How Regulators Can Keep Bankers Honest

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Top Headlines

How Regulators Can Keep Bankers Honest – Wall Street Journal (subscription)
Banks have shelled out more than $10 billion in fines for trying to rig the foreign-exchange markets, including fines of $5.6 billion handed down by US authorities last month in a deal that saw five banks plead guilty to criminal offenses. Yet so far, no individual has been charged with a crime, while the share prices of the banks even rose on the day the fines were announced. Results of a UK review are due next week and could lead to recommendations to more easily punish bank employees.

Reputational Risk Driving Changes at the Banks – Profit & Loss (subscription)
Concerns about reputational risks are driving changes at the banks’ FX departments, according to speakers at Profit & Loss’ Forex Network New York conference last week.

Saxo CEO Dismisses ‘Opportunistic’ Clients Trading Swiss Franc – Bloomberg
Almost five months after Switzerland threw currency markets into a panic, Saxo Bank says clients who lost money trading the franc need to acknowledge their own mistakes and move on.

FX Volumes Rise in May – Profit & Loss (free story)
FX volumes rose strongly on a year-on-year basis in May, however the news was a little more mixed in month-on-month terms.

Here’s the Next Stage in Global Currency Wars – CNBC
According to Societe Generale’s Albert Edwards, the spark for a new round of “currency wars” – whereby countries manipulate foreign exchange to gain a global advantage – is the Japanese yen, which fell to its weakest against the greenback since 2002 on Tuesday.

CNH Tracker: Booming Offshore Yuan Trading Would Get Boost From SDR Inclusion – Reuters
The volume of Chinese currency traded in the offshore market has risen sharply in the past year, after more than 10 offshore yuan hubs were set up and more players switched to using it for payments and settlements.

Prime of Primes Reduce Reliance on Prime Brokers – FX Week (subscription)
PoPs have sensed an opportunity to cut costs with prime brokers by boosting capital and trading directly with banks instead.

Taiwan to Launch Yuan Forex Futures 20 July – Reuters
Taiwan will launch Chinese yuan forex futures on 20 July, four sources with direct knowledge of the matter said on Wednesday, in the island’s latest efforts to become a major offshore yuan market.

EM Currencies: Are Options the Way Forward? – Euromoney
Recent currency movements have highlighted the limitations of the forward as a hedging option for emerging market (EM) currencies.

Regulatory News

New York Regulator Releases Final BitLicense Rules – Profit & Loss (free story)
The New York Department of Financial Services (DFS) as announced the release of the final BitLicense rules, which it claims is the first comprehensive framework for regulating digital currency firms.

UK Watchdog Proposes New Rules to Avoid Excessive Fees for Benchmarks –Reuters
Britain’s financial watchdog has proposed rules to ensure that widely-followed market benchmarks like Libor interest rates, gold or oil are available to all at a fair price.

CFTC Mulls Stricter Rules for Automated Traders – Financial Times(subscription)
The top US derivatives watchdog has said more stringent rules may be on the way for the automated traders that now make up a hefty chunk of futures markets.

G7 Finance Ministers Endorse Code of Conduct for Bankers – Profit & Loss(free story)
The G7 finance ministers see “considerable merit” in establishing a bankers’ code of conduct to tackle market misconduct, behaviour which it says impacts the resilience of the financial industry as a whole.

FINRA’s Top Regulatory Priorities For Financial Services Industry – Forbes
Chip Jones and Susan Axelrod of the Financial Industry Regulatory Authority (FINRA), Mari Buechner of Coordinated Capital Securities, Alan Cohen of Goldman, Sachs and Daniel Kosowsky of Morgan Stanley Wealth Management shared the “Top 10 Regulatory Considerations” for the financial industry at a recent event.

Company News

Currency-Trading Platform 360T Group Explores Sale – Wall Street Journal(subscription)
Currency-trading platform 360T Group is exploring a sale of the company, in a deal that could fetch more than €600 million ($675 million), according to people familiar with the matter.

Hotspot London Matching Engine to Launch on 14 September – Profit & Loss(free story)
Hotspot, the institutional foreign exchange ECN recently acquired and operated by BATS Global Markets, has set a 14 September launch date for its London-based matching engine.

Citi Latest Bank to Publish Client Letter – Profit & Loss (free story)
Citi has become the latest bank to publish letters to its clients explaining how it operates in foreign exchange markets.

UBS and Deutsche Defend Opposing FICC strategies – Financial News(subscription)
Executives at two European investment banks that have stood on either side of the debate over the future of fixed income trading have defended their strategies, with each claiming to have been proven right.

Market Savvy  

Euro Pauses After Biggest Gains in Six Years
Reuters
The euro took a breather after its biggest two-day gain against the dollar in over six years on Thursday, as the European Central Bank played down the impact of bond market volatility and the euro zone returned to inflation.

Exit Short EURUSD on Recent Squeeze, But Look to Fade EUR’s Strength
BNP Paribas
The ongoing sell-off in European fixed income markets continues to result in liquidation of consensus FX trades. Our short EURUSD recommendation (initiated on 3 June) has traded through its stop of 1.1340 and we exit the trade for a 1.94% loss. We favour looking to fade the recent rise in the EUR, although respecting intraday volatility we will not be jumping back into the trade in the coming days.

Two Indices Suggest USD Rally Could Struggle in Coming Months
MahiFX
A couple indices suggest that the US economy may have embarked on a period of slower growth and if that’s the case that could have significant implications for the much-anticipated rise in US interest rates and the USD rally.

Press Releases

MAS Proposes to Strengthen Singapore’s OTC Derivatives Market and Enhance the Provision of Financial Advisory Services
The Monetary Authority of Singapore (MAS) published a consultation paper on measures to strengthen Singapore’s over-the-counter (OTC) derivatives market and to enhance the provision of financial advisory services.

Thomson Reuters Launches Market Data Services in CME Group’s Aurora Data Centre
Elektron Managed Services will be available to all customers in Aurora who want access to low-latency machine-readable news and real-time market data through a simple cross-connect.

Industry Events