Citigroup Takes FX Crown, But Rules of Engagement Change

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Top Headlines

Citigroup Takes FX Crown, But Rules of Engagement Change – Wall Street Journal (subscription)
Once a year, all eyes in the $5.3 trillion a day foreign exchange industry are set on only one set of data: the market share rankings published by Euromoney Institutional Investor. And in 2015 the winner is… Citigroup. But for the first time in the 37 years the survey has been published, the rules of engagement have changed.

Regulation Alone Will Not Restore Faith in Markets – Financial Times(subscription)
Few mechanisms underpin modern life to quite the same extent as the wholesale markets that lie at the heart of the financial system. What may seem like arcane bits of financial plumbing, these determine the borrowing costs of households and companies, the prices at which currencies are exchanged and influence the cost of basic necessities such as food and raw materials. They are also, as recent history attests, prone to manipulation. Recent scandals have rightly caused regulators to review their laissez-faire approach to overseeing the wholesale markets on which such benchmarks are based.

Banks in Political Crosshairs After FX Fines – Profit & Loss (free story)
US politicians could look to use the FX fines issued to the banks last week for their own political purposes, with Senator Elizabeth Warren already being outspoken on this topic. Specifically, Warren has voiced concerns over the waivers granted to the banks that pleaded guilty to FX malpractice as part of their settlement deals.

Currency Traders Speculate Against Riksbank With Krona Bet – Bloomberg
Currency traders have started to test the Swedish central bank’s sensitivity to krona gains as policy makers acknowledge exchange-rate moves are putting their goals at risk.

PBOC Sets China Yuan at One-Month Low After IMF Says Currency ‘No Longer Undervalued’ – South China Morning Post
China’s central bank set the benchmark midpoint rate of its currency at the weakest level in a month against the US dollar on Wednesday, after the International Monetary Fund said in its report that the currency is no longer undervalued.

Currency Hedging: Does it Still Work in Japan and Europe? – Citywire
Over most timeframes, UK investors in Japan and Europe who have hedged the yen and euro have reaped stronger returns. In the last year, three years and five years, the picture has been the same: of the pound strengthening against those currencies, and chipping away at the returns of those with unhedged exposure.

What Does the Future Hold for Exchange-Traded FX in Europe? – the Trade
The push by exchanges to boost their FX volumes has continued in earnest in the last few years. FX on the CME is currently trading at around $108 billion of daily volume, still a drop in the ocean compared to over-the-counter (OTC) volumes, but it is growing to attract at least a small sliver of the market.

Regulatory News

FCA Sets Parameters of CIB Market Study – Profit & Loss (free story)
The Financial Conduct Authority (FCA) has outlined the extent of its market study into competition in corporate and investment banking. The UK watchdog received over 40 written responses to its call for contributions on potential subjects of a market study in the wholesale sector, published in February 2015, and met over 70 market participants through a mixture of roundtables and one-on-one meetings.

Hayes Was “Ringmaster” of Multi-Bank Libor Manipulation, Court Hears –Global Investigations Review (subscription)
Former UBS and Citigroup trader Tom Hayes, who is accused of rigging yen Libor, acted in a “thoroughly dishonest and manipulative manner”, Southwark Crown Court heard on 26 May.

Norwegian Adoption of EMIR to Fix Cross-Border Clash – Risk.net(subscription)
The Norwegian parliament plans to adopt the European Market Infrastructure Regulation during the second half of this year. The action aims to avert issues for European banks trading Norwegian krone swaps.

Deutsche Bank to Pay $55 Million to Settle Derivatives Probe – Bloomberg
Deutsche Bank will pay $55 million to settle US Securities and Exchange Commission claims that it misrepresented the value of derivatives during the financial crisis, materially misstating its accounts.

Company News

FXCM and Saxo Bank to Acquire CitiFX Pro Accounts – Profit & Loss (free story)
Citi is selling its margin foreign exchange business, including the CitiFX Pro and TradeStream platforms, to FXCM and Saxo Bank, the companies have confirmed. Financial terms of the transactions were not disclosed.

Former Goldman Partner Backs FX Start-Up – Financial News (subscription)
The former co-head of interest rate products at Goldman Sachs in Europe has backed a London and Barcelona-based start-up that offers peer-to-peer currency transfers for small and medium-sized businesses.

LCH.Clearnet Extends Buy-Side NDF Clearing to Europe – Profit & Loss (free story)
LCH.Clearnet’s ForexClear has expanded its US client clearing service to include European model account structures for the first time, ahead of the mandated start of NDF clearing and the expected capital impact of Basel III.

Market Savvy  

Pound Verges on ’07 High Versus Euro With Greek Talks at ImpasseBloomberg
The pound advanced toward a seven-year high against the euro as the common currency was weighed down by Greece’s lack of progress in talks with its creditors.

Backstop Against Euro-Dollar Parity Break
Normura Securities
The big picture for the euro remains one of weakness, despite the more double-edged risk dimensions the single currency has demonstrated since March. The euro reached almost $1.40 a year ago. Now, it is close to $1.10. And this is not only a story about the dollar. The single currency is also down more than 10% versus the pound over the past year and has weakened even against the yen, in spite of unprecedented monetary easing by the Bank of Japan.

Japanese Officials Give Weak JPY Green Light
BNP Paribas
Japanese officials gave their blessing to recent JPY weakness as chief government spokesperson Suga stated that the current pace of JPY decline has not reached an undesirable level. We believe that a weaker JPY is strongly favoured in Japan as a means of boosting inflation and will continue to be encouraged.

Press Releases

Shanghai Stock Exchange, China Financial Futures Exchange and Deutsche Börse Agree on Joint Venture
The venture is designed to support the internationalisation of the Chinese currency; therefore, products will be offered in renminbi (RMB). The company will be named China Europe International Exchange, and will commence market operations in Q4 2015. The initial scope of product development will cover cash market products for market launch.

DGCX’s MOU With Bank of China Seeks to Increase Interaction Between UAE and Chinese Financial Markets
The Dubai Gold & Commodities Exchange (DGCX) has signed a memorandum of understanding (MOU) with the Bank of China (BOC). The agreement creates a framework for both institutions to work together to enhance interaction and collaboration between the derivatives and financial markets of the UAE and China.

Industry Events