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 business.
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 concessions.
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 previously.
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 ahead.
Rates will move sooner or later and it is encouraging to see firms like BM&F, Cinnober, Eurex and Icap trying to pre-empt that.
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?