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Regulation

Tarbert Lined Up for CFTC Chair Heath Tarbert is to be nominated by the US government to be the next chair of the Commodity Futures Trading Commission. His appointment is subject to Congressional approval, however he was appointed to his current role at the US Treasury by the US Senate with a huge majority and is expected to attract similar support. Tarbert will take the reins of the US regulator from Christopher Giancarlo, who was appointed to the role in 2017 and is due to step down at the end of April 2019
FCA Seeks to Cement CFD, Binary Options Rules The UK’s Financial Conduct Authority (FCA) has issued two consultation papers ahead of the imposition of rules to address what it terms “harm to retail consumers from the sale of certain complex derivative products”, specifically retail –orientated contracts for difference (CFDs) and binary options. The proposed rules would apply to firms acting in or from the UK and ban the sale, marketing and distribution of binary options, as well as restrict the sale, marketing and distribution of CFDs and similar products to retail customers.
10 Firms Join to Create Code of Conduct for Digital Asset Markets Ten financial services and technology firms leading developments in the digital asset and blockchain space have joined together to create the Association for Digital Asset Markets (ADAM) to establish a Code of Conduct for emerging digital asset markets. US-based ADAM will proactively seek comprehensive standards for digital asset market participants. The group, which includes BitOoda, BTIG, Cumberland, Galaxy Digital, Genesis Global Trading, GSR, Hudson River Trading, Paxos, Symbiont and XBTO, says it will work with current and former regulators to provide rules for the efficient trading, custody, clearing and settlement of digital assets. Future guidelines will encourage professionalism and ethical conduct by all market participants, increase transparency by providing information to regulators and the public, and deter market manipulation, the group stated.
ISDA Publishes Responses to Benchmark Consultation The International Swaps and Derivatives Association, (ISDA) has published a statement summarising the preliminary results of a consultation on technical issues related to new benchmark fallbacks for derivatives contracts that reference certain interbank offered rates (Ibors). The consultation, which was launched in July, covered the proposed methodologies for certain adjustments that would apply to the fallback rate in the event an IBOR is permanently discontinued. ISDA says it received 152 responses from 164 entities to the consultation from a variety of market participants.
FSB Publishes Final Report on Compensation The Financial Stability Board (FSB) has published its finalised Recommendations for national supervisors: Reporting on the use of compensation tools to address potential misconduct risk. The work started in 2015 when the FSB published its Workplan on Measures to Reduce Misconduct Risk through the promotion of incentives for good behaviour. This work promoted the adoptions of standards and codes of behaviour, such as the FX Global Code, and reforms to benchmark-setting practices; A toolkit of measures to address misconduct in wholesale markets developed by the International Organization of Securities Commissions (IOSCO), based on national approaches; additional guidance on the use of compensation tools to promote good conduct; and a toolkit to strengthen governance frameworks to mitigate misconduct risk.
UK Gets New Libor Transition Head The Bank of England and the UK’s Financial Conduct Authority (FCA) have announced the appointment of Tushar Morzaria as the new chair of the Sterling Risk Free Reference Rates Working Group. The group was established in 2015 to implement the Financial Stability Board's recommendation to develop alternative risk-free rates (RFRs) for use instead of Libor-style reference rates. In April 2017, the Working Group recommended the Sonia benchmark as their preferred RFR and since then has been focused on how to transition to using Sonia across sterling markets.
FSB Reports “Good Progress” on OTC Derivatives Reform The Financial Stability Board (FSB) has issued two reports studying the implementation of its reform programme for OTC derivatives markets and says that “good progress” continues to be made across its agenda. Studying the period from end-June 2017, the report concludes that 21 out of 24 FSB member jurisdictions have comprehensive trade reporting requirements in force, up by two since end-June 2017. The three to yet put the reporting frameworks in place are Argentina, South Africa and Turkey, however the FSB says the three have made “some progress” in that period, particularly Turkey.
CFTC Fines Ex-Deutsche Trader for Hiding Swaps Losses The US Commodity Futures Trading Commission (CFTC) has fined a former Deutsche Bank inflation swaps trader for attempting to cover up losses. The Commission has also closed its related investigation into the bank, citing its self-reporting of the incident and its cooperation. CFTC says it has filed and settled charges against Jacob Bourne, a former managing director at Deutsche for fraudulently mismarking swap valuations to conceal trading losses of $16 million. The CFTC Order requires Bourne to pay a $350,000 civil penalty and permanently bans him from trading on exchange and seeking registration with the CFTC, among other prohibitions.
Mizuno Fined $900,000 by NFA The US National Futures Association (NFA) has ordered Mizuho Capital Markets to pay a $900,000 fine for failing to adequately assess the risks of its uncleared swaps. The Decision, issued by NFA's Business Conduct Committee (BCC), is based on a Complaint issued by the BCC and a settlement offer submitted by Mizuho Capital, which neither admitted nor denied the allegations. The BCC found that Mizuho Capital used inadequate processes to assess the risks of its uncleared swaps and back test, benchmark and validate its margin model.
Cartel Members Acquitted of FX Market Manipulation Richard Usher, Rohan Ramchandani and Chris Ashton, the three members of the now notorious “Cartel” chat room, have been found not guilty of FX market manipulation by a jury in New York. It was alleged that between 2007 and 2013 Usher, Ramchandani and Ashton worked in coordination to fix prices and rig EUR/USD markets, participating in telephone calls and electronic messages, including near-daily conversations in a private electronic chat room, in order to achieve this. The indictment against them was issued in January of this year. If found guilty the three could have each faced a maximum penalty of 10 years in prison and a $1 million fine.