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Regulation

US Seeks HSBC FX Dealer’s Extradition The US is to file for the extradition of HSBC’s former senior FX trader Stuart Scott from the UK to face charges under its broad wire fraud laws. According to a report first published by Reuters the US Department of Justice has filed a letter in a in Federal court in New York, stating the US’ intention to initiate formal proceedings to seek Scott's extradition after learning he did not wish to come to the United States voluntarily to face the charges.
Shafik Calls for “Ethical Lift” Outgoing deputy governor of the Bank of England, Manouque Shafik has called for a move from what she terms “an ethical drift” to an “ethical lift”. Speaking at the New York Fed conference on conduct and behaviour, Shafik accepted that misconduct in financial markets is nothing new, but argued the wave of misconduct which has emerged in the aftermath of the financial crisis is different. She highlighted the benefits of the UK's blend of "hard law" and "soft law" when establishing a compliance framework.
Dudley Repeats Call for “Banker Database” The president of the Federal Reserve Bank of New York, William Dudley, has reiterated his call for a database of banker misconduct that will “stop rolling bad apples”. Speaking to open a New York Fed conference on culture and behaviour in financial services, Dudley, who was expressing his own views, observed that the evidence is pervasive that deep-seated cultural and ethical problems have plagued the financial services industry in recent years. He further hinted that the industry needs more than principles to reform conduct and that any guidelines need teeth.
ESMA Provides More Clarity on BestEx Rules The European Securities and Markets Authority (ESMA) has published a Q&A document seeking to clarify expected standards around certain practices, including best execution. The questions have been set following feedback and enquiries from the general public, other regulators and market participants. On best execution ESMA publishes two Q&As, the first explains the different between the “reasonable steps” firms were expected to take to obtain the best possible execution under MiFID I and the “sufficient steps” they are required to take under MiFID II.
CFTC Extends $8bn Swap Dealer Threshold The US Commodity Futures Trading Commission (CFTC) has extended the current swap dealer registration de minimis threshold phase-in termination date until December 31, 2018. The de minimis threshold determines when an entity’s swap dealing activity requires registration with the CFTC. Registration triggers capital and margin requirements as well as other responsibilities, such as disclosure, recordkeeping, and documentation requirements. Currently the de minimis threshold for firms having to register as a major swap dealer is $8 billion, but this was due to expire on December 31, 2017, at which point the threshold would have been lowered to $3 billion.
CFTC Commissioner Calls for Regulatory Re-Think After Sterling Flash Crash A senior member of the Commodity Futures Trading Commission (CFTC) has called for a “thorough and unbiased analysis” by global financial regulators of the systemic risk of “unprecedented capital constraining regulations on global financial and risk-transfer markets”. In a statement issued today, CFTC commissioner Christopher Giancarlo repeats his warning over liquidity risk in financial markets, noting, “The increased risk is in part due to untested bank capital constraints imposed by US and overseas bank regulators under the Dodd-Frank Act and similar laws.”
GFMA Names Jury as Chair, Adds Scotiabank to Board The GFMA’s Global FX Division (GFXD) has named Claudia Jury, managing director and co-head, currencies and emerging markets at JP Morgan as its new chair, and Nigel Khakoo, head of G10 FX at Nomura as vice chair. The trade group also announced it added Scotiabank as a new board member, bringing its total membership to 25 FX market participants. The GFXD says its aim is to promote efficiency, international harmonisation of regulation and high standards of conduct in the global FX market.
Thomson Reuters, Clifford Chance, Team Up on Documentation Thomson Reuters and Clifford Chance have joined forces to help financial institutions tackle in what they term a timely, efficient and more cost-effective manner, their most pressing regulatory obligations relating to margin rules for uncleared OTC derivatives. The firms claim they are using an “innovative approach to contract negotiation and documentation” and that the partnership offers a “flexible, rapidly scalable, technology-enabled solution that will empower these financial institutions to meet their current multi-jurisdictional regulatory obligations and as they continue to evolve in the future”.
FX Code of Conduct: Reasons for Optimism What is widely seen as one of, if not the, biggest challenge surrounding the BIS FX Working Group’s work on developing the Global Code of Conduct – adherence – was addressed by Chris Salmon, executive director, Markets at the Bank of England earlier this week and Salmon – the man responsible for the adherence piece in the Code – was optimistic that it would be effective. Addressing ACI UK’s Square Mile Debate, Salmon noted, “It is no secret that all has not been well in FX or FICC markets more generally.” He cited the erosion of trust in markets to preface his speech but identified an “ethical drift” resulting from “structural weaknesses” that presented opportunities for misconduct.
CFTC Takes Action Against FX CTA The US Commodity Futures Trading Commission (CFTC) has filed a civil enforcement action against a CTA claiming to have grown 2,675% in two years with a 99.55% trade win ratio. Jamal Vance and All City Investments (All City) are the defendants in the action, they are charged with solicitation fraud in connection with an FX scheme and with failure to register as Commodity Trading Advisors (CTAs). According to the CFTC’s complaint, the defendants solicited customers on their website to open and deposit funds into their own accounts with a brokerage services firm that provides an online forex trading platform, and to sign a limited power of attorney form, which designated All City as that customer’s agent and attorney-in-fact for the purpose of buying and selling margined FX transactions for the customer’s account.