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.
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NYDFS Approves Coinbase as Qualified Custodian

Coinbase Custody has obtained a license under New York State Banking Law to operate as an independent Qualified Custodian. It will operate as a Limited Purpose Trust Company chartered by the New York Department of Financial Services (NYDFS). Coinbase Custody is designed as an institutional-grade service for storing large amounts of cryptocurrency in a secure manner. All assets trusted to Coinbase Custody are stored offline. “For our customers, operating under a New York State Trust Company is more than just a new license  -  it’s an important piece of regulatory clarity that will allow us to compliantly store more assets and add new features like staking,” says Sam McIngvale, product lead at Coinbase, in an online post announcing the news.
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ASIC to Investigate Last Look

The Australian Securities and Investments Commission (ASIC) is to further investigate the use of last look in foreign exchange markets. ASIC commissioner Cathy Armour told a conference this week that while the regulator accepts that last look may help facilitate a liquidity provider’s legitimate risk management, it also introduces the potential to exploit confidential client trading intentions and to otherwise treat clients unfairly. The regulator says it will also conduct more sets of on site reviews of local banks' foreign exchange businesses.
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FSB Outlines Potential Financial Stability Issues from Crypto-Assets

The Financial Stability Board (FSB) today published Crypto-asset markets: Potential channels for future financial stability implications. The report sets out the analysis behind the FSB’s proactive assessment of the potential implications of crypto-assets for financial stability. The report includes an assessment of the primary risks present in crypto-assets and their markets, such as low liquidity, the use of leverage, market risks from volatility, and operational risks. Based on these features, crypto-assets lack the key attributes of sovereign currencies and do not serve as a common means of payment, a stable store of value, or a mainstream unit of account, says the report.
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ESMA Extends 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, which have been in effect since 1 August, from 1 November 2018 for a further three-month period. ESMA says it has “carefully considered” the need to extend the intervention measure currently in effect and believes that a significant investor protection concern related to the offer of CFDs to retail clients continues to exist.
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CFTC Hands Out Fines to Deutsche Bank, UBS, BNP Paribas

The US Commodity Futures Trading Commission (CFTC) has fined Deutsche Bank $70 million for attempted manipulation of the ISDAFIX benchmark and $30 million for manipulation, attempted manipulation, and spoofing in the precious metals futures markets. UBS has also been fined $15 million for attempted manipulation and spoofing in the same markets. One of the CFTC Orders finds that over a five-year period, beginning in at least January 2007 and continuing through May 2012, Deutsche Bank Securities (DBSI) made false reports and through the acts of multiple traders, attempted to manipulate the US Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX),
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BIS Paper Maps Out a Path to Crypto Regulation

A new paper included in the latest Bank for International Settlements Quarterly report argues that regulation of cryptocurrency markets can be effective, especially at national level. The report, by Raphael Auer and Stijn Claessens at the BIS, notes that cryptocurrency markets are often seen as operating outside the reach of national authorities, but it also points out that can also apply to other asset classes and emergent technologies. What sets cryptocurrencies apart is that they can function without institutional backing and are intrinsically borderless, which, the report argues, raises the question of whether one can expect regulation – in particular national regulation – to be effective.
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ISDA Publishes Benchmark Supplement

The International Swaps and Derivatives Association has published the ISDA Benchmarks Supplement, which it says gives firms the ability to improve the contractual robustness of derivatives that reference interest rate, FX, equity and commodities benchmarks. The Supplement has been developed in response to the European Union Benchmarks Regulation, which regulates the use of a wide variety of benchmarks across different asset classes. The BMR requires contracts between supervised entities and their clients to set out the actions they would take if a referenced benchmark is materially changed, ceases to be provided or is prohibited from use.
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BoA Latest to Settle with CFTC Over ISDAFIX

Bank of America (BoA) has become the latest firm to settle with the Commodity Futures Trading Commission (CFTC) over the attempted manipulation of the ISDAFIX benchmark, agreeing to pay a $30 million civil monetary penalty. The CFTC Order finds that, beginning in January 2007 and continuing through December 2012, BoA made false reports and attempted to manipulate the US dollar International Swaps and Derivatives Association Fix (USD ISDAFIX) in order to benefit its derivatives positions, including positions involving cash-settled options on interest rate swaps and interest rate swap futures. James McDonald, CFTC Director of Enforcement, comments: “This marks the ninth CFTC enforcement action involving manipulative conduct in connection with the USD ISDAFIX benchmark. As this case shows, the Commission will continue to work vigilantly to ensure the integrity of critical financial benchmarks and hold all wrongdoers accountable, no matter how widespread the misconduct.”
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New York Attorney General Highlights Crypto Platform Concerns

A new report by the New York State Office of the Attorney General (OAG) claims that certain cryptoasset trading platforms suffer from potential conflicts of interest, have yet to implement serious efforts to impede abusive trading activity and provide customer fund protections that are either limited or illusory. The OAG’s Virtual Markets Integrity Initiative was launched in April 2018 as a fact-finding inquiry into the policies and practices of virtual asset trading platforms. The OAG sent letters and questionnaires to thirteen major trading platforms, with the questions reflecting areas of special concern for everyday retail customers, such as site outages, fees, and the effects of automated or "bot" trading.
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