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As ‘Spoof’ Trading Persists, Regulators Clamp Down

By Bradley Hope
February 22, 2015, The Wall Street Journal

One June morning in 2012, a college dropout whom securities traders call “The Russian” logged on to his computer and began trading Brent-crude futures on a London exchange from his skyscraper office here.

Over six hours, Igor Oystacher ’s computer sent roughly 23,000 commands, including thousands of buy and sell orders, according to correspondence from the exchange to his clearing firm reviewed by The Wall Street Journal. But he canceled many of those orders milliseconds after placing them, the documents show, in what the exchange alleges was part of a trading practice designed to trick other investors into buying and selling at artificially high or low prices.

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New SEC Swaps Rules Could Impact Dealers

By Tom Groenfeldt
February 21, 2015, Forbes

The SEC has reopened its possessed rule governing the use of collateral held by security-based swap dealers (SBSDs) — a proposal which would effectively ban rehypothecation — the use of the collateral by dealers as a source of funding.

In a comment to the SEC, Citadel, a major hedge fund in Chicago, said  “In the bi-Iateral market cash and securities collateral posted by the buyside to dealer counterparties is taken into dealer working capital or otherwise available to the dealer for rehypothecation in support of dealer activities; isolation of this collateral from the dealer balance sheet protects it from dealer insolvency, but eliminates a significant source of low-cost dealer financing.”

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SEC Scrutinizing Bank Efforts to Comply with Capital Rules

By Jody Shenn
February 18, 2015, Bloomberg

The Securities and Exchange Commission is scrutinizing banks’ efforts to appear safer to regulators and shareholders.

The agency is looking for improper behavior related to how banks value complicated assets and to transactions they use to shift risks to other entities, said Michael Osnato, head of the complex financial instruments group in the SEC’s enforcement division.

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DTCC Nears Filing for Tri-Party Repo CCP

February 16, 2015, The Trade

Within the next few weeks, the Depository Trust and Clearing Corporation’s (DTCC) subsidiary Fixed Income Clearing Corporation (FICC) intends to officially file a rule with the US Securities and Exchange Commission (SEC) and Federal Reserve to provide central clearing for the institutional tri-party repo market.

Currently, FICC provides central clearing for dealers in tri-party repo, but now, the firm plans to extend the service to registered investment funds in order to “to help to prevent another squeeze in tri-party funding such as the one observed in 2008,” says Murray Pozmanter, managing director and head of Clearing Agency Services at the DTCC, who spoke with Global Custodian recently to discuss the details of the proposal. Much of the operations would be the same though, and the current tri-party repo custodians would continue to serve as the custody banks, just with FICC as a counterparty.

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SEC Officials Blast Agency Over Clerical Error on Swaps Rulemaking

By Sarah N. Lynch
February 11, 2015, Reuters

U.S. securities regulators failed to consider a comment letter from a key derivatives trade group before adopting new swaps data reporting rules last month, prompting criticism on Wednesday from the agency's two top Republicans.

The failure to review the letter was due to an inadvertent clerical error, but in a joint statement, Securities and Exchange Commission Republican members Daniel Gallagher and Michael Piwowar said they felt the mistake warranted the need to re-open the rule for public comment.

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Obama Seeks More Money for Agencies Enforcing Dodd-Frank Rules

By Silla Brush and Dave Michaels
February 2, 2015, Bloomberg

President Barack Obama is making a renewed push to boost funding for Wall Street’s top cops after regulators said budget constraints were keeping them from enforcing rules put in place after the financial crisis.

The funding requests for fiscal 2016, released by the White House Monday as part of a broad spending proposal for the federal government, would raise the Securities and Exchange Commission’s budget 15 percent to $1.7 billion. The Commodity Futures Trading Commission, the main U.S. regulator of the $700 trillion global swaps market, would get a 29 percent increase to $322 million.

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SEFs Prepare for Build Out

By Mike Kentz
January 24, 2015, IFR

Swap execution facilities in the US are poised to build out their trading functionalities and launch products in the early stages of 2015 in an effort to stay relevant in the soon-to-consolidate market that will eventually encompass the bulk of the US$693trn over-the-counter market.

Tradition, one of five major inter-dealer brokers in the rates market, intends to build out an electronic request-for-quote system for interest rate swaps in the early stages of 2015, though company officials said they do not have a specific timeline.

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SEC Passes Single-Name CDS Rules

By Mike Kentz
January 17, 2015, IFR

The US Securities and Exchange Commission last week passed two rules governing the reporting of over-the-counter security-based swaps to newly established trade repositories.

The passage of the rules represents a major step forward for an agency playing catch-up with its sister derivatives regulator, the CFTC, in implementation of Dodd-Frank reforms

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SEC Adopts Rules Establishing Regime for Swap Data Warehouses

By Sarah N. Lynch
January 14, 2015, Reuters

U.S. securities regulators took another step toward shedding more light on the over-the-counter derivatives market Wednesday, adopting a raft of measures to give them a direct window into the opaque market.

The Securities and Exchange Commission's rules lay out a regulatory framework for "swap data repositories" like those operated by the Depository Trust & Clearing Corp, a specialized warehouse that collects trillions of dollars worth of swaps trades, shares it with regulators, and disseminates aggregated data to the public.

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House Republican Push to Roll Back Wall Street Regulations Fails

By Andrew Ackerman and Siobhan Hughes 
January 7, 2015, The Wall Street Journal

A push by House Republicans to roll back a series of Wall Street regulations failed to advance Wednesday amid resistance from Democrats, an unexpected setback for the GOP’s efforts to use its increased majority to ease financial rules.

Republicans were six votes short of the two-thirds support needed to advance the legislation, which included a controversial delay to a provision stemming from the 2010 Dodd-Frank requirement that banks sell stakes in certain complex securities. The bill failed by a vote of 276-146. 

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