TAL pledges to waive pandemic life insurer exclusions for super funds

The insurance company representing four major superannuation companies has pledged it will not apply pandemic exclusions for life insurance as the nation faces a rising death toll from the coronavirus pandemic.

TAL is the insurer for UniSuper, Prime Super, TWU Super and NGS Super who all have exclusions for death insurance in the case of a pandemic. But after pressure from the consumer advocate and meetings with the funds, the insurer has pledged to waive these exclusions.

"As the COVID-19 situation has evolved very rapidly, TAL has been gathering information and assessing the situation accordingly and in consultation with our superannuation fund partners," a TAL spokeswoman said in a statement.

"TAL has confirmed to each of these superannuation funds that the pandemic exclusions set out in the policy will not apply."

Makeshift medical wards are popping up around the world to deal with the rising death toll of coronavirus. Credit:Handout

QSuper, however, is a $113 billion government-owned fund based in Brisbane that is standing by its pandemic exclusion that is relevant to new members who do not sign up through the default system, or those wishing to increase their level of cover.

The majority of existing members at these funds will be covered, but Super Consumers said it had found people had been denied pandemic-related total and permanent disability or income protection if they recently opened an account with QSuper or tried to increase their coverage.

QSuper said exclusion clauses were designed to reduce the cost of premiums and while the clause was waived for existing customers who were defaulted into the fund, new members would be made aware of the exclusion before joining.

QSuper chief of member experience Jason Murray said the fund worked to keep its insurance cover affordable and accessible.

“That means balancing features and exclusions for the benefit of the membership overall,” he said. “QSuper is a not for profit fund and we are focused on protecting our existing members’ retirement savings and insured benefits first and foremost.

“Without a pandemic clause for new non-default members we ran the risk that we would have to increase premiums for everyone who we try to service with economical insurance coverage."

HESTA, Colonial First State FirstChoice and Care Super also have these pandemic exclusions for people who have recently signed up or increased the level of cover. But in recent weeks, these funds have asked insurers to waive these exclusions.

Super Consumers director Xavier O'Halloran said an assurance from the insurance company did not go far enough and called for the policy to be re-written.

"Anyone who doesn't read the reporting, or remember the comms from their super funds would just go to the policy and see they can't claim. It's really incumbent on the funds to inform their membership if they're not going to rely on these terms and they should remove them," Mr O'Halloran said.

Chief operating officer at the Association of Financial Advisors, Phil Anderson, said the majority of life and income protection insurance products sold to individuals by financial advisors included cover for pandemics. "If you pass away because of coronavirus, you will be paid out," he said. "The issue is with the group insurance market."

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Big cruise-ship lines wouldn't qualify for aid under stimulus package

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Royal Caribbean and Celebrity Cruises will extend suspensions until May. FOX Business’ Lauren Simonetti with more.

WASHINGTON — The major cruise-ship operators wouldn't qualify for aid under the roughly $2 trillion coronavirus stimulus package headed for a House vote Friday, despite being one of the hard-hit industries President Trump has pledged to help.

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The cruise industry was among the first to take a public hit from the virus, along with airlines and hotels, as vacationers canceled plans, local governments halted tourism and passengers on board fell ill, leading to entire vessels full of passengers being quarantined.

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But the $2 trillion package approved by the Senate and now headed for the House limits aid to U.S.-incorporated companies with a majority of workers based in the U.S. — two criteria that effectively exclude the major cruise-ship operators like Carnival Corp., Norwegian Cruise Line Holdings Ltd., and Royal Caribbean Cruises Ltd.

While other hard-hit industries, including airlines and hotels, got specific carve-outs ensuring they would benefit from government bailout funds, an effort to provide a similar salve to the cruise industry fell short.

That is despite comments from Mr. Trump and Treasury Secretary Steven Mnuchin that the administration intended to help the industry, whose publicly traded major players have seen their stock prices crushed since the coronavirus crisis began.

The world's four biggest cruise lines, which include Swiss-based MSC Cruises, have suspended their sailings for about a month after coronavirus outbreaks aboard ships underscored the pathogen's easy spread in confined spaces and various governments imposed travel restrictions.

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Early drafts of what would become the rescue package included provisions that would have given the big cruise companies access to government funds.

But labor unions and Democrats in Congress were firmly opposed to including federal assistance to the cruise industry because they don't employ a unionized American workforce and environmental critics accuse the companies of polluting U.S. waterways.

Still, the industry won small concessions that could open the door to federal help in the future.

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A spokesman for Sen. Dan Sullivan (R., Alaska) said the senator supported the cruise-ship industry because of its contributions to small business in the state. "He'll continue to work to educate his colleagues on the importance of the cruise ship industry for tourism in Alaska as well as other states," the spokesman said.

All the major cruise operators are incorporated outside the U.S. The companies don't pay U.S. federal income taxes and most of their cleaning staff, restaurant servers, bartenders and other employees are foreign nationals.

Even the individual ships are typically owned by foreign LLCs and domiciled in low-tax countries such as the Bahamas, Bermuda and the Dominican Republic.

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They do, however, pay state income taxes and port fees.

Stock returns in the resort and cruise-ship industry, including major hotel chains, are down more than 51% overall on the year, according to FactSet.

The U.S. State Department has warned Americans not to travel on cruise ships because of the outbreak. The Centers for Disease Control and Prevention has specifically warned that cruise ships pose a "risk for rapid spread of disease beyond the voyage" and identified more than 800 cases of coronavirus infection linked to cruise-ship voyages.

In the appropriations bill, the Senate allocated $7.5 million toward the Agency for Toxic Substances and Disease Registry's geospatial analysis and mapping of infectious disease hot spots, including cruise ships.

Write to Ted Mann at [email protected], Brody Mullins at [email protected] and Dave Sebastian at [email protected]

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Coronavirus corporate crisis bailouts are cash cow for insider trading: Study

Senators accused of insider trading amid coronavirus panic

Former federal prosecutor Doug Burns weighs in on whether the allegations that some senators sold off stocks by using private information not available to the product are actually insider trading.

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WASHINGTON/BOSTON – White-collar crime prosecutors and defense attorneys are likely to be busy following a massive economic stimulus package from the U.S. Congress aimed at mitigating the fallout from the coronavirus, according to a new academic study of insider trading.

The research, from scholars at the University of Pennsylvania’s Wharton School, Stanford University, University of Cambridge and IESE Business School, found insider trading profitability jumped dramatically during the 2007-2009 global financial crisis and subsequent government bailout.

“Anytime the government picks winner and losers, there is a greater opportunity for insider trading by connected individuals,” said Daniel Taylor, an associate professor at University of Pennsylvania’s Wharton School and one of the authors of the report.

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The report analyzed trading by corporate insiders at leading financial institutions before and after Congress finalized its $700 billion Troubled Asset Relief Program (TARP) to purchase toxic assets from troubled lenders, the details of which were largely thrashed out by executives and government officials in private.

The study, published online this month in the Journal of Finance, found evidence of abnormal trading by politically connected insiders 30 days ahead of the TARP infusions, which either boosted or hit company share prices, depending on the situation.

The researchers examined open market purchases and sales by officers and directors at 497 publicly traded institutions between 2005 and 2011. They then compared the trades placed by insiders who appeared to have identifiable connections at regulators, the Treasury and Congress, with the trades placed by insiders who appeared to have no such connection.

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During the period over which TARP funds were disbursed, the one-month-ahead future returns between purchases and sales by insiders with political connections was 8.89% versus 2.81% for those without, according to the study. It also identified a pronounced increase in the trading activity of politically connected insiders 30 days prior to the TARP announcement.

“I hope we can avoid repeating it this time around, but I am not optimistic,” Taylor said.

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Wall Street rallied for a second straight session on Wednesday as the U.S. Senate neared a vote on a $2 trillion package to support businesses and households devastated by the coronavirus pandemic. The package will include a $500 billion fund to help hard-hit industries including airlines, and at least $100 billion for hospitals and related health systems.

Concerns are already growing that some individuals may have gained an edge amid the chaos by getting material information on the spread of the coronavirus and regulatory moves ahead of the rest of the world.

Most notably, the U.S. dollar pared gains moments before the Federal Reserve announced last week that it was launching a new dollar funding facility for nine central banks to ease a global dollar crunch, Reuters reported.

Separately, two Republican U.S. senators were criticized last week for selling large amounts of stock before the coronavirus-induced market meltdown and after closed-door briefings on the coronavirus outbreak.

Legally, trades that may be based on information gleaned from political connections occupy a “gray area” since the information may be valuable, but may not relate to a particular company or sector, or even be very specific, said Taylor.

“I[t]s something that causes the insider to revise their beliefs about future value, but it’s not a hard piece of information. The legal definition of insider trading differs from the economic definition,” said Taylor.

On Monday, the U.S. Securities and Exchange Commission (SEC) warned executives against insider trading, noting the coronavirus disruption was increasing the number of people with access to material non-public information.

“I would not be surprised if enforcement activity picked up,” said Kathleen Ceglarski Burns, a partner in Nixon Peabody’s Litigation department. “I would expect the government will likely look closely at financial reporting, risk disclosures and corporate insider trading as well.”

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Oil prices sink as crippled demand outweighs stimulus hopes

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Oil prices fell on Thursday after three sessions of gains as restrictions on travel worldwide crimped fuel demand, with U.S. crude futures plunging about 4% after the United States scrapped plans to buy domestic oil for its emergency reserve.

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Concerns about demand also overshadowed expectations that a $2 trillion U.S. stimulus package will bolster economic activity.

West Texas Intermediate (WTI) crude futures dropped 91 cents, or 3.7%, to $23.58 a barrel by 11:11 a.m. EDT. Brent crude futures fell 11 cents to $27.28 a barrel. Both contracts are down about 60% this year.

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U.S. futures were notably weaker than international benchmark Brent crude. The U.S. Department of Energy scrapped a plan to purchase domestic crude oil for its Strategic Petroleum Reserve after funding was not included in the broader stimulus package.

"The SPR element is totally a domestic issue and it has been percolating in the market for a couple weeks," said Bob Yawger, director of futures at Mizuho in New York. "There was a certain assumption that it was going to happen so you had that backstop, to a certain degree, that didn't exist for the international benchmark. But just overnight, it evaporated."

The U.S. Senate unanimously passed the $2 trillion bill aimed at helping struggling workers and industries hurt by the impact of the coronavirus epidemic, and sent the legislation to the House of Representatives. The House is expected to vote on Friday.

But with demand disappearing and output rising, the outlook for oil is bleak.

Goldman Sachs forecast global oil demand, which stood at around 100 million barrels per day last year, will fall by 10.5 million barrels per day in March and 18.7 million barrels per day in April. For the year, oil consumption is expected to contract by around 4.25 million barrels per day, the Wall Street bank said.

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"Global isolation measures are leading to an unprecedented collapse in oil demand," it said.

The weakening demand is leading oil refineries from Texas to Thailand to reduce operating rates.

The world's top oil and gas companies have cut spending by about 20 percent, including majors Chevron, Total and Royal Dutch Shell.

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Brazil's Petrobras said it was dialing back short-term production by 100,000 barrels per day, delaying a dividend payment and trimming its 2020 investment plan.

At the same time, the collapse of a supply-cut pact between the Organization of Petroleum Exporting Countries and other producers led by Russia, known as OPEC+, is set to boost oil supply, with Saudi Arabia planning to ship more than 10 million barrels per day from May.

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Oil stockpiles are already rising, with tanks around the world filling fast despite a 50 percent to 100 percent jump in leasing costs.

U.S. crude inventories rose by 1.6 million barrels last week, marking the ninth straight week of increases.

Products supplied, a proxy for U.S. demand, dropped nearly 10 percent to 19.4 million barrels per day, government data showed on Wednesday.

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U.S. Mortgage Rates Slip While Home Sales Head for Deep Freeze

U.S. mortgage rates fell for the first time in three weeks. But for would-be homebuyers frozen in fear of an economic meltdown, borrowing costs are no longer a prime concern.

The average rate for a 30-year fixed loan was 3.5%, down from 3.65% last week, Freddie Mac said in a statement Thursday.

Americans hunkering down in coronavirus quarantine are in no mood to shop for homes. Even if they can buy, many worry about how bad the coming recession will be, and how long it will last.

In an early sign of slipping demand, a index of applications for home-purchase loans tumbled 15% last week to its lowest level since August, according to the Mortgage Bankers Association.

Home sales are going to drop, no matter what mortgage rates do, said Matthew Speakman, an economist at Zillow. Eventually, the virus will pass and loan costs will start to matter again.

“In the short term, the impact of mortgage rates on home sales has weakened due to the fact there are these shelter-in-place initiatives and consumer confidence has taken a hit,” Speakman said. “Where mortgage rates are going to help is when we find ourselves ready and in place to recover.”

The virus has roiled financial markets, sending mortgage rates and the Treasury yields that guide them on a roller-coaster ride. The average rate for a 30-year loan had tumbled to a record-low 3.29% three weeks ago.

The Federal Reserve, which dropped its benchmark lending rate to near zero, has pledged to buy unlimited amounts of mortgage bonds. That move may help calm some panicked investors who seek to free up cash as Americans lose jobs and fall behind on loan payments.

The Fed’s “swift and significant efforts to stabilize the market were much needed,” Sam Khater, Freddie Mac’s chief economist, said in a statement. “Real estate demand is softening. However, the combination of the Fed’s actions and pending economic stimulus will provide substantial support to the mortgage markets.”

— With assistance by Claire Boston

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U.S. Jobless Claims Surged to Record 3.28 Million Last Week

The number of Americans filing for unemployment benefits surged to a record 3.28 million last week as businesses shuttered and laid off workers as part of efforts to slow the spread of the coronavirus.

In the biggest insight yet into the economic toll the pandemic is already inflicting, initial jobless claims in the week ended March 21 surged from 282,000 in the prior week and more than quadruple the previous record high of 695,000 in 1982, according to Labor Department figures released Thursday. The data date back to 1967.

Economists’ projections for the figure ranged as high as 4.4 million.

“This shows the severity of the downturn and the speed of it,” said Michelle Meyer, head of U.S. economics at Bank of America Corp. “It speaks to the unusual nature of this recession — it is an abrupt plunge into recession versus prior downturns, where the shock has time to multiply. We could have very high numbers continue for the next few weeks.”

Claims increased in all 50 states and the District of Columbia, with nine states reporting increases of at least 100,000 from the prior week. The state data below aren’t adjusted for seasonal fluctuations:

  • Pennsylvania reported the biggest number of claims, with 378,900
  • California claims rose by 129,200 to 186,800
  • In New York state, where approximately half of all known coronavirus cases in the U.S. are located, claims rose by 66,000 to 80,300
  • Ohio claims rose to 187,800
  • Illinois claims rose to 114,700
  • Florida claims rose to 74,000
  • Michigan claims jumped to 129,300

The surge reflects reports from state-level unemployment offices across the country last week citing unprecedented levels of web traffic and exponential increases in applications for unemployment benefits. The reported claims likely represent just the beginning of millions of virus-related job losses as more states order non-essential businesses closed.

U.S. lawmakers are aiming to boost benefits for those laid off. As part of a $2 trillion stimulus package waiting to be approved by the House of Representatives, unemployment insurance would be extended and expanded.

The sharp rise in claims signals the unemployment rate could rise several percentage points in coming months, after matching a 50-year low of 3.5% in February, which reflected 5.8 million unemployed Americans.

The sudden stop of the nation’s economy paired with a consumer retrenchment have several economists predicting gross domestic product will shrink in the second quarter by the most in quarterly records dating back to 1947.

— With assistance by Michael Sasso, Jordan Yadoo, and Sophie Caronello

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‘People shouldn’t come’: Great Ocean Road towns look to stop visitors

Beach towns along Victoria's Great Ocean Road are trying to stop visitors heading there for the usually busy Easter holiday period, to limit the spread of coronavirus.

The surf club in Lorne has stopped beach patrols, while the region's biggest real estate rental agency is blocking all new bookings of holiday houses until the end of April.

The beach at Lorne on Thursday.Credit:Jason South

Tourist hubs along the world-famous holiday trail have already suffered a plunge in visitor numbers following the federal government's ban on overseas visitors to Australia.

Lifesaver Samuel Ord said regular rostered patrols at the Lorne Surf Life Saving Club had stopped and the club house had been shut down.

"We can't have flags up and say it's safe to swim here when the government is saying 'stay home'," he said. "Obviously when Easter is coming up it's usually a busy time and I can understand what they are doing."

Lorne life-saver Samuel Ord.Credit:Jason South

Club captain Sam Aschhoff said a limited patrol would take place with a core group of about four lifesaving club members down from the normal visible patrol made up of about 15 to 20 people.

"We are hoping that people are listening to what the government is saying. There should be no unnecessary travel, people shouldn't come to Lorne for a holiday, there will be no flags up and no patrol," he said. "The beaches are not shut, the word is we are just trying to do self-isolating and social distancing and there should not be any need to go to the beach."

The club followed directives from Surf Life Saving Victoria, which is moving to limited "operational patrols" across Victorian beaches from this weekend.

Clubs along the coast including Torquay, Jan Juc and Anglesea have abolished regular patrols and plan to take down flags, leaving limited "observational" patrols in place.

The move follows outrage over the huge numbers of people flocking to Bondi beach in Sydney last weekend, which prompted authorities to fence off the beach.

Great Ocean Road Real Estate has emailed all holiday-home owners on its books this week advising it would block any new bookings until the end of April, unless owners objected.

The business manages about 700 holiday homes along the surf coast, including in Lorne, Torquay and Apollo Bay.

"We are now in a position whereby government advice is for people to 'stay home'," the email said. "With this in mind, we are moving to place a full bock on calendars across all platforms from now through to April 30."

Existing bookings would be honoured, but many of these had already been cancelled.

"Our business is experiencing a wave of guests seeking to cancel their bookings," the email says. "It is also fair to say new bookings, certainly for the coming months, have reduced to a trickle."

Agency director Darren Brimacombe said "99 per cent of owners" supported the move, which his agency had introduced ahead of any nationwide shutdown of holiday bookings, which it expected the government would introduce.

A dramatic reduction in visitors following the ban on foreign tourists has already hit local businesses hard.

Meryl Bartak, owner of Lorne Beach Books, said she was trading with limited opening hours and offering home delivery, but the beach town was quiet.

"We have a wonderful hospital in Lorne but it couldn't cater for a full town, it would just be impossible," she said.

The permanent population of Lorne is 1114, but during holiday periods 10,000 people can be in the town.

Ms Bartak said it was likely people with holiday houses would still visit over the school holidays, and visitors in the town at the moment were doing a good job of adhering to social-distancing guidelines.

"What people are trying to do is maintain the physical distancing and maintain being kind and looking after each other and persuading people in the nicest possible way that perhaps it is not a great time to go touring," she said.

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Oil Prices Down Over 2% As Virus Worries Mount

Oil prices fell on profit taking Thursday after three days of gains, helped by the Federal Reserve’s sweeping stimulus measures and optimism surrounding a U.S. $2 trillion emergency stimulus plan.

Benchmark Brent crude fell 2.3 percent to $26.75 a barrel, while West Texas Intermediate (WTI) crude futures were down 2.7 percent at $23.84.

Equities resumed their slide today as a historic $2 trillion U.S. fiscal stimulus deal failed to offset worries about a looming recession caused by the coronavirus spread.

As deaths mount in the U.S. and Europe, there are more than 472,000 diagnosed cases of COVID-19 worldwide.

Spain’s coronavirus death toll overtook that of China, prompting lawmakers to extend the state of emergency until April 12.

Italy’s death toll from the virus crossed the 7,500 mark and New York turned out to be the epicenter of the U.S. outbreak with over 30,000 cases, raising concerns about a global recession.

With lockdowns in many countries, investors expect that oil demand will contract by more than 10 million barrels per day.

Production increases by Saudi Arabia and Russia also loomed, causing further uncertainty.

Meanwhile, data released by the Energy Information Administration (EIA) on Wednesday showed crude oil inventories in the U.S. rose by 1.6 million barrels for the week ended March 20, against expectations for a 2.8 million barrels increase.

The data showed gasoline inventories fell by 1.5 million barrels, more than twice the expected drop, while distillate stockpiles were lower by about 680,000 barrels, compared with an expected drop of 1.9 million barrels.

The EIA report also said overall fuel demand fell by nearly 2.1 million barrels per day.

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Coronavirus pushes United Airlines to offer buyouts to US employees

Mnuchin: Want airlines to continue to operate

Treasury Secretary Steven Mnuchin says there are very specific provisions to airlines that are still being negotiated.

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United Airlines is offering buyouts to U.S. employees as it contends with the ongoing financial impact of the global coronavirus outbreak, according to a company memo on Wednesday.

Airline employees in the U.S., Puerto Rico and Guam can ask for a buyout from March 26 through April 10, according to the memo, which was first obtained by Skift. Employees who receive a buyout are eligible for “enhanced medical benefits and travel privileges.”

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“We’re offering this program because in this turbulent time, we want to give you some control over your path forward,” a United Airlines human resources executive said in the memo. “We do have to make sure that our operational needs are covered, now and also when we begin to ramp up service again, so the only thing that would potentially prevent approval of an employee’s request would be if too many team members from one area wanted to participate.”

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Travel bans mandated by the Trump administration and social distancing protocols have brought U.S. airlines to a halt in recent days. President Trump identified the airline industry as a priority as lawmakers work toward a $2 trillion coronavirus relief package that includes bailout funds for endangered sectors.

Ticker Security Last Change Change %
UAL UNITED AIRLINES HLDG. 36.60 +3.60 +10.91%

United Airlines has made significant cuts to domestic and international flights due to the outbreak. The company’s overall flight capacity will be down by roughly 68 percent in April, according to Reuters.

“We are offering our employees many different options regarding their future with the company, so they can find what works best for them,” a company spokesperson said in a statement to FOX Business regarding the buyout packages.

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Employee spouses and domestic partners are also eligible for many of the enhanced benefits, according to the memo.

United CEO Oscar Munoz and President Scott Kirby are foregoing their base salaries through June. The executives warned in a separate memo that ongoing financial difficulties could result in temporary pay cuts for employees.

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JPMorgan’s Equity Derivatives Haul Soars to $1.5 Billion

Revenue is swelling in a key part of JPMorgan Chase & Co.’s trading division as its teams stay engaged through violent price swings that have prompted some market players to pull back.

The bank’s equity derivatives traders have generated roughly $1.5 billion in revenue so far this year, according to a person with knowledge of the situation who asked not to be identified because the numbers are confidential. That’s almost what JPMorgan reported from all equity markets businesses in last year’s first quarter — and at least twice what that derivatives desk usually earns, people familiar with the bank’s performance said.

It’s a snapshot of the way the coronavirus crisis is shifting fortunes on Wall Street. It also shows the intensity of the pace for employees who keep reporting to offices to navigate the turmoil. Some members of the derivatives desk could still be seen sitting closely together inside the bank’s Manhattan offices late last week, despite pleas from public health officials and the bank’s own leaders to help stop the spread of the deadly virus by keeping distance.

A bank spokesman declined to comment on the unit’s earnings. The company’s technicians have been working as fast as possible to move hardwired desks farther apart to ensure safety, a person with knowledge of the matter said.

“We have taken many precautions over the past several weeks to spread traders out within floors and across buildings, and from what we’ve seen they are adhering to social distancing guidance,” the biggest U.S. bank said in a statement.

Pulling Back

JPMorgan controls the largest share of the market for equity derivatives, according to the most recent Coalition data from 2018. This year’s windfall isn’t just a result of the market’s elevated volume, according to people with knowledge of the matter.

During normal times, high-frequency traders and hedge funds play a role in facilitating transactions, but record-setting price swings have strained the ability of algorithms to anticipate moves. That’s forced some of those firms to limit their transactions and leave market share for banks.

By early March, JPMorgan and Citigroup Inc. had together generated about $500 million in additional revenue from equity derivatives, compared with the same period a year earlier, people familiar with the figures said at the time. In the days since, JPMorgan’s boost — then estimated at about $300 million — has soared further.

Like rivals across Wall Street, JPMorgan has sent much of its global workforce home to help stem the spread of the coronavirus. But not all employees are able to work remotely, because they rely on tools and high-speed connections available only in offices. In early March, JPMorgan split its sales and trading staff into groups, leaving some at the bank’s Madison Avenue tower and assigning others to work remotely or from back-up trading floors in New Jersey and Brooklyn.

Last week, New York Governor Andrew Cuomo ordered all workers in nonessential businesses to stay home. But he exempted some of the workers who keep Wall Street running and making money.

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