Top Headlines

SEC a Stumbling Block in Banks’ FX Guilty Pleas: Sources – Reuters
Banks want assurances from US regulators that they will not be barred from certain businesses before agreeing to plead guilty to criminal charges over the manipulation of foreign exchange rates, causing a delay in multi-billion dollar settlements, people familiar with the matter said.

JP Morgan Says Guilty Plea Key to DoJ FX Settlement – Financial Times (subscription)
JP Morgan Chase said on Thursday that any resolution over a probe into its foreign exchange sales and trading activities with the Department of Justice would include the firm pleading guilty to an antitrust charge, according to a filing with US securities regulators.

Citigroup Closes Foreign Exchange Program for Select Clients – Bloomberg
Citigroup, the world’s largest currency dealer, closed a program that provided leverage to some foreign exchange clients without putting them through an extensive credit check.

Barclays Said to Face US Fine for Breaching Libor Settlement – Bloomberg
Barclays will probably be fined for violating a three-year-old settlement over interest rate rigging, but US prosecutors will stop short of seeking a guilty plea, which they are demanding from UBS.

US ‘Superior’ to Europe on Futures Margin – Financial Times (subscription)
The head of the main US derivatives regulator on Thursday launched a passionate defence of its rules, describing European concerns about some of the agency’s standards as “dead wrong”. Timothy Massad, chairman of the Commodity Futures Trading Commission, told US lawmakers that the agency had proved that US rules to protect clearing of derivatives were “superior” to Europe’s as the two sides struggle to end a two-year spat over recognition of each other’s rules.

CFTC Opens Review of US Swap Dealer Rule – FOW (subscription)
The Commodity Futures Trading Commission has started a review of its own plan to reduce in 2017 the threshold at which firms must register with the CFTC as a swap dealer. CFTC chairman Timothy Massad told the Energy Risk Summit USA his agency has started work to review the plan to reduce in December 2017 the threshold for registration to $3 billion from the current level of $8 billion.

Currency-Hedged ETF Surge Prompts Hedging Concerns – Structured Products (subscription)
ETF providers are expanding their roster of currency-hedged products as investors hunt for cheaper ways to exploit the decoupling of equity and currency performance in developed countries. The interest is spurring a new wave of innovation – and prompting a debate on how effective different hedging mechanisms may prove to be in practice.

Ex-CIMB Treasury CEO Calls for Direct Asean Forex Crosses – Asia Risk (subscription)
Companies conducting trade in the Association of Southeast Asian Nations (Asean) region should avoid using US dollars as a conduit before settling into a final currency in order to avoid extra costs and improve risk management, according to the former CEO of CIMB Bank’s treasury.

Dollar Tumble Does More Than Rattle Markets – CNBC
Up until a few weeks ago a firm dollar was a gift to central bankers outside the US, with weaker domestic currencies providing a powerful economic boost and aiding monetary policy easing. But with the dollar now in reverse amid mixed US economic data, analysts say central banks in Europe and Japan may have to maintain monetary stimulus for longer than anticipated.

China’s Yuan May Draw $1 Trillion on Getting IMF Reserve Status – Bloomberg
At least $1 trillion of global reserves will switch into Chinese assets if the International Monetary Fund endorses the yuan as a reserve currency this year, according to Standard Chartered and AXA Investment Managers.

Euro Slips from Three-Month High as Rise in Bund Yields Stalls – Reuters
The euro fell below $1.14 on Friday as a recent spike in German Bund yields stalled, but the single currency was still on track for its fifth straight week of gains.

Futures for Kids ‘Walk to Work’ Taking Place Today
The London Walk to Work is taking place today with participants from the futures and foreign exchange markets raising money for Futures for Kids. The course, covering 25 to 30 miles in total across major London parks, is a new twist on the already established Walk to Work, which by itself has raised £180,000 since inception. It also forms part of the inaugural Futures for Kids Day alongside a number of other fundraising events being held in aid of children’s charities at home and abroad.



Regulatory News

Clearing houses: Too Big to Fail? – Financial Times (subscription)
Clearing houses have been likened to nuclear power stations – necessary, but you would not want them to fail. FT Trading Room looks at how regulators are tackling systemic risk and the problems arising from this.

Esma Delay Opens Three Months of Doubt – FOW (subscription)
The decision by European regulators to delay the Mifid II standards by three months will pile the pressure on firms implementing the controversial new rules, senior lawyers have warned.  The European Commission and the European Securities and Markets Authority (Esma) earlier this week agreed to delay the formal submission from July 2 until the end of September, according to Commission letters seen by FOW.

Opening Statement By Commissioner Mark Wetjen Before the CFTC’s Global Markets Advisory Committee Meeting (press release)
Clearing houses registered with the CFTC now have enhanced financial-resource and liquidity requirements, as well as other risk management standards, that reflect their heightened role in the marketplace. I recognise, however, that as clearing volumes increase, we need to be cognisant of, and effectively address, the resulting increased concentration of risk in the cleared space. Many market participants and stakeholders have rather vocally expressed concerns about this.

US DoJ Extends FX Probe to Include BoE Manipulation Report – Profit & Loss (free story)
The US Department of Justice has asked to interview James Pearson, head of European FX trading at RBS, to record his account of the Bank of England’s FX Joint Standing Committee meeting examined in Lord Grabiner’s report.



Company News

Thomson Reuters Applies for Latency Floor Patent – Profit & Loss (free story)
Thomson Reuters has applied for a patent for what it calls the “Ideal Latency Floor”, which is a system in which market participants, who can respond within the value of the floor and choose to compete in a specific race to make or take a price, may each have an equal chance of winning that race.



Market Savvy  

Asia Forex Sentiment Turns Down: Poll
Sentiment toward most emerging Asian currencies deteriorated with the Thai baht suffering the largest short position in nearly 1-1/2 years, a Reuters poll showed, hit by a slowing Chinese economy and a rout in global bonds. Rupee experienced its largest short positions since mid-August.

Yen and the Art of Currency Maintenance
Financial Times (subscription)
The yen has been comatose since the end of March, stuck in a range of not much more than Y1 either side of Y120 to the dollar. Since the start of the year it has moved a little more, but compared with the ructions in the euro and sterling it looks staid.

NZD Leads Losses in USD Reversal
RBC Capital Markets
NZD weakness is spilling over into AUD and to a lesser degree, a moderate USD rebound. But gains are small in the context of the week’s across-the-board losses.
After last week’s brief foray into risk aversion, markets remain generally risk seeking today, as they have been all week, with RBC’s Risk Aversion Thermometer at -2.0 – a two week low.

Confusion Reigns in this Currency Conundrum
On Thursday, 14 May, the US dollar declined to the lowest closing level in almost four months against all the currencies that form its major pairs. On Wednesday, US retail sales were booked as flat during April following a gain of 1.1% in March. This was the latest data point that has derailed the expectations of an early hike in Fed Funds, which has been held at 0.00% to 0.25% since December 2008.



Press Releases

Options on Futures Now Available on Wolverine Execution Services Trading Platform
Wolverine Execution Services, a provider of technology and execution services, today announced the inclusion of options on futures trading functionality within the WEX Trading Platform. Eligible options on futures asset classes include VIX on the CBOE Futures Exchange and CME Group interest rate, FX, energy, equity, commodity, and metals.



Industry Events