The UK’s FICC Markets Standard Board (FMSB) has issued its 2017 Annual Report setting out the progress it has made to enhance standards of behaviour in the wholesale fixed income, currencies and commodities markets.
FMSB was established in 2015 following the recommendations of the Fair and Effective Markets Review (FEMR), which was conducted by the Bank of England, the UK Treasury and the UK’s Financial Conduct Authority.
FMSB says it has achieved “significant momentum and has received strong support from market participants and public authorities”.
The FICC Markets Standards Board has publishes a transparency draft of a new Statement of Good Practice on Suspicious Transaction and Order Reporting. The Statement covers the identification of suspicious transactions and orders and their reporting to the relevant regulator. In the UK and other jurisdictions regulated market participants have an obligation report such transactions to their regulator – in the UK this is as a Suspicious Transaction and Order Report submitted to the FCA.
A suspicious transaction or order is one where there is a reasonable suspicion that it could constitute insider dealing, market manipulation or attempted insider dealing or market manipulation.
The Commodity Futures Trading Commission’s Division of Market Oversight and Division of Clearing and Risk have issued a joint staff advisory that gives exchanges and clearinghouses registered with the Commission guidance for listing virtual currency derivative products.
In 2015, the CFTC found virtual currencies such as bitcoin to be commodities subject to oversight under its authority under the Commodity Exchange Act.
The latest guidance is another effort to ensure the CFTC is exercising appropriate oversight, while encouraging innovation and growth in these products, the Commission says.
The unsuccessful end of the Axiom Investment Advisors’ class action against Deutsche Bank over last look is an opportunity to look at one or two issues – specifically around the raft of legal actions taking place, a workstream of the Global FX Committee, and disclosures.
My first thought on reading through the judge’s Decision was “I wonder what those banks that settled are thinking now?” My second was the observation that the judge used the word "ambiguous" a heck of a lot.
The FX Global Code witnessed another small milestone this when BayernLB became the first Landesbank in Germany to commit by signing a Statement of Commitment, which it has posted to the register hosted by CLS Group.
The Code was launched in its entirety in May 2017 and since then a steady stream of market participants have singed up to adhere to its principles, attesting that they will operate in a fair and transparent manner and have internal workflows that are in line with the guidelines.
In this week's podcast Colin Lambert and Galen Stops focus in on what seems to be a growing debate about the value and indeed future of the FX Global Code following the acquittal of the three members of the Cartel. Discussing the implications of the jury's decision and the reaction from the FX industry, regular listeners will not be surprised to hear that our two podcasters manage to disagree over a few aspects of both the case and the debate.
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.
The Financial Stability Board (FSB) has also published an overview of responses to its public consultation on its Recommendations for national supervisors: Reporting on the use of compensation tools to address potential misconduct risk (Recommendations), which it launched in May.
Overall the board says it received 11 responses from associations representing supervisors, banks, a research foundation, trade associations and a trade union.
Generally, it says, most respondents voiced support for efforts to promote good conduct, improve culture and reduce the incidence of misconduct at financial institutions.
The Federal Reserve Bank of New York has taken the step of publishing a statement detailing how it handles confidential information from foreign exchange and Treasury market participants.
The New York Fed says it is committed to the use and handling of confidential information about participants in financial markets “in a manner that promotes the integrity and efficiency of these markets, and is consistent with goals of the Treasury Market Practices Group (TMPG) Best Practices and the FX Global Code”.
The International Swaps and Derivatives Association (ISDA) has published a set of best practices for central counterparties (CCPs), aimed at ensuring greater consistency in risk practices at CCPs across the globe.
The recommendations follow a default at Nasdaq Clearing last September, which exceeded the defaulting member’s margin and default fund contribution and required the use of mutualised resources – the second such event in five years.
The paper highlights steps that can be taken to minimise the potential for a member default to impact other members and the financial system as a whole, except in an extreme stress event.
A second working group set up by the Global Foreign Exchange Committee (GFXC) in 2018 to look at how market participants operating the “cover and deal” model utilise last look has published a paper highlighting areas in which it believes practice can be improved. Primarily, the report stresses the importance of those operating cover and deal models ensuring that there is adequate disclosure of the practice, the way in which it is being used, and the clarification of the role and capacity in which the participant acts.