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FCA Outlines Plans for Wholesale Financial Markets The UK’s Financial Conduct Authority has outlined its plans for whole financial markets in its 2018-19 Business Plan, which was published this week. The FCA notes that wholesale financial markets are “complex” and have undergone large-scale and complex regulatory change, including the Markets in Financial Instruments Directive (MiFID II) and the Market Abuse Regulation (MAR). It adds that technology and innovation are affecting markets’ business models and their users have different levels of sophistication. It highlights insider trading, market manipulation and other forms of market abuse as activities of interest.
Systematic Internaliser Register Launched The SmartStream Reference Data Utility (RDU) in collaboration with a group of Approved Publication Arrangements (APAs), including Bloomberg, Deutsche Boerse, NEX Regulatory Reporting, TradEcho, Tradeweb and Trax have launched a detailed Systematic Internaliser (SI) Registry. The service enables SIs to register the financial instruments for which they are providing SI services in a centralised database through their APA, and fills what the firms call an important gap in the MiFID II/MiFIR regulatory framework allowing trading counterparties to identify who is responsible for reporting a trade.
Associations Urge EU Regulation Change The International Swaps and Derivatives Association (ISDA), the European Banking Federation (EBF), International Capital Market Association (ICMA) and the International Securities Lending Association (ISLA) have published a whitepaper on the benefits of post-trade risk reduction services as a crucial risk management tool. The bodies say that risk reduction services like compression and counterparty rebalancing play an increasingly important role in reducing risks in derivatives markets. These benefits are recognised in the European Union under MIFID II/MIFIR, which exempt post-trade risk reduction administrative transactions from the trading obligation, however, currently no exemption from the clearing obligation in the EU for these transactions.
CFTC Hits Back at Proposed Budget Cuts Staff at the Commodity Futures Trading Commission (CFTC) have spoken out strongly in opposition to the proposed cuts to the agency’s budget contained within the US government’s latest spending bill. The US omnibus budget agreement, which passed the House of Representatives yesterday, would cut the CFTC’s budget by $1 million, dropping it to $249 million for fiscal year 2018. In response, Erica Richardson, director of the Office of Public Affairs at the CFTC, issued a statement saying that CFTC chairman, Christopher Giancarlo, has taken this budget decrease “incredibly personally” and is currently meeting with the commission’s finance team “to figure out a path forward for the agency”.
FMSB Details Trading Error Compensation Standard The FICC Markets Standards Board, which was set up in 2015 in response to the UK’s Fair and Effective Markets Review with a mandate to issue Standards designed to improve conduct and raise standards in the wholesale Fixed Income, Commodity and Currency markets, has published its Transparency Draft Standard on Secondary Market Trading Error Compensation. The Standard deals with the issues concerning how compensation should be paid following a trading error, although it does not address the circumstances in which the error might arise, how the risks of such circumstances might be mitigated, the reasons why a party may compensate another party, or the desirability or magnitude of compensation.
US, European Regulators Clash Over CCP Rules The Commodity Futures Trading Commission (CFTC) has accused the European Commission (EC) of attempting to renege on a previously agreed framework for cross-border CCP recognition, with the EC refuting this characterisation. Speaking at the Futures Industry Association’s (FIA) annual conference in Boca Raton, Florida, Brian Quintenz, a commissioner at the CFTC, outlined details of this recent disagreement. He reminded the audience that in 2016, regulators in the US and Europe agreed a “CCP equivalence determination”, which established a common approach to the regulation and supervision of cross-border CCPs.
SEC Issues Warning to Crypto Exchanges The US Securities and Exchange Commission (SEC) has said that certain exchanges listing crypto-assets need to register with the agency because they offer trading in products that meet the definition of a “security”. In particular, it is targeting exchanges that list crypto-assets linked to Initial Coin Offerings (ICOs). “A number of these platforms provide a mechanism for trading assets that meet the definition of a "security" under the federal securities laws. If a platform offers trading of digital assets that are securities and operates as an "exchange," as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration,” says the SEC in a statement today.
US Judge Deems Cryptocurrencies Commodities A US district judge has said that cryptocurrencies can be regulated as commodities by the US Commodity Futures Trading Commission (CFTC). According to a Memorandum & Order (M&O) for a court case brought by the CFTC against cryptocurrency business operator, Patrick McDonnell, the judge ruled that "virtual currencies can be regulated by CFTC as a commodity". Virtual currencies are “goods” exchanged in a market for a uniform quality and value…They fall well within the common definition of “commodity” as well as the CEA’s definition of “commodities” as “all other goods and articles . . . in which contracts for future delivery are presently or in the future dealt in”, stated judge Jack Weinstein in the M&O.
CLS Reporting Unveiled CLS is launching CLS Reporting – a reporting product for FX matched instructions that supports members with their MiFID II reporting requirements. In response to market demand, CLS says it will provide the ability for parties and counterparties to FX trades to exchange additional information in their settlement instructions submitted via SWIFT FIN and ISO20022 XML messages. The trade information will be collated from CLS Settlement and CLS Sameday in a single report after end-of-day processing has occurred for each service.
Former Deutsche Trader Fined over Libor The UK’s Financial Conduct Authority has fined Guillaume Adolph £180,000 and banned him from performing any function in relation to any regulated financial activity. Adolph formerly worked at Deutsche Bank as a short-term interest rate derivatives trader, trading products referenced to CHF and JPY Libor and for a period of time, acted as the primary JPY Libor submitter for Deutsche. Adolph was initially charged by the FCA in January 2014, however proceedings were stayed due to the ongoing criminal investigation of the UK’s Serious Fraud Office into certain individuals who formerly worked at the bank.