Financial Regulation Roundup: June 15, 2018

Ben Shapiro  Follow

Here are the top stories on the financial regulatory landscape in the U.S., EU and around the world over the past two weeks.

U.S. News:

Fed Raises Interest Rates and Signals Faster Hikes on the Way 

  • The Federal Reserve on Wednesday lifted its benchmark rate by a quarter of a percentage point, the second hike this year. And a majority of policy makers said they now expect a total of four interest rate increases this year. Fed officials had been split about whether to raise rates three times this year or four. The decision reflected an economy that's getting even stronger. Unemployment is 3.8%, the lowest since 2000, and inflation is creeping higher. The Fed is raising rates gradually to keep the economy from overheating. (CNNMoney: read more)

Volcker Rule Changes Move Forward After SEC Votes on Overhaul

  • The Securities and Exchange Commission voted 3-to-2 on Tuesday to seek public comment on the Volcker revamp, the last of five agencies that needed to sign off on the proposal. The proposal maintains Volcker’s ban on proprietary trading, in which banks invest for their own profits rather than on behalf of customers. But it would remove an important assumption that positions held by lenders for fewer than 60 days are proprietary and make it easier for banks to determine whether trades are prohibited. Regulators also want to give firms more leeway to take advantage of exemptions in Volcker that permit trades that hedge market risk and are done for market-making purposes. (Bloomberg: read more)

The SEC is Taking a Close Look at the Rise of Electronic Bond Trading, Chairman Jay Clayton Says

  • The Securities and Exchange Commission is taking a close look at bond trading as the market becomes increasingly electronic, Chairman Jay Clayton said Wednesday. While online stock trading platforms have been in business for decades, the bond market has been more traditional, with most of the activity still taking place by telephone or through chat services. However, that's changed as more venues have arisen and fixed income investors become acclimated, however slowly, to the electronic world. (CNBC: read more)

U.S. Regulator Demands Trading Data From Bitcoin Exchanges in Manipulation Probe

  • Government investigators have demanded that several bitcoin exchanges hand over comprehensive trading data to assist a probe into whether manipulation is distorting prices in markets linked to the cryptocurrency, according to people familiar with the matter. The investigation followed the launch of bitcoin futures on CME Group Inc.’s CME -0.95% exchange six months ago. CME’s bitcoin futures derive their final value from prices at four bitcoin exchanges: Bitstamp, Coinbase, itBit and Kraken. Manipulative trading in those markets could skew the price of bitcoin futures that the government directly regulates. (The Wall Street Journal: read more)

SEC Chairman: Most of Dodd-Frank Is Here to Stay

  • Postcrisis rules have created new challenges for Trump-appointed regulators as they look at recalibrating the financial rule book, but the vast majority of the 2010 Dodd-Frank Act isn’t going anywhere, Securities and Exchange Commission Chairman Jay Clayton said Monday. Speaking at The Wall Street Journal’s CFO Network annual meeting in Washington, Mr. Clayton said that regulators are evaluating how postcrisis rules have performed in practice, and that he had concerns about some of the unintended side effects from some regulations. But any changes will be around the edges, keeping the core of postcrisis overhauls in place, he added. “I don’t think Dodd-Frank is changing a great deal, just to put a pin in it,” he said. (The Wall Street Journal: read more)

EU News:

FCA Looks to Soften Mifid II Fallout

  • The FCA is reviewing Mifid II following criticisms that millions of investors are being provided with misleading or false information. Speaking at the FCA’s asset management conference in London on Tuesday, chief executive Andrew Bailey said introducing some aspects of Mifid II had “not gone as we hoped it would and as we wanted it to”. Bailey said the FCA is currently analysing how costs and charges disclosure reforms were working.  (Money Marketing: read more)

FCA Creates Category for Sovereign-Controlled Companies

  • On 8th June, The Financial Conduct Authority (FCA) finalised rules creating a new category within its premium listing regime to cater for companies controlled by a shareholder that is a sovereign country. In July last year, the FCA consulted on proposals aimed at encouraging such companies to choose the higher standards of premium listing, rather than standard listing. (FT Adviser: read more)

International News:

Trump Announces Tariffs on $50 Billion Worth of Chinese Goods

  • In a statement early Friday, Trump said a 25% tariff will be applied to Chinese goods that "contain industrially significant technologies." The administration was expected to specify the goods later in the day. Trade between the two countries "has been very unfair, for a very long time," Trump said. "This situation is no longer sustainable.” The president gave the green light after a meeting Thursday with top economic officials, including Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross and US Trade Representative Robert Lighthizer. (CNNMoney: read more)

Stung by Compliance Costs, Asia Banks Urge Watchdogs to Approve More Fintech

  • Regulators need to do more to allow new technologies that could help in the fight against money laundering, as financial institutions are struggling with ever-growing compliance costs, an Asia finance industry group said on Thursday. Banks have been slapped with vast sums for not preventing money being laundered through their accounts, and the call for action comes after Commonwealth Bank of Australia (CBA.AX) last week was fined a record US$530 million for breaching money laundering and terror financing laws. The Asia Securities Industry and Financial Markets Association said it would like to see greater use of new technologies in “know your client” or KYC anti-money laundering checks, as they promise to drastically cut costs. (Reuters: read more)

Japan Regulator: We Are Racing to Finish FRTB in 2018

  • A leading Japanese regulator has warned that the Basel Committee must complete its revamp of the market risk capital framework before the end of 2018, or face a further delay to implementation beyond 2022. But Japanese banks fear this tight schedule is insufficient to collect the data necessary to calibrate the Fundamental Review of the Trading Book (FRTB) correctly, and also worry about an unlevel playing field if Europe moves more slowly than Japan. (Risk.net: read more)

Wall Street Firms Face a New $15 Billion Hurdle in China

  • China’s promise to liberalize access to its fast-evolving securities markets comes with a new hurdle for Wall Street firms, leaving them uncertain about meeting hefty asset requirements to do business in the world’s second-largest economy. China’s leadership made a pledge to ease foreign ownership caps on domestic securities firms to 51% from 49%, in part to cool trade tensions with the U.S. The catch: China’s securities regulator is requiring that majority owners have at least 100 billion yuan (about $15.6 billion) in net assets. (The Wall Street Journal: read more)

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