It seems every week another bank falls foul of US regulators
courtesy of a big fine and this week it looked like Standard
Chartered was the dubious recipient of that honour until
Thursday afternoon when the US Department of Justice stunned
the market by fining Bank of America $17bn.
The fine, which is the largest the DoJ has reached with any
single entity, was for mis-selling residential mortgage-backed
securities rather than money-laundering or Libor rigging (the
most common misdemeanours these days) but this will offer
little comfort to Merrill’s sizeable futures
The writing is on the wall and it is plain for everyone to
see: regulators are serious and they are not going away.
On this point, the extent of Rabobank’s
involvement in the rigging of Libor became more evident as a
second former trader this week admitted conspiring to
manipulate Yen Libor in a further blow to the Dutch bank which
has already been fined $1.1bn for fixing Libor.
On the regulatory side, US options regulator the Securities
and Exchange Commission came out of the Commodity Futures
Trading Commission’s shadows briefly to tighten up
its rules around non-US firms trading into and with firms based
in the US.
The CFTC maintained a worsening habit by issuing two
no-action letters, to the operators of swap execution
facilities and an Indian clearing, and this despite the House
Agricultural Committee passing laws in April to rein in the
CFTC’s capacity to issue this last minute
To cut a long story short, this week saw more of the same
sorts of things we’ve been seeing all year: fines
and tightening regulation.
This is not particularly positive and the summer slowdown
will have only compounded the mood for those of us not on
holiday but there are still some signs of life out there that
should be celebrated.
BM&FBovespa, the Brazilian exchange that has benefitted
in recent years from the commodities boom, has finally gone
live with its clearing house by bringing together on a single
Cinnober-based platform the four clearing services it provided
Eurex, the German exchange, launched a swap compression
service in a move that pitches it into competition with
LCH.Clearnet and Icap, which already offer these services.
Icap launched a coal desk in Singapore, underlining the
emergence of that city as the Asian centre for commodities, and
the largest Chinese exchange – the Dalian Commodity
Exchange – unveiled an innovative new physical
delivery mechanism that could set an interesting template for
rivals struggling with their warehousing arrangements.
This type of innovation is great to see, particularly at
this time of year and after a tough year-to-date in the markets
which have been perilously slow.
This will change of course, when interest rates go up and
there were some positive signs this week when it emerged two of
the nine members of the Bank of England’s Monetary
Policy Committee voted in favour of a rate rise this month.
This was the first time in years the MPC has not been
unanimous and this will offer some hope to traders looking
Rates will move sooner or later and it is encouraging to see
firms like BM&F, Cinnober, Eurex and Icap trying to
One can’t help imagine, however, if there are
many more fines like this week’s, how much of an
industry will be left to see the recovery?