BNY Mellon to Launch FXPB Service

BNY Mellon is launching an FX prime brokerage service for its institutional clients. The custodian bank announced in a release today that the new service will launch “in early 2018”. In the release, BNY Mellon says the service will allow institutional clients to access a significant new source of FX liquidity while helping streamline and reduce operational expenses, including legal and onboarding costs, as well as generating substantial capital and netting gains. Users of the service will be able to transact a suite of FX products while also having access to pre- and post-trade services in addition to BNY Mellon’s collateral, funding and liquidity capabilities.
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CLS Volumes Show Year-End Dip Despite YoY Improvement

The average daily volume (ADV) submitted to CLS in December was $1.56 trillion, down 6.9% from $1.67 trillion in November 2017, but up 13% from the $1.38 trillion of ADV submitted in December 2016. This increase in total volumes compared to the same month a year ago was driven largely by more swaps trading activity, according to CLS. Last month, CLS recorded an ADV of $1.09 trillion for FX swaps, a 22.4% year-on-year increase. By contrast, the ADV for spot submitted to CLS in December was $391 billion, down 3% year-on-year, and the ADV for forwards was $81 billion, down 4.7% year-on-year.
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BNY Mellon Facing Further FX Class Action

BNY Mellon is facing further legal action over activities in its FX business as a class action suit has been filed in New York claiming it “charged excessive rates and mark ups” on ADR conversions. The bank has previously settled similar cases surrounding so-called Standing Instruction trades with both US authorities and private claimants, however those cases were not brought in regard to the ADR business. As was the case with SI trades, the Plaintiffs claim that BNY Mellon “selected a transaction rate at or near the rate at which the currency traded that day that was virtually the worst for the ERISA Plans”.
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CLS Volumes Tick Up in November

The average daily volume (ADV) of trades submitted to CLS was $1.677 trillion in November, up 3.8% from the previous month and up 9.2% year-on-year. This increase in volumes was largely driven by swaps trading. CLS reports an ADV of $1.149 trillion in swaps submitted last month, which represents a 5.4% increase from the $1.09 trillion submitted in October and a 22.6% increase on the $937 billion submitted in November 2016. Meanwhile, the ADV for FX spot submitted to CLS was $439 billion in November, up 2.8% from the previous month, but down 14.6% year-on-year. Forwards represented $89 billion of the total ADV submitted to CLS in November, down 10% from October but up 4.7% compared to November 2016.
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No Surprises: Fed Raises Interest Rates Again

The US Federal Reserve raised interest rates for the third time this year on Wednesday, citing an improving economy and labour market. At the end of the Federal Open Market Committee’s (FOMC) two-day meeting, it was announced that the benchmark interest rate would be increased by 25 basis points, to between 1.25% and 1.5%. “In view of realised and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-1/4 to 1?1/2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation,” said the FOMC in a statement today.
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RBA, ANZ Commits to FX Global Code

The Reserve Bank of Australia and ANZ have announced that they have signed a statement of commitment to the FX Global Code of Conduct. At the beginning of the month, Profit & Loss reported that 15 central banks had signed this statement of commitment to the Code and in a separate article, noted comments from Mark Carney, governor of the Bank of England, in which he said that the Code may become “more firmly embedded” in the UK’s Senior Managers Regime (SMR), a move which could potentially lead to tangible penalties for firms that do no comply with the Code.
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Absa Bank Joins CLS as Settlement Member

Absa Bank has joined CLS Group as a settlement member.  Absa joins 66 other banks in becoming a settlement member in CLSSettlement, a payment-versus-payment settlement service that currently settles, on average, $5 trillion per day on behalf of its clients. “I am very pleased to welcome Absa as a direct participant in our settlement service,” says David Puth, CEO of CLS. “Absa has been part of our network since the South African rand was added to CLSSettlement in 2004. This latest development strengthens our presence in South Africa and is further endorsement of our commitment to meeting the evolving needs of our clients.” 
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Wells Fargo Disputes WSJ Story on FX Mark Ups

Wells Fargo has issued a statement in which it “strongly disputes” the characterisation of its foreign exchange pricing as being unfair and unfavourable to its customers, as alleged in a story published by The Wall Street Journal on November 28. “We informed The Wall Street Journal that their story had fundamental inaccuracies before they published,” says Wells Fargo Wholesale Banking head Perry Pelos. “We provided pricing data and other information that revealed inaccuracies in the story or that were counter to its negative portrayal of our FX business. Our points and views were either absent in the finished story or not taken seriously by the paper.”
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Operational Risk on the Rise – EBA

In its latest assessment of the European banking system, the European Banking Association highlights the threat posed by technological advances, outsourcing and data protection. The results of a risk assessment questionnaire show operational risks remain an area of concern given the challenges EU banks have to face with the rapid development of financial technologies. Based on the questionnaire results, 55 % of respondents foresee an increase in operational risk in their bank compared to 43 % in December 2016 and 35 % in December 2015.
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HSBC Faces Lawsuit After Judge Finds for ECU Group

HSBC is facing potential legal action after a UK High Court judge ordered it to hand over trading records requested by one of its former clients ECU Group. Although it initially was persuaded by HSBC to drop its complaint, ECU Group renewed its claim against the bank over stop loss orders executed in 2006, following the US Department of Justice bringing charges of wire fraud, including front running, relating to a deal HSBC executed on behalf of Cairn Energy in 2011.
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