US Banks Moved Billions of Dollars in Trades Beyond Washington’s Reach

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Top Headlines

US Banks Moved Billions of Dollars in Trades Beyond Washington’s Reach – Reuters
This spring, traders and analysts working deep in the global swaps markets began picking up peculiar readings: Hundreds of billions of dollars of trades by US banks had seemingly vanished. “We saw strange things in the data,” said Chris Barnes, a former swaps trader now with ClarusFT, a London-based data firm.

Tactical Approach of Dismissed FX Traders Has Banks Worried – Profit & Loss (subscription)
Are some of the cases involving dealers dismissed over chat room activity ever going to be heard? Clearly the tactical approach of some of those traders has got the banks worried.

British Banks Face Foreign Exchange Time-Bomb – The Telegraph
The firefighters of Oklahoma had a lot to celebrate this month. So did public sector employees in the City of Philadelphia, who found themselves cheering in unison with financiers at the Syena Global Emerging Markets Fund. They and their pension funds are among the joint claimants in a class action against a score of banks..

China Poised to Raise Banks’ Liquidity to Boost Lending – Wall Street Journal (subscription)
The People’s Bank of China is preparing to flood the banking system with liquidity to boost lending, according to officials and advisers to the central bank, as its recent currency moves are squeezing yuan funds out of the market and renewing concerns over capital leaving Chinese shores.

Finding Liquidity: Today’s Greatest Challenge – FIX Global Trading
If there is one overarching theme today in debates around trading it is certainly the progressive and consistent erosion of secondary markets liquidity over the last few years. I do not think we exaggerate if we say that finding liquidity has become today the biggest challenge on trading desks.

How the Market Rout is Turning Wall Street Upside Down – Wall Street Journal (subscription)
After stock investors suffered a sharp decline last week and investors flocked to the relative safety of US Treasurys, bonds are once again getting the upper hand, defying market sages who predicted tough times ahead in the vast debt market due to the prospect of rising interest rates.

Wall Street Ready to Fight Against High-Speed Trading ‘Spoofers’ – New York Post
Wall Street sheriffs could soon be hunting down fast-moving trading bandits overseas. Regulatory brass at American exchanges are ready to unleash a new high-tech campaign to isolate and wipe out international high-speed trading “spoofers” who manipulate the US markets from the relative safety of their non-US perches.

Libor Lawsuit Allowed to Proceed in US Courts – Profit & Loss
A US judge has ruled that Barclays’ shareholders may proceed with a case against the British bank, in which they accuse it of inflating its stock price by manipulating Libor.

Illiquidity Worries UK Insurers in FX Hedging Switch – Insurance Risk (subscription)
A lack of liquidity in the cross-currency swaps market worries UK annuity firms as they are forced to stop using FX forwards in their matching adjustment portfolios to hedge foreign currency bond holdings.

 

Regulatory News

Esma Holds Firm on Double-Sided Reporting – Markets Media
The European Securities and Markets Authority has maintained the requirement for both sides of a derivatives transaction to report a trade under the European Markets and Infrastructure Regulation, despite opposition from some market participants.

Full Scope of Mifid RTS “Not Yet Realised” – FOW (subscription)
The full scope of the regulatory technical standards (RTS) under Mifid II are yet to be fully realised by the market, with further work needed especially on trade reporting requirements, presenting a huge project for market participants.

EU’s 2016 Stress Test will Include 50-60 Eurozone Banks – Reuters
Between 50 and 60 eurozone banks will be included in next year’s stress test of top EU lenders, fewer than half of the number in the 2014 exercise.

Blame Wall Street Dealer Retreat on Lower Risk, Flash Trade – Bloomberg
Wall Street dealers should blame their financial crisis hangovers and high-speed traders for the decline in their balance sheets, not just government regulations, Federal Reserve Bank of New York researchers say.

 

Company News

Markit to Acquire DealHub – Profit & Loss
Markit, a global provider of financial information services, has agreed to acquire DealHub, a provider of trade processing and trading services to the foreign exchange market. Financial terms of the transaction were not disclosed.

HFT Group Fined over Self-Trading and System Error – Financial Times (subscription)
A Chicago-based automated trading group has been fined $250,000 after an exchange found it traded with itself and sent out thousands of “resend requests” before its access was cut off.  A disciplinary committee of CME Group, the exchange operator, found that Wolverine Trading “self-matched,” or traded with itself, in natural gas, agriculture and foreign exchange futures markets on repeated occasions in 2012 and 2013.

SGX Proposes New Collateral Segregation System – Profit & Loss (subscription)
Singapore Exchange (SGX) is consulting the public on the proposed introduction of affiliate segregation, where collateral of an affiliate of an SGX Derivatives Clearing (SGX-DC) member is protected if the member defaults on its own contracts.

 

Market Savvy  

Markets Volatile as China Suffers
Profit & Loss
Asia has opened the week on a volatile note in financial markets after the expected RRR interest rate cut by China failed to materialise, causing further sharp drops in equity markets and steep moves in foreign exchange markets.

Emerging Market Currencies Suffer Sharp Drop
Financial Times
Fears over China’s decelerating growth have sent investors fleeing from the currencies of emerging markets, from South Africa to Malaysia, whose prospects have become twinned with the fortunes of the world’s second-largest economy.

Dollar Libor Rises for Ninth Straight Week
Reuters
A key borrowing cost for banks to lend dollars to each other rose for a ninth consecutive week as traders speculated over whether the US Federal Reserve may raise interest rates perhaps as early as September.

Chartist Who Got China Right Sees Dollar Gains Versus Euro
Bloomberg
Thomas Schroeder, the strategist who called the top of China’s stock market in April, expects the dollar to wobble before resuming its rally in 2016 when he sees it reaching a 14-year peak.

Euro, Yen Surge as Risk Aversion Intensifies; Dollar Takes a Hit
Reuters
The euro hit a 6 1/2-month high and the yen reached a three-month peak against the dollar on Monday as investors dumped riskier assets and flocked to currencies seen as safe havens on fears about a slowdown in the Chinese and global economies.

 

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