NFA orders a Utah introducing broker to pay $80,000 fine.

Regulatory and Compliance News

For more information contact:

Christie Hillsman, 312-781-1497, chillsman@nfa.futures.org
Karen Wuertz, 312-781-1335, kwuertz@nfa.futures.org

NFA orders Salt Lake City, Utah introducing broker Member BTU Brokers, Inc. to pay an $80,000 fine

April 5, Chicago—NFA has ordered Salt Lake City, Utah introducing broker BTU Brokers, Inc. (BTU) and its principal and associated person (AP) Christopher Anthony Ridgeway to jointly pay an $80,000 fine.

The Decision, issued by NFA’s Business Conduct Committee (BCC), is based on a Complaint issued by the BCC and a settlement offer submitted by BTU and Ridgeway, in which they neither admitted nor denied the allegations in the Complaint. In its Complaint, the BCC alleged that BTU and Ridgeway failed to comply with NFA Registration Rules and failed to diligently supervise the operations and APs of BTU, in apparent violation of NFA Compliance Rule 2-9(a). The BCC’s Complaint also alleged that BTU and Ridgeway failed to observe the high standards of commercial honor and just and equitable principles of trade expected of NFA Members and Associates by permitting the registration and supervision deficiencies to occur, in apparent violation of NFA Compliance Rule 2-4. In its Decision, the BCC found that BTU and Ridgeway violated NFA Compliance Rules 2-9(a) and 2-4.

The complete text of the Complaint and Decision can be viewed on NFA’s website.

Decentralized finance: Is it time to return to the Articles of Confederation?

A decentralized payment system and the money that runs on top of it requires a public administration that is more people-based than the system of public administration Americans have today. 

Since 2007, Americans have been witnessing an exponential shift in the structure of the political economy where large private and public corporations (government) have been experimenting with ways to streamline employee functions while loading more operational and quasi-management functions unto individual employees.

Meanwhile, these corporations, particularly large corporations, have become bigger and executive power increasingly centralized.  In the larger political economy, we have seen centralization in the banking system not only with the advent and growth in importance of the Federal Reserve System but also in the Executive Office of the President where over the past 245 years the power of decision has moved from the common person to the Congress to the executive branch.

I believe there is a battle of two major narratives occurring over the issue of how best to manage society; to manage human beings.  The first narrative, as espoused by increased centralization, is that society is best managed through two major funnels, corporations and large government.  In a democratic-corporate system, resources are extracted, managed, processed, and delivered by private corporations chartered by government pursuant to an agreement that private corporations will encourage taxable, transactional activity and in return keep profits as income.

Private corporations maintain their oligopoly by persuading government that this form is the most efficient at managing resources while contributing to maintaining the peace.  By employing labor and selling to labor the very fruits of their work i.e., goods and services, the corporate model sells the aspirational narrative of moving ahead and creating a stable quality of life in return for your allegiance to the corporation in the form of hard work.

The second narrative is that humans are best managed when they manage themselves.  While the democratic-corporate model conjures up “The Truman Show”, the voluntarist-self sufficiency model argues that people do much better when they manage their own resources and capital and enter into relationships or strategic partnerships on a volunteer basis, particular when such relationships serve their self-interests.

Whereas in a democratic-corporate system humans are connected by and transact in a government-central bank authorized and issued money, distinct monies are issued by the individual in a voluntarist-self sufficiency model where the demand and supply for such distinct, individual money is determined by a market that recognizes the unique knowledge and data held by the individual or the individual household issuing the money.

The democratic-corporate model is a coerced federation model while the voluntarist-self sufficiency model is a confederation model.  It is a model made up of allies and one that operates better in a decentralized financial system where the emphasis, again, is based on individual value.

As I allude to in the title, an appropriate public administration structure for a voluntarist-self sufficient society may be one governed by an articles of confederation.  If you read the Articles of Confederation agreed to by the Congress in November 1777, you see a document where the majority of government power laid in the hands of a limited congress that left in the hands of a very limited executive the day-to-day administration of interstate infrastructure.  States were independent sovereigns and allies in the interstate administration of commerce and trade.  The independence of the states was stressed throughout the Articles.

Can we, as individuals, enter into our own “articles of confederation” with each other?

Can we re-visit this model and do some work to bring it up to speed with a society that, while digitally connected, at the same time enjoys a technology that allows each individual to generate their own value and thus issue an individual money that reflects that energy?

Alton Drew

6 April 2022

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Taking a look at the US money supply numbers: Has the political right missed the mark?

Between February 2021 and February 2022, Board of Governors of the Federal Reserve System (BOG-Fed) data shows that M1 money supply increased 12.7% or 1.05% per month. When you put this data along side unemployment data from the U.S. Bureau of Labor Statistics (BLS), the 1.05% monthly increase in money supply accompanies a monthly 3.2% decrease in the unemployment rate.

Inflation is running at a rate of 7.9% between February 2021 and February 2022, according to BLS data. This translates to a roughly 0.65% monthly increase in household expenditures.

And the dollar index which measures the strength of the US dollar against a basket of other currencies has risen 7.3% over the February 2021 to February 2022 period, which translates to 0.60% per month.

I’m not going to attempt a causal analysis here. A cursory view of the money supply and dollar index could lead one to conclude that the relationship between the money supply and the dollar index is less than unitary which could be interpreted as the existence of price elasticity; that buyers of dollars could find other competitive currencies to carry out a trade. I won’t say “carry trade” since I am not looking at bond yields.

The political right has been consistent in pointing out that inflation is reflective of increased money supply, but I cannot say whether the less than unitary response in the inflation rate when compared to the change in money supply indicates that the political right has missed the mark.

Alton Drew

03.04.2022

For consultation on how this political or legal event impacts your foreign exchange trade, request an appointment at altondrew@altondrew.com.

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Disclaimer: The above is provided for informational purposes and should not be construed as financial or legal advice or as creating an agreement to provide financial or legal advice.

Inflation is the result of money backed by no current individual data value

Money is not only the physical acknowledgment of what is owed, it is also a claim on an asset.  Money is a receipt documenting the assets a bank holds for an individual and this receipt can be traded for some commodity, good, or service.  The counterparty on the other side of the trade should feel comfortable that the receipt can be redeemed for the assets held at a bank or traded with another counterparty for commodities, goods, or services.

Most of the electorate have no receipts to trade because they have no assets upon which they can issue receipts.

The ideal money is not money issued by the Federal Reserve or U.S. Treasury.  An ideal money is one issued directly by the individual, is backed by commodities or intellectual property, and contains up-to-the-minute data on the value of the individual’s assets.

Ideal, individually issued money should contain the individual’s identifying information, verifiable address, documented assets, and their real-time value.  In an ideal, individually issued money environment, most of us, now, would be walking around with worthless currency.  Our receipts today are backed by nothing that we own or produce.

You could argue that the money in your pocket or on your debit card that you use to buy a hamburger is the result of the hard work that you put in at AT&T.  But is it?  Yes, you have an employment contract with AT&T, and yes, they promise you some payment, x, in exchange for some service, y.  The service you provide, however, is not a commodity that the traded receipts can be used to make a claim on.  The receipts the wage earner receives from AT&T are either issued on the assets AT&T used to borrow money from a bank or from the services it sold with your help.

When you trade the receipts (money) you get from your AT&T wages in return for personal goods and services from a vendor, you are simply reselling someone else’s receipts.

In a value-driven, individual micro-bank environment, the portion of your value that you exchange with me in the form of individualized money should contain the data reflecting your real underlying wealth; the currency; the inputs for your value.

If you picked up a ten-dollar bill off the ground and bought a burger, fries, and a drink, what can I ascertain about your economic value? Nothing.  Even if you believed that the very act of picking up the dollar generated some type of economic value, the act itself is no longer current. The act is not an existing commodity on which an current economic value can be assessed.  Time passed and the duration of the act has reduced to zero any value it may have contained.

The wage earner/non-asset holder is left with no choice in an ideal, individual micro-bank scenario but to create a current asset that contains their data, skills, knowledge, and abilities.  The demand for this individual micro-economy will determine the value of the money the asset generates.

Banks, institutions with 500 years of experience pricing assets, along with the assistance of fintechs, can help the trader design and issue the money issued against assets.

And what would be the role of government in this scenario?  Other than offering a dispute settlement service, nothing.  The data contained in an individually issued token should be sufficient for a trader to determine the token’s underlying value.

The real reason we have inflation is not because of increasing money supply or price gouging on the part of greedy corporations.  This current round of inflation is an acknowledgment that the consumer is exchanging money backed by either nothing or by individual assets quickly depreciating to zero.  

Alton Drew

02.04.2022     

Interbank Market News Scan: Biden releases budget; inflation may not be that high next year; Nigeria’s central bank injects liquidity

Interbank, Pakistan, rupee. “The rupee reached a new record low on Monday, selling at 182.19 against the dollar in the interbank market, as political uncertainty triggered by a no-confidence move against Prime Minister Imran Khan weighed on sentiment, dealers said.” See article here. Source: The International News.

Interbank, Nigeria, naira, Access Bank. Similarly, (Access Bank) states that operating expenses at bank-level was up marginally by 2% year on year, showcasing the effectiveness of cost-cutting measures whilst also noting that FX rates on the Interbank market continued upward trend by 6% year on year to stand at N424 per dollar mainly driven by rate adjustments and lean supply. See article here. Source: Nairametrics.

Interbank, Pakistan, rupee. “The buying rate of 1 SAR to PKR was Rs 48.050 and the selling rate of 1 SAR to PKR was Rs 48.850 in the interbank market on Mar 28, 2022.” See article here. Source: BOL News.

Interbank, LIBOR, SOFR. “With a war waging in Central Europe, inflation at 50-year highs and the U.S. central bank looking to raise interest rates multiple times this year, you’d think that the average mortgage banker already has a pretty full plate. But add to the list of woes the Fed’s abortive transition from Libor to the Secured Overnight Financing Rate or SOFR and you have a recipe for disaster later this year.” — Christopher Whalen. See article here. Source: National Mortgage News.

Interbank, Nigeria, open market operations, naira. “In pursuant of its pro economic growth monetary policy the Central Bank of Nigeria, CBN, increased its net liquidity injection into the interbank money market by 110 per cent  to N770 billion in the first quarter of the year, Q1’22, from N367 billion in the fourth quarter of last year, Q4’21.” See article here. Source: Vanguard Nigeria.

Interbank, U.S., inflation, dollar. “Neuberger Berman expects extreme bond market volatility to stabilise and is counting on opportunities scooping up cheap high-yield and investment grade bonds in the telecom and energy sectors.” See article here. Source: Financial Review.

Interbank, U.S., budget, taxes. “Today, President Joe Biden released the FY2023 Budget to propose critical investments that will prioritize security at home and abroad, bolster the economy, promote health, tackle climate change, and further opportunity for all.” See article here. Source: U.S. Department of the Treasury.

Foreign exchange rates and dollar index as of 29 March 2022, 3:20 am GMT

Currency Pair28 March 202229 March 202230 March 202231 March 20221 April 2022
EUR/USD1.098341.09717   
GBP/USD1.317661.31204   
USD/CNY6.365266.37031   
USD/CHF0.930150.93439   
USD/NGN415.25415.181   
USD/ZAR14.527214.6255   
USD/AOA449.768448.000   
USD/INR76.01178.9895   
USD/JPY122.07123.527   
USD/SAR3.745243.74524   
Dollar Index99.0099.04   
Sources: OANDA, MarketWatch

Government administers the trading post: The underlying philosophy of the law of markets ….

Commentary

Government’s role is to administer the trading post by managing the masses with a law-and-order scheme; broadcasting the value of its money through a regulated banking system; and expanding into and protecting new markets with its military and diplomatic corps.  Government, specifically western government, operationalizes the tenets of western philosophy: that man is at war with himself and nature and to alleviate the uncertainty of extermination, man must divide up the world and seek the most yield from the resulting parts.

Humans have no other reason to engage each other but to extract value from one another.  To garner the most yield from this engagement, the exchange, the trade, needs to be unencumbered by conflict.  Where it is impossible to obtain the means for survival by staying in one’s lane and exchange is necessary, humans then put in place customs, practices, rules designed to reduce conflict. 

Government promulgates the statutes, codes, and policies that manage the day-to-day mitigation of conflict.  It stays “in the money” by optimally maintaining the physical and social infrastructure that facilitates and expands its tax base.  It’s ability to effectively manage infrastructure and expand its tax base makes its money more attractive to traders.

Unfortunately, government has taken on a life of its own, going beyond its mandate to manage infrastructure and ensure law and order to regulating society on an increasingly micro level.  More of its policy and legislative initiatives appear intended to replace private market judgment with its own government judgment.  This imposition of government judgment on market judgment was not part of the original deal between traders, market makers, and government.  The imposition has seeped into the act of establishing price, an act that is best left to markets. 

Government now wants more than its cut in the form of taxes.  It now wants to weaponize price discovery and price setting for the purpose of expanding its cut by garnering more votes from the electorate.

The merchant trader, to protect her lane, should inform herself daily on the political process and support efforts that push back on government efforts to intervene in her ability to set price and other terms and conditions within and via the markets.

Alton Drew

27.03.2022

For consultation on how this political or legal event impacts your foreign exchange trade, request an appointment at altondrew@altondrew.com.

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Disclaimer: The above is provided for informational purposes and should not be construed as financial or legal advice or as creating an agreement to provide financial or legal advice.

Federal Open Market Committee News Scan …

Board of Governors of the Federal Reserve System, Jerome Powell. Recently, Fed Board chair Jerome Powell addressed price stability and the monetary policy rate response to it. “The latest FOMC statement also indicates that the Committee expects to begin reducing the size of our balance sheet at a coming meeting. I believe that these policy actions and those to come will help bring inflation down near 2 percent over the next 3 years.” See speech here.

Board of Governors of the Federal Reserve System, Christopher J Waller. Recently, Governor Christopher J. Waller gave a speech discussing the role of monetary policy in combating rising rent costs and house prices.  “Based on various measures of asking rents, some recent research suggests that the rate of rent inflation in the CPI will double in 2022.3 If so, rent as a component of inflation will accelerate, which has implications for monetary policy.” See speech here.

Federal Reserve Bank of St. Louis, Jim Bullard. “St. Louis Fed President Jim Bullard discussed the upside surprise on inflation in recent months and the Fed’s response. He spoke at the Asian Investment Conference in an interview that was recorded March 22.” See video and article here.

The Federal Open Market Committee (FOMC) is responsible for open market operations, one of the three primary monetary policy tools that are used to influence the federal funds rate. Open market operations involve the sale and purchase of securities by a central bank in the open market. The federal funds rate is the overnight rate that a member bank charges to another member bank when lending excess reserves.

Foreign exchange rates as of 12:13 am AST. United States, Great Britain, Canada, China, Angola, Nigeria, Japan

Currency Pair21 March 202222 March 202223 March 202224 March 202225 March 2022
EUR/USD1.104981.103681.100931.100881.09905
GBP/USD1.317481.316321.320521.323061.31868
USD/CNY6.359056.355546.362586.368546.36767
USD/CHF0.931750.93220.934120.933030.93138
USD/NGN415.42415.043415.732415.115414.015
USD/ZAR14.940114.938814.874714.779514.6555
USD/AOA449.794449.794449.438448.867449.194
USD/INR75.66375.968575.975976.123876.1478
USD/JPY119.145119.274120.537121.022121.77
USD/SAR3.745243.745243.745243.745243.74524
Dollar Index98.4998.4698.7898.8498.52
Sources: OANDA, MarketWatch

Foreign exchange rates and dollar index as of 6:22 am AST

Currency Pair21 March 202222 March 202223 March 202224 March 202225 March 2022
EUR/USD1.104981.103681.100931.10088 
GBP/USD1.317481.316321.320521.32306 
USD/CNY6.359056.355546.362586.36854 
USD/CHF0.931750.93220.934120.93303 
USD/NGN415.42415.043415.732415.115 
USD/ZAR14.940114.938814.874714.7795 
USD/AOA449.794449.794449.438448.867 
USD/INR75.66375.968575.975976.1238 
USD/JPY119.145119.274120.537121.022 
USD/SAR3.745243.745243.745243.74524 
Dollar Index98.4998.4698.7898.84 
Sources: OANDA, MarketWatch