Top Headlines

FSB Report Sounds Warning on Fragmentation – Profit & Loss

A report issued this week by the Financial Stability Board warns that differences between regional and national regulation is heightening the risk of market fragmentation, thus making it harder for global regulators to monitor markets and for global market participants to operate efficiently across borders. The report states, “Differences in rule-making could lead to cross-border regulatory arbitrage.”

FXPBs Over-Allocating Credit to Algorithmic and High-Speed Trading – FX Week (subscription)

Bloated by the algorithmic dealings of lean firms bountifully staked by foreign exchange prime brokers (FXPBs), the $5 trillion-a-day FX market is at risk of blow-up, according to a range of market participants concerned about the lax use of risk tools. The problem is exacerbated by the way venues for spot FX operate their matching engines, meaning FXPBs face impediments when measuring risk on a net basis.

Sonia Advances: Liquidity Builds as Banks Eye Interdealer Shift – (subscription)

In the relinquishing of Libor, the sterling market has an edge over other currencies. Waiting in the wings, sterling has a rate with a 20-plus year history, one the market knows and is used to trading – Sonia, after all, has been around since 1997 and is already used to value around £30 trillion of assets a year.

Italy Revives ‘Alternative Currency’ Proposal – Financial Times (subscription)

Debate is growing in Italy about the suggestion that a new domestic currency could be introduced by the government to pay its debts — and the possibility that Rome’s Eurosceptic coalition might use it to facilitate the nation’s departure from the euro.

The Buy-Side Trader is Latest Job to Be Outsourced as Costs Rise – Bloomberg

To a growing number of asset managers, keeping a trading desk isn’t worth it any more. There are the salaries, data feeds and computers. There are new technologies and sources of liquidity from dark pools to systematic internalizers to keep up with. Then there are the reams of rules.

Regulatory News

‘Brexit Has Already Happened’ for Banks, Says City Lobby Head – Financial News (subscription)

The delay to the UK’s departure from the European Union has done nothing to slow investment banks’ plans for a no-deal Brexit on October 31, the chair of the sector’s lobby group has said.

EU Urges London to Reveal No-Deal Brexit Plans for Share Trading – Financial Times (subscription)

UK watchdogs need to give investors more advanced warning to prepare for a split in European share trading markets created by a no-deal Brexit, one of Europe’s most senior markets regulators has warned.

CFTC’s Giancarlo on Fed Policy, Liquidity, Swaps Framework, Blockchain – Bloomberg TV

Christopher Giancarlo, chairman at the Commodity Futures Trading Commission, discusses the Fed’s signal to markets, concerns about liquidity, the Swaps framework, Facebook’s plans for a virtual currency, blockchain and anticipatory hedging.

Setting the Standard: Derivatives Industry Looks to Machine-Readable Technology – WatersTechnology (subscription)

As regulators and industry bodies ramp up efforts to deploy machine-readable models for derivatives reporting, adoption of industry-wide standards has more than a few challenges to overcome.

Unclear CCP Tiering Threshold Concerning: JP Morgan – FOW (subscription)

A JP Morgan director is concerned by the unclear threshold for what constitutes a tier 2 CCP under Emir 2.2

New Securities Financing Rule Could Give Unwanted Visibility into the Buy-Side’s Trading Book – The Trade

Funds have raised concerns that Securities Financing Transactions Regulation (SFTR) requirements on collateral re-use will provide a full view of their trading book. 

Crypto News

Bitcoin Indicator Flashes a Sell Signal as Slump Accelerates – Bloomberg (subscription)

As euphoria over cryptocurrencies deflates in the wake of Bitcoin’s biggest monthly surge in almost two years, technical indicators are showing there could be more pain ahead.

The SEC Case Against Kik’s ICO Appears Strong, Experts Say – CoinDesk

The US Securities and Exchange Commission has sued messenger app maker Kik for its $100 million ICO – which the agency contends was an unregistered securities sale – and the regulator appears to have built up a strong case in its initial court move.

Open Bets on CME’s Bitcoin Futures Hit Record High – CoinDesk

The open interest in CME Bitcoin Futures contract hit a record high last Friday. The total figure of 5,190 for the period between May 27 to June 3 represents the largest number of open interest, or contracts outstanding, in CME bitcoin futures ever and a 7 percent gain on the week prior, according to data from the Commodity Futures Trading Commission.

FBI Joins Probe Into Quadriga’s $195 Million Crypto Collapse – Bloomberg

The collapse of Canada’s QuadrigaCX cryptocurrency exchange has sparked an investigation by US agencies including the Federal Bureau of Investigation.

Company News

Digital Reasoning Launches AI Surveillance Tool – Profit & Loss

Digital Reasoning has launched an AI-enabled voice analytics service for voice communications monitoring in banks. Allied with the firm’s conduct surveillance solution, Digital Reasoning says it enables banks to achieve integrated surveillance that covers both voice and text communications data.

Itarle to Open New York Office, Co-Locate at CME – FX Week (subscription)

Itarle is hiring staff for a new office in New York. As part of this US expansion, the company is co-locating within CME Group’s data centre in Aurora, Illinois, to beef up its global presence. The Lucerne, Switzerland-based company offers multi-asset algorithmic trading services, smart-order routing and transaction cost analysis to the sell side.

Former TradAir CEO Founds Neural Engines – FX Week (subscription)

Industry veteran Virat Tolat founded technology firm Neural Engines earlier this month. Neural Engines uses artificial intelligence to develop applications inspired by neurophysiology. 

Eurex Begins Test Run of Speed Bumps in Derivatives Market – The Trade

Eurex has commenced a trial-run of a programme intended to curb aggressive high-speed trading and level the playing field for price discovery in derivatives markets.

LCH Outlines Approach to CCP Risk Management – FOW (subscription)

Membership criteria are the first line of defence for a CCP, the clearing house wrote.

Credit Suisse Adds Tretola and Osterman to FX Team – FX Week (subscription)

Phil Tretola and Sam Osterman have joined Credit Suisse as directors in its foreign exchange team. Tretola was previously at Nomura and Osterman was global head of FX options at BNY Mellon.

Lonsdale Retires, Leaves Deutsche Börse’s 360T – Finance Magnates

Paul Lonsdale has retired from his role of liquidity manager, Americas at 360T, the foreign exchange subsidiary of Deutsche Börse, after 24 years in the industry.

Market Savvy

Fed Rate Cut Bets Weaken Dollar as Focus Turns to ECB – Reuters

The dollar struggled near a seven-week low on Wednesday on rising expectations of a US central bank interest rate cut in response to trade conflict-related risks.

Japan Is Still a Haven, But It’s Tougher to Make a Buck on the Yen – Bloomberg (subscription)

Buying Japanese currency when the rest of the world looks wobbly is a classic trade. Japan’s current-account surpluses and its holdings of everything from US Treasuries to foreign real estate mean it doesn’t need to borrow from anybody.

Winter Period to Continue for British Pound? – FX Street

The month of June usually represents the time of the year where many regions across the world prepare for the upcoming summer period, but this is unlikely to be the case for the British Pound where we should not rule out an extended winter freeze.