In its latest ‘Dear CEO letter’, the FCA has written to wholesale banks setting out their supervisory strategy for the next two years based on recent market events.
It includes information on their internal restructuring, which creates a ‘Sell-Side Directorate’ where the Wholesale Banks Department now sits alongside the supervision of market intermediaries and an area that analyses market interactions. …
In a co-ordinated global regulatory action, which included the Swiss Financial Market Supervisory Authority (FINMA), the U.S. Federal Reserve and the U.K.’s Prudential Regulation Authority (PRA), Credit Suisse, now a subsidiary of UBS, has been fined a total of $388 million over their dealings with the collapsed firm Archegos Capital Management.
For the PRA’s part their proportion of the fine was £87 million, the largest ever imposed on …
There have recently been a number of high profile “Spoofing” cases in the US, resulting in several convictions of traders. Spoofing is a form of market abuse which can sometimes be subtle, and hard to distinguish from “normal trading”, and is therefore challenging to monitor.
However, there is a clear message from authorities that spoofing is market abuse and will not be tolerated - so the responsibility falls firmly on senior management to ensure that the level and quality of trader surveillance is adequately robust to prevent spoofing. …
As international legislators and policy makers rush to catch up with the exponential growth of the cryptoasset market the PRA is applying the existing regulatory framework to control their expanding use, while the FCA is focusing on the management of growing risks in the areas of financial crime and custody.
Following global losses of over $10 billion suffered through the failure of Archegos Capital Management earlier this year, the PRA and the FCA have engaged in a multinational review and assessment of the losses conducted by the major global regulators, particularly focusing on counterparty risk management.
The UK response - under the umbrella of the Bank of England - was a ‘Dear CEO’lettersent in December to selected firms, operating in this space, requiring review and assessment of their equity financing business .
In its latest issue of “Market Watch” the FCA has expressed further concerns that, although it is five years since the introduction of the Market Abuse Regulation (MAR), firms are still not keeping up with market developments and thus failing to identify instances of potential market abuse.
The Code had been developed to restore confidence and establish ‘best practice’in FX markets following public scandals about market manipulation. However, the Code still allowed the continuation of the controversial practice of ‘last look’.
In Series 2 we looked at ETF’s as an alternative way to access shares in order to effect a Cum-Ex strategy. In this instalment we move on to consider the use of Physically Settled Futures in these structures, why this alternative was required and the differences in execution compared to simply using Stock.
As our followers on LinkedIn will know, one of FMCR’s areas of expertise is on the complex business of what has become known as ‘Cum-Ex’ trading. FMCR provides technical knowledge and experience on Cum-Ex and Cum-Cum, including forensic data analysis and conduct reviews.
In the last Series, we covered some of the basics of Cum-Ex trading – how the trade works, what factors can create a duplication of withholding tax reclaims and what a short seller is.
In the next few series we will be going over products alternative to shares that could be used in Cum-Ex. In Series 2 we look at ETFs.
The FCA has issued a Warning Notice regarding alleged spoofing-type activities at a bank in 2016. There have also recently been a number of high profile “Spoofing” cases in the US, resulting in several convictions of traders.
Spoofing is a form of market abuse which can sometimes be subtle, and hard to distinguish from “normal” trading”, and is therefore challenging to monitor.
Sustainability-linked derivatives (SLD) are a niche and nascent but rapidly growing market. The first SLD was executed in August 2019 and since then a variety of SLD’s have been developed across Europe and more recently in Asia and the US.
Electronic and Algorithmic (Automated) trading has expanded rapidly from its early roots in equities, extending to FX and, increasingly into Fixed Income.
WFH has almost certainly reduced the levels of casual internal discussions occurring across different departments. Did this exacerbate the problems around Archegos?
A lot has happened since FMCR last published “Were ADRs used for Cum-Ex Trading” and “Cum-Ex trading – is your firm affected?” – two British traders have been found guilty of tax evasion, more participants have been indicted, new European jurisdictions have launched investigations and the FCA have started investigating the involvement of a number of UK institutions and individuals in Cum-Ex.
As we move into the last nine months of transition away from sterling LIBOR, the regulators have written a ‘Dear CEO letter’ to CEOs of UK regulated firms
The process to transition linear derivatives (FRAs, Swaps) to a new RFR rate is now well understood. The issue of the transition of non-linear interest rate products, like options, is slightly more complicated. We can recognise this by observing that option prices are driven by more factors than just the underlying rate. For vanilla options, there are three main factors that drive the price, all of which will affect the fair transition process.
