations, so will bring tangible benefits to the Fund Communication Solutions business and its client base.

Human judgement still king in a world of algorithmic trades
Following extreme market conditions at the height of the COVID-19 crisis, David Whitehouse explores how algorithmic trading performed in comparison to other market-moving events, and find the human touch remains critical.
David Whitehouse – The Trade
As the head of fixed income trading at a European bank in 2007, Jens Kramarczik was troubled by the early stages of the US subprime mortgage crisis.


Regulatory Clean-Up Moves Are Good for Crypto, Fundstrat Says
Joanna Ossinger – Bloomberg
A slew of regulatory moves announced this week is positive for the famously free-market-oriented cryptocurrency space, according to Fundstrat Global Advisors LLC. Developments like the U.K. Financial Conduct Authority banning the sale of crypto derivatives and the U.S. Department of Justice issuing an enforcement framework are beneficial in the long term because they will help reduce nefarious activity in the industry, according to a report by David Grider, Tom Lee and Ken Xuan. They cited regulators “cleaning up bad actors” as also helping. The market’s focus on news that Square Inc. bought Bitcoin and Bitcoin’s ability to push past $11,000 show that crypto can power through these things, the report said.

Quitting Your Job as Political Protest Is a Lot Easier If You’re in Tech
Shelly Banjo – Bloomberg
Hi folks, it’s Shelly. There’s at least one thing more remarkable than the sheer number of employees who left Coinbase Inc. last week over disagreements with the company’s ban on political speech. It’s that they did so while the U.S. faces an unemployment crisis and rising uncertainty over the economic outlook post-election. Sixty people, or 5% of Coinbase’s staff, opted for exit packages after the chief executive officer, Brian Armstrong, told employees to either keep their political views and social activism out of the workplace or leave. The company, which runs a platform to buy and sell Bitcoin and other cryptocurrencies, instituted the policy after workers staged a walkout over Armstrong’s silence on the Black Lives Matter movement.

Coinbase Senior Software Engineer Left This Week, Unclear if Departure Linked to New Policy
Kevin Reynolds – Coindesk
Andrei Anisimov, whose LinkedIn profile still describes him as a “Senior Software Engineer” at Coinbase, tweeted Saturday that this had been his last week at the cryptocurrency exchange. At press time it wasn’t clear whether Anisimov was one of the 60 people who accepted a severance package that was offered this week.

Monthly Ethereum futures volume hit all-time high in September
The Block
Demand for Ethereum futures continues to grow, according to recent data from Skew and The Block Research. The monthly volume of Ethereum futures grew by 5.3% in September, from $163.1 billion to $172.2 billion. This figure broke the previous record high in August. Since the beginning of 2020, Ethereum futures volume has grown by nearly 320%.

BitMEX hires former Revolut executive to lead compliance efforts
Yogita Khatri – The Block
Cryptocurrency derivatives exchange BitMEX, which is currently under a legal battle with the U.S. government, has onboarded a new chief compliance officer. Malcolm Wright, former chief compliance officer at Revolut, has joined BitMEX operator 100x Group. Wright had a short 5-month stint at Revolut in 2018, according to his LinkedIn. At 100x Group, Wright would lead global compliance efforts and report to Vivien Khoo, interim CEO and COO of the group. BitMEX is currently implementing a User Verification Programme, a four-step process similar to ID checks, and Wright would also supervise that initiative.

US Department of Homeland Security taps five blockchain startups to reinforce anti-forgery and counterfeit prevention procedures
MK Manoylov – The Block
The Science and Technology (S&T) Directorate, the research and development wing of the United States Department of Homeland Security, has given close to a million dollars to five blockchain startups. The intent of these awards, totaling $817,712, aims to find standards-based technologies to help the Department of Homeland Security use blockchain to modernize operations. In recent years, the S&T Directorate has awarded funds to a range of startups working on new technology applications, including firms that work with distributed ledger tech.

Spate of Bitcoin Extortion Bomb Threats Hits Government, Schools in Japan
Daniel Palmer – Coindesk
Local government premises in Japan have been hit by a flood of extortion attempts demanding bitcoin over the least three months. According to a report by Japan Today on Monday, such threats have been received in at least 18 prefectures since July. The extortionists demand a payment in bitcoin to avoid the detonation of an explosive device, per the report. Austria has also suffered a spate of similar bomb threats, as CoinDesk reported back in August. Japan Post said that city halls or schools have been the subject of the threats, receiving an email demanding varying amounts of bitcoin.

Bitcoin transaction values and fees grew in 2020’s third quarter
MK Manoylov – The Block
The amount of value transacted on the Bitcoin network grew in the third quarter of 2020 compared to the second quarter, according to findings from The Block Research. During the period, users transacted more than $225B, posting an average of $2.4B a day. In all, the value transacted across the network rose some 25% compared to the second quarter of this year, which saw $180B.

Web traffic to cryptocurrency exchanges fell by over 14% in September
MK Manoylov – The Block
Cryptocurrency exchange web traffic dropped 14.6% from August to September, data from The Block Research shows. August 2020 web traffic peaked at 144.3 million visits, a yearly high, while September saw 123.2 million visits. Despite the drop in visitors, September is still the second-highest web traffic month for exchanges in 2020.


There Will Be No Trump Coup; A final pre-election case for understanding the president as a noisy weakling, not a budding autocrat.
Ross Douthat – NY Times
Three weeks from now, we will reach an end to speculation about what Donald Trump will do if he faces political defeat, whether he will leave power like a normal president or attempt some wild resistance. Reality will intrude, substantially if not definitively, into the argument over whether the president is a corrupt incompetent who postures as a strongman on Twitter or a threat to the Republic to whom words like “authoritarian” and even “autocrat” can be reasonably applied.

Charles Koch’s Big Bet on Barrett; For almost 50 years, the multibillionaire has been pushing for a court unfriendly to regulation of the market. He may be on the brink of victory.
Christopher Leonard – NY Times
Charles Koch has activated his political network to support Judge Amy Coney Barrett’s nomination, and to tip the scales on her nomination battle in the U.S. Senate. While much of the commentary about Judge Barrett’s nomination has focused on the real prospect that Roe v. Wade may be undermined or overturned, Mr. Koch has other concerns. Judge Barrett’s nomination is the latest battleground in his decades-long war to reshape American society in a way that ensures that corporations can operate with untrammeled freedom. It may be a pivotal one.

Boris Johnson faces rebellion over Covid job support for workers; Tory MPs in northern England want higher wage subsidies for employees at companies forced to close
Jim Pickard, Andy Bounds and Chris Tighe – FT
Boris Johnson is facing a rebellion by Conservative MPs and mayors in northern England who want the prime minister to improve his job support scheme for workers at hospitality businesses forced to close because of new coronavirus restrictions.

Militias on standby as Trump warns of rigged election; Alleged kidnap attempt of Democratic governor suggests civilian armed groups are on high alert
Katrina Manson – FT
The FBI’s disruption of a plot by the Wolverine Watchmen to kidnap the Democratic governor of Michigan has highlighted the potentially violent role a clutch of self-styled militias could play as Americans go to the polls next month.

Michigan’s Whitmer Cites ‘Serious Threats’ in Run-Up to Election
Jennifer A Dlouhy and Robert Schmidt -Bloomberg
Fears of intimidation at polling places spur state review; 13 men charged in kidnapping plot against Michigan governor
Michigan Governor Gretchen Whitmer called the kidnapping plot against her evidence of “serious threats” from domestic terrorists, amid fears voters could face intimidation at polling places on Election Day. Whitmer’s comments, on CBS’ “Face the Nation,” came three days after 13 men were charged in connection with a plot to storm the state capital building in Lansing, kidnap the governor, overthrow the government and try her for treason.

Australian ex-PM Rudd calls for inquiry into Murdoch media dominance
Sonali Paul – Reuters
Former Australian Prime Minister Kevin Rudd has called for a major government inquiry into the tight ownership of Australian media by Rupert Murdoch’s News Corp, securing more than 46,000 signatures on a petition after just two days.

JPMorgan Says U.S. Capital Gains Tax Hike May Briefly Hit Stocks
Joanna Ossinger
October 11, 2020, 2:00 AM CDT
Tax policies get fresh focus on chances of Democratic sweep; Strategists see potential strong stock gains once hike is done
If Democrats do “sweep” the November elections and increase capital gains taxes, it would be unlikely to cause more than a temporary slide in the U.S. stock market, according to JPMorgan Chase & Co.


Market abuse in a time of coronavirus
Speech by Julia Hoggett, Director, Market Oversight – UK FCA
There is no doubt, as demonstrated by the fact that this conference is taking place virtually, that we are living in unusual times. Times that provide a great number of challenges for all of us, both personal and professional. The word ‘unprecedented’ has been used in conjunction with the pandemic too many times to count. Whilst, on occasion, historians may accurately be able to say that there are precedents for the times we are living in, there are other experiences and challenges that will be wholly new – in part because every generation lives through a different era in terms of how society and the economy function.

FCA bans IFA directors who provided false and misleading SIPP declarations
The FCA has today banned Peter Howson and John Butterfield from performing any regulated activity because of their roles in the submission of false and misleading information about customers’ high net worth status.

Federal Court Orders Pennsylvania Man and His Companies to Pay More Than $1.2 Million in Forex Trading Scheme
The Commodity Futures Trading Commission today announced that the U.S. District Court for the Eastern District of Pennsylvania entered an order of default judgment finding that Michael Salerno of Chadds Ford, Pennsylvania, and his companies Black Diamond Forex LP, BDF Trading LP, and Advanta FX, fraudulently solicited members of the public to become foreign currency (forex) traders. The defendants are required to pay more than $1.2 million.

CFTC Revokes Registrations of Florida Company and its CEO for Fraud and Related Criminal Conviction
The Commodity Futures Trading Commission today announced it has revoked the Commodity Pool Operator and Commodity Trading Advisor registrations of Phy Capital Investments LLC of Miami, Florida and the Associated Person registration of its owner Fabio Bretas de Freitas, formerly of Miami, Florida.

CFTC Staff Extends No-Action Relief from the Execution Requirement for Swaps in Certain Types of Package Transactions
The Division of Market Oversight (DMO) of the Commodity Futures Trading Commission today extended no-action relief for swaps executed as part of a package transaction in the categories described below. This extension will enable DMO to continue to assess the appropriate response for applying the trade execution requirement to swaps in certain types of package transactions. This no-action relief will expire on the earlier of: (i) 11:59 pm (EDT) November 15, 2022, or (ii) the applicable effective date or compliance date of a CFTC action, including without limitation a rulemaking or order, that provides a permanent solution.

ESAs’ Board of Appeal dismisses case against ESMA on alleged non-application of Union law
The Joint Board of Appeal of the European Supervisory Authorities (ESAs – European Banking Authority, European Insurance and Occupational Pensions Authority, and European Securities and Markets Authority) published today its decision in the appeal case brought by Mr Howerton against the European Securities and Markets Authority (ESMA). The Board of Appeal’s decision considered as inadmissable the Appellant’s claim that six national financial supervisory authorities and ESMA should have taken supervisory steps in relation to an alleged non-application of Union law.

EU warned of global risks to overhauling fund rules; Hong Kong association says a Brexit-driven shutout of foreign managers would dent popularity of EU funds in Asia
Siobhan Riding – FT
The Hong Kong asset management association has warned that a Brexit-related overhaul of the EU’s retail fund rules could have the unintended consequence of undermining the dominance of European funds in Asia.

US regulators should prod lenders to help minority communities; Existing rules can be updated to address inequalities exacerbated by Covid-19
Eugene Ludwig – FT
Despite pleas from Federal Reserve chair Jay Powell for more robust support for the US economy, President Donald Trump has abandoned negotiations with Congress.

Investing and Trading

OECD drafts principles for $100bn global corporate tax revolution; Technical blueprint would upend taxation of US tech groups but still needs political agreement
Chris Giles – FT
The world’s rich nations have drafted a set of technical principles which would revolutionise the corporate taxation of multinational companies and could raise $100bn in extra tax revenues around the world.

BOE Asks Commercial Banks for Views on Negative Interest Rates
Fergal O’Brien -Bloomberg
The Bank of England is seeking information from U.K. financial institutions on their ability to implement negative interest rates without damaging their business. The BOE and the Prudential Regulation Authority are conducting a survey as part of their analysis of the policy. While the BOE has said it isn’t currently planning to cut interest rates below zero, it’s preparing in case such a move ever becomes necessary.

Why a Pot Smoker’s Paradise May Say No to Legal Weed
Matthew Brockett – Bloomberg
Some 80% of its population has used it, including Prime Minister Jacinda Ardern, even though it’s against the law. But New Zealand might say no to legalizing recreational cannabis in the general election on Oct. 17. Two major opinion polls show support waning for a non-binding referendum to end the prohibition. Why would a country where “weed” is widely used turn down the opportunity to acknowledge its ubiquity and reject laws turning users into criminals? In public discussions and debates, the focus seems to be on the next generation.

Environmental, Social and Corporate Governance

Number-crunchers hope new benchmark will bring boards up to speed with ESG; Big Four accountants push for consistent measurement to hold companies to account
Gillian Tett – FT
It is rare to see the chief executives of the rival “Big Four” accounting firms on the same stage. In September, however, that occurred. The reason? The World Economic Forum convened a meeting of the leaders during the UN General Assembly week, where they thrashed out a common accounting framework for environmental, social and corporate governance.

Why start-ups are more likely to dodge greenwashing label; Small companies’ claims of impact and moral high ground can be harder to verify but some investors are trying to do better
Mimi Billing – FT
When asked to explain the greater interest in impact start-ups and corporate sustainability, Niklas Adalberth singles out the global attention on green issues caused by a certain teenage climate activist.

Impact investment gains from improving measures of success and failure; More than a century after a pioneering Rothschild fund to improve London housing, the sector is coming of age
Billy Nauman – FT
In 1885, Nathaniel Mayer Rothschild became one the UK’s first impact investment managers when he established a fund that promised to provide “commodious and healthy dwellings” for the working class in east London — and a 4 per cent return for investors.

Australia Seen at Risk of Losing A$43 Billion in Green Spending
James Thornhill – Bloomberg
Net-zero target would boost spending, investor group says; Government has resisted calls for net-zero emissions target
Australia risks missing out on at least A$43 billion ($31 billion) in investment over the next five years if it fails to set a target of net-zero emissions for 2050, according to a climate-focused investor group.


Robinhood says some customer accounts may have become target of hackers
Fintech startup Robinhood said Friday some customers might have become a target of hackers because of their personal email accounts being compromised outside of its platform. The issue did not occur from a breach in the firm’s systems, a spokesperson for the company said in a statement.

Private equity-owned companies in ‘intensive care’ due to pandemic; Funding strains increase as coronavirus rages across the US and Europe
Chris Flood – FT
One in 10 companies owned by private equity managers is in “intensive care” as a result of the coronavirus pandemic, sparking concerns that alternative funds could suffer performance hits and reputational damage.

Nelson Peltz’s plans for Invesco and Janus come under scrutiny; Questions over benefits of pushing for any deal between two underperforming asset managers
Chris Flood – FT
Big deals have returned to the investment industry, with Morgan Stanley agreeing this week to pay $7bn for rival Eaton Vance and Franklin Templeton splashing $6.5bn to buy Legg Mason earlier this year.

The race to be the next Hargreaves Lansdown; Fund groups are targeting the wealth market to revive falling revenues — but face an uphill struggle
Siobhan Riding – FT
Asset managers across the City of London, the UK’s traditional financial hub, have long vied for the attention of investment platform Hargreaves Lansdown and wealth manager St James’s Place with the aim of selling their funds to the groups’ vast armies of affluent investors.

BlackRock kicks off earnings for fund management industry in tumult; Third-quarter reports start this week as consolidation among asset managers takes off
Michael Mackenzie and Richard Henderson – FT
BlackRock will this week kick off third-quarter earnings season for a fund management industry where the widening gap between its winners and losers has unleashed a wave of consolidation.

UK active managers fail to prove their mettle in a bear market; Only half of stock pickers outperformed in 2020’s volatile markets
Madison Darbyshire – FT
Nearly half of active funds in the UK failed to outperform their benchmark in the first six months of 2020, undermining longstanding claims that stock pickers shine in times of high market volatility.

It’s ‘No Time to Die’ for Hedge-Fund Manager Ulrich’s Big James Bond Bet; Pressure on MGM Holdings and Anchorage Capital Group is mounting with delay of film’s premiere
Juliet Chung – WSJ
Hedge-fund manager Kevin Ulrich has a lot riding on the latest James Bond film. But after the coronavirus pandemic destroyed movie-theater attendance and pushed “No Time to Die” out to next year, the odds of a big payday anytime soon are getting longer.

Goldman Strategists Say Sell Dollar on Biden Odds, Vaccine
Ruth Carson – Bloomberg
Firm recommends buying Mexican peso, Indian rupee against USD; A ‘blue wave’ U.S. election could see DXY index test 2018 lows
The dollar may tumble to its lows of 2018 on the rising likelihood of Joe Biden winning the U.S. election and progress on a coronavirus vaccine, according to Goldman Sachs Group Inc. “The risks are skewed toward dollar weakness, and we see relatively low odds of the most dollar-positive outcome — a win by Mr. Trump combined with a meaningful vaccine delay,” strategists including Zach Pandl wrote in a note Friday. “A ‘blue wave’ U.S. election and favorable news on the vaccine timeline could return the trade-weighted dollar and DXY index to their 2018 lows.”


Renminbi sinks after PBoC responds to biggest rally in 15 years; China’s central bank moves to make it easier to buy foreign currencies
Hudson Lockett – FT
A historic rally in China’s renminbi halted on Monday after the country’s central bank cut the cost of betting against the currency in the wake of last week’s biggest daily gain in a decade and a half.

Buffett-Led Boom Proves Short-Lived for Most Japan Trading Firms
Gearoid Reidy, Shoko Oda, and Stephen Stapczynski – Bloomberg
A share-price surge in Japan’s trading houses’ triggered by Warren Buffett’s $6 billion investment is already fading, due to a lack of fresh catalysts and a downturn in commodity markets. Shares of two of the five “sogo shosha” — as the commodity-centric Japanese conglomerates are called — are now trading below levels before Buffett’s Berkshire Hathaway Inc. announced its stake purchase. The August announcement, among the largest-ever investments by Buffett in Japan, not only sparked a rally in stocks, but also boosted overall investor interest in the trading companies.

EU Primes the Pumps for Start of Its Top-Rated Bond Issuance
John Ainger and Lyubov Pronina – Bloomberg
Social bond sales to begin in second half of this month; There is a lot of investor expectation, says EU’s Hahn
The European Union is about to embark on a bond-issuance program that will see it emerge as one of the largest issuers of top-rated debt by the end of next year. The bloc will begin selling social bonds in the second half of this month to finance a 100-billion-euro ($118 billion) scheme to support employment, according to budget Commissioner Johannes Hahn. Issuance for its 750-billion-euro pandemic fund will then start by the end of the second quarter next year, with an average maturity of 15 years, he said.

Nasdaq-Like Valuation No Deterrent for Poland’s Top Stock
Konrad Krasuski -Bloomberg
Online retailer Allegro surged 61% at the start of trading; Investor says magnitude of index-driven demand is a shock
Poland’s newest stock listing became the largest company on the country’s main exchange, highlighting investor demand for technology exposure as the Eastern European nation is introduced to Nasdaq-level valuations.

Year’s Biggest Bank Merger Sealed as Saudi Rivals Reach Deal
Adveith Nair and Nicolas Parasie – Bloomberg
National Commercial Bank to buy rival Samba for $15 billion; Merger to create the Gulf’s third-biggest lender by assets
National Commercial Bank, Saudi Arabia’s largest lender by assets, agreed to buy rival Samba Financial Group for $15 billion in the biggest banking takeover this year.


How a Brexit deal, or no deal, will affect markets; Investors braced for long-awaited resolution to EU-UK negotiations on their future ties
Karen Ward – FT
The midnight hour in the Brexit negotiations is fast approaching. The outcome will be far-reaching for markets, and not just for sterling and UK assets.

EU leaders to insist on tough enforcement powers in Brexit deal; Boris Johnson’s internal market bill hardens bloc’s resolve to secure retaliation rights
Jim Brunsden and Sam Fleming and Victor Mallet – FT
French president Emmanuel Macron and other EU leaders will this week insist on tough enforcement rules for any UK trade deal, warning that British prime minister Boris Johnson’s move to override the Brexit treaty has shown Britain’s word cannot be trusted.

Brexit Britain Is Failing EU’s Data-Privacy Test, Activist Warns
Stephanie Bodoni – Bloomberg
Ryan says EU citizens’ data isn’t adequately protected by U.K.; EU plans to adopt decision on EU-U.K. transfers by year-end
U.K. privacy protections were criticized by an activist who told the European Union that the British shouldn’t be trusted to protect user data after Brexit.

Brexit: Boris Johnson calls Emmanuel Macron as deadline looms
BBC News
Boris Johnson has told the French president the UK wants to “explore every avenue” to secure a post-Brexit trade deal with the EU, days before the PM’s self-imposed deadline. Mr Johnson told Emmanuel Macron “intensive talks” were needed to “bridge significant gaps” remaining across the negotiating table. A disagreement over fishing has been one major sticking point of talks. Informal discussions will continue in Brussels next week.

Campaigners in last-ditch push to protect farming standards post-Brexit
Fiona Harvey – The Guardian
Campaigners are staging a last-ditch attempt to enshrine food safety and animal welfare standards in UK law after Brexit, as the agriculture bill returns this week for debate and a series of votes in both houses of parliament. The government is said to be adamantly opposed to legislating for a continuation of the high standards required under EU law, with farmers asked instead to rely on ministerial assurances that standards will be upheld after Brexit. A spokesperson dismissed concerns as “unhelpful scaremongering”.


US game theory specialists win Nobel prize in economics
Phillip Inman – The Guardian
The Nobel prize for economics was awarded on Monday to two US game theory specialists, 26 years after John Nash – the Princeton academic depicted by Russell Crowe in the 2001 film A Beautiful Mind – won for his groundbreaking work on the same subject. Americans Paul R Milgrom and Robert B Wilson won for the designs of mathematical models that promote “improvements to auction theory and inventions of new auction formats”, said Göran K Hansson, secretary-general of the Royal Swedish Academy of Sciences.

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CME to permanently close most trading pits

CME to permanently close most trading pits

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

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