Prices for swaps traded on so-called swap execution facilities or exchanges will be delayed for 30 minutes under a rule approved by the U.S. Commodity Futures Trading Commission.
The commission voted 5-0 to approve a final rule for how prices for trades will be made public, which depends on the type of transaction and who is doing the trading. The regulation for “real-time” price disclosures will put swaps subject to a clearing requirement at an initial 30-minute delay, which would narrow to 15 minutes after the first year. The rule also provides for an initial 48-hour delay for end users of derivatives to report prices.
The rule phases in the delays, starting no sooner than July 16.
The Dodd-Frank Act required the CFTC and the Securities and Exchange Commission to increase transparency in the $708 trillion global over-the-counter derivatives market, where largely unregulated trades helped fuel the 2008 credit crisis. The commission voted 3-2 on Nov. 19, 2010, to propose a 15- minute delay for reporting the block trades of standardized swaps.
Industry groups representing banks including JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and Deutsche Bank AG argued that the proposal for a 15-minute limit — meant as a window to give traders a chance to hedge big trades prior to them going public — wasn’t enough time to protect them from competitors taking advantage of their need to hedge.
Bloomberg LP, the parent company of Bloomberg News, has said it intends to register as a swap-execution facility.
Compliance Policy
NYSE-Deutsche Boerse Offer Derivatives Fees Cap to EU
NYSE Euronext and Deutsche Boerse AG told antitrust regulators they would impose a three-year ban on derivative-fee increases should they approve their merger.
The exchanges would agree not to raise published trading and clearing prices for derivatives on NYSE Euronext’s Liffe exchange and Deutsche Boerse’s Eurex market, Deutsche Boerse said in an e-mailed statement yesterday. The remedy was sent last week after the exchanges submitted a revised set of proposals including the sale of NYSE’s Liffe single-stock equity derivatives business to the European Union, two people familiar with the situation said earlier in the day yesterday.
Officials are analyzing the exchanges’ previous offers, EU Competition Commissioner Joaquin Almunia said yesterday. The exchanges are trying to convince European regulators that merging to create the world’s largest exchange operator won’t stifle competition in derivatives and clearing.
James Dunseath, a spokesman for NYSE Euronext (NYX) in London, declined to comment. The companies sent the new remedy in a letter to Almunia, Deutsche Boerse said.
The exchanges plan to meet European regulators to discuss the revised remedies before the European Commission breaks for official holidays tomorrow, the two people said. If the meeting suggests the remedies are still insufficient, the exchanges will continue to press their case, they said.
Before deciding whether to approve or block a deal, the European Commission must consult competition agencies from the European Union’s 27 nations. Commissioners from each EU country must also vote on a decision. Companies can then appeal a merger ban at the EU courts. The last day the commission can rule is Feb. 9.
CFTC Votes 5-0 to Adopt Rule on Swaps Data Recordkeeping
The U.S. Commodity Futures Trading Commission approved a rule requiring swap data repositories to keep digital information about swaps immediately accessible during the life of the swap and for five years after its termination.
The swaps recordkeeping rule, required by the Dodd-Frank Act, passed with a 5-0 vote at a meeting yesterday in Washington.
China to Amend Futures-Trading Regulations, Xinhua Reports
China will amend futures-trading rules to improve government supervision, the official Xinhua News Agency reported yesterday, without citing anyone. The State Council will publish a draft of the proposed regulations today and invite public comment, Xinhua said.
Compliance Action
Further Euro-Bond Steps Urged by European Parliament Committee
A European Parliament panel urged further steps toward joint bond sales by euro-area nations, highlighting growing political concerns over the region’s two-year-old debt crisis.
The European Union assembly’s economic committee pressed EU regulators “to come forward rapidly” with proposals tied to the introduction of common euro bonds, which the German government opposes. The non-binding resolution responds to a Nov. 23 paper by the European Commission, the EU’s regulatory arm, on options for joint debt issuance, also called “stability bonds.”
“The prospect of stability bonds could foster stability in the euro area in the medium term,” the committee said in the resolution approved yesterday in Brussels and due to go to the full 754-seat EU assembly early next year. The committee said it is “deeply concerned by the continuous strains on the euro-area sovereign bond markets reflected in widening spreads, high volatility and vulnerability to speculative attacks over the last two years.”
The idea of bonds sold jointly by the euro area’s 17 nations remains alive because unprecedented support by governments and the European Central Bank have failed to stamp out debt concerns that began in Greece in late 2009 and now threaten Spain and Italy. The troubles led Greece to seek an initial rescue in April 2010, pushed Ireland and Portugal into aid programs over the ensuing year and prompted a second Greek bailout in October.
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Courts
Amaranth’s $77.1 Million Manipulation Settlement Approved
A federal judge approved a $77.1 million settlement by Amaranth Advisors LLC, the hedge fund that collapsed in 2006 after losing $6.6 billion on natural gas trades, of a lawsuit brought by traders who accused it of market manipulation.
U.S. District Judge Shira Scheindlin, in an order Dec. 15, approved the agreement, which was filed two days earlier in Manhattan federal court by plaintiff’s attorney Christopher Lovell of Lovell Stewart Halebian Jacobson LLP. The parties had reached a tentative agreement in October.
“The plaintiffs compromised to a tiny fraction of their overall claim,” Stephen Senderowitz of Winston & Strawn P.C. in Chicago, a lawyer for Amaranth, said yesterday in a phone interview. The settlement avoided the cost and risk of a trial, and paves the way for investors to receive any remaining funds, he said.
Lovell didn’t return calls seeking comment on the settlement.
The case is In Re Amaranth Natural Gas Commodities Litigation, 07-06377, U.S. District Court, Southern District of New York (Manhattan.)
Ferrostaal Fined $183 Million by Court at Ex-Managers’ Trial
Ferrostaal AG was fined 140 million euros ($183 million) yesterday by a Munich court in a bribery case related to the conduct of two former employees.
The fine is the result of an agreement between the company, prosecutors and the judges, court spokeswoman Margarete Noetzel said in an e-mailed statement. The sanction was issued as part of a verdict in the trial of two former company managers accused of paying bribes in Greece and Portugal.
Ferrostaal said at the beginning of the trial on Dec. 15 that it was willing to pay the fine, which was the result of “intensive negotiations.” The company said in a statement yesterday that it would bear the consequences and pay the fine.
The two former company managers, identified only as Johann- Friedrich Ha., 73, and Hans-Dieter Mue., 73, were convicted of bribery, received suspended prison terms of two years and were fined, according to the statement.
Prosecutors had been probing Essen, Germany-based Ferrostaal, which manages the development of industrial and petrochemical plants, since 2009 to determine whether it bribed officials for contracts.
Interviews/Speeches
Chilton Says MF Global Client Funds Must Be Returned
Bart Chilton, a commissioner at the U.S. Commodity Futures Trading Commission, talked about the outlook for returning lost money to former customers of bankrupt commodities broker MF Global Inc.
Chilton spoke with Scarlet Fu and Stephanie Ruhle on Bloomberg Television’s “InsideTrack.”
For the video, click here.
CFTC’s Gensler Says Agency to Propose Volcker Rule in January
U.S. Commodity Futures Trading Commission Chairman Gary Gensler said his agency may vote to propose the so-called Volcker Rule in January.
The CFTC is the last of several U.S. financial regulators to propose the rule curtailing banks’ proprietary trading and their relationships with hedge funds. The rule is required by the 2010 Dodd-Frank Act.
“I would be hopeful that we would address ourselves to a proposal — possibly even in the first meeting of January — of the Volcker Rule,” Gensler told reporters at a meeting yesterday in Washington.
Kroszner Says ‘No Magic Number’ for Capital Rules
Randall Kroszner, professor of economics at the Booth School of Business at the University of Chicago and a former Federal Reserve governor, talked about bank capital and liquidity requirements.
The Federal Reserve will issue capital and liquidity rules this week reshaping supervision of the riskiest, largest banks and those with more than $50 billion in assets, a government official familiar with the matter said. Kroszner spoke with Lisa Murphy and Michael McKee on Bloomberg Television’s “In the Loop.”
For the video, click here.
Comings and Goings
Germany Appoints Elke Koenig to Succeed Sanio as BaFin Chief
The German government appointed Elke Koenig to replace Jochen Sanio as head of the country’s financial regulator, BaFin, effective Jan. 1.
“The financial markets are going through difficult times – - a lot is in a state of transition — so it’s of special significance to have an experienced and proven personality at the head” of BaFin, Finance Minister Wolfgang Schaeuble said in an e-mailed statement. “This will strengthen the confidence in Germany as a financial center.”
Bahrain’s AAOIFI Appoints Khaled Al Fakih as Secretary General
The Accounting and Auditing Organisation for Islamic Financial Institutions appointed Khaled Al Fakih as its secretary general, replacing Mohamad Nedal Alchaar. The Mananma, Bahrain-based institution made the announcement in an e-mailed statement yesterday.
To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net.
To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net.