Global Regulators Rein in Spending as Fines Rocket

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Top Headlines

Global Regulators Rein in Spending as Fines Rocket – Profit & Loss (free story)
While spending increases among global regulators has moderated or reversed from 2013 to 2014, the size of financial penalties has spiked, according to a new report by Kinetic Partners, a division of Duff & Phelps.

South Korea Reviewing Whether Global Banks in FX Probe Affected Korea – Reuters
South Korea’s antitrust agency is investigating whether local firms were impacted by the six global banks that were recently fined nearly $6 billion in a US and European forex probe.

Iosco Publishes Report on Credible Deterrence Approaches in Securities Market Regulation (press release)
The International Organisation of Securities Commissions has published the report Credible Deterrence, which identifies key enforcement factors that may deter misconduct in international securities and investment markets.The report draws on the collective experience and expertise of Iosco members and was produced by Iosco’s Committee 4 on Enforcement and the Exchange of Information, which is chaired by the UK Financial Conduct Authority.

Broking Market Like ‘Wild West’, London Libor Trial Told – Reuters
Tom Hayes, a former trader on trial in London for alleged interest rate rigging, described the broking market he worked in as the “Wild West” with no rules and where relationships relied on lavish entertainment, a court heard on Tuesday.

Janet Yellen’s Prediction Last Month is Already Being Vindicated – Bloomberg
The Fed will take a pass at this meeting and leave market participants debating whether the first rate hike will come in September or December.

You’ve Been Warned: Central Bankers Turning Less Market-Friendly – Bloomberg
Having soothed investors for the past seven years with low interest rates, bond-buying and other interventions aimed at shoring up weak economies, monetary policy makers are slowly stepping out of markets in a variety of ways. That leaves investors facing renewed bouts of the volatility which marked recent weeks.

Biggest Nordic Currency Trader Says Norway Set to Deliver Cut – Bloomberg
“You can only fool the market for so long – it’s time to deliver.” That’s the view at SEB, Scandinavia’s biggest currency-trading bank, where chief strategist Erica Blomgren says Thursday is the day Norway’s central bank will deliver the rate cut it has clearly signalled will come this month. The bank can’t afford to disappoint because policy makers have a “fear of fuelling krone strength”, she said.

China’s Banks Buy $1.3 Billion FX in May, Indicating Inflows: Regulator – Reuters
China’s banks made net foreign exchange purchases of $1.3 billion for clients in May, the country’s forex regulator said on Wednesday, releasing data that helps dispel worries about possible capital flight from heavy outflows in recent months.

Regulatory News

LCH. Clearnet Sounds Alarm Over Declining Use of Repo – Financial Times (subscription)
One of the world’s biggest clearing houses has warned it may soon reach the limit of its ability to use the short-term financing market to park its collateral as banks are squeezed by tougher regulations.

CCP Wrangling Sparks New Frontloading Fears – Risk.net (subscription)
Banks and end-users may be forced to close out and replace trades that are destined to be cleared as a result of the delay to the authorisation of third-country clearing houses, dealers are warning. The danger zone starts up to seven months prior to the clearing deadline. The issue arises because of the so-called frontloading provision in the European Market Infrastructure Regulation (Emir).

China Reiterates Gradual Stance on Loosening Yuan Controls – Wall Street Journal (subscription)
China offered a fresh reminder that it plans to lift capital controls gradually, even after hosting International Monetary Fund officials looking for indications that Beijing will loosen limits on its currency.

Company News

Change of Ownership at Caplin – Profit & Loss (free story)
Caplin Systems has reportedly changed hands, with senior management staff and Ion Capital Management (ICM), a specialised investor in financial technology businesses, buying out the firms’ original private equity investors, market sources tell Profit & Loss.

GFXD Hires MD for the Americas – Profit & Loss (free story)
The Global FX Division (GFXD) of the Global Financial Markets Association has appointed Victoria Cumings as managing director of the Americas with immediate effect. Cumings replaces Mandy Lam who left the industry group in December last year.

ICE to Launch Eris Standard Euro and Sterling Interest Rate Futures – FTSE Global Markets
ICE Futures Europe will launch Eris standard interest rate future contracts denominated in euro (Eris standard EUR interest rate futures) and sterling (Eris standard GBP Interest rate futures). The futures will be launched on June 29.

Market Savvy  

Waiting for Dots
Societe Generale
There is plenty of scepticism about the idea that the Federal reserve will increase rates this year. Sure, the latest Bloomberg survey of economists has only 17 of 83 respondents expecting rates to be unchanged in September, but clients remind me that the consensus view has been wrong a few times already. The risk at this evening’s FOMC meeting is, that while the underlying economic vies are reasonably upbeat and consistent with ‘lift-off’ happening in September, the (in)famous ‘dot-path’ will be lowered enough to be the main talking point.

FX Update: FOMC to Provide Little Guidance, But Market to React Anyway
Saxo Bank
The overwhelming consensus for today’s FOMC meeting is that the Fed will have little to say that would prompt any significant adjustment to the current expectations for the trajectory of Fed policy.

The Weak JPY is Working; Japan’s Trade Balance Improves
BNP Paribas
It is hard to argue with the policy of JPY depreciation when faced with such a steady improvement. Following Kuroda-san’s comments yesterday reversing his opposition to JPY deprecation, Reuters is reporting that the BOJ will discuss the implications of a weaker yen at its policy board meeting this Friday.

Press Releases

Coalition Releases 1Q15 Global Investment Bank League Table
Strong macro franchises outperformed during the quarter as currencies and European rates revenues increased. JP Morgan retained FICC global leadership in 1Q15, while Goldman Sachs joined the top three, closely followed by Deutsche Bank and Citi.

Bank of Russia Fine-Tunes FX Swap Auctions
From 16 June 2015, the Bank of Russia supplemented its system of monetary policy instruments with USD/RUB and EUR/RUB buy/sell fine-tuning FX swap auctions from one to two days term. This decision is aimed at expanding possibilities of credit institutions to manage their rouble liquidity and assets eligible as collateral for Bank of Russia refinancing operations.

Industry Events