Why isn’t CME offering a cannabis futures contract?

May 18, 2020

First Read

Hits & Takes
By John Lothian & JLN Staff

Do you want to see something very cool? This is Ellen Sandor’s virtual art exhibition. Ellen is the wife of Dr. Richard Sandor. She is a new media artist and founder/director of the collaborative arts group (art)n. In light of the impact of COVID-19 on the museum world, this type of display could have a big impact on the art world and people’s virtual enjoyment. You are going to like this. I know I did.

Do you want to see how fast COVID-19 can spread at a restaurant? Here was an experiment with black light to show how widely a virus can spread

The 2020 and 2021 expiration calendars are available from the OCC website.

Later today we will publish the first segment of our John Lothian Productions series on how to shoot video. We will also be publishing another Open Outcry Traders History Project video. Former Cboe and CBOT member Chess Obermeier’s video will be followed later in the week by that of his wife, Maureen Oberemeir, herself a Cboe broker.

On Saturday, my whole block came out to the street to honor three students who would have had their graduation ceremony from York Community High School in Elmhurst, but it was cancelled because of the coronavirus. I like the community and neighborhood spirit that I have seen, which gives me great hope we can prevail over this pandemic.~JJL


In case you missed CBS’s “60 Minutes” interview with Fed Chairman Jerome Powell on coronavirus and the economy, you can watch it – or read the transcript – here. ~SR


The Spread: An Eligible Bachelier

This week on The Spread, the OCC wins best equities clearing house for the third year in a row, a couple of Cboe directors bow out, we discuss the Bachelier model, and more.

Watch the video »


Valuation Model Change for Four Average-Price Options – Effective May 18, 2020
CME Clearing
CME Clearing is switching the pricing model used for valuation of four average-price cash settled options to the Curran model, effective with the end-of-day clearing cycle on Monday, May 18, 2020.

*****Yet another option model from the CME Group. Here is a paper about the Curran Model.~JJL


CEOs Are Cutting Millions of Jobs Yet Keep Their Lofty Bonuses; Bosses are taking pay cuts. But are CEOs really sharing the pain when salaries make up just a tiny fraction of total pay?
Anders Melin – Bloomberg
Even CEOs are starting to get squeezed by the economic realities of this pandemic. But compared to their employees, a growing number of critics still say it’s not nearly enough. So far, top executives of many major U.S. corporations — including some at the very epicenter of the crisis — have mostly held on to their outsize pay packages after giving up some of their salaries. And even as rank-and-file jobs vanish, some still have a distant shot at collecting bonuses for 2020, albeit smaller than last year’s.

******How to lose friends and influence people (against you).~JJL


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Harvard’s Reinhart and Rogoff Say This Time Really Is Different; The professors, whose 2009 book showed that financial crises often follow similar patterns, spoke to us about what’s happening in 2020.
Simon Kennedy – Bloomberg
When Carmen Reinhart and Kenneth Rogoff published their heavyweight history of financial crises in late 2009, the title was ironic. This Time Is Different: Eight Centuries of Financial Folly reminded readers that the catastrophic 2008-09 credit crisis was far from unique. The authors became the go-to experts on the history of government defaults, recessions, bank runs, currency sell-offs, and inflationary spikes. Everything seemed to be part of a predictable pattern.

*****I get really worried when I hear “This time is different.”~JJL


Many Americans Are Getting More Money From Unemployment Than They Were From Their Jobs
Amelia Thomson-DeVeaux – FiveThirtyEight
The United States is not known for its generosity to the unemployed. But the coronavirus crisis has transformed our system for compensating jobless workers. As tens of millions of workers suddenly became unemployed, Congress passed an expansive relief package with an unprecedented $600-per-week supplement for jobless workers. The goal was to replace their wages so they could survive the economic lockdown.

*****The value of work should not be underestimated.~JJL


Drastic Makeover Looms for World’s Most Followed Stock Index
Sarah Ponczek – Bloomberg
More than 30 firms may be removed from the S&P 500: DataTrek; Recently removed companies have drastically underperformed
The workings of passive investment indexes in times of crisis is already a subplot of the virus drama following histrionics in the oil market. It’s shaping up as a flashpoint in stocks, too, as overseers wrestle with pushing the eject button on wounded companies.

*****More than 30 companies could be removed from the S&P 500.~JJL


Covid-19 Could Mean the End of Small Charities
Siraj Datoo – Bloomberg
Non-profit groups in the U.S. and other countries could shutter operations entirely as a result of the coronavirus, even as billions of dollars are donated to pandemic-relief efforts. Many local non-profits that count on small donors are in trouble, said Rick Cohen, chief operating officer of the U.S.-based National Council of Nonprofits. Canceled events, a sudden withdrawal of government financing and the forced closure of stores that were sources of revenue have led to a depletion of funds, he said.

****Yet the need will be greater than ever.~JJL



Friday’s Top Three
Our top story Friday was ABN Amro prioritises review of investment bank as new chief says more de-risking is necessary, from The Trade. Second was the John Lothian Productions video for ErisX, ErisX – About the Exchange. Third was CME to Make Changes to Livestock Markets, from AgWeb.


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Lead Stories

Why isn’t CME offering a cannabis futures contract? CME’s chief dragged his feet on a bitcoin futures contract. He seems to be doing the same with cannabis.
Lynne Marek – Crain’s Chicago Business
Farmers, investors and traders are clamoring for a hedge in the booming cannabis market, where legal global sales have more than tripled in the past five years to $15 billion. Many believe the best hedge would be a cannabis futures contract, but CME Group CEO Terry Duffy, who leads the world’s biggest futures operator, says the Chicago company wouldn’t trade on a federally illicit substance. Even if it weren’t illegal, he’s not high on the idea.

Oil volatility sparks debate on big commodities bets; CFTC proposes looser rules on position limits for speculators in spite of recent turmoil in crude market
Gregory Meyer – FT
The US commodities-market regulator is poised to relax curbs on speculators, just weeks after sales by the largest oil-linked exchange-traded fund helped drive crude prices off a cliff. A new rule proposed by the Commodity Futures Trading Commission would double position limits for investors in commodities including oil, natural gas, gold, corn and soyabeans. In addition, the Washington, DC-based agency would set limits on energy and metals contracts only during the final three days before they expire — abandoning an earlier effort to cap holdings in any contract, whether for delivery next month or next year.

Pandemic Shatters World Order, Sowing Anger and Mistrust
Nick Wadhams – Bloomberg
Virus is like an ‘asteroid hitting the earth,’ Fontaine says; Early battle will be over priority access to any virus vaccine
While the coronavirus pandemic wreaks havoc across much of the globe, political and business leaders are already starting to think about what the world might look like once the worst of the outbreak eases. The forecasts aren’t good.

Pay Attention to the Central Bankers Behind the Curtain; Monetary policy could be a powerful tool to address climate change as well as the coronavirus.
Laura Millan Lombrana – Bloomberg
Compared to the noise lawmakers and officials have been making about the trillions of dollars they’ve pumped into their respective economies to recover from the shock of Covid-19, central bankers have gone about their work more quietly. But that doesn’t make the monetary response any less important—or less interesting to those who’d like to see the coronavirus response tackle climate goals, as well.

Will Oil Prices Ever Recover After the Market Broke?
Rakteem Katakey – Bloomberg
The global economy’s most important commodity is in serious trouble. Oil prices slumped from near $50 to $20 over just 11 days in March, breaking the market’s back. The coronavirus was spreading at alarming rates and countries were going into deep freeze, crushing demand for everything from gasoline to jet fuel. April then decimated oil. Consumption slumped by a third, according to some estimates, as the world headed into deep recession. Crude was so abundant that storage tanks were overflowing. Then, the unthinkable: prices fell below zero on April 20, with sellers willing to pay buyers to take unwanted oil off their hands.

A month after negative oil prices, U.S. crude contract expiry looms
Devika Krishna Kumar – Reuters
A month after sellers had to pay nearly $40 a barrel to get rid of U.S. oil futures, the next watershed moment looms with the expiry of the June contract on Tuesday – and so far there is little sign of a repeat of the historic plunge.

CME Group to shut down regulatory reporting division later this year; Move to shut down regulatory reporting services and trade repositories in Europe and Australia means many firms face the task of switching vendors.
Hayley McDowell – The Trade
US derivatives exchange CME Group has confirmed it will wind down its regulatory reporting businesses later this year, alongside its European and Australian trade repositories. In a statement, CME said that NEX Regulatory Reporting and the Abide Financial division, comprising of its ARM and APA reporting services for MiFID II compliance, would be wound down by 30 November this year.

Oil Watchers Applaud Swift Delivery of OPEC+ Supply Cuts
Grant Smith, Javier Blas, Julian Lee, and Sharon Cho – Bloomberg
Implementation of 10-million barrel cut deeper than expected; Traders, tanker-tracking, refiners point to strong compliance
OPEC+ is responding to the oil market’s collapse with an urgency never seen before. The alliance’s program of production cutbacks this month is well on the way to trimming 9.7 million barrels of daily crude output — roughly 10% of global supplies, according to tanker-tracking data, interviews with physical crude traders and refiners, and assessments by consultants. And that’s just in the first two weeks of the agreement.

Short selling bans lifted in Europe; Austria, Belgium, France, Greece, Italy and Spain have decided not to renew bans on short selling after restrictions were put in place in March.
Hayley McDowell – The Trade
Restrictions on short selling activity due to increased volatility and concerns about market confidence at the height of the global coronavirus pandemic have been lifted by six European states.

Cheer spreads through US oil market as lockdowns ease; Prices climb after operators cut output faster than many analysts expected
Derek Brower – FT
Analysts in the US oil market are growing increasingly confident of stronger prices, as coronavirus lockdowns ease and consumption creeps up just as production plummets.

Investors test central banks’ stance on negative rates; Money-market contracts imply slip below zero in the UK and US
Tommy Stubbington – FT
Investors are beginning to price in negative interest rates in the UK next year, despite the Bank of England’s protestations that it has no plans to push short-term borrowing costs below zero.

Many Bankers to Stay Home After Crisis Ends, Danish Survey Shows
Christian Wienberg and Frances Schwartzkopff – Bloomberg
In Denmark, bankers and their bosses have been so content with the quality of the work they do from home that almost a third plan to continue some form of the regime once the Covid-19 crisis is over, according to a survey.

Traders Bet U.K. Will Have Negative Interest Rates by Year End
John Ainger and James Hirai – Bloomberg
Money markets price in rates below 0% by the end of December; Global banks throw weight behind move into negative territory
Investors are now betting the U.K. will join the negative-rates club by the end of December. Spurred by Bank of England Chief Economist Andy Haldane’s comments that the institution is looking at unconventional monetary policies — including negative rates — more urgently, overnight interest-rate swaps for December’s meeting dropped below 0% for the first time.

Fed Warns of Significant Hit to Asset Prices If Crisis Grows
Jesse Hamilton and Rich Miller -Bloomberg
Commercial real estate could endure major stress, Fed says; Fed flags risks in twice-yearly report on financial hazards
The Federal Reserve issued a stark warning Friday that stock and other asset prices could suffer significant declines should the coronavirus pandemic deepen, with the commercial real estate market being among the hardest-hit industries.

Warren Buffett’s Berkshire dumps most of Goldman Sachs stake; Famed investor backed the bank in 2008 but sold bulk of shares as pandemic developed
Eric Platt – FT
Warren Buffett’s Berkshire Hathaway has dumped the bulk of the stake in Goldman Sachs that it acquired in the depths of the financial crisis, a regulatory filing revealed on Friday night.

Treasury Eases Terms for Small Businesses to Convert Loans to Grants; A fact sheet released on Friday said businesses could get forgiveness without rehiring all their employees if the layoffs occurred early on during the lockdowns.
Emily Flitter – NY Times
The Treasury Department on Friday made it slightly easier for small-business owners to avoid having to repay government-backed loans they took out under a program designed to keep them from laying off employees and permanently closing.

Ray Dalio Says Capitalism Must Be Reformed, Not Abandoned
Nathan Crooks – Bloomberg
“Huge gaps in spending and living conditions are threatening the existence of our system,” Ray Dalio wrote Friday in an editorial published by CNN. “We need to reform capitalism, not abandon it.”

Europe Seen Sizzling This Summer With Below-Average Rainfall
Jonathan Tirone – Bloomberg
Copernicus Climate Change Service issues seasonal forecasts; Weather could spell trouble for agriculture and utilities
Europe is set for a sweltering and tinder dry summer this year, posing trouble for farmers, utilities and transportation on inland waterways.


Coronavirus pandemic hastens decline of US coal industry; Miners are losing their jobs at the fastest rate in decades in shift to cleaner energy
Gregory Meyer – FT
Jobs are being lost from the US coal industry at the fastest rate in decades as the fuel gets crowded out of an electricity market that is shrinking because of the coronavirus pandemic.

Coronavirus pandemic accelerates shift in MBA market; The Covid-19 outbreak has forced schools to rethink their model to survive the crisis and build for the future
Jonathan Moules – FT
During his 22 years at the University of North Carolina’s Kenan-Flagler Business School, Doug Shackelford has helped its MBA programme adapt to a number of serious economic shocks. Following the turmoil after the dotcom bubble burst and the 9/11 terror attacks, he helped lead the school as head of academic affairs. Then in the recession that followed the financial crisis, Kenan-Flagler set up an online version of the programme — MBA@UNC.

How Covid Is Shifting Human Behavior Around the World:
Paul Tugwell – Bloomberg
The coronavirus arrived in early 2020 and within a few months capsized society. Whether rich, middle class or poor, it upended daily life everywhere. The financial crisis was devastating, but many barely felt it. No one has escaped this across-the-board shock to the system that’s ignited a collective pivot.

Putin Sends Army to Fight Siberian Gold Mine Virus Outbreak
Yuliya Fedorinova – Bloomberg
Polyus has 866 people infected with Covid-19 at Olimpiada mine; Polyus CEO says there is no risk that the mine will be halted
Russian President Vladimir Putin ordered the army to send military staff and medical equipment to help the country’s largest gold miner, Polyus PJSC, fight the Covid-19 outbreak at its Siberian unit.

Markets Have Much More to Worry About Than Covid; Start with a renewed worsening of U.S.-China tensions and fresh doubts over the euro’s future.
John Authers – Bloomberg
In Case I Missed It
So, how was it for you? I took a break last week, so this is a good time to take stock. About two months ago, global capital markets sustained one of their greatest shocks in history, driven by the Covid-19 pandemic. Much still depends on how well public health and economic authorities deal with its impact and aftermath.

TSA May Soon Start Screening Airline Passengers for Fever
Alan Levin -Bloomberg
Measure seen as protection against new coronavirus infections; Airline trade group has been pushing TSA to take on new task
The U.S. Transportation Security Administration is close to starting a pilot program to check airline passengers for fever as a new layer of protection against the coronavirus.

Be 100% Skeptical of 100% Coronavirus Cure; Sorrento Therapeutics claims it has a cure for the new coronavirus, sending its stock surging
Charley Grant – WSJ
When fears of a pandemic’s effects take over the public consciousness, unusual things start to happen. That is especially true for biotech stocks. Little-known Sorrento Therapeutics announced Friday that an antibody it is developing demonstrated full inhibition of the new coronavirus. “We want to emphasize there is a cure. There is a solution that works 100 percent,” CEO Henry Ji told Fox News. The stock had more than doubled by midday as daytraders cheered the apparent end to society’s troubles.

Experts Question Russian Data on Covid-19 Death Toll
Henry Meyer – Bloomberg
WHO says it’s in talks with Russia about reported death rate; Deputy premier says Russia isn’t manipulating statistics
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. As Russia’s surging coronavirus infections have turned it into a global epidemic hotspot second only to the U.S., one thing puzzles health experts: Why is it reporting so few deaths?

Clearstream, Euroclear Halt Lira Trade on ‘Bridge’ Platform
Selcan Hacaoglu and Taylan Bilgic – Bloomberg
Clearstream Banking and Euroclear Bank have jointly decided to suspend Turkish lira transactions over a shared electronic communications platform effective from May 18, according to a statement on Clearstream’s website.

Vaccine Nationalism Puts Global Advocate on Covid Front Line
James Paton – Bloomberg
Access to immunizations is the mission of Gavi’s Seth Berkley; ‘Making sure the world is protected’ is key to Covid response
As the coronavirus spreads around the world and the death toll tops 300,000, it’s sparking a race for a vaccine that could leave poorer nations behind. Seth Berkley saw it coming.

The Coronavirus Isn’t the End of Your Career; If anything, it’s time to prove your value.
Rachel Rosenthal – Bloomberg erg
For the hotel chef who can’t afford his nine prescriptions, losing a job could be a matter of life and death. Even among the employed, fear of what’s around the corner is almost as paralyzing.

Exchanges, OTC and Clearing

Block Trades
CME Group
Effective on trade date Monday, June 1, 2020, and pending all relevant CFTC regulatory review periods, this Market Regulation Advisory Notice will supersede CME Group Market Regulation Advisory Notice RA2002-5 from February 10, 2020. It is being issued to add a reference in Section 1. to the introduction of Directed Request for Quote (“DRFQ”) functionality within CME Direct for the electronic private negotiation and execution of block trades.

Notification of Brand Change and Brand No Longer Produced
CME Group
The Exchange was notified that Valcambi SA Switzerland, producer of Platinum and Palladium brand VABS, has changed their brand mark from ‘Valcambi S.A. Balerna-Suisse’ to VALC ‘Valcambi SUISSE (with a diamond comprising of four scalene triangles)’.

Amendments to the Eris US Dollar (USD) Swap Futures Contracts to Migrate to SOFR Discounting
CME Group
Effective Sunday, October 18, 2020, for trade date Monday, October 19, 2020, and pending all relevant
CFTC regulatory review periods, The Board of Trade of the City of Chicago, Inc. (“CBOT” or “Exchange”) will amend Rule 61103.A. (“Maturity Date Final Settlement Price”) of the Eris US Dollar Swap Futures contracts (the “Contracts”) to change the discounting mechanism from Federal Funds to Secured Overnight Financing Rate (“SOFR”).

HKEX to Introduce New Initiatives to Enhance Liquidity of ETPs
New Spread Table and Continuous Quoting Market Making Obligations for ETPs to be effective on 1 June;These initiatives are HKEX’s latest step in a series of market structure changes to enhance the liquidity of Hong Kong-listed ETPs
Hong Kong Exchanges and Clearing Limited (HKEX) is pleased to announce today (Monday) the introduction of a new spread table and continuous quoting market making obligations for Exchange Traded Products (ETPs) from 1 June 2020. The new initiatives are part of HKEX’s ongoing mission to develop Hong Kong into Asia’s ETP marketplace.

China Construction Bank (Asia) joins common depository network
Deutsche Börse Group
The international central securities depositories (ICSDs) Clearstream Banking S.A. and Euroclear Bank SA/NV have appointed China Construction Bank (Asia) Corporation Limited (CCB (Asia)) as common depository, safekeeper and service provider for their international debt securities, also known as Eurobonds.

Eurex STS secures German banking licence for Buy-in Agent service
Launching in early 2021, the Buy-in Agent service will offer an automated and standardized solution to meet the CSDR’s settlement discipline regime; BaFin has granted Eurex STS, a subsidiary of Eurex Frankfurt AG, a banking licence
Eurex Securities Transactions Services GmbH (Eurex STS) has obtained a banking licence from the German Federal Financial Supervision Authority (BaFin), a key milestone required to offer Buy-in Agent services once the settlement discipline aspect of the CSDR regulation comes into effect.

TRADE Calls: EuroCCP – Clearing, COVID-19 and Cboe
Kiays Khalil – The Trade
Cécile Nagel, CEO of EuroCCP, joins The TRADE to discuss how the lockdown environment has impacted clearing, and what the equity clearing house’s acquisition by exchange group Cboe will mean for market participants.

Bahamas International Securities Exchange Marks Its 20 Year Anniversary
The Bahamas International Securities Exchange (BISX) celebrated the 20th anniversary of it beginning trading on 12 May 2020. BISX was incorporated on September 23rd, 1999 with the aim of bringing a regulated and internationally recognized Securities Exchange to The Bahamas. Within a year after its incorporation BISX realized this goal and began its first day of trading on 12 May 2000. Beginning trading on this day also lead to BISX adopting the title “the First Stock Exchange of the 21st Century”.


Tech firms sweeten deals for U.S. banks cutting costs in crisis
Anirban Sen – Reuters
Top technology services firms are offering payment deferrals, discounts of up to 20% and other sweeteners to some U.S. banks to keep their business as the pandemic forces Wall Street to cut tech budgets, according to executives involved in the talks.

Lime Brokerage Systems Pass Stability Test Against Volume, Trading Billions in March and April; A testament to the firm’s infrastructure investments, Lime’s systems maintained 100% uptime activity during March and April’s volatility-induced high volumes.
Business Wire
Lime Brokerage, a leading agency only broker-dealer in algorithmic and electronic trading, reports that the firm’s automated trading systems were consistently running and active during March and April, one of the most volatile periods in recent years, executing multiple billions of shares with zero outages or downtime.

Trading Technologies and Zhengzhou Esunny Information Technology Partner to Provide Connectivity to Chinese Derivatives Markets
Trading Technologies International, Inc.
Trading Technologies International, Inc. (TT), a global provider of high-performance professional trading software, infrastructure and data solutions, and Zhengzhou Esunny Information Technology Co., Ltd. (Esunny), the leading Chinese trading platform provider and a wholly owned subsidiary of the Zhengzhou Exchange, today announced a strategic partnership to develop a joint technology solution that connects Trading Technologies’ TT® platform and Esunny’s platform. The linkage of the two platforms will provide an infrastructure for both international brokers and the global trading community to access Chinese derivatives markets, including the China Financial Futures Exchange (CFFE), Dalian Commodity Exchange (DCE), International Energy Exchange (INE), Shanghai Futures Exchange (SHFE) and Zhengzhou Commodity Exchange (ZCE).


Research report: The State of the Digital Asset Data and Infrastructure commissioned by Blockset
The Block
Digital asset data is one of the sub-sectors specific to the broader crypto space that is well poised to produce its own unicorns as within other ecosystems. To date, only exchanges, token development studios, and mining chip manufacturers have built profitable companies and boast unicorn-like valuations. Data and infrastructure companies would be a logical sector to follow.

Reddit Launching a Cryptocurrency to Reward Users for Engagement
Olga Kharif – Bloomberg
Website is testing a coin that runs on the Ethereum blockchain; Two subreddits will test Community Points for several months
Reddit Inc., the often controversial website and discussion platform that is a favorite of many cryptocurrency enthusiasts, is launching its own digital token. Through the summer, users of two Reddit subgroups familiar with digital coins, including the 1 million-member r/CryptoCurrency, will be able to earn tokens for things like posting a comment. The currency can be used to buy exclusive badges, to use animated emojis and to reply to Reddit comments using gifs.

Trading Contest on Synthetix Aims to Showcase Speed of New DEX Tech
Brady Dale – Coindesk
Synthetix is putting over $40,000 in crypto on the line to entice users to try out the faster beta of its decentralized exchange (DEX). “While DEXs offer significant improvements over CEXs [centralized exchanges] in terms of safety of funds and transparency, there is typically a painful trade-off on transaction speed,” Synthetix CEO Kain Warwick told CoinDesk in an email.

Digital asset derivatives infrastructure draws in $552 million in institutional-focused investments since 2014
Michael McSweeney – The Block
Approximately $1.2 billion has been invested in companies focused on institutional infrastructure and client services since 2014 – and of that amount, just over $550 million was directed toward firms focused on derivatives.

Elon Musk reveals how much Bitcoin he owns
Mathew Di Salvo – Decrypt
Harry Potter author J.K Rowling sent the crypto Twittersphere into a frenzy after asking a journalist to “explain” Bitcoin. Billionaire tech entrepreneur Elon Musk chimed in, saying the currency was useful. But he added how much he actually owns—and it’s not as much as you’d think.

Crypto Long & Short: Mining Derivatives Point to Growing Sophistication
Noelle Acheson – Coindesk
Well, it happened. Block 630,000 was processed on the Bitcoin blockchain (while we were on the air with our Crypto Long & Short show on Monday, how cool is that!), and the bitcoin subsidy paid to miners was cut from 12.5 bitcoins to 6.25. It felt momentous, as we all witnessed a pre-programmed economic system immutably do its thing. (Allen Farrington’s essay beautifully describes what it meant to those of us watching.)

Bitcoin’s halving breathes life into CME’s options product with new accounts rapidly growing
Frank Chaparro – The Block
Bitcoin’s halving appeared to have fueled a surge in a trading product at one of Wall Street’s most important financial institutions. Trading volumes and open interest in CME Group’s bitcoin options product has surged since the event last Monday, which saw the number of bitcoins produced with each transaction block falling from 12.5 BTC to 6.25 BTC (effectively cutting new coin issuance in half). CME, which is among the largest exchange groups in the world, launched its bitcoin options product at the beginning of 2020.

Venezuela Appears to Have Hard Forked The Petro
Samuel Haig – Cointelegraph
Signs indicate that Venezuela’s state-backed cryptocurrency quietly underwent a hard fork earlier this month. On May 5, Venezuela’s government announced that its controversial oil-backed cryptocurrency, El Petro, would go offline for maintenance until May 10. However, observers have since identified that the official Petro block explorer now lists May 5, 2020, as the date that its genesis block was mined. Other block explorers record Oct.13, 2018, as the date for Petro’s genesis block — suggesting that there is more than one Petro chain currently in existence.

Bakkt Announces New Insurance Coverage, Claims More Than 70 Custody Clients
Nikhilesh De – Coindesk
Bitcoin warehouse Bakkt has onboarded more than 70 clients for its custody services and given them the option to tap more than $600 million in insurance coverage overall, the company announced Monday.

18 Months In, Few People Use, Mine or Buy Privacy Coin Grin
Zack Voell – Coindesk
Despite launching with considerable fanfare in early 2019, grin, the first cryptocurrency to test privacy protocol MimbleWimble, is showing no signs of life. At its launch, professional investors poured funding — by some estimates, $100 million — into mining the cryptocurrency, with some even calling it a sort of “Bitcoin 2.0”. Privacy without sacrificing scalability is the primary advantage of MimbleWimble, according to grin developers. The first grin coins were also issued via a so-called “fair launch” whereby, similar to bitcoin, all coins are minted by miners instead of being generated prior to the network going live.


Merkel and Macron Will Discuss European Recovery Fund on Monday
Ania Nussbaum and Arne Delfs – Bloomberg
German Chancellor Angela Merkel and French President Emmanuel Macron on Monday will discuss a range of topics, including a new recovery fund to help the European Union weather the worst recession in living memory, according to an official familiar with the plan.

The Tiny U.S. Agency Fighting Covid Conspiracy Theories Doesn’t Stand a Chance; The State Department’s anti-disinformation arm, the GEC, faces falsehoods from China and Russia—and the U.S. president.
Joshua Brustein – Bloomberg
The stories about Bill Gates started circulating in late January, around the time health officials announced the first confirmed case of Covid-19 in the U.S. According to certain—ahem—sources, the novel coronavirus hadn’t come from bats, but from Gates, the billionaire philanthropist and Microsoft Corp. co-founder. It wasn’t entirely clear why he would engineer a global pandemic, but versions of the conspiracy theory pinned it on Gates’s supposed desire to cull Earth’s population, or possibly to surveil it.

Trump Says Tech Giants Controlled by ‘Radical Left,’ Vows Action
Daniel Zuidijk – Bloomberg
U.S. President scolds Facebook, Google, Twitter in a tweet; Trump says he is ‘working to remedy this illegal situation’
Donald Trump accused Facebook Inc, Twitter Inc and Alphabet Inc’s Google of being controlled by the “Radical Left” and said that his administration is working to remedy what he called an “illegal situation.” In a tweet that also mentions the Facebook-owned Instagram, the U.S. president commented on a clip by conservative blogger Michelle Malkin lambasting the so-called deplatforming of conservative voices by technology companies. Trump didn’t elaborate on potential measures targeting the tech giants.

Feinstein was also questioned by FBI on coronavirus stock trades — but Loeffler won’t say if she has been
Brendan Morrow -The Week
Sen. Dianne Feinstein’s (D-Calif.) spokesperson has confirmed she answered questions from the FBI over stock trades her husband made before the U.S. markets took a dive due to the coronavirus pandemic — but Sen. Kelly Loeffler (R-Ga.) is refusing to say if she was contacted as well.

FDR’s New Deal Worked. We Need Another One; Claims that the programs adopted in the 1930s lengthened the Great Depression don’t hold up.
Noah Smith – Bloomberg
The U.S. is now either in or on the verge of an economic depression. In February, more than 80% of Americans between the ages of 25 and 54 had a job; in April, that number was less than 70%, and it probably will fall even more.

Biden’s Wall Street Pals Think They Have His Ear Despite Snubs
Max Abelson – Bloomberg
Executives from Morgan Stanley to Evercore have stayed close; Top finance figures already imagine having administration jobs
Wall Street veteran Charles Myers got a surprise Wednesday in his Park Avenue home office. The longtime Democratic donor and former vice chairman at investment bank Evercore was sitting near photos of Barack Obama, Bill Clinton, and Margaret Thatcher when he read the names on Joe Biden’s new economic policy task force.


ESMA – non-renewal and termination of short selling bans by Austrian FMA, Belgian FSMA, French AMF, Greek HCMC, Italian CONSOB and Spanish CNMV
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, notes the non-renewal of the emergency restrictions on short selling and similar transactions by the following national competent authorities (NCAs): Finanzmarktaufsicht (FMA) of Austria; Financial Securities and Markets Authority (FSMA) of Belgium; Autorité des Marchés Financiers (AMF) of France; Hellenic Capital Market Commission (HCMC) of Greece; and Comisión Nacional del Mercado de Valores (CNMV) of Spain.

Sales Practice Obligations With Respect to Oil-Linked Exchange-Traded Products
Exchange-traded products (ETPs) provide different types of exposure to the oil market through several product structures, which some investors or investment professionals might not understand.1 Moreover, the performance of such products may be linked to unfamiliar indices or reference benchmarks, making them difficult for the average investor to comprehend. In particular, a number of these ETPs are designed to track daily price movements of specified crude oil futures contracts, such as those on West Texas Intermediate (WTI) light, sweet crude oil (referred to herein as “oil-linked ETPs”).2 Due to recent extraordinary conditions in crude oil markets, combined with the manner in which the products are structured, several oil-linked ETPs have experienced significant volatility and lost a substantial percentage of their value, with at least one ETP liquidating and another forced to halt the issuance of new shares and adjust its investment objective.

SEC Adopts Amendments to the CAT NMS Plan to Improve Transparency and Financial Accountability
The Securities and Exchange Commission today voted to adopt amendments to the national market system plan governing the consolidated audit trail (the “CAT NMS Plan”) to bring additional transparency, governance, oversight, and financial accountability to its implementation.

SEC Orders Credit Rating Agency to Pay $3.5 Million for Conflicts of Interest Violations
The Securities and Exchange Commission today charged New York-based credit rating agency Morningstar Credit Ratings LLC for violating a conflict of interest rule designed to separate credit ratings and analysis from sales and marketing efforts. Morningstar has agreed to pay $3.5 million to settle the charges.

ASIC takes action on two AFS licensees
ASIC has adopted a practice of issuing combined media releases about administrative action. There is no relationship between the matters or the subjects in this media release, except that ASIC has taken administrative action.

Coronavirus Short-Selling Bans Are Lifted Across Europe; Several European countries had prohibited the practice to help maintain market stability
Julie Steinberg – WSJ
A ban on short selling in several European countries—in place since mid-March to try to tame markets careening due to the coronavirus pandemic—has come to an end. The European Securities and Markets Authority said Monday that regulators in Austria, Belgium, France, Greece and Spain opted to lift restrictions on betting against stocks. Italy also ended measures that were set to expire in June.

Hong Kong Unexpectedly Reappoints Top Securities Regulator
Bloomberg News
Alder has held the job since 2011 and considered stepping down; Government cites financial stability for the reappointment
Hong Kong reappointed Ashley Alder as chief executive officer of the Securities and Futures Commission, surprisingly extending his nine-year tenure as the city’s top securities regulator. Alder, who told his colleagues last year that he will step down when his contract expires, will remain on the job until Sept. 30, 2023, the Hong Kong government said in a statement on Monday.

New CTA And CPO Registrations – Week 20 2020

Exclusive: U.S. Justice Dept. subpoenas Wall Street banks for small business loans info – sources
Koh Gui Qing, Pete Schroeder – Reuters
The U.S. Justice Department has sent grand jury subpoenas to big banks seeking records as part of a broader investigation into potential abuse of a $660 billion emergency loan program to help small businesses hurt by the novel coronavirus, two people with knowledge of the matter told Reuters.

Investing and Trading

The Oil Market Is Betting People Want Crude for Christmas; Traders avoid near-term contracts as the coronavirus pummels fuel demand
Ryan Dezember and Mike DeStefano – WSJ
The most wagered-upon oil prices these days are for crude bobbing at sea on big tankers—or even still in the ground. In futures markets for both overseas-benchmark Brent and West Texas Intermediate, the main U.S. price, barrels for December delivery have the highest open interest, or total number of options and outstanding contracts.

Tesla’s Production Restart Could Ease Path to Inclusion in S&P 500 Index; A surprise second-quarter profit could qualify Elon Musk’s car company for addition to key investor benchmark
Tim Higgins – WSJ
Elon Musk’s success last week restarting production at Tesla TSLA -0.52% Inc.’s lone U.S. factory ends one drama but sets up another with a big question: Can the car maker park itself in the S&P 500?

ETF investors flock to gold and corporate bond funds; Haven assets attract record flows in April after market sell-off
Chris Flood – FT
Gold and corporate bond exchange traded funds attracted record inflows in April following the introduction by central banks of vast monetary stimulus measures in response to the coronavirus pandemic.

‘Worst-case scenario’ predicts $500bn of cuts to global dividends; Fund manager Janus Henderson says investor payouts could fall by more than a third
Daniel Thomas – FT
Close to $500bn could be wiped from the value of dividends paid by companies around the world as they scramble to protect balance sheets from the economic damage caused by the pandemic.

Investors should ask if carbon promises are just hot air; Pledges by oil majors to protect the planet often clash with capital spending plans
Natasha Landell-Mills – FT
Total just came in from the cold. This month the French oil major announced plans to get to net-zero carbon dioxide emissions by 2050, thus joining other European oil and gas companies that are promising to wind down their fossil-fuel businesses to tackle climate change.

Business faces stern test on ESG amid calls to ‘build back better’; Response to pandemic shows up saints and sinners — and some fuzziness on the right course of action
Gillian Tett – FT
Three months ago, Brian Chesky, chief executive of Airbnb, made a bold pledge: if he conducted an IPO, he would turn his business into a “stakeholder” company, serving employees and society as much as future shareholders.

Behind Royal Caribbean’s Lifeline, a Shrewd Bond Market Maneuver
Paula Seligson – Bloomberg
Unique structure let cruise company flout secured debt limits; Deal may be copied by other fallen angels facing restrictions
Royal Caribbean Cruises Ltd. was in a quandary. The company needed to raise money while its ships were docked amid the Covid-19 pandemic, and the bond market was open if Royal Caribbean was willing to mortgage ships as collateral. Similar deals had worked for rivals like Viking Cruises and Norwegian Cruise Line Holdings Ltd.

Americans Have No Clue What’s Next on Inflation; The once-stable outlook appears to have shifted drastically among U.S. households.
Brian Chappatta – Bloomberg
The Federal Reserve’s stated mandate is to “promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates.” The first part is obviously a disaster right now, with more than 36 million Americans filing initial jobless claims in the past eight weeks, bringing U.S. unemployment to levels not seen since the Great Depression. The last objective is easily met, with benchmark Treasury yields hovering close to all-time lows.


BlackRock accused of climate change hypocrisy; Asset manager voted against resolutions at Australian oil groups, despite Larry Fink’s new sustainability focus
Attracta Mooney – FT
BlackRock has been accused of double standards after it refused to back landmark environmental resolutions at two big Australian oil companies just months after the world’s largest asset manager warned global warming represented a risk to markets unlike any previous crisis.

UBS’s Iqbal Khan on shaking up world’s biggest wealth manager; Private banker on weathering the storm in his new role after hostile defection from Credit Suisse
Stefan Wagstyl – FT
The timing of Iqbal Khan’s arrival at UBS, the world’s biggest wealth manager, late last year could have been very unfortunate — the Covid-19 pandemic struck just three months after the high-flying Swiss private banker took up his new top job.

Banks probe sales push linked to corporate loans;’ Barclays, Deutsche, HSBC and Santander among lenders conducting internal reviews
Stephen Morris – FT
Banks in the UK are investigating whether they pressured corporate clients into giving them extra business in return for loans, after the country’s financial watchdog warned against the practice during the coronavirus pandemic.

Nomura to boost focus on private markets under new chief; Kentaro Okuda will seek to reinvent Japan’s oldest brokerage with strategic shift
Leo Lewis – FT
Nomura is poised to break with almost a century of tradition by unveiling a new strategic focus on private markets and Japan’s vast hinterland of unlisted companies. The move is part of a broader shake-up at Japan’s biggest brokerage to be announced this week by its new chief executive, Kentaro Okuda.

China central bank should shun risky bond buying as economy improves: adviser
The People’s Bank of China should avoid buying special treasury bonds as such a move could fuel inflation risks and asset bubbles and lead to depreciation of the yuan currency, central bank policy adviser Ma Jun said in remarks published on Sunday.

Europe should temporarily ban Chinese takeovers: Germany’s Weber
The European Union should impose a temporary ban on Chinese takeovers of companies that are currently undervalued or have business problems because of the coronavirus crisis, the leader of the bloc’s largest political alliance said on Sunday.

Energy dispute deepens between Mexico and foreign allies
Diego Oré, Dave Graham – Reuters
he European Union and Canada have formally raised concerns to Mexico about rules they say endanger renewable energy projects, escalating tensions with its government, which late on Friday moved to tighten its control over the power industry.


Saudi wealth fund snaps up $7.7bn of blue-chip stocks; Investment vehicle chaired by crown prince takes advantage of knockdown share prices during pandemic
Andrew England, Anjli Raval and Arash Massoudi – FT
Saudi Arabia’s sovereign wealth fund snapped up stakes worth at least $7.7bn in US and European blue-chip companies during the first three months of the year as it aggressively hunts assets at knockdown prices during the coronavirus pandemic.

Italy’s Huge Debt Load Is at Risk of Becoming Unmanageable
Alessandra Migliaccio – Bloomberg
Bloomberg Economics says debt ratio could rise well above 150%; Low economic growth will hamper ability to manage situation
Italy’s debts run the risk of becoming unmanageable, and a creeping rise in borrowing costs shows investors are getting nervous, according to Bloomberg Economics. Italy, the original epicenter of the coronavirus pandemic in Europe, has suffered serious economic damage from nearly two months of lockdown. The European Commission forecasts output will shrink 9.5% this year, while Bloomberg Economics expects a 13% contraction.

SNB Kept Up Currency Buying Amid Persistent Pressure on Franc
Catherine Bosley – Bloomberg
Sight deposits at the Swiss National Bank ticked higher last week, evidence of officials’ commitment to keep the franc in check in light of increased haven pressure.

Saudi wealth fund boosts U.S. holdings with stakes in Citi, Boeing, Facebook
Saeed Azhar, Kanishka Singh – Reuters
Saudi Arabia’s sovereign wealth fund has bought minority stakes in major American companies including Boeing, Facebook and Citigroup, a regulatory filing showed, giving it a portfolio of nearly $10 billion in U.S.-listed stocks.


Brexit talks head for reckoning on state aid after two sides trade blows; Both EU and UK say their positions are misunderstood, suggesting there may be more room for manoeuvre than meets the eye
Jim Brunsden – FT
The time for a political intervention in the EU and UK’s future relationship talks is fast approaching. After publicly knocking lumps out of each other on Friday, the two sides will spend this week separately trying to work out where to go from here. In effect, the EU and UK have handed each other ultimatums saying they need to shift position or the talks will rapidly reach stalemate.

UK-EU deadlocked in Brexit talks as clock ticks down
Raf Casert and Jill Lawless – Associated Press
Talks between the European Union and the United Kingdom on their post-Brexit relationship ground to a near-standstill Friday, with each side accusing the other of blocking progress on a trade deal just weeks before a crucial summit. The EU’s chief negotiator, Michel Barnier, told a news conference in Brussels that a week-long round of talks had been “disappointing, very disappointing.” Barnier said there was no progress on all the most difficult issues and insisted Britain would have to show more realism. “I am not optimistic in the face of British incomprehension,” he said.

Without human touch, Britain-EU Brexit talks struggle to find harmony
Gabriela Baczynska, Elizabeth Piper – Reuters
Stumbling through video calls, the long-troubled Brexit talks are heading for a new crisis as coronavirus health restrictions bar the intense face-to-face meetings that have proven crucial in pulling the negotiations back from the brink. With increasingly frustrated British and EU negotiators trading barbs over each other’s “ideological approach” and “lack of understanding” of the consequences of Britain’s departure from the bloc, talks on a new trade pact between the estranged allies have made virtually no progress in recent months.


Billionaire Barclay Brother’s Video Shows ‘Bugging’ at The Ritz
Ellen Milligan – Bloomberg
Alistair Barclay seen ‘placing or removing a recording device’; Video released amid bitter family court battle over bugging
Video footage in a court dispute between two factions of one of the U.K.’s wealthiest families allegedly shows a son of one of the billionaire Barclay twins handling a recording device at London’s Ritz Hotel. Dueling allegations of bugged conversations and video recordings have become the focal point of an ugly split between twins Frederick and David Barclay that has played out in a London court this year.

Coronavirus Will End the Golden Age for College Towns; These engines of regional growth will struggle with state funding cuts, fewer foreign students and destroyed household finances.
Noah Smith – Bloomberg
The coronavirus pandemic is likely to bring about many deep, long-lasting changes in U.S. society and the economy. It’s difficult to predict what most of those will be. Unfortunately, one likely possibility is that college towns will suffer.

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