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BoE, ESMA Prepare for Brexit No-Deal with MoU The Bank of England and European Securities and Markets Authority (ESMA) have announced that they have agreed Memoranda of Understanding (MoUs) regarding cooperation and information-sharing arrangements with respect to central counterparties (CCPs) and central securities depositories (CSDs). The MoUs follow the adoption by the European Commission in December 2018 of temporary equivalence decisions on the future UK legal and supervisory framework for UK CCPs and CSDs. The Commission’s implementing acts would come into effect in the result of a no-deal Brexit. In that scenario, they would allow UK CCPs and CSDs to be recognised by ESMA from 30 March 2019, and therefore continue to provide services respectively to EU clearing members, trading venues and also provide notary and settlement services for securities issued under EU law. The MoUs will also only take effect in the event of a no-deal Brexit.
StanChart Fined $40m in FX Rigging Probe The New York Department of Financial Services (DFS) has fined Standard Chartered Bank $40 million for attempting to rig transactions in FX markets between 2007 and 2013. An investigation by the DFS, as well as an internal review by the bank, found that bank traders used a range of illegal tactics to maximise profits or minimise losses at the expense of the bank’s customers or customers at other banks. Specifically, it was found that between 2007 and 2013, traders based in New York and elsewhere joined traders at other locations in a chat room called “Old Gits”. According to the DFS, the chat room was formed so that traders could coordinate trading, share confidential information and otherwise affect FX prices, with one trader apparently describing the chat room to a new member as “a den of thieves”.
Firms Should Revisit OTC Reporting Frameworks – Study A new report from Tabb Group argues that with regulators becoming increasingly strict on OTC derivative trade reporting it is time for firms to consider a comprehensive review of the trade reporting process. The report, Checking in on OTC Reporting Rules was authored by Tabb’s head of derivatives research Russell Rhoads, who points out that a key component to reducing risk levels in financial markets involves regulators having access to timely and accurate data. “With the new regulations mostly set in stone, now may be the best opportunity for firms to consider a comprehensive review of the OTC trade reporting process,” he says.
FICC Markets Group Issues Best Practice Guidelines The FICC Markets Standards Board (FMSB) has published the final version of its Statement of Good Practice (SGP) on Suspicious Transaction and Order Reporting.The FMSB is an independent body set up by market practitioners to try and improve standards of conduct in wholesale FICC markets. It aims to bring transparency to grey areas in the wholesale FICC markets by identifying emerging vulnerabilities, clarifying and documenting practice and agreeing standards to improve conduct and market behaviour. Setting up the FMSB was one of the main recommendations to emerge from the Fair and Effective Markets Review (FEMR), which was conducted by HM Treasury, the Bank of England and the Financial Conduct Authority (FCA).
ESMA Renews CFD Restrictions

in News, Regulation

ESMA Renews CFD Restrictions

The European Securities and Markets Authority (ESMA) has agreed to renew the restriction on the marketing, distribution or sale of contracts for differences (CFDs) to retail clients. The rule, which has been in effect since 1 August 2018, was due to expire on 1 February 2019 but has now been renewed for a further three-month period. ESMA says it has “carefully considered” the need to extend the intervention measure currently in effect, adding, “ESMA considers that a significant investor protection concern related to the offer of CFDs to retail clients continues to exist.”
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.